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Black Swan Fund Bets on Hyperinflation

By    |   Wednesday, 03 Jun 2009 10:41 AM

Universa Investments, a hedge fund manager known for its ties to contrarian investor Nassim Taleb, is opening a fund to benefit from a surge in inflation, The Wall Street Journal reports.

The fund is betting that massive fiscal and monetary stimulus around the globe will lead to huge price increases.

Taleb, the bearish guru who authored “The Black Swan,” a book about how unpredictable events affect markets, has worked with Universa manager and owner Mark Spitznagel for a long time.

Taleb doesn't have an equity stake in the firm, but he put in a lot of his own money and helps direct its investments.

The fund will buy options on commodities such as corn, crude oil, and copper. It will also purchase options on commodity-related stocks such as oil drillers and gold miners.

"We think these things are going to see massive volatility," Taleb told The Journal.

The fund will also bet on losses for Treasury bonds.

Universa funds scored gains of more than 100 percent last year betting against stocks. The firm manages about $6 billion.

Some experts argue that deflation now represents a larger threat than inflation. But Taleb says any deflation will spark more stimulus, which eventually will create big-time inflation.

Warren Buffett shares Taleb’s concern about inflation.

“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett told CNBC.

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Universa Investments, a hedge fund manager known for its ties to contrarian investor Nassim Taleb, is opening a fund to benefit from a surge in inflation, The Wall Street Journal reports.The fund is betting that massive fiscal and monetary stimulus around the globe will...
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Wednesday, 03 Jun 2009 10:41 AM
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