Monday, June 1, 2009

Taleb Related Money Manager Starting Hyperinflation Protection Fund

Last time we spotted Nassim Nicholas Taleb was in March at WSJ's The Future of Finance Initiative. We wrote back then: the back row of the small room was author, Nassim Nicholas Taleb. It was a suit and tie crowd, except for Taleb who came sans tie, and like a true black swan was the only one to then take off his jacket. After a Giethner Q&A, Taleb was also the only one to leave. He left 5 minutes into [Australia's Prime Minister Kevin] Rudd's speech.
It's now clear that Geithner's responses in the Q&A did not result in a tide of all's well with the world comfortness in Taleb. The money management firm he is associated with has gone out and formed a hyperinflation fund.

In a mark of true genius, with rising interest rates confusing the Fed and multi-trillion dollar deficits straight ahead, the firm has done the basic and formed the one type of fund that will benefit from this madness, a hyperinflation fund. The new fund will be called the Black Swan Protection Protocol-Inflation Fund.

WSJ reports:

A hedge fund firm that reaped huge rewards betting against the market last year is about to open a fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.

The firm,Universa Investments L.P., is known for its ties to gloomy investor Nassim Nicholas Taleb, author of the 2007 bestseller "The Black Swan," which describes the impact of extreme events on the world and financial markets.

Funds run by Universa, which is managed and owned by Mr. Taleb's long-time collaborator Mark Spitznagel, last year gained more than 100% thanks to its bearish bets. Universa now runs about $6 billion, up from the $300 million it began with in January 2007...

Unlike last year's sudden market implosion, inflation isn't an unimaginable event that few currently anticipate. In fact, many fear inflation right now amid government efforts to goose the economy. Universa's bet, however, is that inflation will reach levels few expect...

The new strategy, designed by Mr. Spitznagel, aims to post big gains if inflation and interest rates take off as they did in the 1970s.Universa will invest in options tied to commodities such as corn, crude oil and copper, as well as options on stocks such as oil drillers and gold miners.

The fund will also bet against Treasury bonds, which tend to weaken in inflationary environments. Last week, Treasury yields shot to their highest level since November as prices fell on inflation concerns. Oil topped $66 a barrel. Gold is creeping nearing $1,000 an ounce.

The minimum investment in the firm's other funds has been $25 million, though it rarely accepted investments less than $100 million, a person familiar with the fund says...
But don't sweat the high minimum, with hyperinflation, eventually everyone should be able to come up with $100 million in no time.

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