The Null Device

Hedge fund managers bet on apocalypse

Having seen their previous bets turned into a spectacular wipeout, some hedge-fund managers are now betting on the total collapse of civilisation:
In his book Wealth, War, published last year, former Morgan Stanley chief global strategist Barton Biggs advised people to prepare for the possibility of a total breakdown of civil society. A senior analyst whose reports are read at hedge funds all over the city wrote just before Christmas that some of his clients are “so bearish they’ve purchased firearms and safes and are stocking their pantries with soups and canned foods.” This fear is very much reflected in the market—prices of corporate bonds have been so beaten down at various points that they suggest a higher default rate than during the Great Depression. Meanwhile, while the overall gold market has fluctuated, the premium for quarter-ounce gold coins—meaning the difference between the price for gold you can hold in your hand and that for “paper gold,” such as exchange-traded funds—rose to an all-time high of 20 percent. “Gold is transportable, it’s 100 percent liquid, and it’s perfectly divisible in the context of ounces, bars, or coins,” says the head of a California research firm who keeps a supply of it, along with food, water, and guns, on hand. “And most important, there’s no counterparty”—i.e., it’s an investment beholden to no one, and perhaps one of the few assets that will retain value if the financial system collapses.
While it may look like these Wall Streeters are betting on such a collapse, their embrace of survivalism is an outgrowth of their professional habits of mind: Having observed the economy’s shaky high-wire act from their ringside seats, they are trying to manage their risk and “hedge” against a potential fall. “It’s like insurance,” says an investor who has stockpiled MREs and a hand-cranked radio. “And by the time you need it, it’s way too late.” Leave it for others to weep for the collapse of the social order. These guys would prefer to be in a high-speed boat or ex-military vehicle, heading off toward their fully provisioned compounds in pursuit of the ultimate goal: to win the chaos.
I wonder how many of these Wall Street supersharks would be able to translate their killer instincts to being effective post-apocalyptic warlords, or whether most of them would end up as mincemeat when the first killer caravan rolls through their survivalist homestead. I also wonder how long until "Post-Apocalyptic Warlordship for Dummies" replaces "Flipping Houses for Dummies" in the Business sections of bookshops.

There are 1 comments on "Hedge fund managers bet on apocalypse":

Posted by: Greg Sun Jan 18 08:16:30 2009

I blogged recession-related at http://spill-label.org/blog

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