Firm Makes Bold Bet on Falling Prices

Firm Makes Bold Bet on Falling Prices - Firm Makes Bold Bet...

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See a sample reprint in PDF format. Order a reprint of this article now ECONOMY AUGUST 26, 2010 Dow Jones Reprints: This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit www.djreprints.com A Wager by Fairfax Financial Risks $174 Million. If Deflation Arrives, It Could Be Worth Billions. World U.S. New York Business Markets Tech Personal Finance Opinion Careers Real Estate Small Business EXPERIENCE WSJ PROFESSIONAL Editors' Deep Dive: Firms Brace for Deflation DOW JONES NEWS SERVICE Three Dividend ETFs to Fight Deflation INVESTOR'S BUSINESS DAILY Investors Flee to Save Havens as Deflation Fear Mounts INVESTMENT ADVISER Merrill Lynch Goes Back to Basics With Growth Plays Access thousands of business sources not available on the free web. Learn More By GREGORY ZUCKERMAN A Canadian insurer is turning to a seldom-used strategy to make a big wager on falling prices over the next decade. As more investors worry about the possibility of deflation—or a sustained period of falling prices that could cripple stocks Fairfax Financial Holdings Ltd. has spent nearly $200 million to buy derivative contracts wagering on a decline in the consumer-price index, an inflation indicator. The trade could lead to huge profits if deflation occurs. Fairfax purchased some of the derivative investments in the first three months of the year, when few fretted about deflation and the cost of the contracts was cheap. It added more in the second quarter. The derivatives now are catching the attention of some on Wall
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This note was uploaded on 10/31/2010 for the course NBA 6730 at Cornell University (Engineering School).

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Firm Makes Bold Bet on Falling Prices - Firm Makes Bold Bet...

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