Apocalypse Investors: How Wall Street Bets on Catastrophic Breakdowns That Destroy Lives

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AlterNet / By Alyssa Battistoni

Apocalypse Investors: How Wall Street Bets on Catastrophic Breakdowns That Destroy Lives
Bankers figure that if global markets collapse, they might as well make money out of it.

July 6, 2011 |


In the aftermath of the financial collapse, a lot was written about the schadenfreude of watching the masters of the universe take a tumble from their vaunted positions atop Wall Street. But a couple of years later, not only have the hedge fund managers and investment bankers largely reclaimed their bonuses and prestige, but they’ve somehow managed to do schadenfreude one better; instead of deriving mere pleasure at the misfortune of others, they’ve figured out how to make money off it.

Writes Azaz Ahmed in the New York Times, “so-called black swan funds — named for rare and unexpected events — offer a way to profit in the event of a market collapse.”

They may be called black swans, but they operate more like vultures, hungrily eyeing the faltering economy and waiting to swoop in to tear what’s left to shreds. Along with tail risk funds, which hedge against predictable but improbable events, black swan funds offer a way for investors to insure themselves against losses--and make a bundle selling assets bought on the cheap--in the case of rare or unexpected catastrophes, from a default in Greece to an economic slowdown in China.

These kinds of “Armageddon funds” have been in and out of the news since Nassim Taleb’s book The Black Swan topped the bestseller lists in 2007, with most of the conversation proceeding along the lines of “will this kind of investment actually make me a boatload of money or is Wall Street getting punked?” ..........(more)

The complete piece is at: http://www.alternet.org/economy/151551/apocalypse_investors%3A_how_wall_street_bets_on_catastrophic_breakdowns_that_destroy_lives/

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