Let's say you think the economy can only turn out one of two ways over the next 5 years (after that all bets are off):
1) Global economic slowdown. Not as bad as a depression but we do get substantial, sustained deflation and the general malaise that comes with it. The prices of commodities, stocks, real estate...everything declines.
2) Economy starts to come out of recession in 2009 as the impact of all the fiscal and monetary stimulus starts to have an impact. Unfortunately, it has too much of an impact, and we end up with substantial inflation. Not 100%/year, but perhaps 15-20%.
So given this outlook, is there any way to invest with a large payoff either way, but willing to accept losses if neither one of them comes true (its a mild recession then back to business as normal)? It seems like cash would be the best investment under #1, and TIPS or commodities under #2. Can anyone suggest a better straddle?
My premise is that with all the government intervention these days, either they are going to way undershoot or way overshoot the amount of the money to put into the economy.
1) Global economic slowdown. Not as bad as a depression but we do get substantial, sustained deflation and the general malaise that comes with it. The prices of commodities, stocks, real estate...everything declines.
2) Economy starts to come out of recession in 2009 as the impact of all the fiscal and monetary stimulus starts to have an impact. Unfortunately, it has too much of an impact, and we end up with substantial inflation. Not 100%/year, but perhaps 15-20%.
So given this outlook, is there any way to invest with a large payoff either way, but willing to accept losses if neither one of them comes true (its a mild recession then back to business as normal)? It seems like cash would be the best investment under #1, and TIPS or commodities under #2. Can anyone suggest a better straddle?
My premise is that with all the government intervention these days, either they are going to way undershoot or way overshoot the amount of the money to put into the economy.