It's a tough time to be an investor -- the stock market is moving in fits and starts, gold is sliding back down from its once-dizzying heights, and ridiculously low federal lending rates mean that banks aren't really all that interested in borrowing your money. But if you're looking for a promising gamble that could pay off big, there's a new investment opportunity on the horizon: hedging marriages.
Betting on marriages may now be possible, thanks to Wedding Gift Refund, a new service for wedding guests. Recognizing that many couples move quickly from the the altar to the divorce court, the company gives guests a chance to ensure that the money spent on today's gift won't transfer into disappointment after tomorrow's divorce. After buying a gift, guests simply register on the company's website, pay 8% of the gift's purchase price, and upload a copy of the receipt. If the marriage dissolves within three years, Wedding Gift Refund will reimburse the full price of the present.
On the surface, this doesn't seem like a great investment opportunity: After all, even if a couple gets divorced, the 8% cost of a gift insurance policy means that -- at best -- you would only receive 92% of your initial investment. But what if you could insure presents that you didn't buy?
This idea isn't as farfetched as it sounds -- in fact, it has a firm backing in recent history. Credit default swaps, the financial instruments that threatened to destroy the global economy a few years ago, were little more than insurance policies taken out on risky loans. Originally, these were designed to ensure that lenders would not lose their money when loans failed, but several investors, including Jeff Greene and Michael Burry, discovered that it was possible to take out insurance policies on loans that they didn't actually hold. Thus, when the loans failed, they didn't lose any money on the actual loan, but profited mightily from the insurance policies.
The trick, then, lies in taking out insurance policies on gifts that one doesn't actually buy. On the Wedding Gift Refund site, this wouldn't be too hard: The website allows customers to insure multiple gifts, as long as they can produce receipts. In fact, their only restriction seems to be that presents have to cost between $50 and $500.
Getting other wedding guests to surrender their receipts could be a bit more difficult, but it seems likely that many would be willing to sell their receipts for a small sum -- say $10. In other words, for an insurance policy on a $100 gift, one would have to invest about $18. Alternately, if you're a member of the wedding party, you could collect receipts under the pretense that you're gathering them for the bride and groom (although, admittedly, this might count as insider trading).
The next step would be finding the right marriage to invest in. Luckily, there is no dearth of divorce statistics, and a dedicated analyst could pretty easily handicap the marriage market. For example, according to numbers compiled by The Wall Street Journal, Massachusetts has 1.8 divorces per thousand marriages, the lowest rate in the country, while Nevada has a staggering 6.6 divorces per thousand marriages. In other words, a Vegas marriage is nearly four times as likely to fail as a Boston one.
There are dozens of other factors. For example, statistics show that couples that get married before 18 are more than twice as likely to get divorced than those who get married after 24. And factors like prior failed marriages, number of children, profession, and whether or not a partner smokes can all have an impact on the longevity of a marriage.
On the other hand, if you want to avoid all the calculations, the Divorce360.com marriage calculator is a nice tool for quickly determining the wisdom of an investment:
Admittedly, some of the most potentially lucrative marriages don't require all that much research. For example, if one had chosen to invest in the recent Kim Kardashian/Kris Humphries union, the profits would have been staggering. All told, the couple brought in an estimated $100,000 in wedding gifts. Given the 500-person guest list, this would have worked out to about $200 per gift, or $16 per Wedding Gift Refund insurance plan. Adding in an expected charge of $10 per receipt, the total cost to hedge the entire Kardashian/Humphries nuptials would have come to about $13,000.
That's a fairly stiff price, unless one considers that Kim and Kris' marriage dissolved after only 72 days. For someone who bet against them, this would have yielded a profit of $87,000, or a more than six-fold return on the original investment. So betting against Kardashian could have left a savvy investor with a very happy ending!
Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at email@example.com, or follow him on Twitter at@bruce1971.