Right now, somewhere in Toronto, someone is dying. He has congestive heart failure and diabetes. He has spent time in the hospital, and almost passed away last year. It seems he is not long for this world.

That’s sad, of course. But for someone else in Toronto, his death will mean a windfall because this man has a $350,000 life insurance policy. Or, at least, he had it. He sold the policy some time ago for a fraction of its value. Now the buyer of the policy is in need of some quick cash and is looking to sell it again. Don Jones, an insurance broker in Seattle, is trying to facilitate the sale — asking price: $175,000.

If he can swing a deal, Jones will collect a handsome finder’s fee. The seller will get a quick, six-figure payout. And whoever buys the policy will double their money, just as soon as the insured man passes away. It would seem to be a win-win transaction — if a pesky ethical quagmire, and some thorny legal questions, didn’t come along with it.

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Life settlements, a booming, if somewhat misunderstood, multi-billion-dollar business in the U.S., are illegal in most Canadian provinces. All but four (Quebec, Saskatchewan, New Brunswick and Nova Scotia) have laws explicitly prohibiting trafficking in second-hand life insurance policies. And even in provinces where there are no laws expressly against life settlements, securities regulators are suspicious of them, which makes finding seed capital tricky.

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Critics — with insurance companies being foremost among them — say such a market is ripe for exploiting the old, the frail and the desperate. Not only that, many warn a secondary market would drive up insurance premiums for everybody else, since current rates are based on the fact that some policies will default.

Proponents, however, point out that life settlements provide insurance policy owners with financial options they wouldn’t otherwise have. Although most insurance companies already provide people the option of buying the policy back, life settlement advocates claim that people often get 400% more cash for their policy through life settlements than they would get from their insurers.

It was an idea inspired by Ivy League research. The research said that enhancing your portfolio with a splash of commodities — things such as gold, oil and pork bellies — could allow you to reap stock-like profits while providing a safe harbour during market downturns.

It sounded lovely in theory. But commodity investing flopped in practice. Despite a mild recovery, broad commodity indexes are still below their levels of 2008. Rather than being a counterbalance to equities, commodities have bounced up and down in tandem with Wall Street.

To understand how important the fine print is, go back to 2006, when two Yale professors published one of the most influential finance papers in years.

Gary Gorton and Geert Rouwenhorst examined 45 years of market history and concluded that investing in commodity futures, while using U.S. treasury bills as collateral, produced returns just as good as putting money into stocks. Even more enticing was their conclusion that commodities tended to do well when stocks did badly.

To institutional investors, this was catnip. Putting money into commodity futures –contracts for the delivery of commodities in months to come — looked like the perfect way to balance the risks in the stock market.

Within months of the paper’s publication, money managers were searching for easy ways to invest in commodity futures. Fund companies obliged them by creating specialized exchange-traded funds (ETFs).

The new ETFs got off to a roaring start as money poured into what appeared to be a sure bet. Then the stock market sank in mid-2008. This was when the Yale professors had predicted that commodities should shine.

Commodities did no such thing. They plunged in line with the stock market, then struggled to recover only part of their losses. So much for big gains and reducing risk. What went wrong? One theory blames the global recession. Another theory is that the flood of money into commodities changed the nature of the market.