Robert Shiller’s name is synonymous with data on housing prices (who’s Case, btw?). And though he always gets publicity and media attention when his number’s go out, he’s also been looking for fresh ways to monetise his role in this sector.
His firm MacroMarkets has had offered investment vehicles for a while allowing pros to “hedge” housing risk, though you don’t hear about them much. It certainly hasn’t matched the initial hype, when MacroMarkets was being touted as this breakthrough way to trade housing directly.
Anyway, he’s now come out with a new retail product that you can trade right from your online broker.
Here’s how Altos Research explains it:
The securities are listed on the NYSE Arca. You can buy and sell them like any stock.
- Major Metro Up (NYSE: UMM) is how you “go long” US housing. You buy the UMMs when to benefit from a rising US real estate market.
- Major Metro Down (NYSE: DMM) is how you “short” US housing. You buy the DMMs when you want to express a bearish position on the housing market.
That part’s pretty straightforward. But there are some complications. These are not stocks, and not exactly exchange traded funds (ETFs) either. Unlike most exchange traded funds they own none of the underlying asset. (Gold ETFs buy gold, Oil ETFs buy oil, etc.) In this case they hold US treasuries. The MacroShares also trade in pairs and the underlying cash moves from one to the other. When the Case Shiller Index (the S&P CSI 10-city index to be precise) moves up, in a direction, the treasuries move from the DMMs to the UMMs. Note the price of these things will also be a function of the market demand. So if a bunch of you think the market’s going to go up and buy accordingly, the price of the UMM is going to climb.
There are various ETFs out there purporting to track commodities, USO tracking oil is the biggest one, but its attempt to match the price of oil by trading futures has never worked all that well. This sounds like an elegant solution, avoiding the underlying asset completely (but then, how would they ever have a portfolio of houses?).
On the ther hand, unless you really have a lot of housing exposure and really need a hedge, these products sound like a bore, and shouldn’t trade all that wildly, unlike, say, the USO.
Now a triple levered UMM… now we’re talking.
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