MacroShares Crude Oil ETFs: Unintentional Comedy Show

Yesterday, the Feb. 2007 NYMEX West Texas Intermediate crude oil futures contract – the “front month,” although the open interest is rapidly migrating to the March contract - settled at $51.21, down $1.78, or 3.4 percent.

The Claymore MacroShares ‘up’ ETF (UCR), which is supposed to go down when the price of oil declines, closed at $57.90, down $1.35 or… 2.28 percent. Missing its benchmark by a mere 33 percent, but at least it got the direction right.

Not so the Claymore MacroShares ‘down’ ETF (DCR), which is supposed to go up when the price of oil declines. It closed at $62.43, down – yes, down - $1.29 or…2 percent. And missed its benchmark by, well, it’s confusing with all those minus signs, but let’s just call it a really long pipeline.

Several things:

• For additional light entertainment, Claymore - to its credit - discloses what are surely the widest price-NAV spreads, in both dollar and percentage terms, in ETF history. Those numbers - a 12 percent premium for UCR, a near 10 percent discount for DCR - are not typos.
• Unsurprisingly, MacroShares trade on The World’s Most Unnecessary Securities Exchange™ (dba American Stock Exchange), notorious for the light feathery don’t touch regulation of its specialists, who are allegedly responsible for making orderly markets. I say that when it can’t even get the (expletive) direction right, the market is not orderly; anyone care to argue? I thought not.
• Names? The specialist - in what, apart from turning Claymore’s promotional material into a new edition of ETFs for Dummies, has yet to be precisely determined - responsible for this gruesome entry in ETF history, is Bear Hunter, a Bear Stearns subsidiary. But it’s not their money, so that would be one of the WGAS file.
• Dave seems somewhat vexed. And has some good advice re: innovative ETFs.
• I'm hoping to post more substantive dissertation on crude oil ETFs later today. By the way, among MacroShares’ competitors, USO was down 2.76 percent, OIL was down 2.82 percent, and the brand-spanking new DBO (launched Jan. 5) was closest to the target, down 3.29 percent.