The Admiral

ETFs That Bet on Housing Values: Is This a Joke?

"Certainly I understand that how these products work ... I don’t have them confused with real ETFs. I thought I made that clear."

- Nope. You sounded confused. If you say you understand the concepts I'll take you at your word. But then your article is poorly written, because it gives the impression that you've not a clue.

"But how many people would have actually hedged the value of their homes with “Down”? Not now, when we know so much of the extent of the disaster, but then, when it was happening?"

- I have been looking for a way to short real estate, other than by selling home builders, since 2001. This is a godsend for me, albeit 8 yrs too late.

"These exchange-traded products are second-level derivatives. They are symptomatic of what has gone wrong with Wall Street... Our best and brightest (who used to go into industry) for years have been going to Wall Street "

- Ah, your true agenda emerges. You want to go into industry, work with your hands, etc? Be my guest. Have at it. But please don't tell me what the rest of us should do.

"I'm not overwhelmed. I am sorrowful."

- If you say so. But you appear to be over-whelmed by the subject matter. Why don't you write on industrials, since that is what you profess to admire? And if you really want to be helpful, write it for Parade magazine, an audience whose level of financial sophistication might be better suited to your writing style.

ETFs That Bet on Housing Values: Is This a Joke?

Probably the worst article I've seen on Seeking Alpha. So a play on an index price has to actually OWN the underlying? Really. Ever hear of an interest rate swap, or any other sort of derivative?

There are many significant advantages to taking exposure to an asset in a synthetic way rather than through owning the underlying. For one thing, transaction fees and other "friction" costs are greatly reduced. Sure, I could sell my house - and pay a realtor 6%. If I can obtain the same economic position while deferring the cash outflow associated with deal cost, why wouldn't I? In addition, the leverage allows me to invest more of the principle I would otherwise have to tie up in the investment.

Let's say I want to hedge a $300,000 home and didn't want to pay $18K to a realtor. In an unleveraged index play, I'd need to tie up $300K in assets, not easy for everyone. In the case of a leveraged fund, I could tie up $100K and deposit $200K in a fixed income investment which earns interest. I get the same economic exposure, but at a far reduced cost.

Declines from Peaks in Housing Show Big Disparity

It's hard to see New York and other northeastern markets hold out much longer. We're about to have a horrible bonus year on Wall St. NY could see another 10% decline in '09.

Real Estate Bubble Is Only in 4 States: CA, FL, NV, AZ

When I look at places like NY and others, I see the same huge increases that happened in FL, CA and other places. What I DON'T see is the DROP that those places had. Or should I say, we don't see it YET...

Housing Prices Are Still Headed Down

"if everyone is negative on real estate, doesn't that make it a good time to buy?"

I dunno. Everyone's been down on Hitler for 60 years but it doesn't mean it's a good time to become a Nazi...