klarsolo

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

This is a question we cannot ever answer. But I certainly like having this hedging option as a professional now and in the future. Often these products are a beginning and we don't know what other products they'll eventually lead to.

Our "best and brightest" come up with both good and bad inventions and sometimes something that starts out good ends up bad (and vice versa). The fact that CDO's blew up in our faces does not make the underlying idea of structuring cash flows a bad thing per se. But certainly the risks were little understood. Now they're better understood. Who knows what kind of advantages we'll experience down the road from the knowledge we've gained from this catastrophy.

People complaining about such products are like toddlers who stumble over obstacles in their quest to learn how to walk and then vow to never walk again.


On Jul 05 06:53 PM David Van Knapp wrote:

> Certainly I understand that how these products work and that “Down”> can be used to hedge the value of home(s). I don’t have them confused > with real ETFs. I thought I made that clear.
>
> 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?

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

If the author cannot see the value of being able to hedge house prices after all the harm that the recent house collapse has caused, he should not post on Seekingalpha.

This product is another quiver in the hands of skilled traders and investors. Everybody else who is overwhelmed (like the author seem to be) just stay away. It really is that simple. Nobody forces you to buy something you do not like or understand.

Yes, the levered structure of the product might be suboptimal. But if it turns out to be successful we'll see more and better designed products.