American in Paris

Good Riddance: MacroShares Major Metro Housing Funds Trigger Early Termination

Well, Macroshares will actually mirrow the Case Shiller index if you buy the shares when they started trading and held them to termination (assuming they survive to the target date).

I think the problem is that they do not have an arbitrage mechanism in place to ensure between the A point and the Z point that the daily trading values reflect the the Cash Shiller index.

ETFs use an arbitrage mechanism to ensure that their market value does not diverge significantly from their underlying NAV.

Between A and Z the Macroshares trading values simply depend the market's perceptions.

In contrast, the future market is anchored to reality by the spot price.

I don't think Proferssor Shiller was well served by his financial advisors.

You can buy housing futures on the CBOE and they are tied to the Case Shiller index.

So an ETF backed by the CBOE housing futures might work. Of course, futures have their own set of issues (contango, etc.).


On Dec 26 12:47 PM Ron Rowland wrote:

> I thought my position has been clear, but I guess maybe not. My primary
> objection to MacroShares is that the marketing appears to be totally
> misleading. These products would not and did not track the Case-Shiller
> index or any other housing prices. They would not and did not provide
> a means for someone to hedge housing prices.
>
> Stop and think about hedging your house for minute. I don't have
> the exact figures at hand but assume the average US homeowner has
> 10% equity in their home. They are leveraged 10x to the long side.
> If they are fortunate enough to have 50% equity, then they are only
> 2x leveraged. If they are underwater, like most buyers of the past
> 3 years, then they are currently leveraged to infinity.
>
> Now, ask yourself why most homeowners are 10x leveraged. Most of
> the time it is because that is all they could scrape together for
> the down-payment.
>
> So, now they have $30k in a $300k home and they want to hedge against
> falling home prices. If all of their cash is tied up in their 10x
> long position, then where in the world are they going to get the
> $90k cash needed to hedge their position at 3x leverage on the short
> side? Furthermore, even if MacroShares did track the Case-Shiller
> Index, how are housing prices in New York City and Los Angeles going
> to help the home owner in St. Louis?
>
> MacroShares are not an appropriate way to hedge housing prices. MacroShares
> do not track Case-Shiller. MacroShares marketing and hype appears
> to be misleading. Perhaps it misled you too into thinking these were
> something they are not.

The Return of GDP Bonds

Hi Felix,

How can the price become infinite?

Consols have been around a long time and none of them shot off to infinity ...

What Shiller is attempting to fashion is a risk sharing bond.

His proposal shares risk because during a recession, nominal GDP falls sharply and hence government debt payments would fall sharply.

Conversely, during high growth, the government pays more to the trill holders.

Sounds like a risk sharing device and a budget stabiliser.

You and David Merkel could be right, but if I have to bet between the Salmon/Merkel gang versus Robert Shiller ...

Well, I think it is pretty obvious who has made more right calls ...

:)

Not So Cheap Trills

I don't buy your claim that this debt leads to government insolvency.

In a recession nominal GDP falls sharply and hence the interest rate burden of a trills financed government falls very sharply as well.

I see no insolvency there.

In fact, it would stabilize the budget deficit!

During a period of high nominal growth, government would pay much more.

So government surpluses would be reduced.

It is actually risk sharing device.

You need to better explain your position.

Synthetic CDOs: Thoughts on Fiduciary Duty and the Victim Mindset

Kid Dynamite,

Responsibility is a two way street. If Goldman sold trash as Mercedes, then it doesn't matter whether the buyer should have recognized it was trash.

Goldman is still guilty of a moral abyss.

If a girl walks across Central Park at 2 AM and is raped, do we not pursue the perpetrator?

It strikes me as typical 'Right Wing moral black hole in the head' thinking to emphasize the 'responsibility of the buyer' but ignore the 'responsibility of the seller'.

There is no transaction without either party.

:)

If you look at the moral failures of American society, the focus should be on 'the success at all costs' mentality.

There was a time when people lived their lives with more dignity.


On Dec 27 09:48 AM Kid Dynamite wrote:

> Andrew - those are all great points. But how do they relieve the
> buyer of the CDO of their responsibility? the FACT is that the buyers
> didn't do the homework they were supposed to do before buying these
> products. again, we're not talking about retail investors who might
> reasonably not be expected to analyse the underlying components of
> structured products.
>
> they (we're talking the pension fund managers again now) were COMPLETELY
> ignorant of risk - and GS wanted to take the other side of that trade.
> Note that Felix Salmon highlighted the point that GS was doing this
> since 2004! it's not like GS sold CDO's that blew up 15 days later...
>
>
> if you want to really blame someone on the sell side, i think the
> ratings agencies are the most culpable in terms of also GROSSLY failing
> to adequately perform their duty.
>
> ps - your response is most definitely not one of an ignoramus

ETF Spotlight: SPDR Barclays Capital High Yield Bond

If Tom had done his homework and gone to the SPDRs website, he would know the current yield is not 12.2%. That figure he pulled off Yahoo Finance.

More quality, less quantity, Tom.

Nigerian national Umar Farouk Abdulmutallab is charged with trying to blow up Northwest Flight 253 en route to Detroit from Amsterdam. A preliminary analysis found the device contained PETN (pentaerythritol), a high explosive. (DOJ, charges (.pdf))

James,

You are very silly.

It was an incoming flight. No one was hurt.

How many people died during George Bush's first term in office.

Over three thousand.

I would be embarrassed to be a conservative.


On Dec 27 07:15 AM James Levy wrote:

> I am a conservative, and I am very much for government doing ONE
> BIG THING...Protect me and my family from being murdered by an Islamic
> terrorist the next time we fly. The Obama administration is not willing
> or able to do this. If our government doesn´t want to name the enemy
> for the sake of Political Correctness, and wants extend to him all
> the rights and privileges of a citizen in a US court, we are doomed
> to lose the ¨War on Terror¨..(Oh, I forgot, that is nasty Bush talk...There
> is no war..just need some police actions and lots of olive branches...And
> when we close Guantanamo, the Moslem terrorists won´t do these kind
> of things any more...)
>
> God help the Republic survive the coming years until we can throw
> these bums out in 2010 and 2012..Get involved, if you love the United
> States and freedom, vote for change from the Obama/Pelosi/Reid ¨preventive
> surrender¨ to Islamic terrorists.

Nigerian national Umar Farouk Abdulmutallab is charged with trying to blow up Northwest Flight 253 en route to Detroit from Amsterdam. A preliminary analysis found the device contained PETN (pentaerythritol), a high explosive. (DOJ, charges (.pdf))

Don't be silly. It was an incoming flight.

As an American who lives abroad, I can tell that security is extremely tight, and in fact, is a deterrent to flying.


On Dec 26 10:30 PM dondon wrote:

> This should not come as a surprise as the current administration
> thinks that there is no need for a war on terror. The fact that
> the terrorist was Muslim is not a surprise even though the current
> administration doesn't feel the need to look at young Muslim men
> as potential terrorists. This terrorist attacked failed but as long
> as we have a weak view of radical Islamic terror, we can be sure
> they will try again and at some point succeed.

Charles Hugh Smith says interest rates, artifically suppressed by the Fed and by China, are about to start rising, and will continue rising for a generation.

We would pay your way ...

You have been holding the country back for several generations.

You might like an independent Texas. You could reinstate slavery ...


On Dec 26 02:34 PM tripleblack wrote:

> LOL, if all us LIbertarians and Secessionists move to Texas...<br/>
>
> It could get interesting.

Gold and Silver Dead Cat Bounce into Resistance Levels

Hunter,

Where do you dig up this nonsense?

Take a look at the facts. Forget about what some dead white Chicago economists taught you long ago ...

Quantitative easing did not create inflation during Japan's Lost Decade. But it did reignite economic growth.

Second of all, where is all this spending growth that is going to cause hyperinflation?

It only exists in your imagination .... :)

The money velocity measures, both M1 and M2 are shrinking - negative growth.

That means your inflation forecast is dead in the water ....

Have fun on the ride down ...


On Dec 25 08:19 PM HunterGVL wrote:

> A lot of ignorant comments on here today......I am long gold, but
> currently waiting for it to decline further from here. I sold my
> mining positions when gold dropped to 1200 and will be looking to
> re-enter when the dollar tops out and then resumes it inevitable
> decline. I believe the author is of the same disposition as far as
> being long term gold, but short term neutral on gold. He is 'trading,'
> as am I. The short position in the US dollar was and still is, massive,
> and with that kind of one sided trade, the small rise in the dollar
> is not nearly enough to really shake out the shorts (my opinion of
> course). There is also the temporary possibility of sovereign defaults
> like Greece, Latvia, and several others that will give the dollar
> a short term boost as foreigners rush headlong into the (false) security
> of the dollar. I expect this 'false rush to safety,' to last until
> it doesn't. I can see the dollar rallying easily into the first quarter
> as the Bernanke QE and outright treasury buying is denied, denied,
> denied. Many unsophisticated investors want to believe everything
> is all right. They will continue to support the dollar and all falsehoods
> that help them keep believing in the golden calf. Bernanke and Geithner
> will ACTUALLY point to the false dollar strength to further the ponzi
> effect. I wouldn't be surprised to hear Obama mention the dollar's
> renewed strength in his state of the union address. Fundamentals
> are dead; the attempted fix is still in high gear. Quite frankly
> I hope they succeed tremendously in keeping the dollar rising. If
> they can artificially push the dollar up somewhere around $84, $85,
> $90?? with gold dropping into the $800s, or my fantasy -$700s?, .....
> I will be buying like a madman for the long term. The head fakes
> are almost at an end. The lies are browning at the edges. The dollar
> will continue to rise; Gold will continue to fall. So, enjoy this
> last hurrah for the dollar, quit bitching, and prepare to bet the
> farm as gold falls for a final time, below $1,000. You will likely
> never get an opportunity like this again.

Gold and Silver Dead Cat Bounce into Resistance Levels

At 1% inflation, I don't think so ...


On Dec 25 12:15 PM paxjds wrote:

> The dollars dead cat bounces will eventually cease to bounce, laws
> of physics. Then the dollar will lay there, Dead as Dead, dead, and
> dead. Better be in precious metals.
> Yours truly,
> Noah from Genesis

Gold and Silver Dead Cat Bounce into Resistance Levels

He isn't a comedian. Who needs comedians when we have the gold fanatics?

I have never seen such a silly group of wannabe investors.

There are teenagers with more sophistication and common sense than the 'dollar is doomed' crowd.

I can't wait to watch the gold investors sent to the slaughterhouse in 2010.

They will be squealing like pigs ...


On Dec 25 10:58 AM DeepValueLover wrote:

> "Dead Cat Bounce"?
>
> Are you a comedian?

Why Interest Rates Will Almost Certainly Rise in 2010

I didn't know Western Europe was Communist.

Communists are poor and live wretched lives ... f

We live better than you ...

:)


On Dec 25 10:20 AM cosmos110 wrote:

> Obama will keep the economy as best he can until he gets his Obamacare
> in place and then he'll step aside and play his fiddle while we roast.
>
> He'd love to get his Cap & Tax as well as Immigration Reform
> in place but there is only so much one Communist can do.

Global Carbon ETF Heats Up in Wake of Copenhagen

Mr. Steveig,

Your science education is clearly a disaster.

Without CO2 and methane, the Earth would be a frozen snowball.

By the way, carbon emissions trading system is modelled on a highly successful program used by the US to reduce sulfer dioxide emissions.

Second of all, the IPCC contains a lot smarter people than yourself.

:)


On Dec 25 12:30 AM steveig wrote:

> And as we can see the Emission Trading Scheme has not lowered the
> CO2 emissions one bit. This is just another mechanism for the money
> makers to increase their profits.
>
> I note with interest that in Albany NY the Regional Greenhouse Gas
> Initiative (cap &amp; trade scheme) settled out of court a suit filed
> by three power plants. The RGGI has paid $7.7m for a two year period
> and the settlement calls for additional funds to cover them until
> 2016! That is $7.7m for just three power businesses. If this case
> was not settled, these costs would be passed on to the customers
> of the plants. Can you imagine how much your power bills are going
> up with these emission trading schemes? And this settlement doesn't
> even cover converting the power plants to greener processes. What
> the hell are we letting happen to the world? It has NEVER been proven
> that human-based CO2 is the culprit for Climate Change. How can something
> that makes up 1.3% of our atmosphere have such an alleged drastic
> result to the weather? By all means reduce pollution, but CO2 is
> not a pollutant. It is an integral part of sustaining life for the
> Earths' plants. The Intergovernmental Panel on Climate Change (IPCC)
> should be disbanded and the money that is saved be sent to developing
> countries as foreign aid, which is what the emission trading scheme
> is all about. Follow the money trail...

Success in 2010 Requires Investing in Other Countries

You already have a lot of hedge funds shorting China. If any country is experiencing a bubble now, it is China.

And one must ask oneself, should that many eggs be in a repressive country that could explode in political unrest?

The Communist party today has no ideology other than keeping themselves in power. If the economy falters at any point, the lack of political accountability could lead to unrest.


On Dec 24 01:35 PM Econ Grapher wrote:

> You raise some good points here. Emerging markets are increasingly
> becoming the growth engines of the global economy. The long term
> story for the likes of China is definitely compelling, and will become
> very interesting as moves are made to rebalance the economy over
> time (interesting in terms of longer term sustainability). But even
> the more developed countries, like Australia in particular, are on
> a far better footing than the US for example. Australia is enjoying
> relatively strong earnings performance, stock market performance,
> and has been benefiting quite well from trade with China, they've
> even started to add jobs (and not just part-time jobs). Go country
> selection!

Gold: Is It Really a Portfolio Diversifier?

No it is not true diversification. True diversification requires a zero or negative correlation with the other assets in your portfolio.

And it is not a good store of value because its value fluctuates too much.

Gold is too volatile ...


On Dec 24 03:20 AM Freya wrote:

> Gold Equities do not diversify a Portfolio of Equities, Physical
> Gold does.
>
> In the History of Stockmarkets the World over, Individual companies
> have gone Bankrupt by the thousands including Gold Equities.
>
> Physical Gold has retained Value, it has fluctuated but it has Never
> lost All of its Value. This is true diversification.