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Originally Posted by LegendaryLars
Ohh very interesting thanks so much !  |
:-)
Lars, I know you'll like this one. Looks like there will be a good hedge coming.
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Robert Shiller knows bubbles, and he might have just the solution.
The Yale University finance professor ? and author of "Irrational Exuberance," a book that deftly called the dot-com bubble ? is a lead figure at Macro Securities Research. The New York research group has developed financial instruments ? called "MACROs" ? that will be tied to a housing index that tracks property values in certain cities. By purchasing Up MACROs or Down MACROs, investors would be able to place bets on whether a property market is going to keep rising, or whether it's going to fizzle.
In effect, speculators could play the bubble: They could short the City of Angels and go long on the Big Apple, or vice versa. Homeowners in bubbly markets could hedge against a pop. They could stand to gain if the value of their homes go down. If property values keep rising, of course, the homeowners lose on their MACRO investments -- but at least their homes would be worth more.
These days Mr. Shiller is convinced the U.S. housing market is rife with bubble-like behavior. Home-buyer psychology today "fits in with the model of a bubble," he says. "It's a wishful-thinking atmosphere that develops the idea that everything is going to be all right, and there's the sense that you have to get in at any cost because prices are going to keep going up."
Robert Hartwig, chief economist at the Insurance Information Institute, says the MACRO securities may be the best -- and only -- way homeowners can protect the value of their homes. Speculators, including hedge funds, could help add liquidity to the market, he says.
MACRO Securities has filed plans for the new securities with the Securities and Exchange Commission. The company intends to roll out its MACRO securities later this year and, in its filing with the SEC, said it hopes to list the securities on the American Stock Exchange. It also has a deal to develop housing-price-indexed futures with the Chicago Mercantile Exchange.