Back in July I wrote about a really clever investment vehicle for speculating on hedging home prices – the Macroshares Major Metro Housing shares. Created by Robert Shiller, one of the creators of the Case Shiller home price index, these shares allowed you to profit or lose based upon the value of their index. However, as I pointed out, this investment had a lot of nuances. In the end these nuances left the shares neglected in the market. There was very little interest in them; the volume died; they traded at a discount; authorized participants were able to profit by buying them at a discount and liquidating them; the operating expenses were spread over a dwindling number of shares; one of the 13 early termination triggers was activated; and they no longer trade and are being liquidated.
It’s really a shame because it was a great idea: being able to easily trade what is otherwise an extremely illiquid investment. I personally made 42% since July on a small investment that I made in the up shares as I realized they were underpriced at the time. (Yeah, I should have bought more.)
Robert Shiller had created similar investment vehicles for taking positions in oil but these vehicles also died a premature death – in one case because oil prices moved much faster than anyone had predicted. (I made some nice dough on that one also since they were really, really misunderstood in the market.)
Despite this string of failures Robert Shiller is still a genius as far as I’m concerned. He correctly predicted both the stock and housing market bubbles and his data saved me a lot of money by pointing out that the stock market was overvalued in July 2007. I just think the guy is way ahead of his time and maybe too smart for his own good.