Monday, April 27, 2009

The Debts of the Spenders: 3x Levered Housing ETFs Coming This Week

Gambling addicts apply! For those who cannot get enough of the 3x and 2x levered ETF (exchange traded fund) action. The long term math says that any 3x or 2x levered etf will eventually decay into a fraction of its original worth. But not before taking traders (these vehicles are not for investors due to the WILD fluctuations in daily NAV value) on a rollercoaster ride.

Those traders who were burned by FAZ, FAS, SKF, UYG, and a host of other etfs might find their appetite diminished (and their accounts depleted). But a whole new class of traders might be lured into these securities.

The initial offerings of both UMM and DMM will occur simultaneously via an electronic auction process managed by WR Hambrecht.

MacroMarkets' subsidiary, Macro Housing Depositor, doubled the number of shares being offered during the IPO to 20 million shares of UMM and 20 million shares of DMM for a total offering size of USD1bn. The firm says the increased offering amount is a result of the high level of interest voiced by the investor community.

MacroShares Major Metro Housing will provide investors with access to the housing asset class, allowing for investment in either the upward or downward movement of home prices. The securities are designed to track the change in US home prices as measured by the S&P/Case-Shiller Composite-10 Home Price Index.

The paired securities will have a five and a half year term and will feature a 3x (300 per cent) leverage factor.

The Major Metro Housing trusts will be fully-collateralized by short-term US Treasury Bills, overnight repurchase agreements secured by Treasury securities, and cash.



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