Investors to bet against recovery?

investment manager MacroMarkets launched exchange-traded products on the NYSE Arca on Tuesday. These new exchange-listed securities will enable investors to bet for or against a recovery in the residential real estate market with which the movements of U.S. home prices will be imitated. The ascent in U.S. housing prices will be reflected by the rise of the MacroShares Major Metro Housing Up whereas MacroShares Major Metro Housing Down profits when real estate values fall. 

"For the first time, the market will have available exchange-traded benchmarks as an indication of where investors believe U.S home prices are headed," said Robert Shiller, MacroShares chief economist. 

There are differences between MacroShares and traditional ETFs and not investing directly in stocks, bonds, or commodities futures with MacroShares being one of them. Instead, MacroShares are issued in pairs, and an equal number of shares for each fund are created. Short -term Treasury securities and overnight repurchase agreements are invested by these funds. 

It is an obligation of the paired trusts to pledge assets to one another over time, based on the movement of housing prices. The transfer of Treasury securities between paired trusts changes values of securities and gives investors exposure to the direction of U.S. home prices. In the instance when there is net income, the distribution of it will be made quarterly. 

The warnings about deviation of the prices of funds from underlying value have been made by MacroMarkets. "Premium or discounted prices for these securities reflect a variety of market factors and expectations," the firm says. "For example, the market price of MacroShares Major Metro Housing Down will reflect supply, demand, and investor expectations regarding the future path of home prices over the remaining term of the security." 

It should be mentioned that MacroMarkets have attempted to launch the home-price products through a public auction. As there was insufficient demand for an equal number of Down and Up MacroShares at the prices at which they were offered in the auction, no bids were accepted.