Newton has found an ETF with the ticker symbol DCR, the MacroShares Oil
Down fund. Its net asset value is $7.91 per share, but its price is $14.25 per
share: a premium of more than 80%. Yes, I know that there are good
reasons to believe that oil is overpriced. But there are no good reasons
to buy DCR at $14.25 a share in the hope that the oil price will go down and
the fund will go up in price. Hell, the fund could go up in value by 50%, and
the shares would still be overvalued at $14.25 apiece.
Interestingly, Newton says that DCR was invented by none other than Robert
Shiller, of Irrational Exuberance
fame. Shiller’s not a big one for taking other people’s advice, I don’t think,
but in case he is, Newton’s unambiguous:
The MacroShares are irretrievably broken. They have never performed as advertised.
They show no signs of ever working as advertised. They are a disgrace to the
ETF market, and have been, pretty much since they were introduced. Nice try.
Didn’t work. Now kill them.
Is that easy? How does one go about killing an ETF, once one has launched it?
(Via Abnormal
Returns)