UMM & DMM Trigger Early Termination

December 24, 2009 by  
Filed under Commentary, ETF Closings, ETFs

They are not ETFs.  They are not ETNs.  They are MacroShares, and after next week, they are gone.  Bye-bye MacroShares.  If that sounds like something you’ve read before, then you are correct, maybe more than once.

The launch of MacroShares Major Metro Housing Up (UMM) and MacroShares Major Metro Housing Down (DMM) back on June 30, 2009 was the most over-hyped launch of any exchange-traded product that I can recall.  They had pre-IPO road shows, fooled Time Magazine into naming it one of the “Best Inventions of 2008” more than six months before the launch, and somehow convinced advisors and analysts to write glowing pre-launch articles about how great these products were going to be.

I took a different path.  I read the prospectus and then boldly proclaimed that the new MacroShares would not track the Case-Shiller Index, and went on to itemize my 10 reasons why.

I also pointed out that the prospectus contained 13 early termination triggers.  Earlier this week, MacroShares Housing Depositor issued a press release indicating that the “less than 50 million dollars per trust” early termination trigger is now going to be activated.

UMM and DMM will continue to trade through Monday, December 28, 2009.  The liquidation value is to be based on the November 24, 2009 release of the S&P/Case-Shiller Composite-10 Home Price Index.  Payment to any remaining shareholders will be made on January 6, 2010.

I have no idea what the fair prices should be.  If you can figure it out, then there might be an opportunity to make a profit on the termination because the UMM closed at $21.21 yesterday while DMM closed at $24.90.  Theoretically, the two prices should add up to $50 for the teeter-totter arrangement.  However, not much has worked as planned, so don’t blindly enter into this trade.

There have been three pairs of MacroShares, and all three faced an undesired early termination.  Given the lack of success, I won’t be surprised to see them pull the filings for the MacroShares Medical Inflation pair.

MacroShares have always had their problems, and hopefully you have avoided them:

I for one will not miss MacroShares, although it is getting easier to write their obituaries.  My only regret is that I might have to retire the housing teeter-tooter graphic I created.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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