Claymore MacroShares

You may have seen the interview this morning with Robert Shiller and Sam Masucci about the new oil related shares. I found the interview and this article to be very confusing.From the a picture is worth 1000 words file, I offer this chart. Clearly the Up Shares (UCR) and the Down Shares (DCR) are intended to move inversely of each other. I think UCR moves with oil and DCR moves inversely to oil, both on a one to one basis. The two funds will pay interest by virtue of capturing the energy effect in the derivatives market thereby having money left over for short term treasuries. Conceptually there is probably utility with these but I need to look further to learn the ins and outs. If you know something please leave a...

Claymore MacroShares

You may have seen the interview this morning with Robert Shiller and Sam Masucci about the new oil related shares. I found the interview and this article to be very confusing.From the a picture is worth 1000 words file, I offer this chart. Clearly the Up Shares (UCR) and the Down Shares (DCR) are intended to move inversely of each other. I think UCR moves with oil and DCR moves inversely to oil, both on a one to one basis. The two funds will pay interest by virtue of capturing the energy effect in the derivatives market thereby having money left over for short term treasuries. Conceptually there is probably utility with these but I need to look further to learn the ins and outs. If you know something please leave a...

A Call To Arms!

Roubinians of the world unite, the Chicago number came in below 50, oil is above $63 and my neighbor is hoarding water and powdered food. Well that last one is not true. It is fascinating how the data points seem to alternate between good and bad, although I think the tilt has been toward negative data. My brother commented that Nouriel and Barry have been way off with the timing of their predictions. So here is a theory or maybe more of a rhetorical question. That the super tanker that is the US economy is taking longer to turn than normal (not sure that it is turning slower than normal but work with me here) does that mean that whenever the next recession does come it will be longer in duration than normal?...

A Call To Arms!

Roubinians of the world unite, the Chicago number came in below 50, oil is above $63 and my neighbor is hoarding water and powdered food. Well that last one is not true. It is fascinating how the data points seem to alternate between good and bad, although I think the tilt has been toward negative data. My brother commented that Nouriel and Barry have been way off with the timing of their predictions. So here is a theory or maybe more of a rhetorical question. That the super tanker that is the US economy is taking longer to turn than normal (not sure that it is turning slower than normal but work with me here) does that mean that whenever the next recession does come it will be longer in duration than normal?...

Czech Koruna

Jyske Bank had a research piece on their site yesterday suggesting use of the Czech koruna as a funding currency for carry trades instead of the Swiss franc. They see visibility for the Swissi to go higher, not what you want a funding currency to do, because growth in Switzerland has been picking up and the SNB (the central bank) has been raising rates, albeit slowly. They like the koruna as a short because rates are very low, 2.50% for its repo rate, and they feel political deadlock will cause further weakness in the koruna. Well maybe, but the Czech National Bank forecasts inflation between 2.8% and 4.2% so I’m not sure how long rates will stay this low. The reason I bring this up is that I view various carry trade dynamics as expression of the market’s willingness to take on risk. While this is not a trade too many of us have access to, shorting the currency of an emerging (or maybe frontier) market is far from riskless. While I don’t know, I can’t imagine Jyske is the only bank willing to short the koruna. This chart compares the kiwi to the yen; the last three months have been good to the carry trade. While this pair might be the poster child for the carry there are several other pairs to look at too. The higher yielders include the Hungarian forint, Icelandic krona, the Aussie, Turkish lira, Brazilian real and the South African rand. The low yielders obviously are the yen and the swissi. The market’s willingness to take risk can be used as an indicator or...