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Claymore Advisors has teamed up with Robert Shiller's MacroMarkets to launch the first-ever "MACROshares." The new ETF-like contracts are tied to the price of oil, and began trading on the American Stock Exchange (AMEX) on November 30. The contracts are issued in pairs, with an "up" (AMEX: UCR) MACRO that rises in value when the price of oil goes up, and a "down" (AMEX: DCR) MACRO that rises in value when the price of oil goes down. The mechanism driving the funds is exquisitely complicated, but the gist is easy to understand. The paired funds transfer assets back and forth depending on the direction of the price of oil—imagine a teeter-totter, with one side rising as the other side falls. The funds don't hold any oil contracts—instead, they hold Treasuries as collateral, and then transfer those Treasuries back and forth as needed. The Treasuries also earn interest income, which is used by the funds as well. Unfortunately, the funds come with a hefty expense ratio of 1.6 percent. That will be offset by the interest income, but is still a substantial fee.
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