While I have the utmost respect for Robert Shiller, you all know him from the Case Shiller Housing Index, the new product he is helping roll out makes me nervous.

The product is called MacroShares’ Major Metro Housing Product. Here is the Wall Street Journal describing it:

MacroShares’ Major Metro Housing product, brainchild of economist Robert Shiller, will offer investors a way of betting on rising house prices by buying “Up” shares, or expressing pessimism via “Down” shares. Unusually, these won’t be backed with the underlying physical housing assets.

Instead, MacroShares will be tied to the Standard & Poor’s/Case-Shiller Composite 10 Home Price index. When the Up and Down shares float, proceeds will be invested in U.S. government bills to ensure liquidity. If the index moves up, the trust behind the Down shares will shift a corresponding portion of its assets to the Up shares trust, raising the net asset value underlying the Up shares. The prices should follow. WSJ.com.

What makes me nervous is that the Case Shiller index is tied to a product that Robert Shiller is running. One or the other is fine with the principle person, in this case Shiller, in charge. However, when you have an index that is open to interpretation combined with a product that needs to be sold on the street, trouble seems to follow.

Pressure from stakeholders to make the numbers work pop up, or timing issues become a part of the equation. Now again, I am not impugning Robert Shiller’s character in any way, but I prefer research to be kept separate from products being sold. When both come out the same door, problems always seem to follow.

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