Tuesday, January 29, 2008

A New Financial Product-2

"In December Vanguard introduced an Extended Duration Treasury [EDT] fund, which owns zero coupon Treasurys with maturities of at least 20 years. The minimum investment is $5 million for the mutual fund. You can get a round lot of the ETF mirror fund for $9,930. ... Kenneth Volpert, in charge of debt management for Vanguard developed the Extended Duration Fund and ETF. He hopes in typical Vanguard fashion that small investors will stay away, since zeros are very volatile. 'It's twice the duration of our long bond fund, which is 12 years,' he says. 'It's risky'," Forbes, 28 January 2008.

I like this kind of financial engineering. The Funds are "risky", but so is holding dollars. The ETF sounds like an excellent vehicle to "become" Uncle Sam. How? By enabling individuals to make "long-term" dollar short sales! Just like Uncle Sam. If you can't beat 'em, join 'em!

No comments: