Nailed it

In early February I gave a presentation at the O'Reilly Money:Tech conference in New York. The show is about applying all these powerful new Web 2.0 technologies and data streams in financial markets. Just a fabulous few days. Anyway, with my presentation I wanted to do more than talk about hand-waving hypotheticals. I wanted to share something actionable. Something concrete.

So I made a trading call for the Chicago Mercantile Exchange Housing Futures Markets. The argument went something like this:

1. In the Fall of 2007 all the housing news was obviously, strongly bearish.
   
2. The futures markets (specifically the S&P Case Shiller Index traded on the CME) consumed all this news and traded accordingly: Down, down, down. The San Francisco MSA index that we cited for this case traded down to 203 for the November expiration Futures.
   
3. However in September and October of 2007 the Altos real-time real estate data showed that the November-announced number should come in around 206. That is, despite the in-fact crashing housing market, the futures market was too bearish!
4. Ahah! Had you acted on the Altos data, you'd have made money. As of end-of-January, though, this was looking backwards. For the punchline of my presentation, I wanted to look forward four months to May.
5. And, just like the fall, the bearish news dominated the headlines in December and January too. The markets digested the bad news and continued to trade down heavily. By January 31, the May 2008 expirations for the S&P CSI for San Francisco were trading around 185! Down 10% in two months!
6. So when we looked at the real-time Altos data, was the pattern the same as the fall, too bearish?
7. No! As it turned out, the futures markets weren't bearish enough! When I put the presentation together on January 31, the real time data was looking like May at easily less than 175. The number we put in the presentation was 170 for May.

Slide from my Money:Tech presentation February 6, 2008

Looks like we nailed it.

So, I hear you cry, how do I get in on this Altos action?! Two ways:

At the Money:Tech conference, while I gave the presentation, Fred Wilson twittered: "Simonsen says Sell Housing Futures!" So follow Fred or me on Twitter and maybe you'll be lucky to over hear a live market call

Or

[blatant sales pitch following] Subscribe to our brand new Real-Time Real Estate Derivatives Report. Data is updated every week and you can construct your own analyses to project trades for all 20 Case Shiller Markets AND all 25 Radar Logic RPX markets (which seems to have better liquidity, though it's OTC). No derivatives pro should leave home without it. Now, this report isn't available to just any average wannabe. This is for the playas. As of right now, you can't just grab it from our website. You have to inquire directly. email me and I'll send samples.