Everyday Finance

November Highlights - Breaking New Records and Eating My Hat

noreply@blogger.com (Everyday Finance) — Thu, 03 Dec 2009 12:52:00 +0000

November was a great month from several aspects:

Traffic at my new blog Darwin's Finance broke another record and exceeded 40,000 views for the month even with the slow holiday week. Considering the fact that it's less than a year old and is growing by 10-20% per month or more, I'm excited as ever about the long term prospects. That's not to say I'm not excited about Everyday Finance as well, but things are more steady here as opposed to exponential growth given the constraints of the .blogspot platform and whatnot.

I had my first-ever triple digit day on Adsense. In effect, Google's Adsense is one of the ways bloggers earn income on the content which motivates us to create and disseminate the posts you've come to know and love. For whatever reason, everything just came together on the same day with respect to traffic, high income pages, etc. and resulted in a $127 day.

I have to eat my hat because after trashing gold multiple times in my posts on gold hype, better ways to invest in weak dollar trends, and the carry trade, I ended up buying a speculative/volatile gold miner Juniors ETF (GDXJ) anyway. I did fully disclose immediately via twitter and admit my shame in doing so (see my Trades), but I couldn't ignore the trend, regardless of the lack of fundamentals in my view. Since entry last week, GDXJ is up 16%.

The home finances are going well - continuing to invest in retirement plans and the kids' 529 plans and I put in place some home energy saving initiatives for the winter.
I'm loving the several hundred dollars per month we saved on our refi into a 4.625% mortgage. But I was blown away when I saw that you can now get a 0% down loan AND enjoy the home-buyer tax credit compliments of the USDA rural loan program.
The one caveat with my financial management is that I put aside a few hundred more than we spent in the Flex Spending Account this year. So, I've got to get creative and spend the remainder on these eligible FSA expenses by Dec. 31.

Aside from these tidbits, here are a few additional popular posts in Money and Investing from November I think you'll enjoy:

Investing:

$100 Signup Bonus at OptionsExpress Now!

787 ETFs Listed – Every Exchange Traded Fund Known to Man and Woman

Do You Invest in Companies You Find to be Morally Repugnant?

Advanta 11% Yield Investment Notes – Going, Going, Gone!

Time for High Yield Investments if Market has Peaked?

Money and Finance:

Today’s Financial Priority: Get a Free Credit Score from myFICO

Review: Flex CD Offers High Yield if the Dollar Tanks Against BRIC Currencies

Energy Saving Tips from the Dept of Energy – Pretty Darn Good!

Working Long Hours – Is it Worth it?

Cash for Caulkers – I’m Not Kidding. Latest Gov’t Giveaway Program

Abysmal Survey Results: Americans Don’t Understand Basic Financial Concepts

Why Do People Pay More Money for the Top of the Line Model? Incremental Value Analysis

Why do Pharmas Call Themselves Biotechs? You May be Surprised...And Annoyed

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Time for High Yield Investments if Market has Peaked?

noreply@blogger.com (Everyday Finance) — Tue, 01 Dec 2009 04:01:00 +0000

While investors that hung in there during the tumultuous March lows and beyond are surely satisfied with their 60%+ returns in the S&P500 from the bottom, there are several factors that make one question whether this rally has more legs and whether it's reasonable to assume stocks will continue to outperform other asset classes in the intermediate term from here. What am I talking about? Well, there are a few things working against another 15% leg up in US equities:

The intrayear runup we've seen is the most pronounced that we've seen in 75 years. It's unlikely it will continue unfettered by at least a single significant correction.
The market is not being driven solely by fundamentals. Mutual fund managers are playing catch-up for their year-end holdings disclosure, money's coming off the sidelines from Treasuries and savings accounts back into risky assets, and the Fed's creating another bubble with cheap money which will snap back as soon as the market senses a rate hike. It's easy to show year over year employment with flat sales and 10% fewer employees due to layoffs.
Unemployment is over 10% and rising. No government intervention seems capable of artificially turning it around. In fact, the constant government meddling and bailout philosophy may only result in prolonging the recovery since decision makers and managers simply cannot predict which tax law changes or bailouts are coming next.
The weak dollar has been great for multinationals (many S&P500 stocks) since earnings overseas will translate into higher profits denominated in US Dollars. However, the dollar cannot drop forever and on a long term basis, a very depressed dollar is not good for the economy in terms of inflation, energy costs, cost of living depression and the reverse effect when the dollar recovers.
Take a look at the chart from the March lows. While SPY (S&P500 ETF) barely broke past the prior October high of 111, it has dipped back below and hasn't been able to break out. We've been range bound for several sessions now and with so many emergent issues from Iran laughing in the face of international pressure to stop their nuke program to a prolonged stay in Afghanistan to potential passage of a massive health care bill that will burden the economy for generations with debt that will be difficult to repay.

If these factors give you pause but you have liquid cash to invest, there are several high yield options at your disposal, which in some cases, present a compelling bargain from historical prices even in light of the recent runup in equities and the current low interest rate environment.

Highest Yielding Savings and CD Accounts - There are a few interesting CD alternatives out there. First, here's an Ally Bank review demonstrating what happens when a bank doesn't play nice with competitors. Apparently, their rates are "too high" compared to their peers, so they had to file a complaint to Sheila Bair, Chairman of the FDIC. That alone is an endorsement for above-market rates worth considering. Additionally, with the dollar continuing to slide against foreign currencies, there's an interesting currency flex CD that will return more when BRIC economies see their currency rise against the dollar. In the event the dollar rallies, you still get your principal back, with FDIC insurance to boot.
Municipal Bonds - This article on high yield muni bonds and their various investment vehicles provides plenty of options to capture tax-free income with diversified risk in some top performing muni bond ETFs. While the yields are not what they used to be as markets recovered from the abyss, and you'll want to avoid focused muni ETFs for particular states like California, which adequate protection and research, good tax-free bargains can be had, which may see an additional boost in share price if taxes go up next year.
High Yield Bonds - I reviewed the High Yield Bond ETF (HYG) that I favor and hold currently, which was yielding 12% upon entry, but still yields 10%. Now, these high yield ETFs are otherwise known as "junk bond" ETFs and we've seen historically that at the tail end of a recession, junk debt defaults do rise considerably, so the party may not last forever. For a more conservative approach to much larger names with BB ratings and above check out this list of high yield corporate bonds with payouts over 8%.
High Yield Stocks - There are some great high yield stocks out there. Recently, I compiled this list of high yield large caps that with dividend yields over 5% and market caps over $25Billion - and they're not Financials for the most part, since most of them had to cut dividend payouts upon receipt of TARP funds.
Stock Option Speculation Strategies - There are various means to derive income from selling options in a peaked market for the premium that come with varying degrees of risk. I've outlined some low cost option strategies that span the range of high risk to lower risk, all of which requiring very low initial cash outlays to open the position.

Disclosure: Long HYG (High Yield Corporate Bond ETF) and PMF (muni bond ETF); also a put ratio spread position on SPY.

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Best Performing ETFs Week Ended 29-Nov-2009

noreply@blogger.com (Everyday Finance) — Mon, 30 Nov 2009 02:59:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs (and ETNs) out there (check out this ETF Ticker List full of ~800 - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, it was metals and natural gas taking the lionshare of gains. I made sure to include both conventional and leveraged ETFs in this week's hot list:

Hot List Leveraged ETFs

FAZ - Direxion Daily Financial Bear 3X Shares - Up 8% - You can always count on having either FAS (triple long) or FAZ (triple short) Financials on the list given the volatility in the Financial sector and the constant news cycle regarding either more government oversight, more leadership turnover, TARP paybacks and more. In the near term, it's conceivable that Financials just continue to run. After all, it's looking as though they'll be borrowing at zero and lending for much more for at least another year and the comps from the year prior will continue to look stellar. Amazingly, the mortgage market continues to be propped up by the likes of mortgage modification programs, home buyer tax credits and amazingly, home buyers can still get 0% down loan programs (actually make money on a purchase when considering home buyer tax credit) under an obscure USDA farm loan program (and no, most people taking advantage of this don't own a farm). The question is, when (or if) the government assistance dries up, what that portends for the financial sector at large, which still has skin in the game. YTD, FAS is up 175% and FAZ is down 41%. Not for the faint of heart.

SRS - ProShares UltraShort Real Estate (ETF) - Up 6% - In a flat week for the S&P500, as noted above, Financials didn't fare well, nor did Real Estate. Jitters over redefaults and a breather from recent runups in the sector led to a mild decline for the week in this leveraged ETF.

* Be mindful that there are several leveraged ETFs (by sector/ticker), but investors that are unfamiliar with these instruments should be aware that they lose value over time due to the mechanism of daily rebalancing, which isn't intuitive until you see an example. Therefore, these should really be treated as trades over perhaps a few days, as opposed to "investments" for any great period of time.

Hot List - Sector ETFs (no leverage)

PGM - iPath DJ AIG Platinum TR Sub-Idx ETN - Up 12% -This Platinum ETN continues to run. For a non-leveraged play on precious metal strength/weak dollar trending, PGM is up 88% YTD vs. 33% for GLD, the predominant gold ETF.

GAZ - Barclays iPath Natural Gas - Up 7% - Natural gas has been depressed for some time given that its demand profile is divergent from that of oil and demand in the US has been very light given the recession. GAZ has actually lost half its value YTD. However, there are attempts from various camps to turn the US economy into a natural gas economy and move away from imported oil. Whether this ever comes to fruition in our lifetime is yet to be seen. But, if the administration signals that there's interest in considering a heavier reliance on natural gas, you could expect to see a rapid snap upward. As a consumer, if your expenditures for energy are influenced heavily by natural gas, you may want to consider this or other methods to hedge energy prices for your household.

GLD - SPDR Gold Trust - Up 5% -You can't turn on the TV or radio these days without hearing a pundit espouse the benefits of gold, the gold bubble forming, or whatever gold-oriented agenda their pushing...followed by commercials for gold exchange/retail companies. While gold is correlated with a weak US dollar trend, there are a multitude of weak dollar ETF plays including other precious metals that actually have real-world utility, as well as currencies, treasuries and a even flex CD that rises in value as the dollar declines against BRIC currencies (innovative!). GLD has gained 12% over the past month and 23% over the prior 3 month period.

Disclosure: No position in the aforementioned ETFs.

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Black Friday Deals and Resources

noreply@blogger.com (Everyday Finance) — Thu, 26 Nov 2009 02:29:00 +0000

With Black Friday upon us, I thought I'd share some useful resources and online deals since most of the brick and mortar Black Friday come-ons are scams just to get you in the store. If you don't catch the fine print, that $400 LCD TV is often only one of 4 in a store with 500 people in line since dawn. You might as well just shop online to get the real deals.

Start with Amazon: They have a weeklong sale with massive discounts - it's pretty cool to see what's up on the front page, how many items remaining, etc. Lots of great items. I'd start by opening a window with Amazon, then trying out some of the sales below to see if you can beat what you're looking for - click below for the Black Friday Page:

Stores with Great Black Friday Deals:

Electronics:

Newegg.com: BLACK FRIDAY! Ready, Set, Shop at Newegg.com, expires 11/29

Buy.com: Black Friday 2-Four Day Sale Blu-ray Movies from Buy.com! Exp 12/17/09

Dell: Dell Small Business Black Friday Sale

At MacMall, you can actually get better pricing than through the Apple Store Direct!

Must-Have iPhone Apps for Black Friday if you Must Shop in the Real World:

ShopSavvy, a free app for the iPhone: The app allows users to scan the barcode of an item with the iPhone's camera. It then pulls up listings for that item at competing retailers with prices and reviews. This is pretty incredible technology. Try it out!

Mall Maps ($2.99) - You Are Here, a portable database of mall floor plans, store lists and other information intended to help shoppers avoid some headaches this holiday. Pretty cool; I hate having to go find the stupid map in the mall to find out I just went 10 minutes out of my way.

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What's your Money Mindset?

noreply@blogger.com (Everyday Finance) — Tue, 24 Nov 2009 13:00:00 +0000

With Black Friday on the horizon, I thought I'd pose the question -

What's your Money Mindset?

Do you derive pleasure from saving money on something? I do. Many people are excited by spending money; I enjoy saving it. I also enjoy being generous and helping others as well. My overriding theme in life is reasonable consumption mixed with reasonable frugality in an attempt to balance the security of a fully funded future with the enjoyment of life experiences with friends and family while I'm young enough to enjoy and remember them.

This is the dichotomy that may seem confusing to people at either end of the spectrum - i.e. people that are so intent on saving money in such miserly fashion that they lose all site of humanity and focus solely on enriching themselves at the expense of others…or even themselves (i.e. terrible tippers, terrible gift-givers, petty thieves, the "extreme-cheap" - those that are so cheap that it annoys and impacts relationships of those around them, etc.).

Conversely, at the other end of the spectrum are the euphoric spenders who's only pleasure is derived from the acquisition of material possessions. They're down most of the time and they're over the top lit up when shopping. Shopping is their vice. They'll be forever "chasing the dragon" for that first hit, which they'll never achieve, yet they will eternally seek to replicate the euphoria they find to be so elusive. So, they don't really derive any value from saving money because that's not an objective in the near term.

Saving money is a long term benefit so it can be used for a rainy day, early retirement, toward your child's college fund, etc., whereas the instant gratification of purchasing a 77th pair of designer shoes or the latest early-adopter gadget that will be obsolete in 6 months is where they're focused.

So, where do you fall? What is your assessment of your money mindset? What strategy do you have in life for money management and behavior? What kind of money habits do you endorse?

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Biggest Gainer ETFs Week Ended 22-Nov-2009

noreply@blogger.com (Everyday Finance) — Mon, 23 Nov 2009 04:34:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs (and ETNs) out there (check out this full ETF List of ~800 - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, it was metals, metals, metals. I made sure to include both conventional and leveraged ETFs in this week's hot list:

Hot List Leveraged ETFs

AGQ - Ultra Silver ProShares - Up 13% - This is a 2X daily leveraged ETF tracking the return of silver. This one's been a regular on the hot list several times recently, as silver is more volatile than gold, hence, the runups have been even more pronounced. You'll want to check out how silver and other precious metal ETFs are doing in comparison to gold - much better! It's primarily one of many weak dollar ETF plays, but gold tends to get all the press. If you're only investing in the play, silver and other ETFs may actually do much better for you. AGQ is up 119% YTD.

BDD - PowerShares DB Base Metals Dble Long ETN - Up 8% - Aligned with the overall trend in metals strength last week this broader double long ETN for base metals turned in a strong week flat equities market. BDD is up 177% vs. a 21% return for the S&P500 YTD incidentally. As you can see, base metals have been outperforming precious metals.

UGL - Proshares Ultra Gold - Up 6% - Essentially the same play as AGQ, but it's a gold ETF. While the prospects of a 2x return sound appealing, make sure you're familiar with the ins and outs of leveraged ETFs and the fact that over long periods of time, the shares of these ETFs tend to perform at less than 2x as value is eroded due to daily balancing in volatile markets. In the case of silver and gold ETFs, the leveraged type have been able to maintain their gains over time due to a steady upward trend which overcomes daily degradation in value. However, if the trend breaks or even just goes flat, you'll see the decay I cited over time.

Hot List - Sector ETFs (no leverage)

PGM - iPath DJ AIG Platinum TR Sub-Idx ETN - Up 8% -This Platinum ETN continues to run. For a non-leveraged play on precious metal strength/weak dollar trending, PGM is up 52% YTD vs. 31% for GLD, the predominant gold ETF.

PPH - Pharm Holders ETF - Up 4% - For a break from the metals sector, I noted that the large cap pharma index was up on the week. While it may seem counter-intuitive that as we're on the eve of the passage of healthcare reform legislation which is anything but beneficial to healthcare companies at large, it appears as though certain segments of the healthcare economy will be impacted in different ways. It is generally believed that while pharmas may see some price reductions, they'll likely see increased volumes given the universal coverage, so it may be roughly a wash at the end of the day, which is a sigh of relief for an industry wrought with lawsuits, threats of imports from overseas and generic competition. With one major wildcard potentially mitigated, analysts are starting to like the sector a bit more than when the initial healthcare debate began.

UGA - United States Gasoline - Up 3% - Gasoline prices were on the rise last week. Since this product uses futures contracts and attempts to track the prices, it may not exactly match the changes in price as reported by AAA, but it is surely the best proxy for US prices at the pump. Personally, I've used this ETF before to hedge energy prices for our family's finances. I had previously sold puts on the Oct 28 strike contract (which just expired last month as desired) and I rolled a new one this month.

With metals stealing the stage of late due to the continued weak dollar trend, another interesting investment you'll want to check out is the flex CD that derives its return from currency strength of BRIC economies vs. the US dollar (which has been in the cellar in recent months).

Disclosure: As noted, the only active holding is a naked UGA call to hedge energy prices.

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Vonage - Shame on You - And Now You're Paying For It

noreply@blogger.com (Everyday Finance) — Wed, 18 Nov 2009 03:42:00 +0000

In 2008, I wrote this article chastising Vonage for a horrific experience I had in attempting to cancel my account. Well, lo and behold, Vonage disclosed this week that it would pay $3 Million to settle an investigation of its business practices in 32 states. As part of the settlement, Vonage agreed to provide refunds to affected customers and to change its business practices.

What NOT to do as a business

It's really unfortunate that it takes legal action in order to get a company to do the right thing - or to just stop being evil, really. Perhaps that's why we're so litigious here in the US, it's the only way to get anything done sometimes.

Look, I'm not the first person to experience this and I clearly wasn't the last given the investigation and size of the award. With griping bloggers flooding the interwebs with complaints of corporate mistreatment, you can't tell me Vonage 1) wasn't fully aware of the amount of ire their customer service practices were generating and 2) knew exactly what they were doing. Where's the accountability? Apparently, they didn't admit to wrongdoing - they're just being fined for no good reason. I just hope that when Vonage folds (come on, how long are they going to try and keep this going), the miscreants that oversaw these operations are asked to explain their rationale for this systemic mistreatment of customers during their prospective employer interviews.

While $3 Million isn't really much money, especially for the thousands upon thousand of customers that have had to endure this inane mess of a system, neither is the dollar stock status that Vonage now enjoys.

Poetic justice.

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Fast Moving ETFs Week Ended 15-Nov-2009

noreply@blogger.com (Everyday Finance) — Mon, 16 Nov 2009 03:28:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there (check out this full ETF List of 787 and counting - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, Real Estate, Tech and Emerging Markets led the way in an overall up week for equities. I made sure to include both conventional and leveraged ETFs in this week's hot list:

Hot List Leveraged ETFs

DRN - Direxion Daily Real Estate 3x - Up 19% - This 3X Return Real Estate Fund was the hottest ETF from last week, up an astounding 19% after a 13% return the prior week. DRN is 107% since launching in July. While this sounds appealing, note that ETFs tend to launch when their underlying sectors are hot. Real estate is just emerging from a near-collapse in the US and is rallying now. The way these leveraged ETFs work, on the upside, due to daily balancing, they can actually exceed a 3X total return over a brief period of time, if the run is virtually uninterrupted (which this one isn't - DRN is actually down 20% from its peak in September). However, over a long period of time, as a trend reverses (as they ultimately all do), the 3X daily return funds do not return anything near 3 times the underlying index due to daily rebalancing. In fact, over long periods of time, they often lose as much or MORE value than the underlying sector, even during a net positive upswing. I always caution investors to understand the risks and dynamics of these poorly understood ETFs before trading (I don't use the word "investing" with 3X ETFs - see why?).

TYH - Direxion Daily Technology Bull 3X Shares - Up 10% - This 3X Tech ETF has been a stalwart member of the hottest ETFs updates, as Tech has outperformed most other sectors in US equities. With productivity through the roof and companies coming out of this recession leaner than ever while remaining employees doing everything they can to avoid a layoff, what corporations are spending money on however, is technology to further boost productivity and allow them to remain lean on the payroll expense given the uncertainty of the return of the consumer. Year to date, the Nasdaq is up 37% vs. an 21% gain for the S&P500 and this ETF is now up 197% on the year and 364% since the March lows. The top 3 underlying holdings are Apple, Cisco and Google.

EDC - Direxion 3X Emerging Markets - Up 10% - With equities rallying globally and the higher Beta that the emerging market bourses carry (full emerging markets ETF list here), not only did they take it on the chin last year on the way down, but during the recovery, they are rocketing back up at a much faster pace than US equities. EDC is up almost 10X the S&P500 during the 2009 YTD period at 193% vs. 21% for the S&P500.

FAZ - Direxion Daily Financial Bear 3X Shares - Up 7% - You can always count on having either FAS (triple long) or FAZ (triple short) Financials on the list given the volatility in the Financial sector and the constant news cycle regarding either more government oversight, more leadership turnover, TARP paybacks and more. In the near term, it's conceivable that Financials just continue to run. After all, it's looking as though they'll be borrowing at zero and lending for much more for at least another year and the comps from the year prior will continue to look stellar. Overlay these basics with a continued weak dollar trend, which bodes well for all companies deriving a decent portion of income from overseas which many in the index do and it's a perfect storm - of upward share movement; prone to major corrections at any time though. Caveat Emptor.

Hot List - Sector ETFs (no leverage)

ICF - iShares Cohen & Steers Realty - Up 7% -Seeing as how DRN was on the top of the list for leveraged returns, it comes as no surprise that the top rated non-leveraged ETF was also a real estate fund. Coming off the March lows, ICF is up 102% vs. the also astounding 60% return for the S&P500. If you're looking to play the real estate rebound in a non-leveraged fashion, ICF is a decent proxy. VNQ (Vanguard) also performed well on the week at up 6% and has a lower expense ratio.

RSX - Market Vectors Russia ETF - Up 6% - Russia been on a tear, up 160% since the March lows. Viewed as on the verge of default in early 2009, with oil stabilizing over $70 per barrel along with the global economy recovering, markets have viewed Russia's near-collapse in equities as overdone and investors have been buying back in in force. The ruble has recovered against the US dollar indicating the worst may be over from a devaluation standpoint.

SEA - Claymore/Delta Global Shipping - Up 6% - With a steady runup last week totaling 6%, this shipping ETF hasn't been keeping up with the S&P500 over the prior 3 and 6 month periods. However, shippers are notorious for throwing off high yields given the nature of their business. As such, the yield on SEA currently stands at 4%. If you're in it for yield and are thinking perhaps the markets move sideways for a bit, consider high yield municipal bond ETFs which are also tax-exempt from dividends, or high yield corporate bonds.

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New Gold Miners "Juniors" ETF Launches: As Volatile as it Gets

noreply@blogger.com (Everyday Finance) — Thu, 12 Nov 2009 03:32:00 +0000

Van Eck has launched a new ETF focused solely on smaller sized gold miners and explorers than the predominant gold miners ETF GDX. This new Juniors ETF will trade under the ticker GDXJ. According to Investors Business Daily, here are some key stats:

63%, of the components are based in Canada, followed by the U.S. with 22%, Australia 11%, South Africa 2%, China 1% and the U.K. 1%
expense ratio of 0.60%
GDXJ's underlying index spiked 92.4% this year through Oct. 30.

Compare that performance with the gold bullion ETF GLD at 19% and GDX at 24% over that same period. This is because of the speculative nature of some of these juniors that explore for years with no finds and then spike massively upon a find announcement. As an example, the fund's largest holding CDE is up 128% during the Oct 30 YTD period. I've made no secret of my thoughts on gold being more of a weak dollar trade than anything else and that silver-platinum ETFs are better performers than gold if it continues to run and currency ETFs are the base case for continued US dollar depreciation, but I'm going to have to eat my hat if this trend continues.

While I won't be partaking, the prospects for the fund appear to be massive risk and massive volatility which bodes well for a continued upswing in the underlying price of gold and complete ruin if gold returns below $1000.

Are you Buying?

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Fast Moving ETFs - Last Week's Hottest (08-Nov-2009)

noreply@blogger.com (Everyday Finance) — Sun, 08 Nov 2009 21:43:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, emerging markets and commodities continued to show strength while the S&P500 ended with week with a respectable gain of 3.2%. I've made sure to include both some leveraged ETFs with their outsized gains (but take note of leveraged ETF risk of value destruction over time due to daily rebalancing) as well as non-leveraged traditional sector ETFs.

Hot List Leveraged ETFs

EDC - Direxion 3X Emerging Markets - Up 17% - With equities rallying globally and the higher Beta that the emerging market bourses carry, not only did they take it on the chin last year on the way down, but during the recovery, they are rocketing back up at a much faster pace than US equities. EDC is up almost 10X the S&P500 during the 2009 YTD period at 167% vs. 18% for the S&P500.

AGQ - Ultra Silver ProShares - Up 12% - This is a 2X leveraged ETF tracking the return of silver. This one's been a regular on the hot list several times recently, as silver is more volatile than gold, hence, the runups have been even more spectacular. You'll want to check out how silver and other precious metal ETFs are doing in comparison to gold - much better! It's primarily one of many weak dollar ETF plays, but gold tends to get all the press. If you're only investing in the play, silver and other ETFs may actually do much better for you.

TYH - Direxion Daily Technology Bull 3X Shares - Up 10% - This 3X Tech ETF has been a stalwart member of the hottest ETFs updates, as Tech has outperformed most other sectors in US equities. With productivity through the roof and companies coming out of this recession leaner than ever while remaining employees doing everything they can to avoid a layoff, what corporations are spending money on however, is technology to further boost productivity and allow them to remain lean on the payroll expense given the uncertainty of the return of the consumer. Year to date, the Nasdaq is up 34% vs. an 18% gain for the S&P500 and this ETF is now up 170% on the year and 320% since the March lows. The top 3 underlying holdings are Apple, Cisco and Google.

TMV - Direxion Daily 30-Year Treasury Bear 3x Shares - Up 8% - This 3x leveraged ETF seeks to actually exploit improving market conditions that result from a flight FROM safety by driving up the yield (and price lower) on 30 year Treasuries. Recall that in 2008, we were seeing record lows for yields on Treasuries and in some cases, investors were accepting a negative yield on short dated securities just to have somewhere to stash their funds during the storm. Now, Treasury yields have risen dramatically since earlier in the year and it's possible that the easy money's been made already. However, if you foresee a continued exodus from Treasuries into more risky assets, this and the other Short Treasury ETF plays would be the best move.

Hot List - Sector ETFs (no leverage)

GDX - Market Vectors Gold Miners ETF - Up 12% - This ETF was an interesting study in divergence from the underlying commodity. Over long periods of time, GDX roughly tracks the returns of gold, with the ETF GLD as a proxy. However, last week, GDX returned 12% vs. a return of 5% for GLD. In fact, YTD 2009, GDX has actually outperformed GLD by a margin of 41% vs. 24%. If you're a believer in the displacement of the US Dollar as the world's reserve currency, which would bring a rapid increase in the price of gold (which is why we may be seeing the continued rise of late in anticipation of this eventuality).

KOL - Market Vectors Coal ETF - Up 8% - With a 8% move last week, this ETF continued its tear for the prior 6 months, up 50% vs. a 18% for the S&P500 and 26% for the USO oil ETF, another energy proxy. With a US recovery in hand and coal being the practical source of energy in the US for the foreseeable future, regardless of political promises of "green energy, green jobs" and other worthless promises unsupported by market forces, the underlying companies have been rallying.

EWZ - iShares MSCI Brazil Index - Up 8% - Brazil has staged a nice recovery out of the March lows and continued its ascent into November, up 8% last week. EWZ is up 113% on the year vs. 18% for the S&P500. Brazil is one of many hot emerging market ETFs listed here.

XBI - SPDR S&P Biotech - Up 7% - With large pharma continuing their buying/partnership spree and the typical winter biotech conferences coming up, interest is brewing again. Individual Biotechs are prone to single day pops of 30% and more like the binary event associated with HGSI's lupus drug results this week as I had called last Friday with an option spread position that gained close to 100% 1 trading day later. However, as a sector, XBI has been a bit anemic this year, underperforming the S&P500 over the prior 6 month and YTD periods.

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Launch of a Risky and Perhaps Very Profitable Emerging Markets ETF

noreply@blogger.com (Everyday Finance) — Sat, 07 Nov 2009 00:37:00 +0000

What do you get when you mix India with Small Cap Stocks? Well, that would be the Market Vectors India Small-Cap ETF according to this week's BusinessWeek print copy. If a broader emerging markets ETF for small caps is any barometer, the SPDR S&P Emerging Markets Small Cap ETF (EWX) is up 80% YTD. Compare that to 59% for iShares MSCI Emerging Markets Index (EEM) a comparable proxy for emerging markets stocks (refer to this list of all Emerging Markets ETFs) and 18% for the S&P500 (SPY).

Of course, with massive returns like this comes greater volatility and risk of implosion. If you have a spot for speculative investments in your portfolio though, this one may be worth holding for the long term since both emerging markets and small caps in general tend to be more volatile and hence, provide supercharged returns in up markets over time.

At the moment, no word on when this new ETF will be available or what the ticker will be. The Van Eck Fund Filing page is devoid of any information. I'll be sure to update as soon as the information becomes available, so be sure to Subscribe to RSS or follow my Twitter.

Source: BusinessWeek Edition 16-Nov-2009

Disclosure: No position in EEM. Ratio Put Spread hedged position in SPY.

The Carry Trade - What is it? How to Play it?

noreply@blogger.com (Everyday Finance) — Thu, 05 Nov 2009 03:00:00 +0000

There's been a lot of press lately about the Carry Trade, and like all catchy trends in the investing world, by the time it's a routine fixture on CNBC and blogs, the smart money's been made and retail investors are left holding the bag when the bubble bursts (anyone recall housing 2007, oil 2008?). Conversely, the trend is your friend and given the continued decline of the US dollar of late, we may very well see this trend continue for months. In a flat or downward stock market following a 60% move from the bottom, the carry trade may be a nice place to earn a double digit gain in the meantime.

As outlined in this article on Currency ETFs, there are some currencies that are making great gains against the US Dollar and investors could have captured some nice low-correlation gains alongside stock gains in the past few months and this may continue.

What is the Carry Trade Exactly?

Essentially, because the US has a near 0% interest rate and other economies have higher interest rates or are even raising them due to the relative strength and confidence in their economies (like Australia), currency ETFs such as FXA (Aussie Dollar) are on fire. This year, you would have even done better in FXA than the S&P500, even given the recent rally.

Chart 1: YTD Return FXA +28% vs. S&P500 +15%

With all the talk of the US Dollar being displaces as the reserve currency of choice, we've seen gold rally to all-time highs, which is very much a function of the weakening dollar (see why silver-platinum ETFs are even better investments than gold in a weak dollar environment) as opposed to a supply shortage or industrial demand. Meanwhile silver and platinum benefit from actual real-world industrial utilization and are more leveraged to a weakening dollar even than gold.
However, aside from a commodities trade or trying to pit Australia alone vs. the US, another ETF that goes long the highest yielding currencies and short the lowest yielding currencies is DBV - PowerShares DB G10 Currency Harvest. This one is considered a broader play on the carry trade rather than betting on the relative strength of individual currencies.
Carry Trade Bubble Risk

To be clear, playing the carry trade this far into the dance is not without risk. Prominent B-School professor and oft-doomsayer Roubini has been warning of the imminent collapse of the mother of all carry trades. The video's a bit long, so I'll summarize. He warns that when the carry trade reverses (the bubble bursts) and investors have to cover their short dollar positions, panic will ensue and investors will rush for the exits. In doing so, the dollar will rally to the tune of 25% or more and overseas currencies will crash precipitously. Those that are long foreign currencies and short the US dollar will get crushed. Indirectly, all risky assets will suffer including stocks and bonds like we saw in 2008 into 2009.

This would be akin to what we saw during the global collapse and complete capitulation of the investment world at large in March 2009 where even the weak dollar-gold correlation broke down for the first time in years - and then promptly recovered as we're seeing now. Therefore, if you're a contrarian and want to wait it out for this bubble to burst, you'd want to stay out of commodities, stay out of the foreign currency ETFs and just go long the dollar or Treasuries.

Disclosure: No positions in currency ETFs. Engaged in hedged Treasuries ETF strategy that is net neutral.

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October Highlights - 100% Overnight Trades, Traffic Up 50% and More

noreply@blogger.com (Everyday Finance) — Wed, 04 Nov 2009 03:06:00 +0000

It was a great October from several aspects:

Global equities took a breather for the month, but thanks to some nifty hedging and smart trades, the portfolio continued to run. For instance, just this Friday, I tweeted the following knowing there was a nice binary event in play for Monday:

Trade: Spread on HGSI Nov 20/25 on Monday big news. 100% gain or loss by Mon. Details on spreads in recent option post http://bit.ly/2fdOFc

-Well, on Monday shares opened up 35% and HGSI hit $28 today for a virtual 100% 2 day gain on the play. Not a bad trade.

I'm also working on a hedge strategy that's been performing great - and I'm ready to unveil it. I just need to get around to doing it justice with the right visuals, in depth description and requisite risk highlights. Look for it this month!
The blogs are both performing great! Total revenues for Darwin's Finance and Everyday Finance broke another all-time record. While things had been steady in September at Darwin's Finance, traffic skyrocketed to 40,000 views in October, better than a 50% monthly growth rate. If only I could repeat that month after month!

Don't get me wrong - I'm not in it JUST for the money, but being the economics-minded students of behavioral science you all are, you surely realize that it doesn't hurt when there's an economic incentive to further motivate you to continue doing something you already love. Note that if any of us were in it for the money, nobody would tough it out through the first 6 months of blogging since you literally make no money when you start - single penny. Not one click for weeks. It's a long haul, but I think it's good to highlight financial rewards rather than pretend I'm not making any money and claim "I just like to cover my hosting fees". Just sayin' - profit isn't a dirty word.
I've been making some great design changes to the new blog, loving WordPress and the Thesis theme which just released a new update with even more easy to customize features.
And I'm still employed! No joking around - more and more of our friends and acquaintances have found themselves unemployed in this economic downturn and I often reflect on how fortunate we are to be in a position where I'm gainfully employed and we have a decent emergency fund and savings established in the event of a layoff.

How'd I Increase Traffic 50% in 1 Month?

Primarily, with content people enjoy! And of course, some promotional help from readers like you, and friends in the blogosphere. Here are the most popular posts of the month by traffic, comments and my own biased opinion! Since they're split between both blogs and you may only follow one, make sure to check some of these out, you may enjoy!

9 Money Habits to Live By

How to Get Your Market Losses Back Now (BullShit!)

Gold Hype - You're Being Taken for a Ride

How Living Paycheck to Paycheck Can Cost you Thousands

Will the US Dollar Be Replaced as the World's Reserve Currency? What it Means

Apple Covered Calls - What Happens When They're in the Money?

Family Money - Favoritism vs. Fairness in Wills, Gifting and More

3 Low-Cost Stock Option Strategies for Speculation

12 Quirky but Effective Ways to Avoid the Swine Flu

How to Lose 90% in an ETF Fast

Swine Flu Stocks - Where are They Now?

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Why do Pharmas Call Themselves Biotechs? You May be Surprised

noreply@blogger.com (Everyday Finance) — Tue, 03 Nov 2009 13:18:00 +0000

There's a particularly annoying trend in the drug business whereby companies that aren't in the biological manufacturing business refer to themselves as Biotechs. To some, this may seem like splitting hairs. To me, it is disingenuous and may be fooling investors into buying into a business model that doesn't live up to its name.

My first glimpse of the practice was during my MBA program when I took a course entitled Biotech Commercialization and it was an elective geared toward the Biotech option in the MBA program. I thought I was taking a course dealing with relevant issues facing a biological manufacturing company and the commercialization process which is the series of 10 or more years from concept to manufacturing utilizing complex biological processes to regulation by CBER, the Biologics arm of the FDA, to the submission of a BLA as opposed to an NDA, to a business model commensurate with Biologics as opposed to a typical Pharma commercial model, clinical trial topics relevant to biologics, etc. The adjunct professor was hailed as an officer and executive of a major "Biotech" company. Well, about two courses in, I realized I was duped and I was being taught a class in pharmaceutical commercialization from a guy from a small drug company that decided to call themselves a "Biotech" instead. It turns out they were a one-hit wonder (well, the drug wasn't even approved yet and still isn't) with a single DRUG that all his lectures were based on. He was basically going through the tried and true pharma model and we didn't learn a thing about the Biotech industry - the REAL Biotech industry. The same was pretty much true of all the electives in the Biotech arm of the program. While I found this to be personally annoying, I see the same mislabeling occur in the mainstream press, from stock pundits on TV and people that just aren't aware of the difference.

First, let's talk about some of the differences between the terms "Biotech" and "Pharma":

Biotech is cool and Pharma's evil. Think of it as Google vs. Microsoft. This is what your politicians will have you believe and you can even find hippie college students that are destined to work in the cool biotech hubs in California and Boston while claiming they wouldn't be caught dead at a "Big Pharma". Even Cramer was always touting that under Obama, Biotechs would be winners and Pharmas would be losers.
Biotech relies on biological manufacturing processes to produce their products while Pharma utilizes chemical synthesis - in general. While there are sometimes some fermentation processes for a small molecule product and biological products surely require various chemical treatments and separations throughout the process, the overall processes are very much different. Pharmaceutical processes are generally referred to as "small-molecule" since the active is a chemical, whereas a Biologic is a large molecule since it's often a protein, a polysaccharide, an antibody, or some other biologically derived material.
Biotech is cutting edge and Pharma's old school. This would be an over-generalization, but in many cases, it has some truth to it. Many pharmaceutical processes produced today are employing similar processes that were utilized 30 years ago to produce drugs. Meanwhile, companies are still finding ways to entice biological matter to behave in ways we never imagined - to improve yields, characterization, consistency, potency, whatever it may be. Biological products are often injectibles or infusions, whereas drug products are often solid oral dose. The difference? Massive differences in risk to the patient in the manufacturing process - and hence, regulatory oversight. If you're injecting someone with a syringe and there's a single USP pathogen in there, it could mean death once it gets into their bloodstream. With a tablet going through the digestive track, the risk is much lower.
Costs: While big pharma is often vilified for their pricing and seniors want their drugs for free, the biotech model is often one of seemingly truly exorbitant pricing to the tune of $10,000 per month or more for treatments. In many cases, it may be a cancer drug that extends the patient's life by 6 months, but ends up costing insurers/families upwards of $100,000 for a regiment. If I'm the guy looking at a terminal illness and have the means, surely I'd want to enjoy an extra 6 months with my family. However, as more and more treatments are developed and as our population continues to age, is this sustainable?

Why is it Important to Distinguish Between True Biotechs and Pharmas

All other things being equal (commercially), it is much more difficult to manufacture a biologic than a pharmaceutical. Take a look at the trouble multiple capable and established players in the vaccine space are having manufacturing the H1N1 vaccine. People are clamoring for a vaccine by the millions while the companies are helpless to improve their yields. Sometimes, a particular strain just doesn't do what you want it to. Biological processes are particularly difficult to design, control and maintain consistently. Drug processes - not so bad.
This being the case, if you're working in Biotech Manufacturing, there's probably a lower likelihood that your job is going to be outsourced than if you're working in a pharmaceutical plant. While there are dozens of API (active pharmaceutical ingredient) plants in India and China manufacturing upstream components for drugs ultimately sold in the US and the rest of the world, there are virtually no biologics coming out of either country into the US. None, actually that I'm aware of, but there may be a handful that have been approved in the past couple years, as opposed to hundreds of API and drug formulation steps. Large US Pharmas are actually gobbling up Biotech assets by the mouthful while shedding pharmaceutical plants. Every single legacy pharma is doing it and it's unlikely this trend will reverse.
Different Business Models: While the patent law surrounding small molecules is pretty straightforward (at the end of the patent, many generics enter the space and pretty much wipe out sales of the innovator company by undercutting the price), for biologics, this is still evolving. To date, there's still much debate on biogenerics given the technical difficulty in both replicating the manufacturing process and then, proving the efficacy in patients. For this reason, especially if your product is in the peak/mature phase now, it's much better to be making a biologic than it is a small molecule.

Now, let's talk about why people confuse the two - or startups deliberately mislabel themselves as Biotechs when they're not.

Coolness Factor - While executives aren't in the business of being cool per se, they don't want their startup to be viewed as just another old-school drug startup. Biotech has a certain ring to it. It sounds innovative, exciting, about to explode into a world of opportunities. It helps with everything from recruiting to getting people to show you the money:
Venture Capital/Wall Street Treatment - Angel investors and retail investors are enamored with the biotech industry, whereas the pharma industry is viewed as a bit of a dinosaur following the era of the blockbuster. Especially in the early stages, wouldn't you be much more excited throwing your money at a "Biotech" startup than a pharma based on what you've heard?

Who Cares?

You Should if you're considering investing in a Biotech because you think it's a Biotech.
If you're looking to buy a company that's a likely buyout target due to its cutting edge manufacturing and research pipeline, Pharma's on the prowl for Biotech assets (physical) and not pharma assets. This includes plants, personnel and know-how. There's plenty of that to go around on the small molecule side, not so much in biologics.
If you're thinking your target company may have decades of exclusivity while Congress toils with laws governing biotech patent law and the FDA still tries to figure out how to regulate biogenerics, you'll want to make sure you're really buying a Biotech company and not a pharma company.
If get a job offer from a cutting edge Biotech company, you may find out when you get there that you're running a packaging line for tablets and your Biochemical Engineering degree isn't being put to good use. Well, I guess an informed candidate would ask some questions during the interview process, but sometimes you don't learn much about your company until you're already there.

Any other distinctions that come to mind?

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Hottest ETFs Last Week Ended 01-Nov-2009

noreply@blogger.com (Everyday Finance) — Sun, 01 Nov 2009 18:23:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, all global markets and emerging markets especially, took a beating. As such, the short index ETFs were on fire. While going long on a leveraged short ETF is obviously not a sustainable "investment" strategy, for traders anticipating a correction, they were rewarded handsomely. Aside from the 3X short daily balanced ETFs that performed well, I also included some other ETFs that don't employ 3x leverage that at least made money and also have some niche offerings.

Hot List Triple Short Daily Balanced ETFs

EDZ - Direxion Daily Emrg Mkts Bear 3X Shares - Up 23% - The long Emerging Markets ETF EDC had been completely on fire up until last week, gaining 194%. However, last week, EDC reversed and the triple short ETF EDZ rallied 23%. This is really just a play on a correction for a trade. Given the beating emerging markets took in the 2008 downturn and the rapid ascent during the recovery, they're much more volatile and hence, you wouldn't want to be holding EDZ during an upswing, no matter what kind of hedging you employ. However, if you feel you can time the correction better than the next guy, this is your ETF.

FAZ - Direxion Daily Financial Bear 3X Shares - Up 18% - FAZ is another common ETF on this list along with its counterpart for triple long Financials FAS. Likewise, a bad week for global markets didn't bode well for the long ETF, so FAS rocketed 18% on the month. While I often see "resistance" and other technical indicator terminology on the boards associated with FAS and FAZ, I don't think that holds much water for leveraged ETFs since they're really just a derivative of the real underlying index and actual valuation drifts (generally downward) over time due to the leveraged ETF risk whereby you can lose money even if you bet in the right direction and hold on too long.

ZSL - UltraShort Silver ProShares - Up 16% - With silver being even more volatile than gold, this 2X short silver ETF rallied in a declining industrial/precious metals environment. Not one to predict which way precious metals are going to go, if you are looking for a play on them one way or the other, silver moves much faster than gold, even though gold tends to get all the press.

ERY - Direxion Daily Energy Bear 3X Shares - Up 14% - With oil dropping 4% on the week, this triple short Energy sector (note: tracks companies, not the price of oil itself) gained 14%. While on a short term basis, ERY has performed well, the trend during the recovery has been up - big. ERY is down 66% YTD.

Hot List - Other ETFs

VXX - iPath S&P 500 VIX Short-Term Futures ETN - Up 14% - The VXX ETN is the best way to play the VIX which is a common measure of volatility or "fear" in the market. In retrospect, it was kind of a no-brainer to pick up some VXX recently since volatility had approached lows not seen in well over a year and would act as a natural hedge against a correction - plus, the downside risk was minimal. The VIX can't go to zero, but it could easily spike. Unfortunately, I didn't use my brain and act on my hunch and missed a nice easy lurch upward. I had employed other cheap option strategies to hedge (rather than flat out buying Puts which gets expensive) which are now coming into the money, but nothing like a non-leveraged 1 week gain of 14%.

DMM - MacroShares Major Metro Housing Down - Up 6% - DMM is the down leg for the Case-Shiller home price index and while it's not a perfect representation of real estate in the US (since real estate is local), it's the best measure out there. In order to juice the returns, DMM and the long leg UMM do employ leverage, but shares of both have been rather muted since launch in the summer. UMM is up 17% overall and DMM is down 15% overall.

FXY - CurrencyShares Japanese Yen Trust - Up 2% - The Japanese Yen continued to gain strength against the US Dollar as many currencies have been of late. As outlined in this more detailed description of how to use weak dollar ETFs rather than opening a Forex account to either speculate or hedge against a looming US Dollar crisis, FXY is up 10% over the prior 6 months and if the US is spooked by another round of home foreclosures or corporate debt defaults, you'll likely continue to see the US dollar weaken further against other established currencies, even possibly some of the emerging market currencies listed.

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The Best Wisdom from Consumer Reports December 2009 Edition

noreply@blogger.com (Everyday Finance) — Sat, 31 Oct 2009 01:53:00 +0000

As a subscriber to Consumer Reports, I like to share the top couple tips, reviews and consumer alerts from each month's edition. If you want the full monte, subscribe to Consumer Reports yourself; but for now, here's are my favorite highlights from the December Edition:

Best AA Batteries (We spend way too much on these each year with 3 young kids!)

Lithium:
Energizer Ultimate
Energizer Advanced

Alkaline:
Panasonic
*Kirkland is a Best Buy

Rechargable:
Sanyo Eneloop
Sony Cycle Energy

TV - Most Reliable Brands

Flat Panel

Best
JVC
Sony
Sylvania

Worst
Hitachi
Westinghouse
Mitsubishi

Plasma TVs

Best
Sanyo

Worst
LG

Ratings - LCD TVs

52/55 inch

#1 TV - LG 55LH90 55-Inch 1080p 240Hz LED Backlit LCD HDTV, Glossy Black/Infused Blue

46/47 inch

#1 TV - Sony Bravia XBR KDL-46XBR8 46-Inch 1080p 120Hz Triluminos LED LCD HDTV

40/42 inch

#1 TV - Toshiba REGZA 42ZV650U 42-Inch 1080p LCD HDTV with ClearScan 240, Black

Ratings - Plasma TVs

54 or more inches

#1 TV - Samsung PN58B650 58-Inch 1080p Plasma HDTV

50 or more inches

#1 TV - Samsung PN50B650 50-Inch 1080p Plasma HDTV

42/46 or more inches

#1 TV - Panasonic TC-P42G15 42" VIERA® G15 Series 1080p THX®-certified plasma HDTV

Best Website: Amazon

Best Laptops

12/13 inch - Apple MacBook Pro MB990LL/A 13.3-Inch Laptop

14/16 inch - Apple MacBook Pro MC118LL/A 15.4-Inch Laptop

17/18 inch - Apple MacBook Pro MC226LL/A 17-Inch Laptop

And More - This month's edition included cameras, printers, ranges, coffee makers and more.

Consumer Warnings - Consumer Reports found BPA in several name-brand soups, juices, tuna and more. Incredibly, it was even found in foods labeled BPA-free and organic brands. So much for paying an arm and a leg for organic, right? BPA has been restricted in Canada and some US states due to concerns which some studies have linked to birth defects, diabetes and more. The FDA has not yet deemed just what a safe level is - they're working on it.

Best Ways to Avoid?

Buy fresh, of course!
Consider alternatives to canned food and beverages
Use glass when heating in a microwave

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Clunkers Waste of a Program Costs $24K per Vehicle - Govt Ready to Piss Away Even More

noreply@blogger.com (Everyday Finance) — Fri, 30 Oct 2009 03:56:00 +0000

In its unabated effort to piss away as much money as possible on pet projects and freebies to pander to as many future voters as possible, the administration spent a whopping $24,000 per incremental vehicle sold under the cash for clunkers program, according to Edmunds.com, an independent data source with no hidden agenda for forging such a conclusion.

At that price, it probably made just as much sense to simply buy the 125,000 incremental sold vehicles and just give them away to some lucky voters. This "spreading of the money" that so enamors our president is really sickening and evidently, there's no end in sight.
With a weak US Dollar crisis brewing and a record deficit with no chance of recovery for decades to come, the government is also on the verge of extending the home-buyer tax credit...but to even more people! They are considering extending it even to existing homebuyers. What next?

Add on the money thrown down the drain at the US automakers when bankruptcy was inevitable (wait, remember when the politicians claimed a bankruptcy would ripple through the entire country and crash the economy? Well, after big auto bankruptcies that were inevitable, no such catastrophe occurred - but union votes remained intact), extending the cash for clunkers program when money initially ran out (because it was such a sucker's move on the backs of the taxpayers), kicking off a poorly conceived cash for appliances program, reworking mortgages for people that lied on their applications and had (and still have) no business owning a home, and now extending the homebuyer tax credit program, it begs the question as to why our lawmakers even attach a pricetag to anything anymore. Whatever price tag the "phase 1" has attached to it is moot when pandering politicians continue to extend and memorialize money-sucking schemes later anyway.

The Healthcare Bill will be no different. While they claim it will cost "only" $900 Billion or so now, and have nonsensical clauses, like the ability for states to opt out (if every taxpayer if forced to pay for the public option anyway through their taxes, hell, but then, they might as well get something out of it, so they'll be forced to opt in), the reality is that it will actually cost our country much more in direct and indirect costs and reap untold havoc on America in terms of unintended consequences. Please name the last time our government took on anything of this scale with a favorable outcome.

While the last administration wasn't exactly a beacon of competence and success, the current one is completely rewriting the American way of life and we have nobody to blame but ourselves. We voted them in!

I ask you this - If, rather than our children eventually having to pay this debt...If each American had to pay the debt we're taking on (and the debt on top of debt to even service our debt) today to the tune of tens of thousands of dollars per family, do you think we'd engaging in this profligate spending spree? No, we're doing this because we don't have to pay it off - future generations will. It's sickening and shameful.

Thoughts?

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ETFs on the Move - Week Ended 25-Oct-2009

noreply@blogger.com (Everyday Finance) — Mon, 26 Oct 2009 01:48:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, emerging markets and commodities continued to show strength while some of the other usual suspects took a breather and the S&P500 ended with week with a small loss of 1%. I've made sure to include both some leveraged ETFs with their outsized gains (but take note of leveraged ETF risk of value destruction over time due to daily rebalancing) as well as non-leveraged traditional sector ETFs. There are some ETNs in the mix as well, since not every individual commodity is covered by an ETF. ETNs often carry additional counterparty risk, so ensure you've investigated a particular ETN and parent company solvency before considering.

Top Leveraged ETFs/ETNs

BDD - PowerShares DB Base Metals Dble Long ETN - Up 13% - With the US Dollar continuing to weaken against foreign currencies and signs of a global economic recovery, this double long ETN for base metals turned in a strong weak in a roughly flat equities market. BDD is up 46% vs. a 10% return for the S&P500 over the prior 3 month period.

UCO - Ultra DJ-AIG Crude Oil ProShares - Up 9% - Oil moved up again on the week, continuing its ascent. UCO is levered the move of oil and as long as the trend is as strong in the upward direction, the trend is overcoming the long term value degredation that occurs in leveraged ETFs. For instance, in the prior 3 month period, USO is up 12% while UCO is up 21%, pretty close to a 2X increase over the straight oil futures ETF USO (which granted, has its own tracking error due to monthly rolling of futures contracts).

UCD - Ultra DJ-AIG Commodity ProShares - Up 7% - This ETF's intent is to return twice the daily performance of the Dow Jones UBS Commodity Index. Again, same story with global market recovery and currency effects. UCD is up 22% over the prior month, 21% over the prior 3 months, but is up only 15% over the prior 1 year period, less than the 26% return of the S&P500.

A major theme in the markets and in the mainstream press lately has been speculation over the demise of the US dollar as other countries seek to replace their reserve currency with gold and a basket of other currencies. You'll probably continue to see strong volatility in commodities ETFs in the near term while this news cycle continues.

Top Non-Leveraged ETFs/ETNs

GRN - iPath Global Carbon ETN - Up 8% - Here's an article from Barron's in March making the case for Carbon trades which hasn't totally panned out from the early recommendation, but of late with the administration's plans, perhaps there's room to run on this one. It's a relatively complex play, so definitely research this one further if considering this alternative play. GRN has performed relatively poorly this year and with the low volume on this one, I'm not sure I'd recommend it even if I did feel strongly who the winners are going to be here.

BHH - B2B Internet HOLDRs - Up 7% - This internet ETF is actually up exactly 100.0% YTD vs. a gain of 20% for the S&P500. In prior downturns, we saw tech get hammered, but surprisingly, this time around, tech had no direct role in the market euphoria and these companies seemed to have learned a thing or two about living without excessive costs and holding cash. Tech may very well continue to outperform if we're looking at a slow recovery in financials and housing. What we're seeing here is companies that do have cash to invest are investing in productivity gains via technology rather than capital-intensive purchases and rehiring of employees as the job numbers are showing. As such, BHH may make for a decent pairs trade against real estate or retail sectors which you may feel will not perform strongly during the recovery.

UGA - United States Gasoline - Up 5% - Gasoline prices spiked further with oil hitting 2009 highs again this week. Since this product uses futures contracts and attempts to track the prices, it may not exactly match the changes in price as reported in the market, but it is surely the best proxy for US prices at the pump. Personally, I've used this ETF before to hedge energy prices for our family's finances. I had previously sold puts on the Oct 28 strike contract (which just expired) and I'm rolling a new one which I'll report in my next trading update.

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Disney is Offering Exchanges/Returns of Baby Einstein Videos

noreply@blogger.com (Everyday Finance) — Sun, 25 Oct 2009 16:51:00 +0000

Word is out that Disney has agreed to exchanges to parents for money spent on Baby Einstein videos for up to 4*15.99 = $64. Apparently, they've conceded that the videos have done nothing to foster intelligence in youngsters and in fact, evidence shows that television viewing is actually detrimental in toddlers. It seems as though many parents bought the videos for their children actually thinking they would make them smarter due to the marketing and messaging from Disney on the videos.

My Take:

I'm a bit surprised by the move since all kinds of companies peddle stuff that clearly doesn't work, but apparently, parents were threatening a class action lawsuit, so perhaps this wasn't an entirely altruistic move on the part of Disney. This is probably cheaper than a lawsuit and since it involved exchanges instead of a flat out cash exchange, the cost isn't nearly the $15.99 per video cited.

Will You Do the Exchange?

I don't know about us. We have a few videos. While we never actually thought our children would become geniuses as a result of viewing the videos and we try to limit overall TV exposure to our kids, the reality is that sometimes you just need a damn break. With three kids 5 and under, when all hell's breaking loose and you need to make dinner, make a phone call or whatever, if I'm going to flip on the TV, I'd rather it be a Baby Einstein or Little Einstein video than some commercial-ridden anime series or something. So, ethically, I don't think we were duped and we probably don't "deserve" free stuff in return. On the other hand, a lot of people will see this as something for nothing - another freebie - and I guess depending on where my wife lands on it, maybe she'll feel a book is better than the DVD and make the switch.

What about you?

Details:

According to the Baby Einstein website,

To participate, you must have purchased a Baby Einstein DVD between June 5, 2004 and September 4, 2009.

If you are not satisfied with the Baby Einstein DVD you purchased during the period mentioned above, for a limited time beginning on September 4, 2009 and ending on March 4, 2010, you may exchange it for one of the following:

One (1) Baby Einstein Book of your choice
One (1) Baby Einstein music CD of your choice

- Or -

One (1) coupon for 25% off the purchase of one Little Einsteins™ product. Redeemable with promotion code only at DisneyStore.com.

or you may return it, and we will refund the current retail value of the DVD ($15.99).

To request your DVD exchange or refund (limited to four (4) per household), you must follow the steps below for each DVD returned (note: you may return more than one DVD in the same mailing envelope, but you MUST include a completed mail-in certificate or completed 8½x11 sheet of paper for each DVD you are returning) :

1. Package the DVD, in its original DVD case (if available), into a suitable mailing envelope or package.
2. Include the completed (hand-printed) request form below or an 8½x11 sheet of paper with your signature, name, address, telephone number and email address.
3. Indicate the DVD title you are returning and date of purchase.
4. Check the appropriate box on the exchange/refund request form found below or write in on your sheet of paper your choice of :
(a) An exchange for one (1) Baby Einstein Book OR one (1) Baby Einstein music CD. Please write in the product name or title in the appropriate space found on the refund request form below OR on your sheet of paper;
(b) A coupon for 25% off one (1) Little Einsteins™ product purchased online at DisneyStore.com; or
(c) A refund.
5. Submissions must be postmarked by March 4, 2010.
6. Mail to:

The Baby Einstein DVD Guarantee/Upgrade Offer
P.O. Box 3200
Neenah, WI 54957-3200

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Freakonomics Fans Rejoice! New Book: SuperFreakonomics

noreply@blogger.com (Everyday Finance) — Fri, 23 Oct 2009 21:57:00 +0000

For everyone that loved the original Freakonomics (who wouldn't) that turned human behavior and economics on its head, the original authors Levitt and Dubner are back taking on such controversial topics as why suicide bombers should buy life insurance to patriotic prostitutes. It's the book everyone will be talking about this season so you might as well get yours: SuperFreakonomics CD: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance

Additional topics include:

anti-global warming
addiction
spitefulness
advertising
procrastination

So, stop procrastinating and grab yours now!

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Stocks Gone Wild - Until Apple Covered Call Crashes the Party

noreply@blogger.com (Everyday Finance) — Thu, 22 Oct 2009 01:31:00 +0000

For some time now, I'd been employing covered calls as a means to generate income in a down/flat market. More recently, with markets rallying 60% from their lows, the Apple covered calls have come home to roost. For a detailed background and example of how the Apple position was structured, see How Covered Calls Work. While I've captured thousands of dollars in option premiums from my Google Credit Spreads and Apple covered calls over the past 2 years, it's not a free ride. You do of course forgo unlimited upside when a stock runs unabated like Apple has in recent months.

My most recent covered call position for Apple was opened during the crisis when shares were trading at $96 per share and I sold covered calls along the way as shares slowly moved upward. More recently though, shares zoomed right past 160 to over 200 as of today. As such, I had to start thinking about the exit strategy for the covered call which was well into the money.

I had two options:

1) Leave the position alone and let someone execute the option and lose my Apple shares at 160 per share: Since I owned 100 shares, whatever the share price does from here (unless it dropped back below 160 quickly), my net cash position is unchanged; the shares and the option price move virtually 1:1.

or

2) Buy back the call option (granted, at a much higher price than what I got for it initially) and do whatever I want with the underlying shares.

I opted for #2. Why?

I didn't want my 100 shares of Apple called away without any control over the situation. Due to the wash rule I wouldn't be able to buy back shares for over 30 days and I don't want to miss out on continued upside I foresee for the stock. But since I took a hit on buying back the call (a cash hit only, offset by 1:1 paper gains in 100 AAPL shares), I sold off some of my position to take some gains on the shares as well. My portfolio allocation was way out of whack. My initial entry point for Apple was 96. With shares running up 110% since entry, Apple now comprised over 30% of my trading portfolio. That's simply too much in a single stock, even though I like its prospects.

Outcome - I ended up closing the call and selling 50 shares of Apple at $203 for a gain of over 100% on those shares. While I paid $4400 to close the call, I took in $5350 in cash from the Apple shares. I'm still holding the remaining 50 shares.

Note that there was just a wee bit of option premium left on the the open Jan 160. I intentionally waited until after this week's earnings release to allow for the volatility premium to drop out so I wasn't paying for additional premium unnecessarily. As recently as a few weeks back, the option premium was over $400; today it was closer to $100. So, I paid an extra $100 over intrinsic value for the peace of mind in closing the position out with a great overall gain. Obviously, since I sold the option initially for around $1000 my net gain on paper has still been close to $10,000 considering the capital appreciation plus the prior covered calls minus the $4000 to buy back today's call, but the only regret is I could have enjoyed a pure share gain without capping at 160. (205-96)*100 = $10,900.

Summary: I sold options when volatility was high during the crisis and got a nice upfront premium. If Apple shares hovered in the low hundreds or even up to about 160 per share, I would have kept the full premium plus gains on shares. However, since shares zoomed past the strike, I wasn't able to enjoy the gain past 160. Not a bad outcome overall - could have been worse, right? But just keep in mind with covered calls - there's no free ride.

See Also:

How do Stock Options Work? Trade Calls and Puts

A Lesson in Volatility prior to Earnings Releases: Google Options

How to Profit from Employee Stock Options Regardless of Share Performance

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12 Quirky but Effective Tactics to Avoid the Flu this Season

noreply@blogger.com (Everyday Finance) — Tue, 20 Oct 2009 13:23:00 +0000

I'm goin' Sarah Palin on you guys - I'm a Flu rogue. I'm going to share with you my quirky keys to success in avoiding the seasonal flu (and the dreaded swine flu) this fall that you don't see reported in the mainstream press. I'm not a doctor or microbiologist, but I am somewhat of a germophobe and I've spent years of my professional and personal life evaluating, studying, and avoiding the transfer of microbes onto my person and from my person to other objects and people. Here's why:

For years, I spent anywhere from 60-90 hours per week garbed in these rather ridiculous looking, but highly effective clean room suits meant to halt the spread of particulates and microbes from myself to a manufacturing environment where I oversaw sterile biotech and pharmaceutical product manufacturing. With the knowledge that a single microbe could infect an entire batch and (likely be caught due to turbidity or microbial testing, but if not...) had the potential to make a patient very ill or worse depending on the offending organism.

So, in a nutshell, I spent years obsessed with backing into doors, opening doors with my elbows, punching keys with my knuckles instead of fingers, walking around with my hands up in the air like a surgeon and more - never touching my hands to my body, etc. at work, which, depending on how you look at it, translated positively into my daily life. As such, I think the training and behavior has actually translated into a lower rate of infection compared to other people I know. I've never missed a day of work due to illness in my life and I only get about 2-3 colds per year whereas the average is about twice that. I've never had the flu, but I did start to get vaccinated over the past few years, which is generally effective against at least a large portion (often not 100%) of the seasonal strains.

Honestly, everyone's got a line. On one end of the spectrum, you can hunker down and become a hermit living out of your basement Y2K crazy-style. Conversely, you can make no efforts whatsoever to employ routine hygienic customs and hang out in Emergency Rooms for fun this fall. There's a middle ground somewhere and I'm going to give you some ideas that you may not be employing now that might make sense this flu season. I try not to look too "nuts" and drive my wife crazy with ridiculous germophobic behavior when people are looking. However, there are some very simple rituals that I employ covertly (and now I'm broadcasting to several people, so the friends and family that read my blog have just confirmed their suspicions that I'm nuts) that help prevent the spread of germs - and they're not the ones you see on CNN.

Now, keep in mind, I'm not a total freak. And we all have our little tactics we employ in life that might seem odd to publicly state them - but you all do them. Well, I'm sharing mine for the greater good here. I hug my kids who are complete germ-factories, I shake hands with people, I go congregate in places with crowds. I don't avoid germs to the point of lunacy, but I do take some precautions that are relatively low key to protect myself and my family. So, don't judge, just keep an open mind and hopefully these ideas will curtail the spread of the flu a by at least a few people this season.

How to Avoid Getting the Flu

-Opening doors -

I am eternally frustrated when I am confronted by a door that requires me to pull on a handle. I know, that sounds weird. But you're basically forced to put your hands on a surface that hundreds/thousands of other hands have touched during high flu season. I like push-doors, handicap push-buttons, motion detector doors, etc. Unfortunately, there's not much you can do about it without looking totally weird. For some not-so-weird approaches to avoiding contracting flu virus material immediately, you can try the following:

1. It's fall. I'm wearing long-sleeved shirts for the most part. When I approach a door handle that I MUST pull on, I subtly pull my hand into my sleeve a little bit and have my sleeve make contact with the handle instead of my hand.

2. Timing is everything. Often times, someone is either approaching the door from the other direction or you're walking toward the door at the same pace or slower than someone else. Let them get the door, right? Why race to the door. If they're in such a rush, they can open the door and hold it for you.

3. If you absolutely MUST open the door with your own hand, I actually use just 1 finger to grasp the handle and pull pretty hard. Depending on the resistance of the door, I sometimes just use my ring finger and pinky. Why? I rarely touch either of these fingers to my face whereas I use my pointer and middle to scratch, rub and eye, etc. It's all about odds. (And yes, I guess being odd if people see notice this subtle tactic).

4. When leaving a public restroom, after washing my hands, I take the paper towel I dried my hands with and open the door with that paper towel. There's often a trash can at or within throwing distance of the door.

OK, enough on doors, now for some more quirky germ-avoidance tactics.

-Long Sleeves -

5. Can also be utilized to flush toilets, turn off the water when washing hands, etc.

-Public Germ Factories -

6. I've read studies before demonstrating that public phones (conference room phones for cube dwellers since pay phones aren't relevant any more) are actually more bacteria-ridden than toilets and urinals. Everyone's touching that phone and buttons routinely. They never get cleaned whereas bathrooms do. Avoid using a phone other than yours. Avoid using someone else's desk. When you go to a conference room, avoid touching the table top and phone unnecessarily. This might seem a bit unrealistic, but it's all about minimizing risk. If you normally lean all over desktop surfaces, use a shared computer, etc., by making some slight alterations and only doing what you MUST, you decrease your risk of contagion.

-Sneezing-

7. So, don't get me wrong. The right thing to do for the greater good is to cover your sneezes. However, this doesn't actually "prevent YOU from getting the flu". This is one of the bigger factual inaccuracies out there that you see in every brochure and every internet article. Every outlet says that by covering your sneeze (historically, with your hand), you are dodging the flu. Not the case. You're actually potentially spreading it even more by a) sneezing into your hand and then touching something else b) putting your own hand right next to your mucus membranes which are susceptible to disease. What you should do if you've got to sneeze is to actually sneeze into your elbow. I know, we weren't taught to do this as kids, but this is actually the "scientifically-correct" way to sneeze.

-Knuckles, Not Fingers -

8. I'm often forced to touch a public surface that hundreds of people have recently touched. When forced to use a touch-screen at say, the picture developer, Wawa when ordering a sub, or self-checkout at the grocery store, I use my knuckles to make selections rather than my fingertips. You're more likely to transfer flu virus around with your fingers, which are required for virtually all motor activities, versus your knuckles.

-Paying for goods and services -

9. As a habit, when I'm ordering a coffee, food, whatever, I usually have to go up to a counter and pay. I find myself habitually leaning on the counter or touching it with my hands. It's kind of the thing to do when waiting I've found. This is totally unnecessary and since everyone else does it, it's a high risk area. Just stand there and keep your hands to yourself this season.

10. I tend to use a credit card for virtually all commerce anyway since we pay our bill every month and enjoy cash-back rewards. However, cards beat cash and change for other reasons too. Cash and coins have been shown to harbor all kinds or microorganisms (and cocaine actually!). If you're getting cash back from a transaction, it's likely been touched by several people in just the last several hours, whereas, at least with a card, it's only 1 other person - the store employee. Lower risk.

-Avoid Touching Nose, Mouth and Eyes (FOCUS!) -

11. As difficult as it is, making a constant effort to avoid touching these areas will definitely decrease your risk of flu and the common cold. There is some evidence that the H1N1 strain isn't completely susceptible to handwashing since it's spread through aerosolized droplets, but shutting out one pathway via touch is surely going to help. If you have a massive itch that's just killing you and you haven't washed your hands recently, perhaps you can use a knuckle that you didn't use previously, or a pinky which is less likely to be a hot spot (if you're following the rules above!). Again, all about risk management.

-Hand sanitizers often aren't effective -

12. Many people think they can kill/remove virus particles by simply using the nifty hand sanitizer. Well, usually, they're effective only against bacteria and have no claims for viruses. Normal handwashing is generally much more effective since you're completely removing materials and viruses from your skin rather than trying to neutralize it. If given the choice between a hand wash and a gel, I always opt for the old-fashioned way. Plus I don't support the use of triclosan in hand soaps anyway. It's terrible for the environment and has limited benefits - it's totally a gimmick that the American public has fallen for once again - you can barely even find hand soaps without it these days. And many other chemicals in hand sanitizer gels do not have a claim for virus deactivation.

The Obvious

I'm not giving these a number since they're well known and not quirky - but worth repeating:

Wash hands - Probably the single most effective means of prevention aside from vaccination. Better than gels, masks or anything else out there if you live amongst other humans.
Vaccination - The vaccine is the most obvious and effective means of prevention. However, many people either can't get their hands on one or are concerned over potential safety concerns. Nothing I say here is going to change your mind on vaccination, so I won't spend time on it, other than to say that at least for this year, both the seasonal and the H1N1 appear to have decent efficacy against the current strains and no known safety issues. If you're anti-vaccination, #1-12 are especially important to check out.
Eat right, Sleep and Exercise - While it's difficult to definitively quantify exactly what this means given millions of variables and draw a line in the sand, you probably know whether your habits are "good" or "bad". If you sleep 5 hours a night, eat junk food and sit at a desk all day, all other things being equal from a genetic and exposure standpoint, you're more likely to get sick than someone who sleeps 7 hours a day, gets some fresh fruit and vegetables each day and exercises a few times a week. It's simply the way your body was meant to be treated and is more prone to fight off foreign invaders.

So, there you have it. Now you know me. I'm a bit of a germ freak, and now you can be too!

What are your Quirky Tips that you aren't embarrassed to share?

photo credit: sarah,

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Weekend Reading Money & Finance - Balloon Boy Edition

noreply@blogger.com (Everyday Finance) — Mon, 19 Oct 2009 16:01:00 +0000

Reprint from my other blog Darwin's Finance in case you didn't catch it:

Another week of great reads. These are entries from blogs I frequent, and I hope you will too (just come back!). I’ve also included various finance/investing carnivals that published my material this week and my favorite posts from my two blogs. This week’s edition coincides with a rather bizarre tale of a publicity-seeking family that claims to have been fooled by their child – the Balloon Boy. As the nation watched and Twitter was ablaze, pundits were initially mocked for questioning whether this might be a publicity stunt, when in retrospect, perhaps they were right. Balloon Boy was not in the balloon, but in the attic. After hundreds of thousands of dollars were spent and hundreds of man-hours in emergency services and equipment were diverted away from true potential emergencies, it was all for naught. I dedicate this edition to the folly because it was really a sign of the times to see a story sweep the cable news cycle and captivate Twitter followers whereas if this happened 20 years ago, it would be a back page story in the “Oddball News Column”. This story grabbed more attention than the ever-increasing violence in Pakistan, Iran’s nuke program potentially provoking Israel to attack, or the notion that we may be seeing the sun set on the US Dollar as the World Reserve Currency unfold before our eyes.

Personal Finance:

Weakonomics: You’re Manipulated all the Time (Great Post that totally clicks with me that I never thought of doing myself)

Get Rich Slowly: Dow 10,000? Nonsense! (Thank God someone influential said it. Couldn’t agree more)

Million Dollar Journey: How the Alternative Minimum Tax Works (I’m just waiting for this to hit me one year – Aaauugghhh)

Consumerism Commentary: Make your Own Extended Warranty

Moolanomy: Fall Cleaning for your Financials

Political Calculations: Implicit Taxation By Design (Please, Please, Please read this article on the current Health Care Bill and how it will really tax the middle-class)

Investing

Oblivious Investor: Best Low-Cost Index Funds (stop paying for actively managed under-performance, please!)

Dividend Guy: High Yield = Low Returns? (in many cases, yes)

Afraid to Trade: BIDU – The stock that keeps on giving (I’ve owned for years, love it!)

Monevator: Tax Avoidance vs. Tax Evasion

My Top Articles at Darwin’s Finance and Everyday Finance:

Death of the US Dollar? What it Means

Gold Hype – Don’t Get Taken for a Ride

9 Winning Money Habits

How to Get Your Market Losses Back Now (NOT!)

Comcast vs. Verizon FIOS [Hidden Fees]

$50 TradeKing Signup Bonus: Review

Cash for Appliances – Details Emerging

How to Lose 90% in an ETF Fast

iPhone Apps that Changed My Life

Our Health Insurance is Increasing 30% Next Year – What ?!?

Carnivals that Featured my Content Recently:

Carnival of Personal Finance

Carnival of 20-Something Finances

One Mint

Carnival of Pecuniary Delights

Tax Carnival

Carnival of Trust

Best of Money

Carnival of Financial Planning

Festival of Stocks

Money Hacks

Carnival of Money Stories 2

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RECORD LOWS on Mortgage/Refi Rates - Compare your Savings and get Free Quotes: Mortgage Calculator

Hottest ETFs of the Week 18-Oct-2009 Edition

noreply@blogger.com (Everyday Finance) — Sat, 17 Oct 2009 15:50:00 +0000

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, emerging markets and commodities had quite a showing. I've made sure to include both some leveraged ETFs with their outsized gains as well as non-leveraged traditional sector ETFs. There are some ETNs in the mix as well, since not every individual commodity is covered by an ETF. ETNs often carry additional counterparty risk, so ensure you've investigated a particular ETN and parent company solvency before considering.

Top Leveraged ETFs

UCO - Ultra DJ-AIG Crude Oil ProShares - Up 18% - Oil reached new 2009 highs last week on the usual mix of news items on supply, demand and international happenings. The weak dollar trend is a large part of the moves as well. Since this is a leveraged ETF, near term moves up are magnified substantially over a 1 week period. However, given the longer term loss in value in leveraged ETFs I always start this section off by highlighting what can happen to these over time - see "How to Lose 90% in an ETF Fast".

ERX - Direxion Daily Energy Bull 3X Shares - Up 15% - This ETF seeks to return 300% of the daily performance of the Russell 1000 Energy Index. With oil prices hitting year highs this week, the underlying energy companies really took off this week again. If the upcoming hurricane season is not as benign as anticipated or if the global economy continues to pick up steam, an onward march for oil is certainly feasible.

UWC - Ultra Russell3000 ProShares - Up 13% - While this one showed up on the hot list, it's a bit of an anomaly so I thought it was worth highlighting here. The Russell 3000 1x ETF IWV was only up marginally at 1.4% on the week. UWC has virtually no trading volume and there's a huge bid/ask spread on it. On many days, there are no shares exchanged. I'd recommend avoiding this one (in addition to the risks of leveraged ETFs) unless it starts picking up some volume and matching expected returns.

DAG - PowerShares DB Agriculture Dble Long ETN - Up 10% - Agricultural products are hot with the resurgence of the global economy and a weakening dollar. This ETN was up 10% on the week, but a safer play to remove the long term leverage degradation may be some straight commodities ETFs or if you're looking to hedge a particular commodity, there are many niche commodity ETNs that don't cover a full basket (see below).

Top Non-Leveraged ETFs

SGG - iPath DJ AIG Sugar TR Sub-Idx ETN - Up 12% - Trading in a sugar ETN (exchange traded note which has some different properties than ETFs that you'd want to research further) is probably best suited to those with industry knowledge, but there is such a niche ETN available to retail investors nonetheless. Sugar moves at the whims of India's production output, the indirect relationship with Brazil's sugarcane and weather all over the globe. Year to date, SGG has returned 60% vs. a 20% for the S&P500. For broader commodity representation, consider the the Greenhaven Continuous Commodity index ETF GCC, which holds sugar along with several other commodities. Note however, that SGG has routinely outperformed in recent history.

UGA - United States Gasoline ETF - Up 11% - Gasoline prices spiked with oil hitting 2009 highs this week. Since this product uses futures contracts and attempts to track the prices, it may not exactly match the changes in price as reported in the market, but it is surely the best proxy for US prices at the pump. Personally, I've used this ETF before to hedge energy prices for our family's finances. I had previously sold puts on the Oct 28 strike contract (which just expired) and I'm rolling a new one which I'll report in my next trading update.

USO - United States Oil Fund LP - Up 10% - This ETF uses futures prices for oil to try and replicate the increase or decrease of oil. Unfortunately, USO and USL tend to be the most popular proxy instruments for oil investing for retail investors but because of the futures roll timing and mechanism, in a rising market such as this one, they don't actually keep up with the increase in the price of oil.

PGM - iPath DJ AIG Platinum TR Sub-Idx ETN - Up 8% -This Platinum ETN continues to run. As I highlighted in my gold hype rant, if you're buying gold as a weak dollar ETF, you should really be thinking about silver, platinum or just buying currency ETFs to get a more levered (metals) or direct (currencies) move out of the continued weakness in the dollar, as opposed to holding the useless metal that's really just appreciating due to the weakening dollar. And make sure you fully understand the gold dollar correlation and why you're buying gold if you have your heart set on it. PGM is up 50% YTD vs. 19% for GLD, the predominant gold ETF.

Disclosure: The author sells puts on UGA to hedge energy prices and is holding a USO call contract with January expiry.

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Our Health Insurance Plan Cost is Increasing 30% Next Year!?!

noreply@blogger.com (Everyday Finance) — Sat, 17 Oct 2009 02:28:00 +0000

It's that time of year where we take a look at next year's benefits expenses and I was shocked and awed by the annual increase of over 30% year over year. I understand that health care inflation costs are running at anywhere from 6-10% annually (which nobody can seem to explain why), but 30% for the same coverage??? While it's not going to destroy us financially, it still comes out to a pretty large sum over the course of a year and I have to imagine such an increase could have a massive impact on many families walking a fine line between being in the black versus being in the red each year. We'll adjust this year, but on a compound basis, 30% starts to become completely unsustainable, even for a family with some slack in the budget.

We used to do the 90/10-type plans early on because we used to hear about HMOs having poor service/selection, but after my wife ended up in the hospital for 2 weeks with our last child and we were handed a bill for several thousand dollars (just 10% is still a lot when the bill's 50K), we opted to switch to an HMO for the last baby so we wouldn't be hit with multi-thousand dollar hospital bills again should another prolonged hospital stay be required.

Well, now, the HMO is the most expensive plan in the mix and with a cost increase of over 30%, it really begs the question as to how this can possibly be justified?

Is this just the insurance industry gearing up to react to the administration's proposed health care reforms?

I get it, they're going to get screwed next year when this health reform bill passes, so they're screwing us this year in anticipation of their misfortune. I'm not going to go off on a rant about the health insurance sector, there's plenty of that to go around already - but I'm just highlighting how drastic the increases are this year and what it will likely mean for disposable income and the onus for health care reform when people become more and more irate over the premium increases - whether or not the reform bill would even have the desired effect.

Related:

How FSA Plan Account Contributions Can Save You Thousands

Resveratrol Health Benefits - Fact and Fiction

Health Insurers are from Hell...How to Fight Back

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