Leave it to Intrade to come up with the latest Doomsday index. Intrade functions as a binary futures market. I've utilized positions previously on things like betting against an overt airstrike on Iran and Osama's capture or elimination. The categories are pretty outrageous, take a look at this index. If it closes below 50, the world has improved in 2009; if it increases, we're headed for the Apocalypse. Wanna bet?




The 8 "World Crisis" Markets Level

Germany Recession in 09 92.0
Japan Recession in 09 88.5
US -10% Depression in 09 20.0
Russian Debt Default in 09 39.0
China Growth Below 7.5% Q4 08 62.0
Unemployment in the US above 9% Q4 09 44.5
New Dow low in 09 from Nov 08 low 62.7
Airstrike against Iran by US and/or Israel by end 09 23.7


Total (divided by 8.648 to get 50.0) 432.4


Index Value as at 2:00pm GMT, Wed 28 Jan 2009 50.0

I listed some articles below where I explained Intrade futures in a bit more detail, as well as my own trades and how I fared:

Intrade Now Taking Bets on U.S. Bailout Timing

InTrade Futures Trading Update: Election, EarthQuakes, Iran and More

Intrade Events Futures - Better than Stock Trading!

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I am constantly befuddled by the sheer number of people who live so hand to mouth for an event that only happens once per year that they leave common sense at the door at sign up for what is essentially a short term loan from the tax preparer or tax software. If they had simply done their taxes two weeks earlier, they could have saved themselves the unnecessary fees incurred by these "Tax Refund Loans" or whatever they're packaged as. In many cases, consumers don't know what they're buying because these fees are referred to as something else, like "administrative fees". Now that you've read this article, you're informed - you shouldn't pursue this near short-term loan for money you can wait an extra 1-2 weeks for.

According to this article by Marketwatch, here are some startling facts:

• Fees for these short-tem loans range from $34 to $130
• Some tax-preparation firms tack on other fees ranging from $25 to several hundred dollars
• 8.7 million American taxpayers bought refund-anticipation loans in 2007
• Taxpayers paid about $833 million in loan charges, plus another $68 million in other charges, according to estimates by the NCLC

On an annualized basis, fees can equate to 50%
to almost 500%, even before the additional fees are tacked on.

You can receive your refund in about two weeks if you just file electronically and have the funds direct deposited into your account. While $100 or $200 may seem like a drop in the bucket if you're about to get your hands on a $2000 or $3000 refund, that's money wasted that could have gone somewhere else - to pay down some high interest debt, to go into your emergency fund, or into your kids' 529 plan. It adds up 20 years down the road since this is an annual rite.



Start Today and Save Money

If you want to save yourself the money and start chipping away at your return this very minute, you can start electronically today and do a bit of administrative entry here and there before you even have all your tax info in hand. Here's a link for E-file with TurboTax which I recommend over TaxCut based on past experience due to usability, bugs and other factors.


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When I announced the launch of my new blog, Darwin's Finance, I said I'd check back in periodically to let everyone know how it's going. It's been a week and the launch has completely exceeded my expectations. Solid content combined with the switch from Blogger to Wordpress has yielded very encouraging results. While not a ton of readers/subscribers have switched over just yet according to feedburner, I've been amazed at how easily my posts now rank in Google in comparison to posts from Blogger. Just as a goof, early on, I posted the same article from both blogs and Darwin's Finance ranked higher even though there's no page rank and the blog's brand new with only a couple incoming links. This is due to the optimized permalink structure (the way search engines see your keywords in your url) among other things.


Here's a snapshot from earlier in the day of the build in page views just over the first few days since launch. It took me close to a year on Blogger to routinely get over 300 views in a day and I did it at Darwin's Finance within the first few days of launch (I didn't install sitemeter until Sunday).

As I mentioned during the launch announcement, I will be keeping both going, just with a different focus for each. You'll note earlier, I posted on trading updates and such. Darwin's Finance will have less of a "personal" touch and be more objective/analytical in its approach. I envision drawing on the strengths of each and keeping them both going though regardless.

Switching to WordPress:

For any fellow bloggers out there on the Blogger platform thinking of doing the same thing, I overcame my concerns over lack of programming experience and my reliance upon the simple Blogger interface and signed up with Dreamhost for a 1-click install of Wordpress. Once you're a member, you're actually able to generate your own Dreamhost referral code or discount code with whatever amount off you like and share with other bloggers. Most of the ones I've seen are for $50 off, so I generated a Referral Code for $60 off. Why? Why not? I'd still make a few bucks and I'd be glad to help out/lend advice to anyone who signs up.

1. Click on This Link
2. Click Host a Domain
3. Enter the exact word: EVERYDAYFINANCE in the promotional code box for $60 off
4. Select the time period (I'd start for at least 2 years; you can always renew later once you're sure this works out for you)
5. Leave everything else as is (I didn't pay for any extras) and enter your personal info
6. Boom, go into the panel select your blog name and do a 1-click install.

It was really quite simple and their customer service is very receptive. I highly recommend it if you feel you're ready to take on a new challenge and feel that Blogger's holding you back. I've read books where they recommend getting a domain at say, goDaddy and then trying to register it and do a full manual install. I couldn't be bothered trying to learn the 50 steps for mySQL databases and all that. The 1-click install was cake and I don't really see the benefit of the self-install with other systems.

Here are the 5 top posts from so far Darwin's Finance. I hope you enjoy!

3.99% Mortgages from Toll Brothers - What’s the Catch?

Tobacco Settlement Money has been Squandered Shamelessly

Is Now the Time to Short US Treasuries?

TARP Program ROI Not So Hot for Taxpayers

37 High Yield Mega-cap Stocks

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This was a week that tried men's souls...as opposed to completely obliterating them like past weeks.

Apple Covered Call

As I had covered in more detail previously, I had entered into an Apple Covered Call and briefly dipped into a loss net of option premium income following the Steve Jobs announcement. Thankfully, Apple released blockbuster earnings this week, crushing the street estimates and I'm back into the green.

Google Credit Spread

Similarly, I had great success earlier this year with a Google Credit Spread whereby I captured $750 within a few months and went for #2. It started off OK until the market swooned downward and I feared I might be way into the red below my upper strike at $260. Fortunately, Google also blew away earnings and not only are shares way over that strike value, but much of the volatility premium has dropped out following earnings.

Oil 2X Long

I entered into a leveraged oil position too early (or late for that matter, tough to pick a bottom) and was disappointed to see DXO not only take a nosedive, but I also learned the hard way that this ETF doesn't exactly track the spot price of oil in real time, but rather trades on forward futures contracts, so you can actually see DXO move down on a day when oil moves up and vice versa. I'll be doing a full post on ETFs that lie (or defy intuitive logic) soon. Anyway, I was glad to see it rally 12% today on an up oil day, but I'm still in the red 15% since entry.

3X Short S&P500 ETF

My position in the 3X short ETF BGZ is up a nice 13% since entry and I've been selling a bit off here and there as the market tanked earlier in the week, especially when dipping below Dow 8000, not only to rebalance, but also to generate some cash for some new positions. I had actually taken on 10% of the portfolio short, so lightening up as it increased in value wasn't a stretch.

Self Directed High Yield IRA

I haven't had much action in the self directed IRA since I keep that maxed out as a long term investment portfolio and I haven't added any new cash for 2009. I had some money from the dividend income that's accumulated there since I focus on high yield stocks there (here's a list of 37 high yield megacaps). This week, I bought into Vector Group, the "higher yield" Philip Morris is the way I like to think of it. They just reaffirmed their dividend, and at 12%, it's tough to ignore. Since entry, shares are flat.

The next move I'm considering:
Is Now the Time to Short US Treasuries?

Related:

Last Week's Trading Update - Trading Update Amidst the Carnage
3X Return ETFs are Here! The Long and Short of It
Biotech Seasonal Cycle Extending?


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I'm going to send one out to the bloggers here. I follow several personal finance and investing blogs and conversely, a few bloggers follow Everyday Finance, and now, Darwin's Finance. This will be a great opportunity for bloggers to introduce their work to readers of EverydayFinance and Darwin's Finance. In order to spread the wealth of our most prized posts from 2008, I'd like to ask bloggers to do the following:

• Submit your best article you published in 2008. This can be based on views, comments, most controversial, most uplifting, whatever you deem important.
• I will do a "Carnival-like" post and link to your favorite post with a brief description.

To Do:

• Send me your link and a 1 line description of your post to: everydayfinance "@" yahoo.com
• Do this by next Friday 1/30

Requirements:

• The topic should be on investing or personal finance (savings, frugality, whatever).
• Nothing offensive or ridiculous as judged by none other than me.
• Your blog should be up now for at least 2 months and be posted to regularly
• No Spamblogs, overtly commercial websites please - we want blogs ranging from truly altruistic to those that only partially sell out

Enough rules, now go dig out your best work and share it
with a new audience!

Shortly after I review all the entries, I'll do a premiere post at both Everyday Finance and Darwin's Finance. I'll just ask that in return, you link back, Digg, Stumble, Tweet, whatever, to get the word out and hopefully introduce thousands of readers to all our best content collectively!

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Hey, I'm an American, and I was moved by seeing how important our election was to the rest of the world while spending the election overseas, but Americans have to get real...and fast. I think the Dow breaking below 8,000 was the wakeup call today. Are Obama's grandiose promises just platitudes? Or can he really deliver? I surely hope it's the latter. I'm an optimist, but also a pragmatist. Sometimes, these don't go hand in hand.



While the press generally focuses on the high level topics they think Americans can understand, some recent events not getting an adequate amount of coverage. Instead of revisiting how GM's been doing post-bailout and what the likelihood is that they'll be back in the spring with their hand out again, we hear the insipid commentary about Michelle Obama's attire for the inagural ball repeated ad nauseum. What the press forgot to cover this week:

• The TARP has already lost 25% (at last check, probably more by now)


• We're about to start nationalizing banks via the UK route


• The auto bailout and subsequent handout in the spring has been totally forgotten now that they got their money


• States are going bankrupt and will need to refund taxes with IOUs


• Pension funds are underfunded big time and this has been further impeded by lousy bets with hedge funds and credit default swaps that they didn't understand

A few people got this right (and note, I didn't for the most part - still long BGZ 3x short ETF but taking it on the chin on my long positions).

• Soros has been saying for some time now that the way the TARP was implemented was inadequate and isn't working.


• The author of The Black Swan (a book that changed my investing outlook forever), Nassim Taleb, provided investors with triple digit returns in 2008 due to his play on the last year's "Black Swan". It's likely that this year will be a nice one as well.


• And get this, I've been checking out these videos by INO TV, especially since much of it's free by just signing up...and they totally called the drop below Dow 8000. I had actually had a link to one of the videos advocating the case for a break below 8000 several weeks ago and was chided for such a foolish prediction, but here we are. I recommend checking out some of these videos. This one just came out recently showing the performance of their various commodities plays with their trade triangle system where the portfolio actually showed a gain in virtually every quarter (which admittedly, I'm not using just yet). The videos are free though, what the heck; I've learned a heck of a lot about technical analysis just by watching a few. And the prospect of making money in volatility versus requiring an up market is appealing these days.

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I came across a shocking study that demonstrates just how effective those lobbyist dollars are in translating payments to politicians into profits for individual corporations. A study by Hui Chen, Leeds School, Univ. of ColoradoDavid C. Parsley, OGSM, Vanderbilt UniversityYa-Wen Yang, University of Miami took a look at the lobbying activities of publicly traded companies between 1998 to 2005 and created two different portfolios: One with heavy lobbying and the other without.

The results are not trivial:

Over 3 year periods, the heavy lobbyists returned anywhere from 7-11% more than the control group. There's likely a causal relationship here given the statistical significance and study design, but the mechanism isn't entirely clear. There are likely some federal contracts or legislative benefits that are favorable to the lobbying companies but it's odd that the share performance is so significant, given competition in the same sectors that should benefit to some degree from the same legislative benefits.

Who knows, maybe this will prompt a new ETF focusing on high-lobby dollar
companies. There are certainly dumber themes out there for ETFs which show
no discernible benefit. At least this one appears to have some correlation
between the underlying theme and market alpha.

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Source: This article can be referenced by clicking on this link and clicking through to download. Just click on a random university and the study should appear in a PDF.

Picture credit: deucegunner

I've been mulling over making the jump over to WordPress for some time now and I finally got around to making the switch. The benefits and drivers are numerous and I'll make it a point to start posting here occasionally on how it's going and what the hot articles are over there. The WordPress platform simply allows for so much more that I can deliver to readers and benefits that I'm already recognizing as a blogger immediately.

What is the new site all about and what does it mean for
readers?

Darwin's Finance


Darwin’s Finance is about Financial Evolution: Educate, Adapt, Achieve

For Investors:


As is evident from recent global market tumult, commodity, currency and credit events, the traditional buy and hold approach is no longer a guaranteed means to achieve financial success. Investors need to adapt to an ever-changing environment by staying on top of new investment instruments, market conditions, political influence, tax implications and more.


From an investment standpoint, the blog is primarily focused on alternative investment strategies that aren’t widely covered in the mainstream press such as hedging strategies, non-market correlated instruments, high-yield investments, international/developing markets, biotechs, InTrade World-Event Futures and the use of stock options to generate income and hedge other holdings.

Personal Finance and Savings:


Personal Finance topics span the realm of saving money on everyday purchases and utilities to differences between various retirement plans and setting financial goals.

You’ll find a diverse mix of useful information and personal experience relayed here in a format that most people can relate to for easy implementation.


What is the difference between Darwin's Finance and Everyday Finance?


While this is a work in progress and I just have enough posts up to unveil Darwin's Finance, I intend on continuing to post routinely here at Everyday Finance. There's a good following here, I have advertising commitments, and I like the idea of having two outlets for the two types of writing I employ. I'm going to draw a bit of a distinction between the two blogs:


At Everyday Finance, you'll continue to enjoy:

• Personal accounting of investing and trading moves and outcomes
• Market commentary
• Personal stories of saving and frugal tactics and outcomes
• Criticism and opinionated reviews of business outfits, stocks, world leaders and more
• More of what you're used to here, essentially

At Darwin's Finance, I intend on focusing on:

• Empirical models, examples and novel investment ideas
• Broader, less opinionated (if I can manage that) topics spanning Personal Finance and Investing
• It really just comes down to Evolutionary Finance...this isn't your grandpa's buy and hold.

Here are some examples of recent articles there:

37 High Yield Mega-cap Stocks

Is Now the Time to Short US Treasuries?

TARP Program ROI Not So Hot for Taxpayers

Lowest Mortgage Rates Ever - A Record…and Opportunity

8 Most Shocking Market Events from 2008

Please support the launch of my new blog by visiting and becoming a regular visitor to both sites. I'd appreciate comments, suggestions, ideas on how to further differentiate/focus the two blogs and anything else that's on your mind.


Please visit here or sign up in a reader for Darwin's Finance:


Are you evolved?

In news that was anticipated since Lilly disclosed in October that it was setting aside litigation funds, the drug giant reached a settlement with the US Attorney's office in Philadelphia for $1.4 Billion for allegedly marketing the antipsychotic Zyprexa to patients who didn't need it.






This case was brought under the federal whistle-blower laws by company employees. So far, outlets are mum on just who the whistleblowers are and whether they stand to profit from their whistleblowing activities. However, this reminds me of some other prior whistleblower suits where employees were awarded with enormous sums for going to the Feds with company wrongdoing.

Whistleblowing: A lucrative option

Employees can make up to 30% of the total award in a federal whistleblower case. Take this example from TAP Pharmaceuticals. In 2002, $885 million in damages were recovered under the false claim act. Whistle-blowers received $160 million of the of that settlement. And the largest such award in history, $126 million, went to a single individual, Douglas Durand, a former executive at TAP Pharmaceuticals who first highlighted how TAP conspired with doctors to overbill government insurers for Lupron, a prostate cancer drug. A second whistle-blower lawsuit against TAP, filed by Dr. Joseph Gerstein and Tufts Health Plan, yielded a $17 million settlement.


I understand if an employee feels that they will have trouble working in their field again or face professional repercussions as a result of their morale stand. They may never work again in their desired field. This may amount to a few million dollars over the remainder of a career for a typical employee. But how much is too much?

What do you think?

Should there be a cap on awards to whistleblowers? Should people be getting rich for simply doing the right thing?

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photo credit: TIL10

Well, for anyone following my Twitter Updates where I post trades and ideas day of, I've been back in the market a bit lately making some trades. For the most part, I've been able to catch some neat opportunities and I've fortunately been hedged a bit in this downturn...but I'm also fearful about what happens to Apple shares tomorrow following the surprise announcement from Steve Jobs on his leave of absence. Some recent trades and background:

Biotech Arbitrage Play

The best trading action of the week was my quick entry into Crucell (CRXL) and subsequent exit for a quick 13% gain during a very rough week for the major indices. As I tweeted that night, following the news of takeover talks, the stock zoomed, but I figured there was more to go given other suitors like Novartis and Pfizer that may not let the takeover go unchallenged. I got out because CRXL has been sliding and the initial bid, whatever it turns out to be, may be lower than the $23 I sold out at. Instead, see below on my broader biotech play.

Actual Twitter Update: Crucell to be acquired;bought in AH trade.i think it goes
higher-other suitors.us adr crxl. bought more oil; slow entry. yesterday to
early.

Biotech ETF Long

Since I missed out on the Seasonal Biotech Up Cycle, which is inexcusable, given that I highlighted this trend a year ago, I'm finally back in with XBI. Bought in at 53 yesterday. I will ride this wave of acquisitions as Big Pharma continues to feel the pain with blockbusters going off patent and they subsequently find themselves with a need to buy revenues to fill the gap via biotechs.

Hedged Position - Took Some Profits

In December, I took a position in the 3X Short S&P500 ETF since I was selling the rather predictable rallies and dips as highlighted late last year. Finally, this position is well back into the money given the six day slide and I unloaded enough shares to have some cash on hand for the next few days should another opportunity present itself.

Oil - Bad Timing for Now...

I did start to build a position in oil...On the way down. While I may be early...very early, I don't envision we're looking at $30 when the global economy recovers. We're likely going to find ourselves at $100+ oil again this decade and I plan on waiting this one out. If oil breaks below $30, I'll buy some more, but for now, I'm in deep enough with the DXO 2X Long Oil ETF.

Google Credit Spread - Again!

Following my recent success in pocketing $750 from the Google Credit Spread that expired last month, I entered into a new one by selling a Jun 260 Put and buying a Jun 220 Call. See this article for pros/cons and how my last one played out.

And to top it off...

Apple Covered Calls Update

After patting myself of the back for netting several hundred dollars on an AAPL covered call position over the course of a few months, I'm now below the neutral point given the surprise announcement from Jobs regarding his health. In after hours, shares are showing $79, which is below the $83 neutral point. Hey, I guess on the bright side, I'm only down 400 bucks and I own 100 shares of Apple that I bought at $95.

Next up? I'll probably ride out the old call position since it will clearly expire worthless, but if shares really tank tomorrow, I may actually sell an out of the money put for some additional income. While Steve Jobs is important to the company, Apple doesn't go insolvent without him. Markets overreact; I'll let this play out. And this isn't just about the money. I hope to see Stevo back in the driver's seat with a speedy recovery.

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Another in a series of reviews, both positive and negative at EverydayFinance:

I tried out tradeMONSTER™ today, the trading site affiliated with OptionMONSTER for those of you familiar with the options (see this article on How Options Work: Puts and Calls) mavens on CNBC, John and Pete Najarian. There are several benefits over the typical trading platforms I've tried out, including Ameritrade, which I'm using.

Look and Feel - System:

• Overall, I have to say, this system offers a much better interface, user-friendly tools and a true "trader" look than what I was used to with Ameritrade. Some examples of places where they clearly took the time to understand and build in user preferences are: dropdown tickers based on your recent entries (saves you the time/effort in retyping symbols you routinely track/enter), scrollable recent news items, nice candlestick charts with mouse rollover data displays...all in the same screen.


• For traders that are into technical analysis, the system offers nice tools for charting, trending, drawing your own patterns on the charts, etc., with the same easy interface. (see screen shot below).


• Each of the screens offer A LOT of customization. For instance, you can check boxes to set preferences for whether you'd like to see YTD gain, days left til expiry on options, cost basis, profit target, etc. I haven't seen these customizations on other tools.


• You can actually drag tags and windows around (reminds me of Apple's interface over Windows) and customize your view in all screens. It's easy to expand/collapse these windows, pretty neat.


• From your watchlist, if there's a stock you've been tracking, you simply click on the symbol and a new window opens up to allow for a quick trade. This is so much quicker and easier than what I'm used to where I need to type in the symbol in a small window, etc.


• They actually have a pretty cool intro video showing you all these interface capabilities right at the home page.

I've included a charting screenshot:

Pricing - The Bottom Line:

The pricing they list is pretty transparent and depending on the type of trading you do, this system could save you some serious money. I've just included the screen shot here instead of listing it all out. In short, you could save a bit more on stock trades with TradeKing given their $4.95 commissions, but they're clearly after the low-end discount market. For options trading, they're on par with Tradeking for 1-10 contracts and then TradeMONSTER becomes cheaper for larger orders. The Monster blows away all the other higher end services listed.

Areas for improvement:

• For some of the tabs/buttons you need to click on, like to "Launch Trading", rather than a quick transition to the next page or tool, there's a brief loading period. Upon inquiring with their rep, I was told the platform itself is built on Adobe Flash technology so just as flash videos load, so does our application. The faster the internet connection, the faster the load time. Also, if you are set up correctly, once you load it, you don’t have to go through the loading again as the framework is “cached”. For me, once the trading screen was up, most of the transitions were expanding/collapsing boxes, so perhaps not a routine thing. I guess a few seconds of loading is the price you pay for all the interface benefits.


• They offer a "Trade Ranking" for stocks, but it wasn't clear to me what criteria were used for this ranking and what kind of history these rankings have demonstrated versus random broad market representation. Some of the research identified the typical leveraged ETFs as top performers (all short ETFs of course). Given these new 2X and 3X ETFs, they should consider having a screen for sector ETFs that exclude the leveraged types (since some of those are ONLY top performers due to the leverage). As of now, the rankings are purely data-driven so there's no method to screen these out.


• On pricing, they obviously don't match Zecco.com, which offers free stock trading and cheap options trades, albeit with varying levels of execution and customer service troubles for limited trades per month, so I can't say they're "high priced" at all, but for people that are already happy with Tradeking and haven't tried out the new interface, tools and benefits of the system, they may be tough to win over. In the end, a $7.50 stock trade vs. a $5 stock trade is not a tough sell though, when you're paying $10-$13 at Ameritrade and E*Trade.

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This week's BusinessWeek highlighted an interesting investment opportunity that matches low correlation to major stock indices and positive alpha that all investors seek. Since 2004, Patrick Welton's Global Directional Portfolio has produced annualized double digit returns since mid-2004 when the fund was founded. The fund thrives on market volatility and utilizes a managed futures approach. When volatility is low as it was a few years back, the returns were in the low single digits. When volatility soared such as it did last year, the fund racked up a 23% gain while major indices the world wide were pummeled. Here's a graphical representation of the fund's returns.

As is evidenced by this graph, the fund has no correlation to the S&P500, and handily outperformed several other prominent peer hedge funds.

Investing requirements? Not stated explicitly on the site, but I suspect investing requirements will be only for "sophisticated investors", which means most of the people reading this post and the author don't meet income and/or net worth requirements. I have inquired though nonetheless. Be sure to check back via links below or free email alerts on my findings.

Related:

Profiting from Market Volatility with VIX/ETF Pairs Trades

2008 Stock Market Returns by Country and Sector

Selling High Priced Options in a Volatile Market

References:

Welton Funds

BusinessWeek

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One of my perennial favorite trends which hasn't autocorrected like the January effect and any other publicized cyclical trend is the Biotech Seasonal Cycle. As I'd posted last year, the Biotech indices tend to outperform the S&P handily late each year. See this post for an explanation of reasons and historical data/graphical representation. To demonstrate this year's continued trend, check out this chart of XBI vs. the S&P500 during the last 3 months showing a marginal gain for this diversified ETF vs. a loss for the S&P:






This time around, I think the overperformance may extend well into 2009. Essentially, big pharma's struggling with patent expirations and lackluster new drug launches and late-stage pipelines. They are still flush with cash, but need to start showing growth and the old small-molecule approach isn't going to cut it. This article from Forbes highlights the declining value of new drugs coming to market.



Therefore, you're going to see a wave of biotech acquisitions. Just look at the announcement tonight that Crucell is in talks with Wyeth to be acquired. I went long the ADR CRXL with the notion that Wyeth isn't the only suitor and shares could well be pushed past the 27% move today on the news. Make sure to stay tuned via a reader or follow my twitter for how this potential bidding way plays out over the next month.

UPDATE 1/8/09: CRXL Up another 13% today since entry yesterday.

Why XBI? With this index, you get a broad swath of biotech stocks. When the frenzy begins, the rising tide lifts all ships. Watch out for BBH, it's heavily weighted toward Amgen and Genetech.

What are your thoughts; does this biotech outperformance have legs?


Disclosure: Authos is long CRXL, no position in XBI.

On Oct. 26, 2008, I posted on the Apple Covered Call Options Play I entered into. At the time, Apple shares were trading at 94.6. Today, they closed at about the same value. To demonstrate the efficacy of entering into credit spread plays at a time of extreme market volatility, consider that the underlying share trade is a net wash, yet my option position is up close to $600. As highlighted previously, concurrent with my purchase of 100 shares of Apple, I also sold a Call Option as outlined below:

Bought 100 shares APPLE (AAPL) at 94.6 = $9460 Outflow

I sold a Call with April09 Expiry 110 strike for 11.30 = $1130 Inflow

Today, same option worth $535 = Net gain of ~$600 if position closed

Given the recent announcement on Steve Jobs' health no longer being such a concern, I anticipate Apple shares will at least tread water with the market and if that means up, so be it. If that means down, shares can drop to as low as $83, a 12% move from here, and I will still have broken even. I'll probably just ride out this option and let it expire worthless and then roll into a new spread for more income. In the event shares exceed 110 prior to April, I can always buy it back (while holding the underlying shares of course, as collateral) and then sell a higher strike option for say, June.

Make sure to stay tuned!

Related Trades:

Google Credit Spread Expired for easy $750...Next?

Hedging Your Energy Exposure by Selling Puts on Oil

Leveraged ETF/Volatility Plays

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A consumer's credit score is based on a statistical analysis of a person's credit record and is meant to assess their credit risk. A credit score is primarily based on information gleamed from one of the three main credit bureaus. Lenders use credit scores to determine whether or not you should qualify for a loan, at what interest rate, and what your credit limit should be.

The primary score out there within industry and available to consumers is the FICO score. You can get your FICO Score Here. This site links to FairIsaac's site, which is the developer of the FICO score.

Even though utilization of FICO scores by mortgage underwriters (the ones that even bothered to check creditworthiness or verify income) proved to be inadequate in assessing default risk, it is still the most widely utilized tool out there for lenders and borrowers alike.

Why FICO Matters

I recently had my credit run during my new car purchase activities. I was pleased to hear that my credit was over 800, so I qualified for the optimal .9% financing terms. However, just like the cost of credit to corporations increases with a decreasing credit rating, it does for consumers as well. If my FICO score were lower, I'd be paying possible 5% or higher for the same loan.

• Employers check your credit as part of the new hire verification process
• With interest rates dropping like they are now, you'll possibly want to refinance in 2009. A low FICO will guarantee you the best rate.

Some things to do to improve your FICO score include:

• Increasing your credit limit, believe it or not, since this will decrease the ratio of amount owed.
• Leave old accounts open - closing accounts hurts your score; again, counter intuitive. If you must close accounts, close the newest ones first since old open accounts reflect favorably.
• Reduce revolving debts (obvious)
• Limit credit inquires. Even a call to your cable company or cell phone signup triggers an inquiry. Use sparingly.
• Don't open too many accounts in a short period of time.
  
  
  To start off the new year, you should consider spending the few minutes to line up your analysis and This Service will even notify you when your score changes!
  
  
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Reflecting on a great 2008 in many aspects, I'd be foolish to claim victory in all facets of my life. It's time of year to reflect on what went right, what went wrong, and what to do about it in 2009.
Investing

Better Risk Management: I wish I had read The Black Swan: The Impact of the Highly Improbable a few months earlier. The predictions in that book as well as the notion that people either don't understand risk or inappropriately try to quantify risks that simply can't be understood was especially prescient in 2008. That being said, I've learned from both that book and a horrendous investing year a bit about risk management that I'll take forward.

Lower Correlation Investments: Earlier in the year, I bought into the punditry that emerging markets were non-correlated with the US market. They said, this time would be different...these markets have their own internal economies now, they no longer rely on the US for aid or exports to the degree they once did, they'll continue to grow no matter what happens to the US. As evidenced by this recent article on country returns for 2008, the US actually outperformed every major market and some of the emerging markets were completely decimated! In my eternal search for decreasing the correlation of my investments, I'll start building a stronger position in oil at these prices, perhaps gold, and will also try out some new financial models to continue to reap income in markets up or down, similar to how I had been selling options and credit spreads last year.


Blogging


New Endevors: In my quest to break free from the rather restrictive Google Blogger platform, I started up a Wordpress blog (to be unveiled once I get some content and figure out how to use Wordpress a little better). I also started a new website through SiteSell.com since I have no idea how to build one on my own website from scratch. It will be months until the site is ready; they really force you to think through every detail from title to keywords to page design. The intent there is to have a more passive income approach with static pages that draw in traffic without having to post so frequently. They really do an excellent job of optimizing your site for long term performance. Eventually, I'll continue to keep Everyday Finance going with more personal perspective (individual trades, life experiences, etc.) and have the new site and blog with a bit more objective, professional feel (if I can pull that off!).


Efficiency: Most importantly with the blogging piece, with a new job and a third kid on the way, I really need to work on my efficiency. Stop checking traffic stats, affiliate income, etc. so often and really just batch process a few posts here and there when time is available. The biggest efficiency I've realized this year is to just watch less TV. While my wife's watching American Idol or something else rather painful, I just blog. I need to continue to free up more time this year while not adversely impacting time spent with my family. And of course, I spend zero time on this at work for workload, ethical and potentially job security reasons (I just assume they're watching us all the time, especially when companies are looking to ax thousands in 2009).


Work


At work, I'm in a new role effective January, so I need to quickly cut the cord from my old area (always difficult, especially when a replacement hasn't yet been named) and get up to speed in the new role. I need to focus on my productivity. I tend to procrastinate and then as deadlines approach, if it requires working through the weekend or staying til 8PM a few nights, so be it. This is a lousy way to go through a career. To mitigate the impact to my family (and blogging) impact at home, I really need to work on my efficiency in the office and try to keep more of my work within normal business hours. The 4-Hour work Week: Escape 9-5, Live Anywhere, and Join the New Rich offered some good insight, from checking email less frequently to only attending meetings you really need to. I have to start to put some of these ideas into practice.


Life


While attempting to realize the goals above, I need to continue to spend as much time as possible with my kids while they're awake (I do most blogging while they're napping or sleeping at night). I also need to balance time with my wife and other friends and family. As long as I don't do a ton of travel this year, I should be able to retain a decent balance, as I have in the past; I've just taken on more ambitious goals both within and outside of work this year.


I'm going to try to be less lazy. I've mastered the art of pretending to be asleep. I did it this morning with unparalleled skill. Our 2 year old climbs out of the crib now and he came into our room babbling and I just pretty much laid there until my wife got up with him. I then slept another hour. She's pregnant, is always on her feet and I'm lazy. I really need to try and get more balance in our relationship.


And of course, I'm going to lose 10 pounds first thing back from vacation...right!

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The 2008 Stock Market returns were generally a painful exercise in precipitous declines, volatility, and unforeseen high correlation that defied conventional wisdom. When the investing experts cited the "de-linking" that was forming between the US and other global markets, the exportation of our credit malaise became evident; so much so, that the U.S. was actually at the top end of global performers for 2008 even though much of the current global crisis stemmed from the US housing (note, you'll soon be able to trade on the US Case-Shiller housing index) and derivatives collapse and the subsequent credit crunch. It is interesting to take a look back at what the major markets returned throughout the year, what's in store for 2009, and additionally, to consider some new ETFs that you probably didn't even know existed.

2008 Global Stock Market Return Graph:

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2008 Global Stock Market Return by Countries and Tickers:


Israel EIS -39%
United States SPY -39%
Mexico EWW -43%
South Africa EZA -43%
Canada EWC -46%
France EWQ -46%
Germany EWG -46%
Untd. Kingdom EWU -50%
MSCI Emerging Index EEM -51%
Australia EWA -52%
China EWH -52%
Brazil EWZ -57%
South Korea EWY -57%
BRIC Index BKF -58%

Now, for some select Sector ETFs that are rather unique (prior posts on some niche ETFs and returns here):

Claymore/Clear Global Timber CUT -50%

Claymore/Robb Global Luxury Index ROB -52%

First Trust ISE Chindia FNI -58%
First Trust ISE Global Wind Energy FAN -60%
First Trust ISE Water Index Fund FIW -30%

iShares KLD 400 Social Index Fund DSI -37%

Market Vectors Gaming ETF BJK -58%

For those seeking a leveraged return, of course, there are now 2x and 3x leveraged ETFs for several sectors and indices which can be combined nicely with various financial models for a hedged return.

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