I've been watching some of the Swine Flu Stocks I initially covered right when the first cases were identified with a mixture of a) disbelief in the volatility and gains on little fundamental substance contrasted with b) envy that I didn't pick the right one(s) and let 'em ride.

Novavax: If we take Novavax as an example, I had highlighted here in this Novavax CEO interview article that while the stock had rallied coming off the breaking news, much of it seemed to be based on hype and I postulated that the large pharmas with the existing capacity and approved technologies would likely get the lionshare of the tenders for vaccines. Following my post on 4/30, shares dipped as much as 40% within weeks and unfortunately, I didn't play it right and make any money on the call. However, subsequently, shares are now up 34% vs. the S&P rally of 15% even inclusive of that dip. For a high Beta stock like this, perhaps not to be unexpected even in lieu of any Swine Flu news, but not too shabby either.

Some Other "Swine Flu Stocks" over the prior 3 month period:

• AVII is up 152%
  
• BCRX is up 157%
• VICL is up 59%
• DVAX is up 59%
• SVA is up 79%

Each of these has a particular niche or stake in a swine flu breakout worth investigating further. Some have more diverse pipelines and approved products that don't rely so heavily on swine flu hype, and SVA is a Chinese biotech which adds an additional emerging market/preferred local China supplier tilt to the equation.

My calls that still stand:

a) Most of these "swine flu stocks" will not be able to retain their gains once the dust has settled.
b) Some will continue to run due to a large tender award here and there (if there isn't enough capacity to go around from large pharma, some of these smaller players will inevitably get some tenders)
c) Anyone making predictions on just how virulent and contagious the swine flu will become this fall doesn't know what they're talking about - anything can happen.
d) The revenues derived by the large pharmas like GSK will likely not see a meaningful impact to their bottom line (above and beyond what is already baked in to committed orders) given the relative small impact to revenues - and vaccines in general are a low margin business compared to small molecule products sold in massive scale like typical blockbusters.

Swine Flu Investing Idea

Rather than throwing money after individual stocks which are subject to massive volatility, perhaps consider some speculative cash going toward several cheap way out of the money call options on multiple stocks (see this article on How Options Work: Puts and Calls). If just one or two of them hit, the gains of Thousands % on the couple options that hit will more than offset the inevitable declines/losses you'll see in expired options that didn't go anywhere. I wouldn't advise LEAPS or waiting until January expiry. I think it will be quite evident by the Nov time period both how severe the pandemic becomes and also, how effective/available the existing supplies of vaccines are. If things go well, expect options to expire worthless and your speculative play lost 100%. If things don't go so well on any of multiple fronts, at least some of these shares could continue to see triple digit rallies, sending options returns into the 4-digit realm easily given the leverage employed and low starting share/strike prices.

What are your favorite Swine Flu Stocks, Ideas and Forecasts?

Disclosure: No position in any of the aforementioned stocks.

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I received my property tax bill the other day and noticed the usual due date and amount owed, along with the option to pay 2 months early with a discounted price and a late payment penalty as well. While the net dollar amount may not seem like much on either end, it's the decisions around these little discounts and additional fees that people make everyday decisions on that dictate at the end of the year whether you've saved money (and potentially invested or utilized on something of value) or threw it away to the tune of thousands of dollars per year.

While tax bills may range from the low thousands in a low tax state like North Carolina or the midwest to $15,000 per year in New Jersey/New York or another coastal hotspot, in the states I've lived in, I've seen the same concept of discount/penalty arrangement on tax bills. Following my recent refinance (where I got an incredible 4.625% mortgage rate by the way), I opted to pay my own tax bill rather than have the banks earn money on my escrow account year over year.

Let's assume a $5,000 tax bill:

Due on 10/1/09: $5,000
Pay Early by 8/1/09: $$4900 (2% discount)
Penalty for Late Payment After 10/1/09: $5,500 (10% penalty)

While the $100 savings for paying by August may not seem like much, annualized, that's (roughly) a 12% return! I say roughly, because 2% saved over 2 months is more than 12% annualized, but the point is that

This transaction exceeds any risk-free investment like Treasuries or CDs over a 1 year period by 4-fold or more.

I'd venture a guess that a large portion of tax payers wait until the "actual due date" and forgo the 2% discount to defer payment for an extra 2 months. And of course, there are some that can't make that payment and pay the 10% late. If you know this is the deal each year, why not budget for it and just make the payment early to get the 2% discount each year and it's no longer "early" if it's planned.

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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 ideas. For this week, Tech finally took a break (if you can call a 10% gain on TYH a "break") in comparison to some of the other leveraged ETFs. In order to share some other niche ETFs, I wanted to avoid leveraged ETFs this week, especially since they generally don't make for suitable "investments" but are rather, a trading/hedging tool as outlined here in this leveraged ETF risk article.

Here are 3 top performing ETFs from last week that do not employ leverage:

FBT - First Trust AMEX Biotechnology Index - Up 26% - While a non-leveraged ETF return of 26% in a week seems incredible, I want to highlight that this is a complete anomaly, unlikely to be repeated on any sort of routine basis. If you look at a competing Biotech ETF like BBH, it was up 4% for the week, just like the S&P500. What's the anomaly? As of Jun, the ETF held over 8% in Human Genome Sciences which jumped over 300% last week due to positive news related to its Lupus drug. Why did I include it in this week's list? So you don't buy into this ETF thinking it is likely to outperform any of the other myriad biotech ETFs out there due to last week's performance alone.

UMM - MACROSHARES MAJOR METRO HOUSING UP - Up 25% - This is a rather unorthodox ETF that while imperfect, acts as the most representative measure of the US housing market as outlined in more detail in this Case-Shiller Home Price ETF article. Basically, since the home price numbers looked good last week, the ETF rallied, but it tends to trade at premiums/discounts to the actual index, which adds some near term uncertainty and volatility to both the long and short ETFs.

TAN - Claymore/MAC Global Solar Energy - Up 17% - Solar stocks have been hot for varying reasons, including a recent note on subsidies from China for solar technologies which are expected to boost revenues for shares of underlying holdings. Top holdings inlcude the usual names you'd expect to see associated with solar plays, like First Solar, Sun Power, and a Chinese play Yingli Green. While many of these darlings doubled, tripled or more in 2007 and 2008, they crashed hard along with the rest of the market as oil tanked. YTD, TAN is up a healthy 20% vs. the S&P500 gain of 8%, but since launch in mid-2008, shares have lost double what the S&P500 did at -60% vs. -30%. So, it's really a levered play to oil and global markets. And with a ticker like that (TAN)...who could resist?

Disclosure: No position in any of the aforementioned ETFs.

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Here's a neat trading video on natural gas, which is at historic lows, especially when considering oil prices and prospects of an economic recovery. These videos are pretty good and free. Feel free to sign up for more.

Natural Gas ETF Trade.


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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 ideas. For this week, and the past several for that matter, Tech has been completely outperforming the broader market and the while the triple leveraged ETF instrument lends itself to massive gains during such a run, there are many risks that aren't totally intuitive that investors need to consider as well given daily rebalancing.

Here are 4 top performing ETFs from last week:

TYH - Direxion Daily Technology Bull 3X Shares - Up 30% - This 3X Tech ETF has been a stalwart member of the hottest ETFs updates, as Tech has outperformed most other sectors in US equities. Year to date, the Nasdaq is up 16% vs. a 4% gain for the S&P500 and this ETF is now up 64% on the year and 200% since the March lows. The top 3 underlying holdings are Apple, Cisco and Google.

FAS - Direxion Financial Bull 3X Shares - Up 27% - 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. Financials have fared quite well given strong results from some of the major investment firms and improved sentiment from influential analysts (Meredith Whitney's glowing review of Goldman Sachs' prospects).

EDC - Direxion 3X Emerging Markets - Up 26% - 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 over 15 times the S&P500 during the 2009 YTD period at 74% vs. 4% for the S&P500.

ERX -Direxion Daily Energy Bull 3X - Up 26% - This ETF seeks to return 300% of the daily performance of the Russell 1000 Energy Index. While oil prices had retreated briefly, it appears as though they're headed back toward a natural pivot point of around $70 and in the near term, ERX could serve as a hedge for another summer runup in oil and of course, gas prices. However, given the longer term loss in value in leveraged ETFs I pointed out earlier, there are several lower risk/lower cost options out there to hedge energy prices for the retail investor/consumer.



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This is a reprint from my other blog Darwin's Finance for those of you that aren't on both feeds.

Incidentally, here's an article I published last night which I'm sure you'll enjoy:

Median vs. Mean: Know the Difference or Risk Being Manipulated

Original article: 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 as well as my posts within my network since the last weekly links. With market pundits calling the next week a tipping point for whether this was a “Sucker’s Rally” and we’re going to retest the March lows or whether the market can maintain stability and head upwards, I don’t know that we’ll see any big moves, but that’s what the “pros” are saying. It is earnings season after all, so perhaps we’ll see some action in the coming weeks.

My Favorite Investing Reads

Stocks that are Raising Dividends
Watch for Fraud with this FTC video
Div Stocks with a 5 Star Rating
Taking on Roubini Dr. Doom
12 Div Stock Recommendations
Sovereign Wealth Fund Explained
Beware the Underwater Stock Option advice out there. And recall, I shared how to profit from your Employee Stock Options no matter what shares do.
Green Shoots are Yellow Weeds

My Favorite Personal Finance Reads

Here's some mortgage loan info
How to find a Virtual Assistant - I’ve thought about this since reading The 4-Hour Workweek(awesome book)
10 Purchases that can actually Harm Your Credit
Avoid Loan Modification Scams

Within my network at Darwin’s Finance and Everyday Finance:

How to Get a Mortgage Rate Under 4%
How Does Deferred Compensation Work?
15 High Yield Corporate Bonds Raising Eyebrows
I Hedged my Gas Prices Today
Who Here Steals Food from the Company Caf?
Is Goldman Sachs Responsible for Every Bubble?

While I didn’t include my own submission, I did host the Carnival of Personal Finance this week.

Carnivals that featured my content recently:
Festival of Stocks
Best of the Best in Money and Personal Finance
Carnival of Money Stories
Money Hacks Carnival
another Money Hacks Carnival
Festival of Frugality
The Carnival of Twenty Something Finances
Money Hacks Carnival
Festival of Frugality
another Festival of Frugality
One Mint Economy and Your Finances


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After two weeks of the media gushing over Michael Jackson, they're back to the standard formula: Bring on fresh faces who can talk fast, talk loud, sound like an expert, and let 'em loose. The reality is that most of these "experts" have no idea what they're talking about. There are often vague descriptions listed under their name or no credentials whatsoever. "Relationship expert", "Consumer behavior expert", "Blogger". They cite statistics like median, mean, average, without even knowing what the underlying data set looks like or what the implications of their assertions are.

Who are these people? And why are they on TV?

The sad reality is that while local news coverage focuses almost exclusively on murder, fire and car chases with some weather teasers sprinkled in, cable news networks focus almost exclusively on panels of pundits debating the same topics in polarized fashion in a dog fight of stupidity.

I flipped by Fox recently and they had this panel of "Financial Experts". They have some email that comes in and it reads something to the effect of

"Hi, I'm $30,000 in debt, I just lost my job, I have very little savings/emergency fund to get by and I'm afflicted with this particular disorder which is very expensive to treat. I have no health insurance. My medical bills are stacking up and I don't know what to do. Help!"

After listening to a particular commentator tout "Flexible Spending Accounts" as the solution to the country's health crisis in the prior segment, it was evident he was chomping at the bit to jump on the bandwagon again. He didn't seem to have anything else to talk about, he was really pumped over these FSAs. The host read the question aloud and looked around at the panel, probably thinking to himself, "This guy's totally screwed; I'd love to hear what these experts have to say now". Nobody else on the panel had any advice for the guy, there's obviously no clear answer for him. Well, jumpy commentator #1 hops right into Flexible Spending Accounts again.

He says, "OK, what you need to do is start contributing the maximum amount to your FSA account..." and he spews out the same log of crap he just spewed out in the prior segment.

Is this guy kidding?

He's advising a guy with no funds and no income to go start up a Flex Spending Account? From where, thin air? The host looked at him in amazement, but was too embarrassed to call him out and moved on to the next email. I felt dumber for having watched that segment. But I didn't flip the channel, this was just too annoying to ignore.

Next, they take this same panel of boneheads and do a rapid-fire stock pick segment. They have each person pick their favorite stock and give a quick reason why. This is the most formulaic, insipid segment that virtually every network runs. Unfortunately, many of these panelists have no clue what they're talking about. They memorized a sound bite they heard on Cramer or read in the Wall Street Journal and go on the cable news channels spewing out some nonsensical qualitative reason to buy a stock. There's no credibility or historical accountability whatsoever to what they say. They just keep bringin' em back. Someone tuning in for the first time has no idea if this guy has ever run a mutual fund, is an industry analyst for a major firm, or whether he's columnist for some blog and somehow made it onto TV. The worst part is that some retail investors actually act on this advice!

This is the type of thing that just makes me want to vomit.

While Cramer's been vilified and is becoming less and less relevant, at least the guy beat his peers and beat the market in unique fashion for years on end and he has a staff doing research for him. While he's obviously lost plenty of money for people acting on his advice, and his format lends itself to poor investing decisions for probably millions of retail investors (very compelling monologue, gushing CEO interview, closing with lightning round which is completely useless), at least the guy's done something in the field! He's earned his stripes. He occasionally takes blame for a bad call and sacrificed himself to Jon Stewart. Some of these other boneheads are just sock puppets spewing out someone else's idea a week after the smart money already acted on it.

What's your favorite pundit story?

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A few months ago, when I saw ads plastered all over investment publications for 11% high yield investment notes from Advanta, I thought I'd look into it a bit further since it seemed too good to be true. Perhaps it was. A few weeks back, I saw an article on how Advanta will have to repay as much as $35 Million in restitution for alleged violations of federal consumer protection and banking laws, which obviously isn't helpful to the company's already-stressed balance sheet. Then, on Friday, Advanta announced that it was laying off half its workforce. On Friday, shares closed at 28 cents; not exactly a resounding endorsement of the prospect for recovery.

For existing holders of Advanta's high yield notes, this could be a rough patch. The only good news? This is the first weekend in several months that I haven't noticed an ad for their high yield investment notes.

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I read with interest this article citing just how badly homebuilders are looking to unload inventory. I had posted previously on the Toll Brothers 3.99% interest rate (with some concerns), but this more recent article reinforces that several different homebuilders are looking to entice home sales by utilizing the following methods, but take note of some of the fine print:

• "Buy Down" your interest rate to get to below 4% by paying points
  
• However, some of these buydowns are temporary only
• 29 percent of builders offered a buy-down in February 2009 vs. only 16% last year
• Hovnanian, Toll Brothers and Lennar are the major builders engaging in this type of incentive apparently.
• Buydowns may not be offered in all regions and are probably more prevalent in the hardest hit areas.
• The Buydown may offset other freebies that you may have negotiated otherwise, like free finished basements, free kitchen upgrades, etc.

So, the bottom line is that there is POTENTIAL for some serious long-term deals from builders out there that are desperate to move inventory and want to maintain the facade of a high selling price. In order to do so, these buydowns accomplish both getting a buyer into the house and posting a high (relatively) sale price. Just make sure you understand what you could have negotiated otherwise, what the Mortgage NPV is if the buydown is only in effect for a few years and perhaps try playing multiple builders off each other if you're in the market and have the flexibility to do so. There may not be another opportunity like this until...well, next year if the housing market declines even further...but I don't think the government's going to let that happen. They're throwing everything they've got at stabilization.

Don't forget, you can now hedge your home price with home price ETFs (if you feel they adequately represent your holdings).


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Goldman Sachs has been at the center of several global conspiracy theories, especially since the financial meltdown. I had previously highlighted a heavily anti-Goldman website and their legal maneuvers meant to quell dissent. Today, I came across this article and set of videos published in Rolling Stone basically blaming Goldman Sachs for the creation, manipulation, profiteering and crash of every bubble we've seen recently. The article is interesting to say the least. Contrary to the claim that Goldman has the power structure in their pocket is this massive fine they were hit with for their role in the housing crisis, but in general, Goldman did emerge from this recent collapse relatively intact.

While I had admonished those citing speculators as being responsible for the increase in oil prices and have since hedged my gas prices personally, if there is anything to this notion that Goldman rules the world, if you can't beat 'em, join 'em, right? I was thinking about who survived the crisis and who didn't...who can repay TARP and who can't...who benefited from the bailout via counterparty passthroughs from AIG that otherwise would have decimated them...and then I took a look at their chart vs. the general markets.



Goldman has outperformed the S&P500 in stellar fashion since launch to the tune of a 100% Gain over the past 10 years vs. a loss of 37% for the S&P500. That's hard to believe, but yes, we're down that much over the prior 10 year period. As naive and elementary as the question is, it begs asking:

If Goldman Rules the World and will continue to do so for the foreseeable future, why not hold common shares?

Disclosure: I have no position in GS at the moment.

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So, I work in your typical corporate office. It's a pretty large building with enough people to host a pretty bustling company cafeteria. For years, I've frequented the caf (shame on me for not saving money by brown-bagging it...I know) and since I generally take it with me and work at my desk while I eat, the food is served in a little container with a lid. Generally, you just walk up to the cashier and tell them what you ordered. Of late, they started writing anything special on the lid, like if you ordered an extra side or whatever. But in general, it's always been based on the honor system.

More recently, on a few occasions, the cashier has asked me to open my container AFTER I told her what I ordered. I figured maybe there's been some "leakage" of food that wasn't accounted for or something. After this exercise was repeated a few times, I asked, "so are people stealing food or something?" starting to wonder if I "looked guilty or something" or if this was just a new phenom. She replied that there has been theft of food requiring sporadic checks of the contents of the containers. Presumably, there are some employees adding some cookies, french fries or something in their containers and not reporting it during checkout.

I realize we're in a recession, but isn't stealing food from the company cafeteria over the top?

If you were caught red-handed doing this in front of your colleagues, wouldn't you be completely mortified?

Cheating on taxes or not reporting to a store clerk when they forget to ring something up and you found it in your bag in the car seems to feel more "anonymous" and many people reading this probably have at least one such experience of that nature (not that I condone, but pragmatically speaking...) but risking getting nailed in front of your coworkers is really brazen.

I've heard of people getting fired from great jobs for really stupid stuff like stealing office supplies and such. I don't know how this would be (or has been) handled since it might be tough to prove what the employee's intention was (like perhaps it was an "oversight") and the cafeteria is run by a third party...but it seems pretty lousy nonetheless. We're just paying for it in our costs and service cuts so the food company maintains the same profit margins.

Do you know anyone that steals from their company or have stories outlining what the consequences were?

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I had hosted this week's Carnival of Personal Finance at my other blog Darwin's Finance, which is a culmination of the best articles in money and investing from the prior week. Make sure to visit and check it out - there are some great articles this week!

Alas, my favorite read each week has let me down once again! I look forward to the weekly delivery in the mailbox, not just because it's not a bill or caterpillars for my kid's science experiment (well, OK, he gets some pretty cool stuff in the mail too), but because it's the best balance for me in terms of not overly "dumbing down" the personal finance and investing content (like the press touting the New Normal, which is totally not what PIMCO's El-Erian envisioned when he made the phrase popular this year) like some of the other publications on the news stand, balanced with an occasional new investment vehicle or idea that I end up investigating further and in some cases, blogging about after taking it a step further. Well, occasionally, I come across typos, mathematical modeling errors and other gaffes that disappoint for such a widely disseminated and venerable magazine. Where are the editors on this?

Can you spot what's wrong with this graph from this week's edition?



Hey, and since this is a totally random post, make sure to stop by my new blog Darwin's Finance on Monday, as I'm hosting the Carnival of Personal Finance where you'll find the best in money and finance from top bloggers around the world all consolidated into one edition.



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I had posted recently on an upcoming set of ETFs that would allow you to trade on the Case-Shiller home price index, which is meant to mimic the largest metropolitan areas in the US and be "generally representative" of the US housing market. Even though you hear the proverbial expression that "real estate is local", if these ETFs were available in 2006 and you bought the down option, you'd have made a killing. I like the idea that you can hedge your own real estate, especially if you live in one of the metro areas tracked. In effect, if you have a $300,000 home and feel good about an annual 3% increase in your home price, you could employ a small hedge with the down ETF. If your home price declines, while you're losing a lot of value on paper, you're making it up in the ETF. If you home price rallies (and if you're ever going to sell or do a cash-out refi [as hard as they are to get nowadays]), the money you lost in the ETF will be more than compensated for in your actual home price appreciation.

Finally, these ETFs started trading yesterday. If you think the economy's in for more turbulence, you can just buy the downside ETF now or buy the upward one on recovery hopes. For more details on just how these ETFs work, ticker symbols and more, check out my initial article on the Case-Shiller ETF for US Home Prices.

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