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.

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.

If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.

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

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?


If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.

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

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?

If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.

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.


If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.

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

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
  

If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.

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?

If you enjoyed this article, make sure to Subscribe to this feed .

For Trading Updates and Post Alerts in Real Time, Follow my Twitter.