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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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, real estate and the reign of the months-long Short Treasury play reversed for big gains in leveraged long Treasury Bond ETFs. China and sugar (there's an ETN for that!) performed well also. Here are 4 top performing ETFs from last week:


PSR - Up 11% Powershares Active US Real Estate - This is an "actively managed ETF" which may sound like a bit of a misnomer. The fund will invest at least 80% of assets in securities of companies that are principally engaged in the U.S. real estate industry and included within the FTSE NAREIT Equity REITs Index. It is free to utilize the balance of the assets for additional exposure to other real estate or alter the weighting of its holdings. With a higher expense ratio of .8% than its passively managed brother VNQ at .1%, it will be interesting to see if the ability to add some actively managed positions to the ETF outweigh the .7% difference in expense ratios. What is somewhat deceiving as well though, is that the instrument doesn't seem to have much trading volume at all and last week may have actually been an anomaly, since it didn't track VNQ closely at all. I'd watch PSR with suspicion near term if you see it showing up on ETF hot lists and perhaps think about VNQ if you're itching to get into real estate until there's more volume and the spreads are smaller.

TMF - Up 11% -Direxion 3X Long 30 year Treasury - A few months back, shorting Treasuries seemed like surefire way to capture the optimal risk-adjusted return - since Treasuries really couldn't run much higher with yields approaching zero - and some short dated maturities actually fetching negative yields! Well, that strategy has sputtered out and is reversing near term. From here, it's like volatility both ways and the easy money appears to have been made. Recall that leveraged ETFs pose risks that aren't immediately intuitive due to daily rebalancing - see this article on Leveraged ETF Risks to understand why these are only suitable for a near term trade (sometimes!) and never suitable for a long term hold.

TAO - Up 9% - Claymore/AlphaShares China Real Estate - Virtually anything China has been hot during the recovery and for the prior week, this niche China Real Estate ETF has turned in stellar performance, with a 3 month return of 60% vs. 10% for the S&P500. While many US Real Estate ETFs and Real Estate Investment Trusts offer higher yields, TAO comes in with a once per year dividend, averaging around 2% based on December's payment, so don't plan on buying this one for income.

SGG - Up 9% - Barclays iPath Sugar ETN - Trading in a sugar ETN (exchange traded note which has some different properties than ETFs that you'd want to research further) is probably best suited to those with industry knowledge, but there is such a niche ETN available to retail investors nonetheless. Sugar moves at the whims of India's production output, the indirect relationship with Brazil's sugarcane and weather all over the globe. Year to date, SGG has returned 30% vs. a roughly flat S&P500. For broader commodity representation, consider the the Greenhaven Continuous Commodity index ETF GCC, which holds sugar along with several other commodities. Note however, that SGG has routinely outperformed in recent history.


Miss the Boat on Corporate Bonds and Bond ETF?

Investors may well want to keep an eye on high yield corporate bonds as well, since returns are trending virtually in lock-step with equities, yet the yields on the bonds are often significantly higher than the dividend payouts (which are cut well ahead of a bankruptcy declaration that would chop the bond return by more than 75%). For simplicity, a lower barrier to entry and diversification of risk, this High Yield Bond ETF HYG is still sporting a double digit yield - just note that there will likely be some defaults in the underlying holdings as the economy stagnates in the next year or so, which may adversely impact share price and yield.

Disclosure - The only active position at this time is HYG. The author closed a 2X Short Treasuries position last week.


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As I had posted in my more detailed article on how to hedge energy prices for everyday consumers, today I finally got around to personally hedging my gas price expenditures. While I had listed 8 different ways you could do this, I took the simple income approach, which was to sell puts against the gas ETF UGA. I sold two puts with an October expiry for .95 each = $190, or ~$180 after commission. With UGA trading over $32 per share, gas prices will need to drop 15% in order for the UGA shares to even approach breakeven. If they drop below, I would have to pay the difference to close out the position or take custody of the shares at expiry if still in the money. This is fine, because with our family's expenditures on gas, and summer vacations on the way, I'm taking $180 now, spending more if prices rise with $180 to offset it or spending less on gas if prices drop. And sweetspot - if prices stay about where they are or drop less than 15%, I get to keep the full $180 and pay less for gas as well! It's a natural hedge that I outlined further in my gas hedging article. I plan on rolling over this hedge or one of the other ones I outlined for the foreseeable future. Why now?

Just thought I'd pass on my personal plan on lessening the pain of rising gas prices this summer; I would love to hear about yours.

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