Seeking Alpha by Adding Beta

Finally all three indexes are almost in bear market territory - means they are down by 20% from their recent peaks reached in Oct 07. So that begs the questions - which direction markets are headed ? I have been quite optimistic predicting markets to touch 13000 during by Aug 08. But looks like I was wrong (though almost 2 months of summer is remaining - so you never know:-) During recent bear markets in 1991 and 2001, markets have been down by about 21% to 36% from their peaks. So if we assume that we are seeing a typical bear market this time around, we will see markets go down by around 5-6 % taking Dow to near 10500 range. Good news is that within 12 months of touching bottom, markets have rebounded returning 23% to 33%. So while we cannot predict the bottom, this down-trend provides an excellent buying opportunity to reap the long-term benefits. I would recommend index funds like S&P or International indexes. Note that markets in China and India are down by 50% to 30% so once

Just saw a program on CNBC hosted by Erin Burnett titled "India Rising: The New Empire". I must say it was well balanced program covering all aspects of India from snake charmers to India's booming IT industry, Dharavi slums to Ambani's $1B house in Mumbai , Disney/ McDonald's going to India and India's booming bollywood industry. With 300 million kids (equal to the size of US population), demographics is definitely in India's favor only if India can invest in educating all of its future generation. With Indian stock market down by nearly 25-30% from its peak, is it good time to invest in India? With elections looming (could be at same time as US elections in Nov 08), I would expect BSE index may come down below 13000 from 14500 - it could even go to 12000 with additional loss of about 15%. However once elections are over, market can start its long-term upward trend going above 20000 by 2010 (similar to Brazil where markets went up after elections we

As world watches what's coming out of meeting between oil producers and oil consumers in Jedah , I am thinking - do we have oil bubble of 2008 similar to tech bubble in 2000 ? Just from back of the envelop calculation (w/ completely hypothetical numbers) , if there is about $10 B invested in oil indexes, ETF (like USO), futures and swaps, this would create demand of 80 million barrels of crude (at $125). If every month additional $1B is getting invested in these oil related futures, it would create additional demand of 8 million barrels per month. No wonder we are seeing oil prices north of $130. I fully support Obama's call on band on oil speculators (and possibly commodity speculators) or at least force them to not allow them to trade on margin Obama suggested ban on oil speculators During last 16 years, there were always problems during US election year. In 1992, US economy was coming out of recession from a deep housing/employment crisis, in 2000, we had tech bubble burs

With oil prices not budging below $130, alternative energy - especially Solar stocks are hot again. I recommended these stocks in my previous blog entry "Solar Stocks Hot Again?" After that blog, most of the solar companies reported results and all of them have shown tremendous growth in latest quarter. There were some headwinds like German tax credit changes, polysilicon supply and price issues and US senate not able to pass alternative energy tax credits. However the momentum to these stocks is such that these are marching upwards despite these headwinds. For example, CSIQ (which is part of model portfolio 2008 and recommended in Jan 08) , ENER, SOLF are all up significantly. I am still bullish on Evergreen Solar (ESLR) which announced another $600 M contract bringing its order backlog to $1.7B to be completed by 2012 and hence up by more than 10% in AH trading Many of these stocks still have 50% upside from their current prices. Look for some pullback before making an ent

I am halfway through Barack Obama's book titled "The Audacity of Hope". He can write as well as he can speak. His thoughts are clear, well explained. It's good read. Being just a first time senator for 2 years (book was published in 2006), he has great understanding of politics, values, opportunities. If he becomes president (and I strongly believe he would be in Nov elections), his rise would be one of the fastest rise in American politics. With so many things going wrong around us (Iraq war, oil at $135, subprime mess, economy stuck, unemployment at 5.5%, inflation rising across the world and rampant speculation in commodities trading), we need a fresh start and I am hopeful that Obama can provide that fresh start. I was just watching US open and Tiger Woods is 1 behind the leader with 5 more holes to go. I bet he is going to win his 3rd US open title today Now coming to markets - where are they headed next week ? Here are my predictions: Oil coming down below

Warren Buffet has put real money ($320K)to prove his long-held belief that experts cannot beat S&P over long run. I agree with WB . Check out details at: WB bet about S&P and Hedge Funds returns While running after long-tail, returns (after hefty fees) of majority of hedge funds (except top 10%) is normally below market returns and I am strong believer of efficient market theory over long run (though in short duration, markets could be inefficient and provide great opportunities) However I think S&P could be wrong benchmark going forward. By 2018 when this bet concludes, US would be only about 30% of overall market capitalization across the world with BRIC countries having major growth. If I have to put a bet, I would bet on international equivalent of S&P 500 - I don't know if there is an index which tracks top 500 world companies Now coming back to oil - I am glad that it is back to $131 and looks like it is going to $120 in next few weeks - hopefully it would

Again very interesting week in stock markets - oil going to $122 and bouncing back to $138 within a week - how can this happen purely based on supply and demand. Neither supply has changed dramatically or demand has changed. IMO last $30-40 of oil price increase is purely due to speculation and index/ ETF trading. Unfortunately that impacts common man across all countries. I am surprised that US government has not acted quickly enough to ban futures trading or at least put a halt on trading using margin for these accounts. I see another bubble in making and surest sign of this is when most of the investment bank analysts start predicting price targets which are completely out of whack - remember Amazon target price of $400 during hay-days of dot-com boom. Finally Amazon did reach this target price just recently (adjusted for split) but it took 7 more years. I hope I am right about "oil bubble" and if US Gov and Fed are smart, they would take immediate corrective actions to

Check out graduation photo of my MBA at Haas School of Business, UC Berkeley