Seeking Alpha by Adding Beta

For past few weeks I have been watching shipping companies like DRYS, EXM , NM and found that they have been going down almost every day. In fact some of these companies are down by 50% in last 3 months. There are various reasons for this downturn: Worldwide economy slowing down reducing need for shipping Commodities demand slowing down Credit becoming tight and these shipping companies depend on credit to fund their major purchases and operations Some of these companies have debt repayments coming up in 2009 Baltic Exchange Dry Index ( BDI ) has come down from 11700+ to nearly 4000 Let's look at how these factors would change in next 12-18 months Now that bailout package is near approval, World Economy should start turning around (or at least stop going down) Credit markets should start working again enabling shipping companies to refinance their debts Speculation in commodities would go down and they would start trading at their true economic value. China and India are still grow...

Finally the first presidential election debate happened and yes McCain did show up after many flip-flops. The debate went as expected - McCain showing his true colors and Obama feeling little agitated due to McCain's constant hammering "you don't get it". In all Obama held pretty well on a subject which was supposed to be McCain's strength. McCain did nothing but drop names of some international leaders (that also he was wrong on saying Pakistan's new President). Obama was crisp in defining his stance on bailout plan. McCain was just saying we need to do this without explaining what is his stance and plans of getting us out of this mess. Overall poll results do show Obama winning the debate and increasing his margin slightly. I would recommend Obama stop saying "John was right" - he said it 8 times during the debate. He should go in offensive mode and keep on saying that we need to stop failed policies of Bush supported by McCain. If he jus...

Looks like McCain is chickening out from facing American public, Obama and debate moderator. Otherwise why would be pull his typical maverick style trick to postpone the debate where he has chance to explain his plan on how he as president would get us out of this mess - he does not have a plan and everyone knows that his party and Wall Street got us into this mess. So on the premise of economic crisis, he is cancelling his participation in debate. Obama should go ahead with his appearance in the debate and take this opportunity to explain his policies including how to get USA out of this mess created by current administration and Wall Street. I hope Obama go on attack mode and really gain momentum and seal the victory in next couple of weeks FRE , FNM continue to climb and make another 30% gains (third in a row). Would this continue - don't know. Now only these stocks are trading at about 20% of what they were trading before Government took over 80% of stake. So technically t...

Finally Warren Buffet have started scooping the market for bargains. He spent $10B in one week picking up Constellation Energy at about 26% of all time high and Goldman Sachs at about 40% of its all time high. Does it indicate that finally US markets are bottoming out. I have been calling out bottom for some time and I am a follower of Buffet. It's good that I picked some FRE , FNM and MS even before Buffet took stake in GS (but I did some silly mistakes also which I am sure Buffet avoided). Now that Buffet owns major chunks of Wells Fargo and Goldman Sachs and GS is becoming commercial bank and need to expand into branches etc, I won't be surprised if there is merger/takeover of Wells Fargo and GS in next few years. Now coming to $700B bailout package. I think Paulson thought that he can get away by rushing this bailout package through and bail Wall Street over weekend (similar to what he did with all the weekend dramas over Bear, Lehman and FRE / FNM ). He did not know that...

With stocks of once high-flying companies trading less than $ 1 for Freddie/Fannie and around $3-4 for AIG reminded me about technology stocks in 2002. I remember stocks like Sonus , Rediff and many other technology companies trading for less than 50 cents. As soon as technology market recovered, stocks of these companies jumped ten-fold in 2-3 years. Of course many technology companies also went bust with no value left for shareholders. Do we have similar opportunity in some of these stalwarts. Here are my three simple questions which may help understand this: Would Freddie /Fannie/ AIG survive (means no BK or receivership) Would government (which owns 80%) would let these companies run like any for-profit companies (unlike ones run in socialist countries) and eventually get out of business of running these companies Is there any value left for common shareholders If answers to all three questions is YES, then I would say it is worth buying stocks of these companies which are sel...

With potential demise of Morgan Stanley and Goldman Sachs (let me remind you that Hank Paulson used to work in Goldman), finally regulators have woken up and banned "naked" short selling and potential may ban short selling altogether in few financial stocks. With concerted efforts to prevent short selling making wall-street into casinos, the steps taken by pension funds, FHA and SEC (finally - what was Cox doing when Lehman and AIG were going down), shorts are going to lose big-time if they don't cover their bets. Poor Lehman, AIG shareholders and employees - the actions came late for them. BKPIX which is mutual funds concentrated in banks (and which I recommended in my previous posts) shot up by 22% in one day. Too much volatility to call it as mutual fund. So where does markets go from here ? I have been too quick to call bottom for this extremely volatile markets. So I hesitate to call this as bottom, I would say we are very close to it. We may see another round of...

First Bear Sterns, then Freddie and Fannie, now Lehman - who's next: Merrill Lynch maybe. Wall-street and US banks used to pride themselves as most well-run banks and world used to envy US financial system similar to the way world envy Silicon Valley... But current credit-crisis really shaken this confidence and now that US government (thanks to Bush and Paulson ) are nationalizing and bailing out various banks, why not nationalize the wall-street similar to what Venezuela's Chavez did with oil companies... I know I am writing this with a sarcasm but I never imagined that things would turn down so quickly (I was so wrong in recommending LEH in my recent posts). I am sure we are somewhere near the bottom but not sure what other shoes are going to fall before things calm down again. I remember the week when markets opened post 9/11 attacks - it was brutal market but it was expected due to unexpected shocks caused due to 9/11 attacks on WTC . The recent crisis in stock markets is...

Finally Uncle Sam has woken up and taking over Fannie and Freddie by end of Sunday - it took PIMCO's Bill Grass to give the final push saying that we won't be buying any more stuff from these GSEs till US is in with us. Chinese and Russians not buying also helped tilt the odds - unfortunate for some shareholders (including myself) that they would lose lot of money on Monday - these stocks have already lost over 90% in last one year so there is nothing much to lose from here. What good thing would come out of this bailout ? Here are my thoughts: The uncertainty about these GSEs would be gone - at least for now and they would be able to raise money from all over the world (including Russians and Chinese) Mortgage rates would come down little bit - they have been going up even though Uncle Ben was reducing Fed rate all the way down to 2%. So that should help struggling homeowners with refinances Financials would get another boost especially mortgage insurance companies. I thi...

I selected these two sectors for this post for one main reason - both sectors are at crossroads and most important sectors of the economy at least in 2008. Let's take a look at both of them at macro level: Financials: Consists of banks, mortgage companies, insurance companies, investment houses Is down more than 50% - some of the stocks have been down more than 70% (check out ABK , MBI , LEH ) In recent weeks, stocks in this sector have bounced back - some of them have jumped nearly 500% from their lows (check out ABK , RDN ) No one is sure if we have seen the worst in this sector and hence don't know if we have reached bottom Oil: Consists of oil majors, oil servicing companies, natural gas companies Only major sector which is still in positive column when almost all sectors are down by 10 or more % Has come down by 25-30% from recent high Oil has come down from 147 to 109 and going to $100 So where should one invest ? Here is my prediction and recommendation: Financials have ...