Seeking Alpha by Adding Beta

Asian markets are up again. As predicted, oil is almost reaching $70. With Fed and Chinese cutting interest rates, has the tide finally turned ? With US elections almost over, I think we have seen the bottom last week with Dow reaching 8200. Markets could test that level again but there is strong support around 8000 (markets have rocketed twice from that level). As soon as elections are over and I hope Obama wins, markets would start going up. My prediction is that DOW would close above or very close to 10000 rising another 10% from current levels. I am still long on financials and recently I have become bullish on oil - especially oil service sector. Emerging markets got killed in Sept and Oct and could provide a good entry point for long-run. / Shyam

Today is biggest festival of India - Diwali: Festival of lights. On this festival, Hindus celebrate for 5 days by lighting houses, temples and get blessings from Lakhsmi : Goddess of Wealth. What better way to celebrate the festival and pray for well-being of whole world than getting confidence back in the stock markets. All the major stock markets across world shot up by 5 to 10% in one day. Let's hope (and pray) that this is turning point for the markets and worst is behind us. Since this is festival of India, here are some bargains on Indian stock market which should provide solid returns in next 2-5 years: ICICI Bank Reliance Industries, Reliance Communications (or Idea or Bharti ) Wipro , Infosys , TCS Larsen and Toubro Adlabs One who has courage to take plunge in this market would definitely reap the rewards in the long run Good luck and Happy Diwali ! / Shyam

Oil has come down by more than 50 % from high of 147 reached just three months back and has touched $62. Opec had an emergency meeting on Oct 24 and announced cut of 1.5 M barrels. So that begs the question ? Which direction oil is headed and how one can invest based on oil direction? (last time I predicted oil reaching $100 and recommended some airlines which did ok considering the overall direction of market) The way oil price overshoot in July in upward direction, this time it has overshoot in downward direction and this is all because of extreme speculation by hedge funds and index/ ETF investors like ourselves. The demand for oil has moved around 85 millions barrels per day and supply has been managed around that demand. Even with slowdown in economy, demand has come down by single digit percentage. So in rational terms, swing of 100% in oil price does not make sense. If we take basic marco -economic principle, marginal cost of producing one barrel of oil is about $70 to 80. I

Finally the most volatile week in the history of stock market is over and we are about 4-5% up in this week. Not bad considering Vix cross 80, we had upward move in DOW by 900+ points and downward move close to 800 two days later. But this volatility must be confusing to lot of investors including seasoned ones. So what should we as common investors do ? Here are some pointers which may help: Warren Buffet is recommending buying in this market and he is buying for his personal account. I like his statement: "Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors" and he had given some historical examples of 1932, 1979 and 1999. He is my stock guru so I am following him and doing some buying for my own account (although very small amounts:-) There are so many bargains around with most technology stocks trading at PE of 10-11 and financials/energy stocks trading at single digit PEs

In this market turmoil, one would wonder which sector have potential to generate 50+% returns in next 12 months ? Here is my take on this. Life, Health and Property Insurance Companies: Companies in this sector got killed last week by virtue of their associations with finance related activities (and AIG disease). So many well-known companies like HIG , MET, Genworth , XL, Conseco got hair-cut of 50+%. Let's understand their basic business. These companies underwrite policies to cover property, health or life and collect regular premiums from their customers. If there are claims, they pay to claim-holders. Very simple business. Only gotcha is that these companies would need to park money they collect in some type of instruments - could be treasuries, bonds or other "safe" instruments. Some of these companies got into trouble because they parked their money in supposed to be highly rated securities (thanks to Moody's and S&P for rating junk as AAA !!!). Now that t

What a week with worst weekly losses ever for Dow and S&P. Both indexes lost 18% in one week. I thought these indexes are supposed to be less volatile unlike Nasdaq . But last week, all bets were off. Almost all stocks were having weekly fluctuations of 50%. What would next week bring ? There are couple of important trends to watch out to predict what would happen next week ? Would MUFJ close Morgan Stanley investment of $9B for 20% at $25 per stock ? (MS closed below 10 on 10/10). I am predicting that this deal would get closed on Tuesday though MS may give it discount and bring down the price just below $20. That would still much better than MUFJ just walking away. If that would happen, it would be repeat of Lehman story. But this time Paulson cannot afford to play "moral hazard experiment" he did with Lehman. If MS goes down, that would be end of American finance as we know it. But that won't happen. So in summary, MS would survive US gov taking stakes in banks:

As expected 6 major central banks including US Fed did a co-ordinated rate cut of 50 basis points. Since it was expected move, markets have already discounted this move. British came up with its own rescue plan with nearly trillion dollars in supports/guarentees of one form or other. I think overall it was good plan especially providing guarantee for interbank lending. Due to British rescue plan, RBS common and mainly preferred shares jumped while overall market was down. I think RBS preferred (RBS-M, RBS-P, RBS-L) do provide good value as long as bank does not get nationalized completely. They offer about 6-7% interest with face-value of $25. However since they are trading at 5-8 ranges, effective yield would be north of 20% as long as RBS does not cancel dividends. It would also provide an upside when values start climbing towards face-value in due time - again if RBS survives and in this market conditions, that's big IF. However if regulators have learned anything from letting L

Last week was very interesting week with one up and so many downs. Let's start with Wachovia . Week started badly for Wachovia - 4 th largest bank got sold forcefully to Citibank at $1 and by the end of week there were two suitors for the same bank - Wells Fargo and Citibank. Citibank Deal: Offers $1 to Wachovia holding company for all banking assets - this is a robbery IMO: Shareholders not happy Taxpayers on hook for billions of losses: Taxpayers not happy Company gets broken and remaining Wachovia remains with only securities and AG Edwards.: Employees not happy Wells Fargo Deal: Offers about $ 7 for whole company. Much better than broken company and only $1 for banking assets: Shareholders happy No taxpayer money on hook: Taxpayers happy Company remains as whole and become part of stronger bank: Employees happy So it looks very obvious that Wells Fargo should win the deal. But hold on - there are regulators in Washington who wants to force this shotgun marriages and let sel