Seeking Alpha by Adding Beta

We had a Haas Alum Reunion on Saturday. Few of us went and I must say it was a great event. It was refreshing to hear professors and other experts on various topics and their views on current economic crisis and how we can get out of this mess. Keynote speech by twitter co-founder Biz Stone was also great. Despite having such a high success, I was amazed by his down-to-earth personality. During this event, I came to know about following book which I am planning to read. As I mentioned in my last week's blog,  human psychology is playing a much bigger part in investing than fundamental analysis. Prof Leblanc had a lecture on similar topic. He was very funny - as always. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism   by George A. Akerlof and Robert J. Shiller Last week's market action was expected. To my surprise, markets were much robust than I expected and glad that DOW could stay above 8000 even though it had first weekly

Markets are up for sixth week in a row. With major banks like GS, C, JPM and tech companies like GOOG and INTC results out and surprisingly all of them were pretty good considering scare in early March. Does this mean worst is behind us ? If stock market is leading indicator, it may be possible that worst is behind us. Obama, Bernanke and other govt officials have started talking about "green shoots". It's almost like seasons (which to some extent makes sense since markets are more driven by people behaviours than fundamentals:-): Fall - markets had a free fall  Winter - markets were frozen Spring - green shoots with mild recoveries Summer - does that mean markets are going to "sizzle" in summer ? If earnings are not one-off, it is possible that DOW would cross 9000 by summer 2009. By that time suspense of stress test results and health of banks would be over, we would have seen few more unemployment reports. If unemployment rate holds steady below 9%, that

Now that Dow has closed 8000 second time in 2 weeks and S&P is up by 27% from its low of early March, many questions are on every investors mind - What's next ? Is it going up or down ? Have we already seen the bottom or have we missed the rally ? When DOW was below 7000, I mentioned that it does not matter where markets are headed as long as you are in the market for at least 12-24 months. In that time span, DOW would go below 7500 and above 9000. So it's up to your comfort level if you want to get out of market to possibly enter again when it goes below 7500 or stay in the market to catch the rally above 9000. Personally, I am in the market with time-span of 12-24 months. IMO, we are just getting started on next bull run - there would be lot of volatility along the way. But who said making money is easy:-) Now stock of week section: Symbol: ACAS Company: American Capital Buy price: $ 2 to $ 2.40 Target price in 12 months: $ 3 to $3.60 (for 50% return) Company background

In past few weeks I have been researching various European banks - mostly focused on British banks like Barclays , Lloyds and Dutch group ING . However today I noticed that almost all other European banks are also on upswing - two banks from Ireland caught my attention: AIB and IRE. Both of them are up more than 100% in last 5 days. What is happening ? Is worst over for European banks and hence these explosive moves ? Here is my analysis: Each country in Europe has 2-3 major financial institutions and government cannot let these companies fail at any cost.  Generally European governments have been more creative in terms of bailout terms. For example, Swiss government had "ring-faced" nearly $58B assets  ts of UBS long before any other government considered the idea. This is similar to what Uncle Sam did w/ Citibank and Bank of America later After government injection of funds, capital ratios of these banks look much healthier Sub-prime mortgages were not very common outs

Finally last week, DOW was above the level when Obama became president (Dow at 7949 on Jan 20). In last 70 odd days, it was mostly trading below that level and made a dangerous trip to levels not seen for last three presidential terms (12 year lows). Now that it has recovered all its losses, can we say that "Let Obama Rally begin". Considering President Obama's performance at world stage (G-20), we can definitely give credit to him for new-found confidence among investors and speculators alike ! We need little bit of that if world economy has to climb up the hole it has dug itself. With looming Q1 results and stress test results on 19 major banks, April month would be quite volatile. I won't be surprised if index goes close to 7000. As long as it holds above 7500 by end of Apr, it would set a nice base for Obama "bull" run and could take markets above 9000 by year end. Now let's come to stock of week pick: Last couple of weeks, my picks have been doin