Seeking Alpha by Adding Beta

Markets continued their summer ascend for one more week but it is becoming more frothy in short term. Most of the rally in last one week was due to major short squeeze in few zombie companies like AIG, FRE, FNM. Markets are due for a correction and could anytime take a dip of few hundred points. And that would be a great opportunity to revisit your "wish list of stocks" so keep some cash handy for our shopping list. It is almost given that DOW would close above 10000 by year-end but before that we have to cross months of Sept and Oct. Now let's visit to insurance sector which had been pretty good overall. Insurance companies have been on fire lately (and I am not counting AIG in that list which is pure speculative play and I won't touch it or recommend it). In my previous posts, I have mentioned and recommended XL capital, HIG , LNC , GNW , CNO - almost of of them have given multi-fold returns in last 6 months. Once you understand business model of insurance compa...

The sizzling summer rally continues for another week with all indexes reaching 10 month high. The rally gathered momentum this week due to surprise GDP growth numbers coming from German, Japan and France and even Bernanke mentioning that US economy will grow soon (but slowly). So that puts all stock markets at cross-roads. The recent rally has taken markets to yearly high in anticipation of GDP growth. However at same time, it is priced almost for perfection for Q3 results. Everyone was expecting worst results during Q2 but majority of companies gave positive surprises due to heavy cost-cutting. However consumers are still stretched and unless there is significant job growth, recovery cannot be sustainable. In recent weeks, good news is coming out for home sales, car sales (thanks to cash-for-clunkers program) but news on job front is not so rosy yet. So watch out for market sell-off in Sept. DOW is more likely to touch 9000 before it touches 10000 ! In anticipation of GDP growth and ...

Last few weeks have been pretty calm with many folks enjoying their 50% gains with summer vacations just before the school starts. It is almost exact replica of last year's August. But then dreaded Sept 08 came when the whole financial (and along with that real) world around us turned upside-down starting with Fannie/Freddie takeover and Lehman BK. I am not predicting that coming Sept would be anywhere close to last year's events but it is very likely that volatility is going to increase significantly. Currently VIX index (also called as wall street fear gauge) is hovering around 25 which is very close to its yearly low. I call it as "Calm before the Storm". Most likely it would touch 40s sometime in Sept/Oct. So how do one makes some money from this volatility ? There are few ways: Just stay away from market and cash in the gains you may have made in last 5 months since not losing money is equivalent to making money:-) Sell "out-of-money" covered calls for...

Last week was another up week for markets with all indexes reaching 10 month high. The positive mood was reinforced by better than expected unemployment report with unemployment dipping to 9.4%. Looks like investors are becoming ready for GDP growth and willing to pay next year's prices now. In last 4 weeks, markets have gone up significantly. While this momentum could continue, it is better to take some profits and keep cash in hand because famous "Fall" months of Sept/Oct are nearby and if history is any guide, these months do bring some excellent opportunities if you have dome dry-powder ready. Here are few steps you can take: If you are up by more than 50% or so, take some profits and keep those profits in cash If you do not want to sell your long-term holdings (for tax reasons), sell "out of money" covered call against these stocks. So even if stocks went down, you would keep the premium. If stocks went up, you would get additional 10-20% upside. Keep a lis...

Last week capped the good news which was coming over last few weeks with GDP contraction at 1% which was better than expected. Here are some of the snippets of good news: GDP contraction slowing considerably and coming at 1% Housing showing some life at last with prices in some areas increasing in 3 years Inventories down significantly More than half the companies which have reported beating profit expectations Durable sales increasing Consumer confidence holding steady Car sales increasing (thanks to Cash-for-clunkers) China/India still showing enviable growth Stock markets across the world showing significant increases with S&P having its best 5 month run since 1938 All these factors are indications that we are on our way to slow and gradual recovery. I won't be surprised if economy/GDP shows a growth of about 0 to 0.5% in Q3CY 09 and 1-2% or more in Q4CY09 Last week was pretty good for many of my earlier recommendations especially FIG, ACAS , PCX , CENX , HIG and LNC . I e...