Seeking Alpha by Adding Beta

This week was one of those weeks when investors start paying attention to volatility and come out of their complacency which they got used to in last few months. When all major indices go down by nearly 5%, one has to wake up and pay attention. This week, every day DOW had century movements (1 up, 3 down) - last two were double-century on down-side. There are quite a few reasons markets behaved the way it behaved. Let's look at them: China is putting brakes on its rampant credit growth and associated speculation to prevent economy from going out of hand. And now a days when that happens, whole world markets shiver ! Continuing worries of Greece being on verge of default And as major shock, democrats losing Mass senate seat and hence putting Obama's overall policies (including health care bill) in tatters. Now that his major initiative in trouble, Obama is trying to rally his support by attacking wall street and bankers - some of it is justified and some of it is just politics

GOP candidate Mr. Brown won Mass senate seat which was held by one of the most liberal democrat Ted Kennedy for last 50 years. What a difference one year makes - last year this time Obama was on top with oath celebration of first black president. One year later, he is about to see his most important domestic policy issue - health care bill derail after so much efforts or after coming so near. It's sad that due to this one election, health care bill and some other key policy initiatives may be dead. Is this preview of Nov elections ? This win would definitely get GOP rank and file motivated to get few more senate seats in Nov elections. So this seems to be repeat of 1994 when democrats lost elections and both houses. Only silver lining about this is: Stock market would love this (in fact it already predicted this with markets going up today by 116 points). It would go up even more tomorrow. If we look back, it may be good thing for economy and stock markets. Here are two examples:

Last week earnings season started with three important earnings - AA, INTC and JPM . All three of them had decent bottomline ( INTC surprised even on t opline ). But investors wanted a reason to sell (don't blame them since markets were becoming dizzy after 65%+ rise in 10 months). Investors focused on revenue growth. With Q-to-Q comparisons becoming difficult starting from Q2, many folks believe that this may be peak earnings for many companies. Stocks of all three companies fell after the earnings were announced. So what can we expect as earnings season gathers steam ? I would predict that we will see last week's pattern repeating for majority of companies - most of them would surprise on upside but stocks will still fall on next day. However overall market should hold pretty well with DOW hovering between 10500 and 11000 and S&P between 1100 to 1150. Let's take a look at couple of investment ideas: Company : Hercules Offshore, Inc Symbol: HERO Buy price: $5 to $5.

Markets welcomed new year with enthusiasm with first day DOW going up by 150+ points and S&P climbing up by 2.6% in first week itself. My recommendations in first post of 2010 did even better - they were up by nearly 17% (assuming you had bought on first trading day of year). One would be excited to get such return in a year. Now that these picks have returned 17% in one week, what should one do ? To answer that, let's look at where markets and economy is heading. I think markets have found a nice sweet spot. Here are positives which are going for markets: Economy is coming out of recession Interest rates would remain low for quite some time Inflation is till muted Companies would have top-line growth due to increased consumer demand, inventory buildout and exports Companies would have bottom-line growth since they have been very careful in increasing headcount or other expenses 60% of stimulus funds are going to be spent in 2010 No significant profit pre -announcements before

Happy new year to all of you and your families ! Hope you had a great new year party. Now that we are starting a new year and new decade, it's time to look forward and get ready for what's in store for 2010 and this decade. Here are some macro predictions which I assume would form basis of my investment ideas and recommendations: For year 2010: At end of year 2010: DOW: 11500 to 12000; S&P: 1220 to 1250: Nasdaq : 2500-2600 US GDP growth for 2010: 2.5 to 3.5%; Unemployment rate: 8-8.5% Fed interest rate: 1-2% Oil: $75 to $90; Natural Gas: $5 to $7 BRIC stock indexes: Up by about 15-20% from 2009 levels with economies growing between 5% (Russia/Brazil) to 9% (China) - India would be somewhere around 8% Now that we just had one lost decade for developing economies, new decade should bring some cheer to investors (similar to 1980s after stagnant returns of 1970s). Here are some stocks which I think has 50% upside potential. Caution: Most of these stocks would also have 50% dow