Congratulations Mr President !

Congratulations Mr. President on enacting health care law which America needed and was in works for last 6 decades ! After setback of Mass senate elections in Jan, everyone had almost given up on health care reforms for few more decades. But Obama took charge of overall game-plan and led from front to get health care reforms done. This week was the the best week in Obama's presidency with following key achievements !

• Health care reforms done - this goal eluded for all previous presidents and Obama would be remembered for this in same way as FDR for enacting Social Security and Lyndon Johnson for enacting Medicare for elderly !
• Major arms reduction treaty with Russia
• Some tough talking to Israel's prime minister about settlements in Jerusalem
• Proposal of using some TARP money to help struggling home-owners
• Financial Reform bill getting momentum and has potential to get it done in next 2-3 months

Lot can be done when Obama leads from front and Congress gets a taste of win ! Hopefully this momentum can continue.

Now that Washington has finally started working, we hope that they pay more attention towards job growth. Economy has started showing quite a bit of momentum but real truth would be in next week's employment report. Economists are expecting job growth of about 150,000. That much of job growth is needed just to maintain unemployment rate of 9.7. We need much higher job growth to bring down unemployment below 9%. This is absolutely important to keep stock market momentum and for democrats to keep control of both houses.

Dow is within spitting distance of 11000. As I predicted few weeks back, it may touch 11000 next week. Where it is headed after that ? Most likely DOW would trade in between 10500 and 11500 till summer end. If companies continue the good results for first two quarters and continue to forecast robust growth in last two quarters, DOW could start its upward journey in Nov/Dec with potential of touching 12000 by end of 2010. With this macro forecast, here are some sectors one should invest:

• Financials: banks, insurance companies (SNV, KEY, RF, FAS, UNG and some European banks like AIB, ING and NBG)
• Real estate - commercial and shopping mall REITs (SFI, GGP, DDR, PLD)
• Energy Sector - look at master limited partnerships (AHD, XTXI, ERX, CHK)
• Private equity sector - finally M&A and IPO activity has picked up. So private equity companies can cash out their past investments (ACAS, FIG, BX)

So once again, Congratulations and Thank you Mr. President on job well done !

Have a great weekend !

/Shyam

It's time to "insure" !

IPL (Indian Premier League - cricket's equivalent of NFL) started its third season with a bang. It's fun watching cricket in India. I would be able to see couple of IPL matches on TV. I am rooting for Mumbai Indians - Sachin Tendulkar being in top form should help it get into Semi-finals.

Markets are holding onto gains made in last couple of weeks with each of last three sectors I recommended (Energy, REIT and Banking) making significant gains. Now onto my next sector recommendation:

Insurance Sector:

This sector is kind of proxy for asset valuations since companies in this sector invest policy premiums in various kind of assets ranging from bands from banks, REITs and government bonds. Many companies in this sector were on verge of bankruptcy in 2008-2009 - AIG being the biggest and well known company. Now that asset valuations have stabilized and many companies have fixed their valuations, there are many stocks in this sector which could return 50% in next 18-21 months (by end of 2011). Here are some of the recommendations:

• Small cap: PNX ($2.80), CNO ($5.80)
• Mid-cap: GNW ($15), HIG ($25), LNC ($25)
• Large-cap: MET ($40) and PUK ($16)

Once economy fully recovers, these companies would resume their dividends with yields in 4-6%.

Finally there is some momentum in health-care bill. It would be leadership test for President Obama if he can get it through political quagmire ! Good luck President !

/Shyam

"Banking" on Recovery !

I am in India due to some personal matter hence could not post my blog for last couple of weeks. Indian economy is very hot - I can feel it given the traffic conditions when I was coming out of Mumbai or going to Pune. Roads are improving but still has long way to go before infrastructure could handle onslaught of new cars and two-wheelers. Today only I was reading that nearly 2 million cars and 10 million two wheelers are sold in India every year. Not sure where is space to drive all those new cars !

Now coming to today's topic - last couple of posts I am been recommending sectors and some few picks in those sectors. Both energy and real estate picks did very well since I recommended (see my last two posts). This week's theme is "banking".

Overall banking sector has been doing very well and would continue to do well. Most of the bad news is out, economy is recovering, unemployment is stabilizing and banks are in the process of repairing their balance sheets. So unless complete world falls apart, this sector provides excellent opportunities to provide market beating returns. Here are some of the picks:

• US regional banks: Key ($7.35), RF ($7), SNV ($2.80) and for risky investors CBC-PB ($3). These banks provide direct exposure to recovery in US real estate
• European banks: ING ($9.9), AIB ($3.70) and NBG ($4.20). These banks provide direct exposure to recovery in Europe and European leaders fixing PIIGS issue once for all
• Leveraged ETF: FAS (below $70) - this is most risky which provides 3x exposure (up or down) to banking sector. This is recommended for those who can bear extreme risk and volatility. This provides leveraged exposure to big banks like GS, JPM, BAC recovering. If sector recovers as I am predicting, FAS could reach $120

Overall markets seem to have found its footing after more than 5% correction and looking forward to Q1CY10 results.

Good luck !

/Shyam