India's answer to Superbowl !

Finally IPL mania is over with IPL final played between Mumbai Indians and Chennai Super Kings. Considering IPL is only in its 3rd season, the level of excitement it has created both due to exciting cricket and off-the-field politics, corruption and celebrity involvement, I won't be surprised if it takes similar level as Superbowl in USA. We had few friends at our place to watch IPL final - most of them from Maharashtra were supporting Mumbai Indians. So it was little dis-appointing that Mumbai lost to Chennai - but looking at today's game, Chennai deserved to win today's game. Overall it was great IPL season. By rough estimates, IPL with its 60 matches create economic activity of close to $1.5 to 2 billion per year ! Good for Indian economy.

Last week of 8th week when DOW had positive week. I was surprised at the strength and positive momentum markets had especially on Friday last week despite upcoming financial reforms and GS/SEC saga. Regional banks were very strong on Friday with some smaller banks with assets less than $10B had 50% returns (in one DAY). So should one put more money in financials or energy. IMO, the positive momentum would continue for another couple of weeks. But market is getting ahead of underlying strength of economy. In couple of weeks, we will get key reports such as Q1 preliminary GDP report and unemployment report. GDP should show growth of about 3-4% and unemployment should dip below 9.5%. Next few months, DOW could touch 11500 and then go side-ways before resuming its march towards 12000 by year-end. So if you are fully invested, it is wise to take some money out. One strategy is to sell "out-of-money" near term call options. So if markets go up, you can still participate. If they go down, you can keep "call option" premium. However one has to be careful since call option works with most volatile stocks like PMI/MBI/SFI/FAS/ERX/DRN.

SandRidge Energy (SD) is good buy at around $7.5 to $7.7. Due to its pending merger with Arena Resources, stock got punished. However once merger is completed, it could cross $10 in 12 months. Downside risk should also be less compared to other high-flying stocks.

Have a great week ahead !

/Shyam

Sell in May and Walk Away !

Looks like old wall-street saying about "Sell in May and Walk Away" could be more applicable this year considering following factors:

• Markets have seen best rally in 7 decades with all major indexes up by over 70% in one year
• Major indexes have crossed key psychological levels of DOW 11000, S&P 1200 and Nasdaq 2500. Many investors must have kept these as key levels where they were thinking of selling
• Financials could be in trouble again with all the "sins" catching up with them - Goldman Sachs fraud case could be first of many to come. This could shatter confidence once again in wall-street and banks
• While corporate earnings till now have been excellent, economy is still in delicate stage. It is possible that these earnings could be one-two quarter phenomenon before comparisons with 2H2009 would start kicking in
• Unemployment still over 9.5%

SEC case against Goldman Sachs was interesting in many ways - but most importantly it highlighted that regulators have finally woken up from their hibernation of 8 years during Bush administration. This case would surely add lot of momentum to Obama's financial reforms and that would be good for America in long-run.

So how does one invest in these times - it's best to stay with "Sell in May and Walk Away" rule of wall-street and stay on sidelines for next few weeks. Keep lot of dry-powder (aka cash in hand) in case DOW comes below 10500 !

Have a great week !

/Shyam

Welcome to DOW 11000 and S&P 1200 !

Finally I got my MINI Cooper S - check out my new car and sold my beloved Toyota Camry which I used for 12 years without any major problems.

We had fun ride to Livermore Temple and now I can drive it on regular basis.

Next week seems to be exciting week for markets - my prediction is that finally DOW would cross and close about 11000 tomorrow and S&P would cross 1200 sometime this week.

Now that Europe has come to terms and helped set up emergency fund of $40B for Greece, markets should be assured that Greece won't default and Euro is here to stay. This is big positive for markets.

Earnings should be very good with Alcoa announcing tomorrow and major banks in next 4 days. Last year was the season of write-downs - I won't be surprised if banks start announcing "write-ups" (if there is term like that). This should not only help reduce banks losses but also help improve their capital positions. Most of the big banks (BAC, C, JPM, GS) and their regional brothers (RF, KEY, FITB) would do pretty good. In fact their smaller and more problematic cousins (SNV, CBC) would also start reporting improved conditions.

So if you have invested in my last recommended 4 sectors - financials, real estate, energy and insurance, my recommendation would be stay put and enjoy the ride above 11000 for DOW.

Have a great week investing !

/Shyam

Energy Politics - Smart Move !

Mr President was on roll for second week - he made some more key moves in the game of politics for to push some of his key domestic initiatives (for good of country I must say). Now that health care is out of way, he puts his focus on Energy Policy. This is as important to America as health care. America imports nearly $500 B worth of energy from outside and any dent in this bill would help address trade imbalances. Here are key steps Obama took to start addressing energy issue America is facing:

• Opened up vast areas to start drilling again - by sharing revenues with states, state governments who are in desperate need of additional revenues would be more open to this
• Increase CAFE standards for higher mileage for cars from 2016
• Additional focus on clean coal, nuclear energy
• Changing vast fleet of government vehicles to hybrid, Eco-fuel equipped

These are small steps towards a very big policy initiative of "cap-n-trade". If congress can pass even minor version of "cap-n-trade" this year, it would make a big difference in America's energy problem and would be good for Mother Earth !

With so much focus on energy, let's talk about what happening in oil/commodity market and are there any good opportunities for investment.

Oil crossed $85 due to recovery gaining momentum all across the world. I am predicting that oil would cross $90 in summer of 2010 and may even touch $100 if speculation is not controlled. Is this repeat of 2008 ? I hope SEC and other government regulators pay close attention to speculation in commodity market otherwise rising oil price could choke economic recovery.

Now coming to investments - I would refer to my post about 2 months back on energy sector. I would still recommend some of the stocks in that post. In particular following ones:

• XTEX ($11), AHD ($6) and ERX ($38)
• You should also look at CHK ($23) and BBEP ($15)
• HERO ($4.2), MMR ($15) and EXXI ($18) also offer excellent exposure to increased activity in oil sector

All major indices are up by about 5% which is their best first quarterly performance since late 90's. Does this mean stock market is on ascent similar to 1998-1999 or is it heading towards some rough waters as in 2000. More about that in next few weeks !

Myself and my son went to Apple store to check out "iPAD". Both of us really loved it - I would wait for few more weeks to buy one for myself. Apple has another winning product on its hands - kudos to Steve Jobs and all creative minds at Apple !

Have a great weekend and good week investing !

/Shyam