Seeking Alpha by Adding Beta

One of the most anticipated talk by Fed chairman Ben Bernanke gave Friday boost to markets but still it ended in red for the week. This is 4th down week for markets and gave almost all the gains it made in July.  Now every word from Fed chairman and other members of fed are watched carefully to understand where is economy headed and how Fed would react. Bernanke's "unusual uncertainty" could be remembered similar to Greenspan's "Irrational Exuberance" comments in 1996. Final revision of GDP for Q2 came in at 1.6 % which was better than some of the worst fears. So what's in store for Q3 and Q4 since this is what would decide if markets are breaking from trading range. Based on my observations (while back-to-school shopping for kids), retail sales seem to have picked up - at least traffic in shops like Target/Walmart has increased during this season. The all important holiday shopping season is coming soon. It should be relatively ok shopping season. I a...

Summer of 2010 is almost coming to end with labor day (un-official end of summer in US). Kids are back in school. Markets are trading water around same level as start of 2010. After peaking in Apr 2010, summer was mostly about few weeks up and then few weeks down - some professionals call it as risk-on and risk-off. Bond markets and stock markets are diverging. Yields on 2-year and 10-year T-bills (as wells as UK Gilts and German Bunds) are reaching all time lows. Few weeks back I wrote about treasuries in bubble when yield on 10-year fell to 3%. Since then it has dropped below 2.60 and heading below 2.50 very soon - looks like my short-term timing is wrong since treasuries has gone up by 7-10% since then. However I still stand by prediction about long-term that treasuries are headed for a fall (with yield going above 3% by year-end). Basically bond markets are saying that we are heading towards double-dip. Stock markets are pricing in very modest recovery (below 2%). Hence they ar...

Blackstone bought Dynegy with nearly 62% premium. What did Blackstone see in DYN which markets could not see for last few years since all power producers have been in rut since Enron saga ? Is it time to look at some of these independent power producers and utilities ? The investment logic goes something like this: With economy eventually growing, there would be higher need for power thus increasing demand for power / energy Creating new power plants cost quite a bit of capital which is not easily available With Blackstone deal, there would be more companies / PE firms looking at these companies  These companies have steady cash-flow They are trading dirt-cheap compared to their book values Here are couple of companies worth taking a look with potential of 20-30% return over 12-18 months: RRI ($3.5) or MIR ($9.80) - both these companies merging to produce a power producer with over 24000 MW. Both are trading at about 35% of book value NRG ($20) - With over 21000 MW capaci...

After having best month in a year, one starts wondering - what's in store for August for markets ? There are quite a few positives for markets to keep on inching towards DOW 11000 over next 5-6 weeks. Here are some of those: European mess seems to be over at least for now with Euro over $1.30, I am sure Europeans would enjoy their summer holidays in August US GDP growth came in at 2.4 % which is lower than expected but much better than sub-par recovery (with growth of less than 1%) and puts "double-dip" fears at rest (for now) Company earnings came out much stronger than many have expected across the world - this bodes well for second half Shippers (Fedex/UPS) have raised their full year earnings guidance and these are best companies for understanding economic activity across the world Many emerging markets (except China) are trading near their YTD highs - good for developed markets to catch up  So for now, except unemployment report which would be out next Friday...