Seeking Alpha by Adding Beta

Year 2013 is ending on a very positive note and upbeat mood. Personally we just came from our relaxing vacation with two more families on Big Island. It was a great vacation. US Stock markets had their best run since 1997 and all indexes except Nasdaq is ending at all time highs. The yearly gains are outstanding with DOW 28%, S&P 32% and Nasdaq 41%. Instead of individual stock picking or investing in exotic hedge funds or PE, one would have done extremely well by just buying regular index funds with lowest costs. So how did my 2013 recommendations did? Here is report card (based on Happy New Year 2013 blog) Best recommendations: BBY (250%) and MTG (225%) Worst recommendations: VVUS (-31%), CRUS (-27%) Others like MBI, BAC, KBH, ITB also did ok. Overall if one had invested about $10K per stock, the portfolio would have returned 41% which would have beat S&P by 9 points. Not bad! During the course of year, I started tracking solar sector but since I had yearly reco

Normally I am not into baseball. But given history buff and always trying to find some interesting co-relation, I start following it in Fall when playoffs start. I definitely follow world series since that's kind of movie climax (for readers outside USA, don't fret over calling it as world-series. Americans always thought that America is world and hence they end up calling most of their game finals as world-something). This year Baseball world series started with Boston Red Sox and St. Louis Cardinals tied at 1:1 each. Another 5 games to go and it's about time to start predicting winner! Let's look at some interesting connections. I was reading an article in WSJ. As expected "Blue" states are supporting Red Sox (with exception from Texas) while majority of "Red" states are supporting Cardinals. Even New-yorkers who consider Red Sox as arch rival to Yankees are supporting Red Sox. So given this co-relation between politics and sports, I am predictin

Finally the mess Washington politicians (mainly tea-party hard-core republicans) created had ended for 3 months with Government shutdown over and debt-limit increased. As always it came down to 11th hour and solution had to come from US Senate leaders. Grand Old Party (GOP) managed to destroy itself by falling into traps of likes of Ted Cruz and lack of leadership skills by house Republican leadership to stand against tea-party hostage-takers! What Obama could not do it in last 5 years (of bringing down Republican Party's approval rating), Ted Cruz managed to do it in 2 weeks. As they say, be careful about who are your real enemies. In this case GOP's main problem is not President Obama but their own party members. President Obama came out winner in this - not only he stood firm against ransom demands of few crazy politicians but also got what he wanted without giving in much. Looks like President Obama having good success in last few weeks - first in Syria where he made Assa

Since Aug 21 incident in which Syrian Government supposedly used chemical weapons on its own citizens, President Obama's foreign policy looked like a random walk through middle-eastern politics. But if Sept 14 agreement  between USA and Russia turned out to be effective (only time would tell), it would turn this "random walk" or "on the fly" diplomacy most effective since Nixon/Kissinger times in early 1970s. This could would bring USA foreign policy in tune with times in which everyone need to adopt to changing situations on a moment's notice. We see that in corporate world (especially in startups) almost on daily basis. While some hard core old-timers (aka conservatives) may not be happy that Putin may get all the credit and it has put down USA in world politics, what matters is how end results can be achieved without more blood-shed (if there was Republican President, I am sure USA would have got it's 3rd war). While I was not happy in the way Presid

September is known to market watches as the month when stock markets do worse. Statistical analysis of 100 years data has shown that September is only month when on average markets are down 1% whereas other 11 months it has been positive. Looks like markets align themselves with start of "Fall" season in September! With markets close to all time high this year and generally very positive till early Aug, how would they fare this September. Let's see what events are going to unfold in next few weeks: Syria attacks - next week Congress after much debating would most likely pass resolution granting President Obama authority for limited attack on Syria to send a message to Assad to maintain America's credibility as international police (whatever that means). This would really give markets a jolt and most likely cause quite a bit of volatility. However unless the war escalates (due to Iran attacking Israel or Western Embassies in Lebanon which real possibilities), long-

It has been a while since I wrote my last blog on Tesla. Since then Tesla's stock price has increased by 30% (from 90 to 120). Looks like many folks are believing Tesla story and possibly its similarity with Apple when ipod was introduced. But most important story for last few weeks have been "QE3 tapering" by fed. Just the talk of tapering has caused havoc in bond/treasury markets with 10-year treasury yield jumping from 1.6% to 2.7%. This is huge in terms of move (equivalent DOW move would have been anywhere between 3000 to 4000 points down). Markets always position for what may happen 6 months in advance. However at same time it overshoots on either direction. IMO, markets have started overshooting in terms of punishing some REITs and commodities. So that may create good value to take some positions in stocks like AGNC ($20), CYS ($8), NLY ($11). These are all high-yielding REIT and very sensitive to interest rate changes and are down by 30-40% this year just due to p

After a long time, I am writing this blog only on stocks and that too some exciting but pricey stocks. Last week Tesla's results and subsequent jump in stock caught my attention. I have been following TSLA stock since its IPO. Every time I go to Santana Row, I make a point to visit Tesla store - same way every time I visit Valley Fair mall, I make a point to visit to Apple store. This started me thinking - Can TSLA (stock) could be similar to APPL (stock) @ time of iPod introduction? Let's look at some similarities? Car companies have been around for over 100 years but in a long time (maybe since Ford introduced Mustang), there has been so much excitement with Model-S introduction. Consumer Digest gave Model S almost perfect score and Tesla surprised Wall Street with profit and 25% gross margins which is unheard of in car industry. Same could be said when Apple introduced iPod. Tesla is run by young CEO Elon Musk in his early 40's same way Apple was run by Steve jobs.

With stock markets at all time high and month of May approaching, it is time to follow time-tested advise of "Sell in May and walk away". While there may be some more gains in weeks away, historically we are entering into six-moth period where avg stock market returns have been slightly negative (compared to this we are just ending Oct-Apr period where returns have been good historically). If we just go with pure financial logic, this does not make sense. But after all markets are more influenced by psychology (than formulas). Yesterday only in Haas Reunion Conference @Berkeley, I attended a sessions on "Behavioral Finance" by Pro Greg La Blanc. Basic theme was that markets are influenced more by what people think of what others would do than by fundamentals (at least in short-term). This is why we see Apple trading at less than 10 times earnings while Amazon trading at close to 100 times earnings because people believe that Apple story is over while there is still

Cyprus banks have been bailed out by giving a hair-cut to its own customers. Government which is supposed to protect depositors is putting a levy or tax unto 10% on deposits in banks. Whether this gets reversed or softened, it had made a big dent in confidence of bank depositors that their money is not safe. While Cyprus is very small economy in EU, depositors in Greece, Spain and Italy (which does not even have a government), must be looking at this and could start their own bank-run. Is this "Lehman" moment (or mistake) done by EU? We won't know the exact fallout since Lehman was much bigger and bank officials and governments have learned their lesson and most likely would come up with alternate proposal for Cyprus bailout. Markets tomorrow are definitely going to be volatile and S&P would have to wait for few more days to reach its all time high. Given that markets are up nearly 10% in less than 3 months of 2013, it would be prudent to take out the gains and stay

Spring is almost here. While many may balk at losing one hour of precious sleep on Sunday morning, I always look forward to day-light-savings as it gives more day-time to enjoy Sun! Spring means we can start looking forward to many things - wrapping up school and other kid activities, summer vacation, summer movies, IPL cricket season and don't forget stock market churn. This year markets are following the script almost to the letter. As historical data suggests, markets perform best during Oct to Apr cycle and perform worst during Apr to Sept cycle. If that pattern repeats, we are at end of cycle. With all indices recording multi-year highs with DOW even reaching all-time high, it is time to be careful. Most likely over next week or two, S&P would reach all-time high and possibly may try to breach 1600. After that market participants would realize that markets have reached too high too quickly. With Q1 wrapping up, markets would become cautious and start trending down. By e

It's Oscar weekend and to make watching Oscar awards program interesting, what is better way than to pick winners and see how one does in predicting. Last year I had 75% success rate (3 out of 4). So this time I decided to predict 14 winners as follows: Best Picture - Argo  Lincoln has good shot but after seeing both movies, Argo deserves to win Best Director - Steven Spielberg (For Lincoln).  This should have been Ben Affleck but nomination process blew up this time. So it would be one of those years when Best Picture and Best Director could go to two different movies Best Actor - Daniel Day-Lewis (for Lincoln) - no competition here Best Actress - Jessica Chastain (Zero Dark Thirty) - this could be only award this movie may win due to controversy surrounding this movie Jennifer Lawrence (for Silver Linings Playbook) could be surprise winner only because of "feel good" factor vs "controversy"  Best Supporting Actor - Tommy Lee Jones (Lincoln) Be

Finally the day which all of Bay Area and for that matter all of America was eagerly waiting is here. The biggest sports day of the year for America (bigger than Olympics) - Superbowl day is here! This year's Superbowl is special for many reasons: First time two brothers are head coaches of opposite teams dubbing Superbowl as HarBowl (as I predicted in my previous blog) First time a team (49ers has won 5 times) has a chance to match record of most Superbowl wins (currently held by Steelers with 6 Superbowl wins) First time a team (49ers) has a chance to have chance of perfect score by winning today's Superbowl - they have 100% record of winning Superbowl. Hence Quest for Six! First time an average cost for 30 second ad would cost close to $5 Million ($3.8 million for TV spot and over $1 million to produce the ad) There are many reasons but for Bayarea fans like us, 49ers playing in Superbowl is happening after 18 years. I remember last time it happened when I was just s

This weekend is best of NFL sports when two teams who would be playing Superbowl in two weeks would be decided. This time, 4 best teams have come to championship games - each one of them could be Superbowl winner. Last Saturday was great Saturday for Harbaugh brothers whose teams (Jim Harbaugh - 49ers and John Harbaugh - Baltimore Ravens) won their places against tough teams. Question is - would this year's Superbowl be Harbaugh Bowl. There is real chance that this could happen (if luck plays some role in helping both these teams). Current favorites for Superbowl matchup is between SanFranciso 49ers and New England Patriots. But if luck plays some role, Baltimore Ravens could sneak up a victory similar to what they did against Denver Broncos last week. I am rooting for Colin Kapernick's 49ers to win tomorrow against Falcons and then eventually Superbowl. And given 80% co-relation between stock market returns and Superbowl win by original AFL team, any team except Patriots win

It was an interesting week when we saw lots of turns and twists in "fiscal cliff" saga. In the end, one aspect of "cliff" mess was resolved with tax increases on rich and super-rich whereby middle class and upper middle class were spared with tax-increases which they would have been hit otherwise. Stock Markets were happy with best new year day gains on DOW. But all of this may be short-lived since there are more "cliff" fights are coming. This round was clearly won by President Obama with clever negotiations tactics which lasted till last minute (by design). Republicans got played in this and came way short and had no option but to sign off which was essentially what President wanted all along. And worse part was that they got no brownie points at all even though they won on extending tax-cuts permanently for 99% of Americans - one of their major policy victory. Well done President Obama in first round. Now there are at least 2-3 more rounds remaining