Seeking Alpha by Adding Beta

After writing my last blog on  All Clear for Santa Claus Rally? , I never thought that my next blog would be on "Grinch who stole Santa Claus rally". But that's exactly where markets are at. It's just over 2 weeks and December which is normally a good month for markets is turning out to be worst December since great depression - yes that happened almost 85 years back! So how did we landed here? Well - lots of reasons and any or all of them are playing "Grinch" stealing what was supposedly Santa Claus rally after treacherous Oct and Nov. Let's look at these. Fed got itself into a bind by pre-signalling rate hike in Dec. With markets at delicate stage and inflation under control, ideally they should and would have liked to skip interest rate hike in this week's meeting. However President Trump's public statements against Fed would make Fed's job difficult in skipping interest rate hike. So if they increase, it's problem for markets (and

Three most important men in terms of impact on market (President Trump, President Xi and Fed Chairman Powell) played nice to each other and markets. Starting with Powell's speech that interest rates being closer to neutral rate means pause after expected 25 basis point increase in December. Over weekend during G20 meeting, both Trump and Xi agreed to pause raising tariffs on Jan 1 and keep talking to reach "biggest" trade deal between US and China in next 90 days. With markets reaching low 2600 couple of times in Oct and Nov and rates and tariffs worries subsided should bode well for Santa Claus rally going into new year. Would markets reach all-time highs? It depends. If signs of substantial progress is made on trade talks between US and China, interest rates are not increased and economy still shows 2.5 to 3% growth without inflation, we could see markets reaching all time highs in Q1 of 2019. Of course FAANGs and Semis need to rejoin the party. That can happen if Q4 r

Hope all of you had great Thanksgiving weekend. Visiting one of the Bay Area Mall on Black Friday gave a sense that economy is doing well since malls were packed with people doing bargain hunting. We are almost at end of 2018 and given recent churn in markets, I keep on going back to the year which was very much like 2018. The year of 1998! I could almost cut-n-paste my previous blog on this topic  1998, 2008 and now 2018: History Repeats! Let's look at current state of various markets: "Crude" reality is setting in oil markets with supply increasing due to waivers granted by US for Iran oil imports, OPEC pumping like there is no tomorrow and US shale producers going with mantra of "drill baby drill". At same time, demand is slowing down due to Chinese economy slowing and US GDP growth coming down from 3+ to natural rate of 2%. All of this resulting in crude crashing from $75 to $50 and more pain to come. Cryptos are crashing - This was expected since vari

As predicted, US elections produced split congress with Democrats taking control of House of Representatives and Republicans keeping Senate (with increased margin). Pundits will analyze these results and comment on how nation is divided. I beg to defer! In my opinion, Divided congress = United America! People want their politicians (I refrain calling them leaders yet) to work together and implement policies and pass bills which both parties agree on. If divided congress produce complete gridlock, that's ok since at least nothing will happen. It also means no bad policies will be implemented. Time and again this has proven very effective. Some of the best years of 60s, 80s, 90s and recent Obama years had divided congress. Markets seem to agree that divided congress is good and hence all indices are up significantly. Now that Democrats control house, let's look at 4 "i"s of Democrats: Infrastructure, Immigration, Investigation and Impeachment. If Nancy Pelosi and

It's that time of year when "scary" October gets over with Halloween and November starts with holiday spirit. This time Diwali also happens to be in November (happens once in approx 3 years). So first of all, Happy Diwali to all my readers! This is the biggest and most joyous festival for "festival crazy" Indians. The festival itself goes on for 5 days but if you combine with Vijadashmi, Navratri and multiple weekends of Dandiya, it feels like we are in this for months. It's also called Festival of Lights! With lights, fireworks (where permitted), sweets, parties with family and friends wearing colorful outfits, it's fun! This time I am also looking forward to seeing Aamir/Amithabh's most awaited film "Thugs of Hindostan" which is releasing day after Diwali. it's MUST WATCH film. Go and see in theaters. November also brings election season every two years These are mid-term elections but due to unique style and substance of our Presid

The market turmoil continues and President Trump and everyone on street started talking about how Federal Reserve Bank (FED) is keeping its blinders on and intent on keeping up with its chosen path of increasing interest rates. Basically they are "Fed" up and wants FED to change its stance on interest rates. We had seen this movie before. Interest rates start going up, markets have tantrum hoping fed will chance its stance. Then monthly and quarterly economic indicators start coming and everything looks ok giving fed ammunition to keep up its course and then markets adjust back to normal. It's almost like markets have 10-year itch (there is 7-year itch term in relationships). It happened in 1987, 1998, 2008 and now 2018. While there would be some hit to confidence, recent market turmoil also helps take out the excesses and set a good foundation for further upside movement. Mid-term elections also add to the uncertainty even though most of the polls are predicting that co

In politics "October Surprise" means  any political event orchestrated (or apparently orchestrated) in the month before an election, in the hopes of affecting the outcome (from Wikipedia). In stock markets, October is known for sharp market corrections as seen during so many times(1929, 1987, 2008 and so on). So this October, its no surprise that we are having some gut-wrenching correction which exactly started on first day of October. Today and next couple of days would be critical in terms of momentum selling before it settles down and get ready for year-end rally. President Trump is calling fed "crazy" which almost feels like Turkey President directing its central bank what to do. (another similarity: both these presidents have their son-in-law in key government position). Last few weeks interesting political drama unfolded in which both parties tried to score some points with their constituencies by using Judge Kavanaugh's confirmation to Supreme Court. Mi

What a week of theatrics by all the Ts mentioned. Let's look at each one of these! Trade:   Trade and tariffs continue to dominate the news with skirmishes between US and Canada, potential battle with Japan and escalating trade war with China. On the strength of US economy, US seems to have upper hand which Trump and his trade representative wants to fully exploit and extract most from its trade partners. Mexico fell in line so will most likely Canada resulting into NAFTA 2.0 by end of year. EU has started taking about "no tariffs or reciprocal tariffs" on cars. Japanese are smart not to ruffle feathers with Trump administration. And then there is China! The trade talks started two weeks back but did not made any progress. Most likely tariffs on another $200B Chinese goods  will happen and then serious negotiations will start resulting into some kind of deal by end of year. Till then trade will continue to dominate the economic news Tech: After reaching all time high i

Happy Labor's Day to everyone. The month of Sept is here - one of the worst month in terms of market volatility and precursor to even dreaded Oct month. Sept 15 will be 10 year anniversary of famous Lehman Bankruptcy which started great recession of last decade. So it's time to pause, reflect and decide what's best strategy for remaining 4 months of 2018.  The market voted unanimously who is winning the battle of trade wars between US and China with US markets reaching all time highs and Chinese markets entering into bear territory. This is one the reason China is entering into discussions again. The "Game of Chicken" between US and China may be entering into decisive phase in next few weeks. And that's good for markets. Now let's look at best performing S&P stock of the year - AMD and what I mean by new "A" in FANG. As most of you must be knowing, FANG represents 6 companies (originally there were 4): Facebook, Apple/Amazon, Netflix/Nvidi

The double negative verdicts of Aug 21 may be considered as start of end of Trump Presidency. Only history would tell us significance of events happened on that day. Almost exactly 20 years back, political news were filled with special counsel Ken Starr and possible impeachment of President Clinton. Now it is Muller and Trump filling the political news. Special counsel Muller may file his report sometime later this year and democrats may gain control of house triggering possible impeachment process of President Trump. So what impact will it have on markets? Looking back, markets in 1998 fell nearly 20% leading to release of Starr's report. But once report was out and actual impeachment process started in Nov, markets regained all the losses and some more. It gained 28% by the time senate acquitted President Clinton in early 1999. While Clinton became lame-duck in last 2 years, markets continued to gain momentum during dot.com era. Looking at this history, what could happen this ti

Thanksgiving is more than 3 months away and world is already worried about "Turkey" because of Turkey Shoot.  A  turkey   shoot   is   a   fight   or   contest   where   one   side   is   so   much   stronger   than   the   other   that   the   weaker   side   has   no chance   of   winning.  That's exactly what is happening with President Trump taking the fight with Turkey's strongman Erdogan over release of American Pastor Andrew Branson. Turkish Lira dropped over 40% in 2018 (17% drop coming on Friday last week). This reminds the days of Asian  currency crisis 20 years back. What started in Thailand in 1997 with its currency dropping 40% quickly spread to other countries like Indonesia, Malaysia and South Korea and caused turmoil in worldwide markets. As they say, history does repeat itself. 20 years later, world is in very similar phase. Would summer Turkey Shoot turn to be a full-blown crisis? Sept and Oct are upon us. These months are one of the worst months i

As I mentioned in my previous blog in May about Race to Trillion , last week we did see first modern-day trillion $ market cap company. And the crown went to Apple as expected. As Q2 results started pouring in, it was clear that one of the two companies (Apple or Amazon) would claim the title. Both companies along with other two contenders Alphabet and Microsoft announced outstanding results and continued the momentum towards trillion. I won't be surprised if we see another trillion $ company in 2018 and most likely it would be Amazon. By end of 2019, expect all 4 companies to have crossed this milestone. Looks like Trillion is the new $500 Billion (of dotcom days). Lots of interesting events have happened in month of July. France won its third Soccer world cup, escalation in tariffs "war of words", continued early-morning twitter meltdown of President Trump, Fed staying the course of raising interest rates. Despite all of these potential market moving news (except Fran

Want to start with big disclaimer. Even though I have keen interest in science behind biotech and many successful investments (and some spectacular failures), I have no formal education in biotech or for that matter investing in biotech. On top of that, investing in biotech is extremely risky due to binary nature of outcomes. So if you are not a person with extreme risk tolerance, you can stop reading this week's blog (and save few minutes:-) I got interested in biotech few years back due to science, potential to make outsize gains or losses (almost like bets) and just sheer progress happening in the field (personal situation was also one of the factor due to which I did lot of reading in this area). Last two years I started noticing emerging biotech companies in areas related to "genes".  In general these companies can be divided in two broad categories: Gene Therapy:  "the transplantation of normal genes into cells in place of missing or defective on

If one asks the question "which is most valuable media company?", what would be your answer? With blockbuster franchises like Disney, Starwars, Marvel, Pixar, all Disneyworld theme parks, ABC, ESPN and many other valuable assets, answer should be obvious that Disney is most valuable media company in the world. And that answer would be correct for now! In 2019 most likely the answer is going to change to Netflix as most valuable media company. What a shakeup in span of just one decade. Ten years back, Netflix was struggling to survive and had to be rescued by Carl Ichan (who made billions on his investment) and now we are discussing Netflix becoming most valuable media company surpassing Disney. However this should not be surprise to students of how economy and markets progress. Old gets replaced by new. We had seen it in so many industries time and again. Let's see how these two companies stack up in 2018: Revenues: Netflix: $13B; Disney: $56B Market Cap: Netflix: $

The earnings season is almost getting wrapped up and race to become first trillion $ company is getting to finish line. During dot-com bubble, there were couple of contenders mentioned (Cisco, Microsoft) but then bubble busted and these companies lost the momentum in that race. During last few years, the race is back on and most likely in 2018 we will see first even trillion $ company. Here are real contenders in that order: Apple: $927 Billion Amazon: $780 Billion Microsoft: $750 Billion Alphabet: $764 Billion Facebook: $550 Billion Not surprisingly that all of these are tech companies and within themselves they have market cap approaching $4 Trillion (exceeding GDP of all but top 4 countries - US, China, Japan and Germany). Given the momentum Apple has regained after latest earnings results, the crown would most likely go to Apple to become first company to cross this milestone in 2018 followed by Amazon either in 2018 or 2019. Remaining two companies (Google and Microsoft

March madness continued for all of March with so many upsets in NCAA "March Madness" in which 100% of brackets got busted by end of 2nd round. Loyola Chicago's dream run (with inspiration from 98 year old nun) ended just before Easter Sunday. It came down to Villanova vs Michigan. If I have to bet, Villanova would win NCAA Men's Basketball championship tomorrow. White House Madness continued with few more resignations. People are getting used to White House version of Apprentice! However most surprising and dis-appointing news came out of Silicon Valley. The companies we got used to trusting with our photos, likes and shares had been taking our privacy too lightly and had major leaks across the board. Most significant revelation came from a whistle blower that Cambridge Analytica had account details of 50 million Facebook accounts and they used these details to influence outcomes of Brexit as well US presidential elections. Basically they stole privacy of 50 million

Just little more than one week of March has ended and college NCAA basketball "March Madness" bracket of 68 teams is not even published. Yet given the events of last few days, it feels like we are already into March Madness. Let's recap some of the events of last few days. Republican president announcing tariffs on Steel and Aluminum. Isn't GOP supposed to be party of "free trade" and isn't America the beacon of "free trade" lecturing all other nations? Resignation of senior economic advisor Gary Cohn - that was not surprise when he lost "tariff" brawl in white house. Elon Musk supporting Trump policy of tariffs with justification that China has 25% duty on American made cars and US has only 2.5% on Chinese made cars (to this point, I agree that there is major imbalance in tariffs between US and China) Trump exempting Canada and Mexico and promising to exempt many countries who will play to his tune. I read Australia is next on

Around this time of year, I used to write my blog about Oscar predictions. However last week's announcement by Trump and unknown   Oscar lineup promoted me to write about something which has been brewing since Trump started campaign and finally coming to reality. What did Trump announced? He announced that US is considering putting tariffs on Steel and Aluminum imports. As definition, tariff is tax or duty to be paid on specific item. Before globalization, every country used to put tariffs for many reasons but most importantly for protecting domestic industry. US was major proponent of Globalization and worked/pushed countries/unions to remove tariffs. NAFTA is an excellent example where 3 North American countries (USA, Canada and Mexico) act as tariff less union. It's good concept as long as there is balance in imports and exports among countries. However over last 2-3 decades, it has been mostly one sided equation in which US imports vast amount of goods compared to exports

Only 2 weeks back I wrote about markets "Melt Up" which really turned out to be a "Meltdown.  It all started with employment report on 2/2. DOW dropped 666 on 2/2 and continued into next week  with 1000 point swings on DOW. What may have suddenly triggered change of course for markets? There are multiple theories being hashed out. Before we get into some of those, let's learn little bit about history which seems to be repeating every 10 years. Let's look at 1998 and 2008. Year 1998: This is the time US was in its longest bull market and irrational exuberance was in full force with "dot.com" bubble forming. Another president (with somewhat similar personal character traits) was in white house. Experts (including Nobel Laureates behind LTCM) were making one-way bets on "convergence" in bond prices. Questionable dot.com companies were coming to markets with billion $ valuations with just some eye-balls as "customers". Generally life

January of new year is almost wrapping up and I must say what an exciting way to start new year. It started with Intel (followed by other CPU vendors) announcing security vulnerability called " Meltdown ". Combined with " Spectre ", these security vulnerabilities were reminder of another Y2K type problem which impacted almost every known computing device. The CPU vendors including Intel handled the issue relatively well by coming out with patches and system/server/equipment vendors quickly integrated these patches into their software releases. To some in high-tech world, it also presented an opportunity to upgrade antiquated equipments with newer ones creating additional business. What started as major issue for Intel at start of year became an opportunity as seen in Intel's latest quarterly results. Intel stock crossed $50 after many years. That brings me to " MeltUp ". The way markets are rising with almost 7% return in Jan month itself, we can defi

To all my readers, I wish you a very happy new year 2018. During holidays two of my friends gave me Satya Nadella's book "Hit Refresh". Initially I was little skeptical since we read about these companies and their CEOs almost on daily basis so I was wondering what new I would learn from reading the book. I must confess that I was totally wrong. Satya has narrated his personal life, his passion about cricket and corporate life effortlessly and authentically. It's more of a story of transformation he took personally and how he applied his personal experiences to transform a company like Microsoft. Over next few years Microsoft transformation will be similar to what Apple did at start of century. This book is for everyone (not only for those who work in tech) as it does provide some simple tips about life, empathy and culture. As happens to most of us, start of new year brings new resolutions (which get forgotten by Groundhog Day). So instead of making new resolutions