Seeking Alpha by Adding Beta

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 unl...

Last week markets wanted to hear three most important words which were worth billions of $$ and they got what they wanted to hear. In his semi-annual update to Congress, Bernanke did say that Fed Interest rates would stay "exceptionally low" for "extended" period of time ! And what a difference these three words made - on that particular day, markets went up by 100 points which is worth many billions of $. As investor, low rates are very crucial particularly at this juncture since economy is just coming out of ICU and unemployment is still near double-digits. So low interest rates are serving as "oxygen" for economy. "Extended" means Fed won't start raising interest rates for at least 6 months. So road is clear for investors for at least six months except for " European " mess ! Now coming to "Greek" problem: Last week Greek and Europe were playing game of chicken and finally Europe is coming to terms of helping Greek by ...

Earnings season is almost over and majority of companies beat earnings - what is relief especially since markets has built up so much expectations. Last week finally DOW broke its 4 week losing streak but still very much hovering around 10000 range. I was predicting it to touch 11000 based on momentum and earnings surprises. If not from Greek and overall Europe problem, it might have come very close to 11000 - instead Europe problems brought it down below 10000. One way it was a good break since non-stop ascent was not sustainable. Now that it has taken some breather and assuming Europe resolves its issues about PIIGS deficit by standing firmly behind Greek debt, markets would resume its upward journey. I am predicting DOW to cross 10500 by Mar 31. Only major risk is Greek problem - if Europe is not able to give clear direction about Greek, there is risk that DOW may fall near 9500. Last Sunday's Superbowl match was great - while my prediction did not come true, I was happy with ...

Debt troubles in "PIGS" countries - Portugal, Ireland, Greece and Spain seem to be threatening nascent worldwide recovery. It is reflected in losses in stock markets over last 4 weeks - some of these losses approaching 10% which would qualify for a technical correction. So are troubles facing these countries similar to what happened to financial companies in 2008 resulting in Bear, Lehman, AIG and many other fiasco ? Governments used to be last stop which bailed out these banks. Who will bail out these countries ? Fortunately (or unfortunately as some may think) these countries are part of EU with Euro as single currency. EU and Euro is too important for all Europe and then big European nations like Germany and France won't let Greece or Portugal derail complete EU. So my prediction is that these countries would be bailed out by either EU or IMF but they would have to pay price by making sure that their budget deficits are brought under control in next 2-5 years. Now ...

This week was one of those weeks when investors start paying attention to volatility and come out of their complacency which they got used to in last few months. When all major indices go down by nearly 5%, one has to wake up and pay attention. This week, every day DOW had century movements (1 up, 3 down) - last two were double-century on down-side. There are quite a few reasons markets behaved the way it behaved. Let's look at them: China is putting brakes on its rampant credit growth and associated speculation to prevent economy from going out of hand. And now a days when that happens, whole world markets shiver ! Continuing worries of Greece being on verge of default And as major shock, democrats losing Mass senate seat and hence putting Obama's overall policies (including health care bill) in tatters. Now that his major initiative in trouble, Obama is trying to rally his support by attacking wall street and bankers - some of it is justified and some of it is just politics...

GOP candidate Mr. Brown won Mass senate seat which was held by one of the most liberal democrat Ted Kennedy for last 50 years. What a difference one year makes - last year this time Obama was on top with oath celebration of first black president. One year later, he is about to see his most important domestic policy issue - health care bill derail after so much efforts or after coming so near. It's sad that due to this one election, health care bill and some other key policy initiatives may be dead. Is this preview of Nov elections ? This win would definitely get GOP rank and file motivated to get few more senate seats in Nov elections. So this seems to be repeat of 1994 when democrats lost elections and both houses. Only silver lining about this is: Stock market would love this (in fact it already predicted this with markets going up today by 116 points). It would go up even more tomorrow. If we look back, it may be good thing for economy and stock markets. Here are two examples:...

Last week earnings season started with three important earnings - AA, INTC and JPM . All three of them had decent bottomline ( INTC surprised even on t opline ). But investors wanted a reason to sell (don't blame them since markets were becoming dizzy after 65%+ rise in 10 months). Investors focused on revenue growth. With Q-to-Q comparisons becoming difficult starting from Q2, many folks believe that this may be peak earnings for many companies. Stocks of all three companies fell after the earnings were announced. So what can we expect as earnings season gathers steam ? I would predict that we will see last week's pattern repeating for majority of companies - most of them would surprise on upside but stocks will still fall on next day. However overall market should hold pretty well with DOW hovering between 10500 and 11000 and S&P between 1100 to 1150. Let's take a look at couple of investment ideas: Company : Hercules Offshore, Inc Symbol: HERO Buy price: $5 to $5....

Markets welcomed new year with enthusiasm with first day DOW going up by 150+ points and S&P climbing up by 2.6% in first week itself. My recommendations in first post of 2010 did even better - they were up by nearly 17% (assuming you had bought on first trading day of year). One would be excited to get such return in a year. Now that these picks have returned 17% in one week, what should one do ? To answer that, let's look at where markets and economy is heading. I think markets have found a nice sweet spot. Here are positives which are going for markets: Economy is coming out of recession Interest rates would remain low for quite some time Inflation is till muted Companies would have top-line growth due to increased consumer demand, inventory buildout and exports Companies would have bottom-line growth since they have been very careful in increasing headcount or other expenses 60% of stimulus funds are going to be spent in 2010 No significant profit pre -announcements before...

Happy new year to all of you and your families ! Hope you had a great new year party. Now that we are starting a new year and new decade, it's time to look forward and get ready for what's in store for 2010 and this decade. Here are some macro predictions which I assume would form basis of my investment ideas and recommendations: For year 2010: At end of year 2010: DOW: 11500 to 12000; S&P: 1220 to 1250: Nasdaq : 2500-2600 US GDP growth for 2010: 2.5 to 3.5%; Unemployment rate: 8-8.5% Fed interest rate: 1-2% Oil: $75 to $90; Natural Gas: $5 to $7 BRIC stock indexes: Up by about 15-20% from 2009 levels with economies growing between 5% (Russia/Brazil) to 9% (China) - India would be somewhere around 8% Now that we just had one lost decade for developing economies, new decade should bring some cheer to investors (similar to 1980s after stagnant returns of 1970s). Here are some stocks which I think has 50% upside potential. Caution: Most of these stocks would also have 50% dow...

Now that 2009 year is over, it is time for report card on market predictions and stock recommendations I have been doing on my weekly posts. Here are macro predictions and actual : DOW would cross 10000 , it did it Oct and stayed mostly above that level for last two months. Oil would touch $80 , it did touch $80 few weeks back and stayed very close to $70-80 range for most of last 2 months GDP would start growing in Q3 , it did started growing - in fact it grew more than my prediction Financials and REIT would recover , they did as soon as stress tests were completed In all, macro predictions were more or less came out to be accurate and that helped me pick my weekly predictions. Here is summary of report card of weekly predictions (assuming one invests about $1000 in weekly stock recommendation at recommended stock price) Overall return: 80% (assuming dividend investments). By any standard this is winning performance (in comparison: S&P up by 23.5%). Best stock: XL with 354 % gain...