Seeking Alpha by Adding Beta

I am glad that May is over. It is one of the most terrible month personally for me. My dear father passed away at age 69 due to post-surgery complications on May 16. If you are around Pune and had to go to hospital, AVOID Ruby Hall at all cost. It is one of the worst hospital in terms on post-operative care. I wish someone had warned me about this before my father's bypass surgery. Please spread the word about avoiding Ruby Hall, Pune at all costs for any treatment ! It has been 2 weeks since my father passed away - myself and my family are coming to terms and returning to our normal lives. Life would never be same when you lose someone dear to your heart and has been an inspiring figure all your life. But life must go on ! I am so looking forward to forgetting this dreadful month of May 2010. Coincidentally it is worst May month since 1940 with 8% monthly loss. I never thought my prediction about "Sell in May and walk away" would be so right on target. I wish it did ...

Market action in first week of May gives new meaning to English word "mayhem". Dictionary meaning of this word is: needless or willful damage or violence. The afternoon action in stock markets on Thursday May 6 was so true to this dictionary definition. It was indeed needless/willful damage to the confidence which was just getting started to build up. Many folks are still searching for answers what exactly happened at 2.45 pm EST on May 6 when DOW had its biggest intra- day points loss in its history ! I was amused that my previous post about selling in May would be so much on target - unfortunately when it comes to selling, I don't follow my own advise ! Storms were building for this fateful day for last few months with slow and erratic European response to Greek debt mess. Now the problem has become much bigger since contagion virus has spread to other European nations and may cross to other nations outside Europe. Unless Europe acts decisively over this weekend and ...

Looks like there are various G-forces holding down the market from taking off beyond 11000. First of all, blame it on PGS (Portugal, Greece and Spain) of " PIIGS " club for bringing down markets due to rating cut. But let's look at these G-forces which are in work: Greece: It has been in news for last 4-5 months and due to structure of EU, there is no quick closure on this. Now that it has only 2 weeks left, Europe better hurry up to help Greece avoid default which may lead to end of Euro as we know it. If Greece defaults, contagion would very quickly spread to other nations in PIIGS and many other nations outside Europe. This could be repeat of 2008 with difference that this time it would be nations defaulting (instead of corporates). Europe needs to have its own TARP for it's member nations and that too very quickly ! Goldman: Since SEC filed civil suit of fraud 2 weeks back, Goldman cannot catch a break. After senate hearings, now there are talks of criminal suit...

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 8 th 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 v...

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 fin...

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 (...

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-...

Congratulations Mr. President on enacting health care law which America needed and was in works for last 6 decades ! After setback of Mass senate elections in Jan, everyone had almost given up on health care reforms for few more decades. But Obama took charge of overall game-plan and led from front to get health care reforms done. This week was the the best week in Obama's presidency with following key achievements ! Health care reforms done - this goal eluded for all previous presidents and Obama would be remembered for this in same way as FDR for enacting Social Security and Lyndon Johnson for enacting Medicare for elderly ! Major arms reduction treaty with Russia Some tough talking to Israel's prime minister about settlements in Jerusalem Proposal of using some TARP money to help struggling home-owners Financial Reform bill getting momentum and has potential to get it done in next 2-3 months Lot can be done when Obama leads from front and Congress gets a taste of win ! ...

IPL (Indian Premier League - cricket's equivalent of NFL) started its third season with a bang. It's fun watching cricket in India. I would be able to see couple of IPL matches on TV. I am rooting for Mumbai Indians - Sachin Tendulkar being in top form should help it get into Semi-finals. Markets are holding onto gains made in last couple of weeks with each of last three sectors I recommended (Energy, REIT and Banking) making significant gains. Now onto my next sector recommendation: Insurance Sector: This sector is kind of proxy for asset valuations since companies in this sector invest policy premiums in various kind of assets ranging from bands from banks, REITs and government bonds. Many companies in this sector were on verge of bankruptcy in 2008-2009 - AIG being the biggest and well known company. Now that asset valuations have stabilized and many companies have fixed their valuations, there are many stocks in this sector which could return 50% in next 18-21 months...

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...