Seeking Alpha by Adding Beta

Since the movie "Ides of March" came, I was intrigued by word "Ides". This is when my son Yash explained meaning of Ides to me and what it meant in context of "Ides of March". In brief,  a  seer  had foreseen that Julius Caesar would be harmed not later than the Ides of March and he warned him about this as "beware the Ides of March". And as we know from history, this is when he got stabbed 23 times in Roman Senate by group of conspirators. So how does this fits in today's investing world? Since Oct, stock markets have been on a tear ignoring so much uncertainty and geo-political risks around world. Last week, Dow crossed 1300 twice (but failed to close above it), S&P is at 4 year high, Nasdaq is as 11 year high. This is happening despite following: European debt mess Tensions around Iran's nuclear program - this week's economist article details risks around this. Some are predicting around 50% chance that Israel would take pr...

This week Apple stock reached milestone price of $500 per share putting valuation of nearly $470 Billion to Apple. While Apple deserves every bit of this valuation, as investor one has to wonder how much more upside there is to Apple stock? I am sure you must have seen many articles on how Apple is still "cheap" at  $500. While on current valuation basis, I agree that it looks cheap, there are many potential dangers one has to worry if considering for long-term investment. Let's look at some of the past historical perspectives. Most valuable companies in recent past Microsoft in 1999 Cisco in 2000 (for few days) GE in 2000 Walmart (at some time in past one decade) GM - sometime in past 5 decades IBM - I don't know fact but I am sure it git this title at some time Exxon - Company which had this title for longest time in recent history Apple - current king of valuation Let's look at this differently: Current valuation of Apple ($470 Billion) is more than G...

Jan month of 2012 is almost over and to stock investors, this month is turning out to be a pretty good month. This also means that 2012 overall would be a good year to be in stocks (as per statistics over decades). The markets are becoming more and more "stock pickers" markets. Forget about index investing in 2012. It's all about picking up right trends and stocks. Keeping that in mind, here is one idea of screening potential picks. I called it as "75% Club". The criteria is simple: Identify stocks which are down by at least 75% in last 12 months (52 week high/low should be 4:1) Research why stock is down by 75%. There can be multiple reasons for stock to go down by that much -  fears of bankruptcy (EK), change in business conditions or competition (SHLD, solar sector), stupid mistakes by management (NFLX), regulatory environment (BAC), macro-economic conditions like housing downtrend (MTG) Find out if companies identified are going to run out of money and h...

Markets have been on tear for first 3 weeks of 2012. I decided to create a mock portfolio based on recommendations from my first post of 2012 by mock buying these picks in first 2 weeks at or below the prices mentioned. This portfolio is up by nearly 11% assuming all picks have equal amount of investment. Highest returns are BAC with 25% and then STX with 23%. So with yearly target of above 10% returns achieved in 3 weeks what should one do? All indexes are heading towards highs of 2011 which were reached in May and July before European mess pulled the indexes down for a flat year. European mess is no where near resolution (see debt negotiations between Greece and bondholders). These worries are again going to come to front lines in Feb/Mar. So at this time best course of action to take some gains off the table by selling some of the winners and keeping some dry powder. There would be quite a few buying opportunities when DOW would go below 12000 sometime in next 3...

Bye-bye/Alvida 2011. It was a gut-wrenching year with so many Geo-political events all across the board and associated stock market moves. What started as a promising year with DOW reaching yearly high by late Apr turned out to be whimper by end of year with S&P barely moving at all. Someone who had gone into hibernation may not even notice the dramatic stock market movements (like 250 points moves on so many days). Personally my stock market returns were dismal (basically all 2010 gains were wiped out in 2011). Unfortunately my weekly/bi-weekly picks also did not do very well. So with that dismal track-record, I ought to change my stock picking/investing strategy. Let's start with some macro predictions. 2012 being election year, first some election predictions: Mitt Romney will wrap up Republication nomination by Mar 2012. Democrats would lose control of senate by margin of about 2-4. Republicans would lose seats in house reducing their majority to single-digits/teens. M...

Year 2011 is coming to an end. What started as promising year both on economic front as well as Geo-political front with Arab Spring is ending with recession clouds and European "Fall". What a mess our elected politicians have made in managing affairs of their countries. Everywhere you look, politicians are failing in delivering what they were supposed to deliver. Enough said about European circus - every few weeks they meet, make lot of promises after long meetings and then go their own ways without implementing these promises. Already 4 countries have changed their Prime Minister(s) (Ireland, Spain, Italy and Greece). Next round could be France US is in gridlock which is likely going to be intensified in election year 2012. So nothing would happen on economic front other than political posturing. Obama started as great promise but coming up way short than what his Presidency could have been. India is stuck in non-stop corruption/Lokpal/Anna's fast. This has started ...

Another week of European drama - only difference from last week that center stage moved from Athens to Rome. The economic crisis cost one more powerful prime minister his job (don't feel sorry for Silvio Berlusconi  since he had 3 years to fix Italy's problems)  With crisis finally moving from PIG (Portugal, Ireland, Greece) to PIIGS (with addition of Italy and Spain), Euro has reached cross-roads. Both Italy and Spain are "too big to fail and too big to bail". This means both these countries need to fix their problems on their own with some support from ECB. Germany/France cannot bail Italy/Spain otherwise they risk getting engulfed by crisis themselves. Already France is at brink of losing its prized AAA rating. European politicians are at least taking steps by installing technocrats like Mario Monti in Italy as prime minister. Since he is short-term prime minister, he has nothing to lose. He should convert crisis into opportunity and forcefully move in freei...

Watching last weeks events in Greece, I was curious to find out origins of following three words and to my amusement all of these three words have Greek origins. Democracy -  δημοκρατία  – ( dēmokratía ) "rule of the people Drama -  Classical Greek :  δρᾶμα ,  drama Tragedy -  ( Ancient Greek :  τραγῳδία ,  tragōidia , " the - goat - song " [1] ) is a form of  art  based on human  suffering  that offers its audience pleasure No wonder these three words represent what is happening in Greece in particular and in Europe in larger context. It all started when Greece joined Eurozone in 2001 by falsifying its government debts and lost control of its financial destiny. While people of Greece benefited in last 10 years by joining the Euro club, they started living lavishly without paying proper dues which comes with this membership. Finally in started catching up with them in 2009 and continue to muddle thru one crisis after anoth...

Finally Qaddafi is dead! In Arabian world, 2011 would go as historic year. What started as Arab Spring movement would most likely end rule of 4-5 dictators who have been ruling various countries from 30-40 years. On economic front, European mess continues and that keeps world stock markets on roller-coaster ride. Oct is turning out to be much better than Aug/Sept but wait till European leaders miss the opportunity on this weekend again. Markets are hopeful that finally Europe would put some credible plan to resolve its mess. But most likely people are going to be dis-appointed with the news coming out on Monday and markets would sea-saw again! So be very careful with your investments. Right now its better to be in cash or cash-generating investments. This is where I would recommend considering some high-yielding mREITs. These stocks are risky investments but due to their yields, they at least provide some kind of cushion against downside. Here are some names: AGNC: $27 Yield: 19% CI...

Steve jobs passed away today morning. World lost a visionary and one of the most loved human being. Steve Jobs made America and all of us as Americans proud. Many of us (including kids) felt that he was a close and dear friend even if none of us ever met him in person. With his genius creativity, he made people happy through his products like MAC, ipod, iphone and iPad at Apple, movies like Toy Story and Finding Nemo @ Pixar. Many kids in far flung countries know and love America only because of products like iphone and ipods. He was Thomas Edison and Henry Ford of our generation ! We will miss you Steve. May your soul rest in peace ! /Shyam

Many folks have heard about "Marshall" Plan which helped rebuild Europe after WWII which completely destroyed Europe. For a small history lesson, check out details of Marshall Plan . Europe is on brink of financial disaster again with fears of cascading defaults if Greece is allowed to go under. And that would not only bring down Europe but potential of another great recession across world. It would be 2008/2009 all over again. So what would make Europe hold together and not bring world economy to its knee ? That's where we can learn from post WWII history. During the four years that the plan was operational, US $13 billion in economic and technical assistance was given to help the recovery of the European countries that had joined in the  Organization for European Economic Co-operation . This $13 billion was in the context of a U.S. GDP of $258 billion in 1948, and was on top of $12 billion in American aid to Europe between the end of the war and the start of the Plan th...

Ten year anniversary of 9/11 is upon us. Ten years back on 9/11, America and to some extent world changed forever! For first ever time, America understood real meaning of terrorism. Till that day, it was always something which happens in Kashmir or middle-east.  While that day was unfortunate, what followed with two wars (one unnecessary one in Iraq) changed America. For many, it was lost decade (and still counting). I was just looking at S&P performance over these 10 years. It has gone up by meagre 3.5% in 10 years. There goes your buy and hold strategy which all pundits recommended. 10 year is a long time for someone to hold onto their investments and in return getting only 3.5% in capital appreciation. As we enter into 2nd decade of post 9/11 America, what should policymakers and most importantly we as American citizens do ? First and most important thing - get out of Iraq and Afghanistan by ending both wars. That should save enough money to invest in domestic infrastructu...

Last week there were many downgrades to US GDP growth with many economists lowering their GDP forecasts to 1% growth. With such a slow growth, there are always dangers of economy slipping back into recession. Markets being 6 months in advance are definitely hinting and to some extent pricing 40-50% chance of this happening. This summer's events and market reaction was almost exact replica of 2010 summer with some extra spice added due to debt limit drama played out in Washington DC. This is why next week's Bernanke speech in Jackson Hole is so important. Last year, in same speech he gave an indication of QE-2 which saved markets and to some extent economy. Would he repeat his performance next week ? Given charged political atmosphere and Fed's bloated balance sheet, this is unlikely. Fed had already given promise of keeping rates low for another two years. However this did not help much at least in short term. So what medicines are left to treat sick patient (aka economy) ...

Last Sunday no one would have thought that we are going to see market history in the week. This is only week where DOW moved 400+ points up or down in 4 consecutive days. Even during 2008 crisis, this did not happen. Despite such large moves, week ended with DOW down only by 1.7%. So if you were awake and cut from news, you are good since no one likes (except day-traders and option players) so much volatility. Few more notable things happened last week: Apple became new company to claim the title of Most Valuable Company in World. It had that crown for two days and then again lost to Exxon which has this honor since 2005. In coming weeks it would be interesting to see this duel fight out. Let's see who wins - ipad or oil by end of 2011. My prediction is Apple ending year as most valuable company. Even though S&P downgraded USA debt, debt markets mostly ignored the downgrade and instead rushed to buy USA debt at record low yields. 10 year treasury yield went down below 2.15% ...

Finally the inevitable happened on Friday 8/5 when S&P lowered USA credit rating from AAA to AA+. This is almost history (which no one should be proud of) since it is happening first time in 70 years. Last year when folks elected bunch of tea-party members, no one imagined that tea-party would make history in wrong way.  This is what we get when bunch of politicians have single minded agenda just to make president's life miserable and not letting him govern the country. They don't care of state of people or for that matter country ! Markets just have guessed that this is what something going to happen and hence they gave an indication on Thursday and early Friday when DOW almost touched 11000 - 10% correction in less than two weeks. I am sure all of us lost quite a bit of money (I did lose significant amounts). This was worst week since first week of March 2009. That says it all. We still need to watch out reaction to S&P decision of lowering credit rating next week. ...

It has been few weeks since I got chance to write my blog. Lot has happened since I wrote about summer blues market was going thru. I was busy taking kids around. Just came back from Alaska cruise vacation - got nice break ! Markets have gone nowhere in last few weeks. It went up due to some optimism on earnings reports and came down hard last week due to all drama in Washington. I am sure markets did not wish for kind of grid-lock they saw last week. Be careful what you wish for ! Tea-party politicians were acting all crazy not even listening to their own GOP leadership. No wonder their un-popularity has gone from 22% last year to 47% this year. GOP leadership should learn from last week's events and be careful whom they put on ballot in 2012. After hectic back-door negotiations, finally Washington has come to an agreement on debt-limit and spending cuts. At this time, any deal is good deal since it would save AAA rating for US debt. Futures are reacting positively and we shou...

Recent economic indicators have clearly shown that economy is going thru soft patch and markets are following economy. This is almost exact replica of last year when it went thru similar phase during summer months. There are various reasons for this soft patch: Impact of disruption in supply-chain due to 3/11 Japan Earthquake European debt problem in general and Greece's issues in particular Continued impasse in Washington regarding how to handle US's raising of debt limit which is causing rating companies to put USA on possible downgrade path Continued slowness in hiring - May month's employment report was much worse than expected with unemployment rate inching up to 9.1% Upcoming end of Fed's QE II Now the question is - are these temporary or more bad news is yet to come ? Have markets priced all bad news ? Is DOW heading below 12000 and S&P towards 1250 ? We will have to find out answers to these questions in Jun and it would most likely depend on how cor...

Welcome to sequel of Internet Bubble - Part II. The way Netscape IPO created first Internet Bubble when its shares jumped from $28 (IPO price) to $75 on first day in 1995, we can see almost similar bubble time reaction to Last week's Linked IPO. The shares were issued at $45 which itself was very high given that just six months back they were at $20 in private market. On first day, it went all the way to $122 before settling down at $94 giving its valuation equal to 40 times of its last year's sales. Is this another bubble around "social networking" companies or what ? Given this action around LNKD, I won't be surprised to see Facebook as first company having $100 Billion valuation on day of its IPO which would be sometime in 2012. Groupon may have around $15-20 Billion valuation on first day. Are these valuations sustainable. At least folks buying on first day think so since similar concerns were raised in 2004 when Google went IPO. But eventually Google not onl...

Last Sunday US Navy Seals killed Obama by going deep into Pakistan and finishing the job in 40 minutes. Since 9/11, all world was waiting for this event which took nearly 10 years and hundreds of billions of $$ if you include cost of two wars. Finally it took some good intelligence work by CIA, bravery of few good men, not trusting supposed "partner" (Pakistan) in this war on terror and most importantly decision to go forward with raid by President Obama. Well done Mr. President ! World is much safer and better place without Bin Laden. Market reaction was usual - initial euphoria on killing of Laden news gave away with nervousness due to heights markets have reached and uncertainty going forward. The sell-off gained momentum especially on Thursday with rout it commodities market with many of them down by double-digit %. So is commodity bubble busted ? In short term, it looks like. It all depends on how US economy holds up in 2nd quarter and Chinese actions on slowing down i...

It has been while since I wrote my blog. Got busy ! Now that April has wrapped up and May is about to start, time to be cautious. Markets has been on a tear crossing 12800 (DOW), Nasdaq is at 10 year high. So is it time to "Sell in May and Enjoy the gains in Summer Time ? " I think so. Best period for stock markets (Nov to Apr) ended today. There may be another 5% upside remaining for 2011 and most likely this would come towards end of year. In between there are quite a few headwinds markets are facing. Here are few of them to list: Noise around US debt limit. In two weeks, Congress needs to act on raising debt limit and given drama around budget, there would be quite a bit of drama before debt limit is raised. Markets don't like drama ! Talks of Greek debt restructuring ! Greek debt is trading at yields not seen even during last May when Greece was about to default. End of QE II - while Fed had given better news than markets were expecting, QEII is ending in June....