Seeking Alpha by Adding Beta

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 ...

It's going to be an eventful Sunday (similar to those ones back in 2008/2009) when Washington is busy cooking something to deal with nation and world economies from plunging into a "cliff". Finally on last day, politicians would wake up and come up with some deal to avoid "fiscal cliff" and declare it as victory that they saved 98-99% of people from dreadful tax increases. When it comes to politicians, it always have to come to last day to make a deal. Maybe that's art of politics! Most likely Sunday on prime time TV, all 5 "leaders" would come on TV and announce that they have a deal to avoid tax-increases by 99% of Americans and would work together for larger deal on debt reduction and so on. World markets would cheer with DOW jumping up more than 200 points on Monday and everyone would welcome 2013 with late night parties! Since 2013 is almost here, here are my new year recommendations. Caveat: Please invest only after doing your own analysis...

You must be wondering if I did spell check on title of this blog. If you are in America, you would understand what I mean by "Cliffmas" since not a day goes by when we don't hear about "Fiscal Cliff" in America. Fiscal Cliff is nothing but a name given to a situation which our politicians have created by agreeing to a deadline of Jan 1, 2013 when automatic tax increases for all Americans kick in and significant spending cuts also kick it - both at same time. This has potential to push America (and possibly world) in another recession in 2013. So no wonder there is so much talk about fiscal cliff in US. That's why this year it's not Christmas but rather "Cliffmas". Speaker Boehner's "Plan B" did not go thru since his own republican party did not support it. That was one of the major negotiation ploy speaker had. Now that it did not get enough support, it would be interesting on how he would deal in ongoing discussions with Preside...

Now that DOW has finally touched 12500, I am changing my outlook for stack markets. It is ready to bounce back and DOW would close about 13000 by year end. Despite all nervousness around "fiscal cliff" and recession due to fiscal cliff, US politicians are not stupid to push country into recession. President Obama has upper hand in negotiations due to strong showing in re-election and finally republicans leaders have started showing some sense in their public talks (otherwise they know that they are going to lose control of house in 2014). So all indications are that there would be some kind of "grand bargain" between Thanksgiving and Christmas. Markets would start anticipating this starting from next week and start rising slowly but surely. This is why I am predicting DOW to close above 13000 and S&P near 1400. So what sectors I am bullish on? I still prefer REIT, Energy and Health-case sector. in REIT sector, recently I discovered new leveraged ETF - MORL (bet...

Even though I was 99% sure that President Obama is going to win his re-election bid, I eagerly watched election night results till late night just to make sure that it did happen. History was made again on Nov 6, 2012 when America re-elected Mr Obama as her 45th President. This proved that 2008 was not a fluke and America is indeed ready for non-white-male President. Hats off to American People for making it happen! Now it's President Obama's turn to prove that 2008 was not a fluke and match his words with his actions. I was once more moved by his victory speech on election night and looking forward to his actions to match his speeches in next 4 years. Here are top priorities I would like him to focus and lead. Economy, Economy and Economy (you can also read as Jobs, Jobs, Jobs) Health-care for all (implementation of Obama-care without breaking the bank for country as well as businesses) Get America out of all wars (and don't start new ones) Education (make college ...

This is last weekend before one of the most important elections for all of us, future Americans and to some extent for world. I am personally endorsing Mr Barack Obama and congratulating him in advance for winning the election and 2nd term as President for USA. I have nothing against Mr Romney - in fact as person I like him and his values which come from his faith. However I have major differences when it comes to role of Government vs private sector with Mr Romney and his party. This was evident from last weeks effects of mega storm Sandy. If it is up to Romney and his party, they would outsource such responses from Federal government to state/local or even private companies. This is what we heard during earlier debates and we already had a taste of this during Hurricane Katrina response (when we had Republican President). Mr Obama handled response to Sandy very well by stopping his most important election campaign and focused all his energies to make sure that affected people get ne...

Today morning I was wondering which "match" bay areas people would be most interested in and what would be likely outcome they would prefer. Both "matches" are over and I like results for both of them. Normally I do not follow baseball till playoffs and unless one of the Bay Areas teams are closer to world series. After lagging by 3-1, San Francisco Giants pulled am amazing feat by winning today's last game by 9-0 and hence entering world-series against Tigers. On second "match", President Obama won today's debate hands-down. Foreign policy is Obama's strongest suit and he demonstrated and articulated his vision and clarity on his approach to this very important aspect of Presidential responsibility. He also attacked Mr Romney by calling his policies as "wrong, reckless and all over the map" (which is true if anyone hears Romney's speeches in last 18 months). Now that 3rd and final Presidential Debate is over, debate scores stand...

First week of October brought quite a few surprises. When week started, I thought election results would be "sealed" on Oct 3 with first Presidential debate. But given Mr Obama's lackluster debate performance, Mr. Romney got a slight opening but in the end that may not be enough (thanks God) and Mr Obama would win this election to get 2nd term. But he better practice his debating and most importantly attacking skills. I want to see Obama from 2008 who can lead from front. Hope his campaign managers learnt from first debate and would call on Mr Romney on his flip-flopping and in some cases complete lying! Then comes employment report with some good news of unemployment dipping to 7.8%. This is lowest since Obama took office. That was good news for Mr President. As usual some folks like Jack Welch started crying wolf that this number is tweaked by white house. In one tweet, Jack lost all the respect I had for him over last 20 years. He should know better that no one is st...

One of the most important product launch for Apple in particular and all of tech world happened on Sept 12 and iphone5 started shipping on Friday Sept 21. This one product could be first ever $100 Billion product. I got mine on first day and has been using it for last 48 hours and I am impressed with two things which matter: Design and Speed. I used Galaxy SIII for last two months. Galaxy SIII itself is very impressive phone. But when I switched back to iphone5, there is no comparison when it comes to style and design. iphone5 is clear leader in today's smart phone world! I was little surprised that I could even get my hands on it on first day itself (for ipad I had to wait for 2 months and for iphone4 also I had to wait for 3 weeks). Looks like Tim Cook is finally putting his stamp on Apple bu making sure that enough supply is available for anyone who wants to buy it. Predictions are that over 8 million iphone5 would be sold in one weekend. That's like $4-5 Billion in revenu...

It has been a while since I wrote my blog since I was just coming out of summer vacation/travel and some other personal things on family side. So many things have happened on economic front and stock markets which I wanted to write. But nothing was as important as events in last two weeks centered around two most important men in economic world: "Super"Mario Draghi and "Helicopter" Ben Bernanke. Both of them stay true to their promises of "Saving Euro at any cost" and "Printing dollars to address US high unemployment"! The markets liked what they saw and has jumped to their highest in nearly 5 years. Only time would tell us if this is "irrational exuberance" or start of a new bull market as seen during 1990's. There are so many uncertainties still around. Few of them are: US presidential elections - Obama campaign is definitely on right track and unless anything drastic happens, Obama would win second term as President of USA. ...

Next week Supreme Court of America would give ruling on one of the most awaited ruling in over 50 years. Would it strike out health care law in its entirety or would it hold it? Would individual mandate go but everything would remain? One way or other, this ruling would impact each and every American one way or other. Health care law is considered as one of the main policy initiative and could have as big impact as previous two initiatives - Social Security (passed in 1930s) and Medicare (passed in 1960s). So next week would not be only very important for President Obama for his re-election but most importantly for his legacy, it is also important for each and every American. With so much burden and expectations, here is I think Supreme Court ruling would come out: Would upheld most of the provisions in this law. Some of the important ones are like covering kids till age 26 on parents coverage and many others However it would strike down "individual mandate" on basis of ...

Finally Greece elections are over and pro-bailout parties winning slight majority over leftists should assure markets that Greece would remain in Euro and contagion to other PIIGS countries can be contained - at least for now! These elections could have profound impact on Greece, Europe and world economies and hence world markets. Lehman type moment has been avoided for now. Could this be a repeat of 2008 when Bear Sterns was rescued in March 2008 just to land into Lehman/AIG situation 6 months later in Sept 2008. Only time would tell. Hope European policy makers learn something from US policymakers actions back in 2008/2009 and take decisive actions to get ahead of crisis and provide a bazooka instead of patch-work rescue. ECB and Northern European countries has fire-power. What they need is will to use them. Whether Germans like it or not, they should start thinking of "United States of Europe" and start helping broke southern countries. Merkel may be most powerful per...

May deja vu - third time in a row. If you go back in 2010 and 2011, one could have almost predicted what would happen in 2012 and could have saved tons of money by moving to cash at end of Apr. While I almost knew what was coming in May, I did not act on moving my investments to cash (luckily I told few folks who may be smarter in acting on it). Well now that May has again proved true to old saying of "Sell in May and Walk Away" and month is over, what's in store for rest of summer? Given Facebook IPO fiasco (which was supposed to be savior for markets) and continued political and policy mess in Europe, things don't look very promising. Dismal labor market conditions in USA and sudden slowing down of economies in China and India are adding fuel to the fire which Europe's lack of action has created. Here is my prediction on how it would play out: Markets would be very volatile till elections on Greece on Jun 17. Most likely Greece results would be slightly pos...

Finally Facebook's IPO is here. One of the most hyped IPO (and it deserves all the hype it received) is finally here valuing Facebook at around $104 Billion - more than Cisco or Amazon as standalone or Dell/HP combined. Only time would tell if Facebook as company can grow into this valuation or is this top of its valuation! I am sure tomorrow's trading would be all about FB. I won't be surprised to see it pop over $50 at open. Interesting as I have predicted sometime back, savvy investors were taking profits out from Apple for investing in Facebook. Is it coincidental that Apple lost almost $100 Billion valuation from it's high - almost exactly same as Facebook valuation! After all stock market is all about capital moving from one company to another company. In late 1990s Yahoo/Ebay/Amzn/CSCO/MSFT were dominating stock market valuations. All the valuation moved to Google/Apple and now Facebook. It's just matter of time when capital moves from these companies to som...