Seeking Alpha by Adding Beta

Happy holidays to all. Year 2014 is almost ending. As we close on 2014, it was interesting to see that last week became kind of historical week with 3 different "communist" countries in news for different reasons. Russia - its currency ruble dropped by nearly 50% in last 6 months. Last week was capitulation when it ranged from 60 to 80. That's unheard in currency markets. Has ruble stabilized around 60. I doubt it. But worst may be over and it should hover between 40 to 60 for next few months unless Putin pulls up something like what he did in last spring. Oil dropping also did not hep Russia.  Cuba - Cuba was in news for good reasons, After nearly 55 years, US and Cuba has re-opened discussions and started process of normalizing relations. This could be good news to Cuba and America. Americans would be flocking to Cuba for vacations and buying lots of Cuban cigars North Korea - Looks like North Koreans found more effective way (than building nuclear bomb) to attack...

Looks like bubbles have 7-year itch. Every 7 years one bubble starts bursting based on recent history: 2000-2001 - Dot-com bubble started to unravel 2007-2008 - Housing/Finance bubble 2014-2015 - Could this be unravelling of great energy bubble which was forming around oil and shale gas If oil price is any indication (down by nearly 45% in one year), that seems to be case. In capitalist system, there are always excesses which need to be adjusted by these bubble-bursting events. In today's WSJ, there is article about unravelling of oil boom  which provides pointer to seed of this oil bubble. Ironically it was planted right when previous housing bubble started bursting. I am sure if we go back to 2000-2001, we would notice that similar seeds were planted for housing bubble. Are these 7 year bubble cycles would be new norm? Similar to technology bubble which mostly impacted high-tech areas like Silicon Valley, this time pain would be mostly around oil producing states like Te...

What a change few weeks can make? Just 5-6 weeks back, markets were collapsing and pundits were talking about possible recession coming and then come Oct 31, Japanese central bank started printing press to start printing yen. Suddenly market sentiment changed and all indexes are close to multi-year highs. So question is - what's next? Looking at historic patterns, holiday season has always been very good for markets. So I expect all clear to break some records and end the year on highs. In fact I would claim that DOW would break 18000 and S&P may touch (or come very close) to 2100. It may be little tougher for Nasdaq to break 5000 but you never know. So if don't do anything, you should expect 2-3% gain from here to year end. But having said that one could potentially start setting up for 2015. Here are some ideas with usual dis-claimers of watch out for risk. NFLX at $350 YELP at $55 SCTY below $50 SPWR below $27 CSIQ below $26 FEYE below $30 GILD below $96 BABA ...

We were at Berkeley campus yesterday for a course I am auditing and I noticed beautiful fall colors started appearing on trees.  Fall also brings interesting memories from markets in months of September and October. Historically September is worst performance month for markets. It is also filled with many events to remember (or not) from great recession of 2008/2009 which started with Lehman Brother's bankruptcy (anniversary of which is on Monday 9/15). So what it all means to remaining two weeks of September and upcoming October (which is normally most scary for markets) of this year. Let's look at some of the major market moving events which is coming up next week and what could be outcome of those events. FOMC 2-day meeting wrapping up on Wed 9/17 - most likely Fed would give some indication of timeline for interest rate increase by removing "considerable" word from their statement. This means interest rate increases would start in 6-9 months (1HCY2015). Marke...

Given the recovery of biotech stocks over last few weeks, investors can almost say "In Biotech We Trust". Monday started with big biotech buyout with Roche buying Intermune (ITMN) for $8.5 Billion. This is a deal for company which has less than $150M yearly revenue. But hey, when did those things matter when you have a promising billion $ drug waiting for FDA approval which could come as early as Nov 2014. One could have easily made some dough by buying ITMN stock when rumors started about 2 weeks back that some European drug giants are interested in this company. Luckily I have been studying, tracking and investing in this company since mid-30s. This deal gave a major boost to other bio-techs which could be next buyout candidates. Here are some of my predictions for either buyout or positive response from FDA. Since these stocks are extremely volatile, I won't recommend them to anyone AT ALL since one could lose all their investments . The reason I am even writing th...

I went into summer hibernation from updating my blog. After Modi's spectacular win, I could not find interesting enough topic for me to come out my hibernation and write about it. Finally now kids are back in school, summer trips are over, it's time for me to get into blog-writing mode. Yesterday I started auditing course at Haas School of Business, UC Berkeley (along with my friend). That is also motivation for me to write my blog which I started during my MBA days. Markets are all time high. Nasdaq is within teen percentage of all time high and it's just matter of time (most likely in early part of 2015) when Nasdaq would break it's all time record. So in such exuberant markets, what should an investor do? Go with the flow and invest in markets, sell all holdings and sit tight in cash (which may not be a bad decision given historically scary months of Sept/Oct) or pick-n-choose your stock selections. I am leaning towards 3rd option. While in long-run, efficient ma...

Today is historic day for India. After three decades, one party has won majority on its own and should be able to provide a strong government free of coalition politics pulls. And all credit goes to Mr. Modi who single handedly created the history by his and his party BJP's historic win. My father would have been so happy since all his life he had been RSS/BJP member. He used to be BJP President of our small city for some time. He passed away 4 years back on exact day (16th May). I am sure his soul would be happy to see his dream of strong BJP government is getting fulfilled by Mr. Modi. Now that Modi and BJP got historic mandate, I started thinking of how this new government should be run. History provides very good lessons (and I like History). The situation in India is almost exactly same as that in USA in 1980. During those years, USA had a weak government and weak President (President Carter). India has same today. USA economy was in problem and inflation was rampant. Situat...

Namo, Namo! It has become equivalent of Namaste in some sections of Indian society during these election times. Namo = Narendra Modi. After long time (nearly 20 years), one person has captured imagination, hope (and hatred on other side of aisle) in Indian politics. This reminds me US elections in 2008 when Obama ran for President. Every 5 years, there is biggest show on earth called Indian Elections when nearly 1 in 8 person on earth (815 million) have right o cast their vote and decide future of one of the most important country on earth. And the show normally carries on peacefully and reflects mood of country and generally create a viable government. Despite so much illiteracy, Indian voter have shown such level of maturity and intelligence which sometimes is missing in many developed countries. The elections which would start on Apr 7 wold finish by May 12 and counting would happen by May 16. By morning of May 17, most of the results would be out and next government formation woul...

Almost 9 months back, I wrote in my blog on how Tesla is like Apple of car industry . That was when TSLA stock was around 80+ with market cap of around $10 Billion. Fast forward 9 months and TSLA stock is hovering around 210 with market cap of close to $25 Billion. And during these 9 months lot of things have changed for US economy as well as Silicon Valley. Bubble type valuations are back with FB buying WhatsApp for $19 Billion (nearly 1000 times annual revenue) and market rewarding FB in taking this bold step. While all this is happening, Apple lovers (including myself) are patiently waiting for iPhone 6 and iWatch (not for iTV). Apple as company is doing great but in these growth hungry world, stock is not getting any love. It's trading at P/E of less than 10 (after accounting for cash on balance sheet). Why? Because heyday of growth are over at Apple. Even to grow at 10%, Apple needs to not only maintain the momentum in iPhone and iPAD but also find additional product category...

It is very rare to say public thanks to a public official But given what Mr. Bernanke has done as Fed chairman over last 5 years during financial crisis and almost single-handedly saved America (and to some extent) world economy from another depression, he deserves Thanks. Mr. Bernanke retired on Jan 31 and effective today he has become private citizen. I am sure he is proud of his achievements of saving world economy and most importantly saving millions and millions of jobs when politicians in Washington were fighting each other and doing nothing. We should consider ourselves fortunate that we had a student of depression era has Fed Chairman and was daring enough to follow un-conventional (and many times controversial) policies to prevent America from falling into another depression. For that Thank you and wish you best of luck Mr. Bernanke! This weekend is SuperBowl weekend. While we are little dis-appointed that 49ers did not make into SuperBowl, it's always fun to watch the B...

Year 2013 is ending on a very positive note and upbeat mood. Personally we just came from our relaxing vacation with two more families on Big Island. It was a great vacation. US Stock markets had their best run since 1997 and all indexes except Nasdaq is ending at all time highs. The yearly gains are outstanding with DOW 28%, S&P 32% and Nasdaq 41%. Instead of individual stock picking or investing in exotic hedge funds or PE, one would have done extremely well by just buying regular index funds with lowest costs. So how did my 2013 recommendations did? Here is report card (based on Happy New Year 2013 blog) Best recommendations: BBY (250%) and MTG (225%) Worst recommendations: VVUS (-31%), CRUS (-27%) Others like MBI, BAC, KBH, ITB also did ok. Overall if one had invested about $10K per stock, the portfolio would have returned 41% which would have beat S&P by 9 points. Not bad! During the course of year, I started tracking solar sector but since I had yearly reco...

Normally I am not into baseball. But given history buff and always trying to find some interesting co-relation, I start following it in Fall when playoffs start. I definitely follow world series since that's kind of movie climax (for readers outside USA, don't fret over calling it as world-series. Americans always thought that America is world and hence they end up calling most of their game finals as world-something). This year Baseball world series started with Boston Red Sox and St. Louis Cardinals tied at 1:1 each. Another 5 games to go and it's about time to start predicting winner! Let's look at some interesting connections. I was reading an article in WSJ. As expected "Blue" states are supporting Red Sox (with exception from Texas) while majority of "Red" states are supporting Cardinals. Even New-yorkers who consider Red Sox as arch rival to Yankees are supporting Red Sox. So given this co-relation between politics and sports, I am predictin...

Finally the mess Washington politicians (mainly tea-party hard-core republicans) created had ended for 3 months with Government shutdown over and debt-limit increased. As always it came down to 11th hour and solution had to come from US Senate leaders. Grand Old Party (GOP) managed to destroy itself by falling into traps of likes of Ted Cruz and lack of leadership skills by house Republican leadership to stand against tea-party hostage-takers! What Obama could not do it in last 5 years (of bringing down Republican Party's approval rating), Ted Cruz managed to do it in 2 weeks. As they say, be careful about who are your real enemies. In this case GOP's main problem is not President Obama but their own party members. President Obama came out winner in this - not only he stood firm against ransom demands of few crazy politicians but also got what he wanted without giving in much. Looks like President Obama having good success in last few weeks - first in Syria where he made Assa...

Since Aug 21 incident in which Syrian Government supposedly used chemical weapons on its own citizens, President Obama's foreign policy looked like a random walk through middle-eastern politics. But if Sept 14 agreement  between USA and Russia turned out to be effective (only time would tell), it would turn this "random walk" or "on the fly" diplomacy most effective since Nixon/Kissinger times in early 1970s. This could would bring USA foreign policy in tune with times in which everyone need to adopt to changing situations on a moment's notice. We see that in corporate world (especially in startups) almost on daily basis. While some hard core old-timers (aka conservatives) may not be happy that Putin may get all the credit and it has put down USA in world politics, what matters is how end results can be achieved without more blood-shed (if there was Republican President, I am sure USA would have got it's 3rd war). While I was not happy in the way Presid...

September is known to market watches as the month when stock markets do worse. Statistical analysis of 100 years data has shown that September is only month when on average markets are down 1% whereas other 11 months it has been positive. Looks like markets align themselves with start of "Fall" season in September! With markets close to all time high this year and generally very positive till early Aug, how would they fare this September. Let's see what events are going to unfold in next few weeks: Syria attacks - next week Congress after much debating would most likely pass resolution granting President Obama authority for limited attack on Syria to send a message to Assad to maintain America's credibility as international police (whatever that means). This would really give markets a jolt and most likely cause quite a bit of volatility. However unless the war escalates (due to Iran attacking Israel or Western Embassies in Lebanon which real possibilities), long-...

It has been a while since I wrote my last blog on Tesla. Since then Tesla's stock price has increased by 30% (from 90 to 120). Looks like many folks are believing Tesla story and possibly its similarity with Apple when ipod was introduced. But most important story for last few weeks have been "QE3 tapering" by fed. Just the talk of tapering has caused havoc in bond/treasury markets with 10-year treasury yield jumping from 1.6% to 2.7%. This is huge in terms of move (equivalent DOW move would have been anywhere between 3000 to 4000 points down). Markets always position for what may happen 6 months in advance. However at same time it overshoots on either direction. IMO, markets have started overshooting in terms of punishing some REITs and commodities. So that may create good value to take some positions in stocks like AGNC ($20), CYS ($8), NLY ($11). These are all high-yielding REIT and very sensitive to interest rate changes and are down by 30-40% this year just due to p...

After a long time, I am writing this blog only on stocks and that too some exciting but pricey stocks. Last week Tesla's results and subsequent jump in stock caught my attention. I have been following TSLA stock since its IPO. Every time I go to Santana Row, I make a point to visit Tesla store - same way every time I visit Valley Fair mall, I make a point to visit to Apple store. This started me thinking - Can TSLA (stock) could be similar to APPL (stock) @ time of iPod introduction? Let's look at some similarities? Car companies have been around for over 100 years but in a long time (maybe since Ford introduced Mustang), there has been so much excitement with Model-S introduction. Consumer Digest gave Model S almost perfect score and Tesla surprised Wall Street with profit and 25% gross margins which is unheard of in car industry. Same could be said when Apple introduced iPod. Tesla is run by young CEO Elon Musk in his early 40's same way Apple was run by Steve jobs. ...

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...