Seeking Alpha by Adding Beta

Sometime this week, number of confirmed COVID-19 infections would reach one million and number of deaths may touch 50,000. There is no flattening in sight as virus is still spreading exponentially in many countries and big cities like New York. The governments are putting shelter-in-place, 21-day lockdowns type of policies which is crippling economies around the world. At same time governments and central banks are providing trillion(s) $$ fiscal and monetary stimulus so that their economies are kept on life-support during these forced lock-downs. It's difficult choice policy-makers have to make. If you do too much it's a problem (like migrant crisis in India due to forced 21-day lockdown). If you don't go too far, it's a problem (like spread of virus in New York City and New Orleans due to slow actions taken by leaders in those cities and states). If you take the virus lightly the way President Trump took initially, it's irresponsible. In democratic world, one can...

Last week the COVID-19 hit home on US shores. Finally US woke up to the upcoming pandemic and   looking at Europe, what could happen. I really have sympathy for Italy that it became worst affected country (after China) and that may be due to all the famous tourist spots. We were in Barcelona at end of Jan and life was going on usual even though 60 million Chinese were quarantined. No one thought world would be at this stage 5 weeks later! And given the speed at which it is spreading, things would get worse before they get better. That brings me to the topic of "The New Normal". Last week almost all US employees of big tech companies started working from home till further notice. Colleges moved to virtual classes and plans to continue that till end of school year. That means all of spring quarter moving virtual. Even convocations most likely will move to virtual. That would be a big dis-appointment since that's once-in-a-lifetime experience graduates of class of 2020 wou...

Super Tuesday was really Super with Fed reducing rates by 50 basis points and Biden becoming front-runner. The week ended with clarity on democratic nomination with race between Sanders and Biden with momentum clearly behind Biden. With 3 more contests in March, the race is entering into decisive phase - if Biden wins Michigan and Florida, it would be over for Sanders. That means one of the potential risk of Sanders presidency I mentioned in my blog about " Black Swan " would be over! That leaves other major risk of Coronovirus spread. We already saw major increase of infections in South Korea, Italy and Iran. All these countries are using various mechanisms of quarantine, cancellation of public gatherings as well as workers staying home to stop the spread. There has been 100+ cases in USA and major companies like Google, Amazon, Facebook, Microsoft and Apple are asking their employees to work from home. They have also cancelled major events avoiding potential spread. These...

Even though only last week I warned about potential "Black Swan" on the horizon , no one would have predicted that within a week markets would go from all time highs to correct territory in one week. This is the fastest and steepest entry to correction. So it's worth looking at which direction world economy and world markets are heading as new week starts. Here is my take based on some history, market psychology and just some common sense: The world had seen many pandemics such as SARS (2003), Swine Flu (2009-10), Russian Flu (1977-78), HongKong Flu (1968-69) and one of the most deadly Spanish Flu (1918)  The Spanish Flu infected nearly 500 million people and caused over 50 million deaths (more than both world wars combined). Before these pandemics, there used to be plague pandemics. Humanity had always and will always survive. During all these periods, markets go down but every time it had recovered. In 2003 during SARS, markets went down by 15% but six months later t...

Black Swan Definition from  Investopedia : A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight. From Markets point of view, there are two events in 2020 which could match the above definition: Coronavirus becoming Pandemic: Based on weekend news, the virus has already spread in South Korea, Italy and to some extent Japan. While China is putting extra-ordinary measures to stabilize the situation, other countries are just gearing up to potentially deal with unfolding situation. This means lock down of cities, travel restrictions, cancellations of trade shows and major gatherings to control the potential of spread. Companies have been prudent in cancelling major shows like MWC (Mobile World Congress) and many others...

Oscars have come early this year. The Academy had moved the event from last week of Feb to 2nd Sunday of Feb to potentially reverse the decline in viewership in changing world of entertainment. This year's Oscars would be interesting for few reasons: Netflix has arrived on Hollywood: Netflix has highest number of nominations (more than Disney). Last year it came very close to winning best picture with Roma. This year it has couple of strong contenders (Marriage Story, The Irishmen) but most likely actual wins would be very limited if at all First time a foreign language film (Parasite) is nominated for main category of best picture The slate for best picture is varied from two world war movies (1917, Jojo Rabbit) to period dramas (Little Women, Once Upon a time, Ford vs Ferrari) to Comic adaptation (Joker) Here are my predictions for 6 main categories. Best Picture: 1917 (even though Parasite deserves to win. Since Parasite will win Best Foreign Film category, Academy vo...

America's National Sports Day (also called SuperBowl) is here! Nearly 100 million plus Americans will be glued to their TV sets on Sunday afternoon to watch history in making (will explain later) as well as advertisements which cost $5.6 million for 30 seconds and JLo/Shkira performances during half-time! There would be Super Bowl parties, tailgate parties, and so on. This year is special for multiple reasons: After long time, Patriots are not in SuperBowl. Instead two most exciting teams are playing. If KCC wins, it would be their win after 50 years; If 49ers win (which is what everyone in bay area is rooting for), it would be their first win in 25 years - that's why this is historical! First time, sports betting in 18 states is legal so Americans will be betting over $6 billion on anything related to SuperBowl (even how long Demi Lavato's Anthem performance will take in seconds) 49ers would match the record of most SB wins (6 if they win) KCC's last win was wh...

MLK weekend is becoming a sports weekend. India won 3rd deciding cricket ODI against Australia. 49ers won NFC championship to claim their rightful place in Super Bowl and KC Chiefs got their chance to appear in Super Bowl after 50 years. Overall weekend was filled with lots of sports watching. This year's Super Bowl will create history since it would be first win for 49ers after 25 years and first one for Chiefs in 50 years. Both teams have exciting, young and upcoming quarterbacks who are willing to play their own games of rushing (sometimes themselves making touchdown) and occasionally college football type hail-mary passes. It would be fun to watch the game (and advertisements and JLO/Shaikra half-time show). Of course we all in Bay Area know who is going to win. Go Niners and Make History! Let's look at how first month of new year is shaping. First phase of trade deal between US and China is signed with all the fanfare. Same day house sent Articles of Impeachment to Senat...

100 years back, decade of 20's was called roaring 20's till depression started in 1929. Looking at markets in 2019, it feels like repeat of 90's or start of another decade of roaring 20's? Well - we have to wait few years to see how this decade rolls. Since this is first blog of the new year, it's time to look back and see how the recommendations of "BEST" of New Year 2019 did? BEST represented Biotech, Energy, Social/Streaming/Semi and Technology. Looking at companies I recommended, if one has invested equal amount of money at prices recommended and held till end of 2019, the portfolio collectively would have returned close to 60% (which is twice of S&P return). Did I just got lucky in identifying 75% winners like ROKU (360%), AAPL (100%), MSFT (60%), DIS (40%), AMD (180%) and so on. There were losers mostly in energy sector like OAS (-36%), RIG (6%), NKTR (-36%). However winners did much better than losers to create a combined return of over 6...

Once in a while a week comes when so many events line up that it feels like we are reaching climax of many! Next week feels like that.  Let's look at some of the events which could reach climax Finals Week: Since both my kids are in college, I know when is Finals Week and what it means. Next week is finals week for them (one of the final is on today Sunday - who schedules final exams on Sunday?) Knowing the pressure of finals and maintaining grades, I am only imagine the relief these kids will have at end of week. I am definitely looking forward to seeing smiles on their faces after finals are over! Trade-War: While President Trump may say that there is no deadline, he has to make a call if he plans to put tariffs on rest of Chinese imports (including iPhones) on Dec 15 or not. That would give a signal to world if phase 1 deal is near or would continue what has been going on for last 12-18 months. So in a way, Dec 15 would be a day of climax for trade war between US and...

Unicorn which is supposed to be rare is known to many people working in tech or general investment community. Let's look at Wikipedia definition:  The  unicorn  is a  legendary creature  that has been described since  antiquity  as a beast with a single large, pointed, spiraling  horn  projecting from its forehead. In private market (per-IPO) unicorn means startup which has billion $ valuation before IPO. This used to be very rare and hence association with unicorn! Based on latest Google search, there are over 300 "unicorns" (it used to around 100 in 2015). Let's look at journey of these unicorns from "Hope, Hype and Reality"! Hope: By definition, startups are all about hope of starting something new, changing the industry and world and improving lives of billion people. They are also about dreams of founders and employees to make big in terms of monetary rewards. VC community is able to fund these with initial capital, guidanc...

First of all, Happy Diwali - Festival of Lights to all my readers. Its' climax of series of Indian Festivals which start at end of summer and is considered biggest Indian festival. It's 5 day festival which also marks start of new Hindu calendar year! On eve of such festival which celebrates Lakshmi (Goddess of Wealth), S&P is within inches of reaching all time high. I am sure it will reach new highs next week on its way to 3100 as seasonal Santa Rally gets underway. So what changed in supposed scary October month? As in Halloween, markets have been playing "tricks" on investors with scare of upcoming recession but at same time "treating" patient investors for just staying invested. 2019 is turning out to be one of best year of returns with S&P returning over 20%. It does not feel that way due to recent drubbing software/cloud stocks took. That brings me to today's topic of Chips & Clouds! Chips: You can read this blog eating Chips and S...

October is known for market moving events since most of the big downward moves (1929, 1987, 2008) have happened in Oct. Why Oct?  It could be Autumn Blues or upcoming time change with Fall Back, Back to school season... There are many potential topics for behavior finance scientists to study and may get some doctorates. This year's October started with its usual volatility in first week due to inflation and not-so-good manufacturing and services sector confidence readings. Second week  gave some positive signals on trade talks bringing back markets. Now let's look at events for remaining part of October.  All of these events again could impact markets! Brexit: Finally the deadline of Oct 31 is almost here and that has forced UK and EU to seriously talk to each other on some kind of deal - including the question of hard vs soft customs border between UK and N. Ireland. It will come down to the wire but my guess is that either deadline will be extended by another 3 mont...

2019 was supposed to be multi-billion unicorns coming out to markets with big bang with their stocks going up by 50% plus on first day. But suddenly these unicorns are finding that staying private was much easier than public scrutiny on their books. WeWork had to cancel it's IPO because valuation it was getting was nearly 70% below last valuation of $47Billion. Uber and Lyft also had to reduce their valuations and they are further down by 30-40%. Peleton is down by 15% since their IPO price. Slack is down by 40% since opening day price. There are few exceptions like Zoom and Guardant Health. But generally mood is downbeat. Is IPO market having Autumn Blues or is this the start of trend similar to what we saw in late cycle during dot.com bubble? It feels very much like late 90's - similarities are too many to ignore. Let's look at them Longest economic cycles (1991-2001 and 2009-2019). So the economic cycle is getting tired and markets are betting that recession is in si...

Three T's are driving the market sentiment and ups and downs (two of them are caused by another T). After increased volatility in which DOW was going up and down by 300-800 points on regular basis. August wrapped up where it started. So if you were enjoying your summer vacation without looking at daily ups-and-downs, you did not miss anything. Let's look at each of the T's and see where market is heading for rest of the year and 2020. Tweets: Tweets are the new norm on how policies are made and communicated on the fly. You know whom I am referring to. President Trump had almost made this as norm. I am sure his twitter followers know what's in his mind before his chief-of-staff. His decision on additional 5% tariffs on China, his constant criticism of Fed Chair Jay Powell or his supposed offer to mediate between India and Pakistan and his "hereby" order to American companies to move their production to USA - all of these would have been carefully thought a...

Just came back from relaxing vacation in Kauai and surprisingly we did not even turn on TV during all of vacation. That must be some kind of personal record given the countless choices we have in world of streaming with Netflix, Prime Video, Hulu, HBO, Cinemax, Hotstar and so on! And given this week's announcement of upcoming bundle of Disney+, Hulu and ESPN+ coming in Nov 2019, more choices are coming! Not to be left alone, AT&T is going to launch HBO Max. Viacom and CBS are talking about combining their content. And each of these are offering some high quality content to watch almost on daily basis. What started as a small experimental stream by Netflix about decade back is turning out to be a flood-gate. By some counts combined spend on streaming content would exceed total US  movie box office collections (which was around $11B on annual basis). Netflix alone plans to spend over $12-15 Billion on content - majority of that would be on creating original "Netflix" o...

As I wrote at start of year " Third year is Best ", 2019 is turning out to be exactly like that and more. In 3rd year of president's term, markets have been up on average of 15%. This year, S&P is up by 20% and only half the year is over. So does that mean we have seen all the gains for 2019 already? With earnings season about to get into high gear, let's look at key factors which would decide what's in store for markets. Earnings:  Next two weeks, large number of companies would be reporting 2nd quarter earnings and provide forecast for 2nd half. While some companies have started warning season (e.g ILMN), it has been relatively quiet on warnings front. Analysts have already lowered their expectations. Economy is not doing as badly as feared at start of year. Trade noise is subsiding. So majority of companies would meet/beat earning forecasts and provide cautiously optimistic forecast. The earnings show is becoming too predictable. No one likes surprises....

Its exciting time in sports with two world cups in progress. Being from India, I am fascinated by Cricket world cup which I have been following closely since 1983 when India won its first cricket world cup. I still remember the 1983 world cup final in which India (which was not even underdog) beat 2 times world champion West Indies with many stalwarts. It was and still the biggest Indian achievement in world of sports. Dhoni's team repeated the feat in 2011 and now its time for India to claim the Cup third time. The Indian sub-continent is crazy about cricket and even regular matches make viewing history. India-Pak match was watched by 700 million people - highest watched match possibly in any sports. If India makes into final, this record may also be broken. Just as reference, this is 7 times viewership Super Bowl gets! I won't be surprised to see billion people watching India-Pak match in 2023 world cup (which would be held in India). While I watch FIFA Men's soccer wo...

First of all, the Greatest Show on Earth wrapped up on May 23 with Indian elections producing a resounding victory for PM Narendra Modi and his party BJP. Modi got complete mandate to lead India for next 5 years. Congrats to Indian voters for making a wise choice in electing Modi and rejecting one of the possible 22 PM candidates from smaller parties (yes - Rahul Gandhi is from a small party called Congress). Even if large number of Indian voters are un-educated, they have demonstrated lot more maturity in selecting their leader than educated electorate in Britain. As I said in last couple of blogs, "Sell in May and Go Away" was right on mark! It was one of the worst May month since 2011 and first down month of 2019. Just six weeks back S&P was on its way to 3000. And then it all fizzled out. Let's see what changed the narrative. Brexit - PM May had to announce her resignation due to Brexit mess. British must be thinking what mess they got into by narrowly votin...

What seemed like final climax of trade negotiations turned out to be another round of back-and-forth negotiations between Americans and Chinese (from last count, they are in 11th or 12th round of negotiations). Last Sunday President Trump surprised the world and markets with his tweet that US is going to put 25% tariffs from Friday May 10. Markets took the note and tumbled 2-4% across the world. While Chinese team did come to Washington to continue negotiations, on Friday US increased tariffs from 10% to 25%. Chinese reaction was relatively mild but future of further trade discussions is uncertain. Markets and companies were expecting that Trump and Xi will sign deal in May or at most by G20 summit in Jun. Now that's most unlikely unless both sides back off little bit in give-and-take of negotiations. Both sides are banking on their relative expertise and history. On one side we have president who wrote "The Art of the Deal" book while other side prides itself on legacy ...