Seeking Alpha by Adding Beta

Congratulations Joe Biden and Kamala Harris for Democratic Nomination for President and Vice-President and Best of Luck for winning the elections! Exactly six months earlier S&P reached all time high - that happened in BC (Before COVID). World changed with record unemployment across most of the countries, many folks who have jobs are working from home and close to 800,000 people died due to novel virus COVID-19. But markets don't seem to care...it took 3-4 weeks to lose 34% from Feb 19 to Mar 23 and since then it has not looked back. If you want to see what V-shaped market recovery looks like, just look at S&P chart. It has recovered all the losses and some more and reached all time high last week. And it all can be attributed to select few companies - many of them happened to be in Bay Area. Paradoxically instead of celebrating these with dot.com type excitement, we are all holed up in our houses and packing our bags in case we have to evacuate due to fires burning across ...

Almost every article you may have read regarding current COVID pandemic, you would see references to  Spanish Flu Pandemic of 1918-1919. But I was surprised to read that just 11 years back, we had similarly wide-spread Swine Flu pandemic in 2009. The CDC site gives very detailed information and timeline about this pandemic.   Let's look at some of the comparisons and timelines and learn/predict the course of COVID pandemic H1N1 Pandemic 2009: First case detected in USA on Apr 15. CDC reported to WHO 3 days later 2 weeks later, WHO declared that Pandemic alert The distribution of tests started by CDC in May Jun 11: WHO officially declared it as Pandemic (less than 2 months after first case) Jun 25: Infections reached 1 million July: Reached peak of first wave and Vaccine trials begin Oct: Vaccine approved and second wave started Some school closures but not wide-spread Nov/Dec: 5 vaccines approved and CDC put orders of 100 million doses Aug 11, 2010: WHO officially declare...

Early Aug of 1720, stock price of South Sea company reached 1000 pounds (from 100 pounds at start of year).  The year was marked with many companies with lunatic, dubious and fraudulent business plans were formed and their stock prices increased many-fold. One company's plan was " For carrying-on an undertaking of great advantage but no-one to know what it is”...sounds very similar to 2020's SPAC IPOs which are coming to market. By 1720 year end, many of these companies stock were worthless. Even South Sea stock returned to gravity and ended year with price close to 100 pounds. Many aristocrats,  parliamentarians and even King George I lost money. Talking about gravity, even Newton could not resist the temptation of quick money and invested in the South Sea company and lost significant amount of his fortune. So why is this relevant today? First of all, its 300 year anniversary of that historic bubble! Second, humans don't change/learn even after multiple...

Changing of the Guard  refers to a ceremony during which soldiers  or other officials guarding a major  government   building  or  state   residence , especially  Buckingham Place  in England, are replaced by a new  shift . It also means a group of individuals or organizations is replaced with another individuals or group. (source Wikipedia). Last few weeks of market action has demonstrated that similar trend of "Changing  of the Guard" is gaining momentum in valuations of sectors and groups of companies. The trend is always there but gets momentum when major shift happens (like in dot.com era and recently has been expedited due to COVID pandemic).  "Sector" Changing of The Guard: Looking at two market bottoms - March 2009 and March 2020 illustrate on how S&P sector weightage has  changed just in 11 years. Mar 2009: Information Technology: 18% Healthcare: 15.1% Energy: 13% Consumer Staples: 12.8%...

The " Irrational Exuberance " which markets were showing got taken out little bit during usual " June Swoon" . Now what? It all depends on if Economy is going back to "Quarantine" mode or continuing its path to "Rebound". Let's look at some factors which would decide this. Trajectory of COVID-19: Various states (Texas, Florida, California, Arizona etc) have shown increase in infections and positive test ratios. Part of it is due to increased testing,  relaxed norms as well as opening of bars, restaurants and public places. Many nations especially in Asia (India) and Latin America (Brazil) have shown significant pickup in infections. Even China had shown outbreaks in some clusters. Hospitalizations and Death Rates: While infections have increased, rate of hospitalizations is lower than infections and mortality rates have also improved due to increased understanding on how to treat COVID patients. Hospitals and health care system is much ...

Last week would be marked as one of the historic week in America. The brutal murder of George Floyd by Minneapolis Police in plain-sight brought centuries of racism in US to the fore-front. The peaceful protests were just and warranted to bring attention to this ongoing pandemic in US society (and many other countries). Some of the protests turned into riots due to opportunistic looting by some criminal elements. It's time for US to root out the silent racism and reform the police departments across the nation! And looking at Amy Cooper's infamous racist video, we all must internalize and root out whatever un-conscious or silent racism which we may have! Exactly in same week, markets were ignoring all of these events and almost partying like it's late 1990s-2000. That reminds me of the famous speech by former US Fed chairman Alan Greenspan's about " Irrational exuberance " in Dec 1996. As Yale Prof Shiller wrote in his 2000 book (source: Wikipedia) Irra...

In US last Monday of May is  observed as Memorial Day to remember the soldiers who had fallen while serving in US Military. Its somber day to remember the men and women who gave their lives to protect the freedom and security of Americans and all the people of free world. This year world is fighting a new war against invisible enemy. So in addition to fallen soldiers, let's also remember the new warriors! People who lost their lives prematurely due to COVID-19 infections Healthcare professionals who are fighting the war against the COVID-19 virus Economists and policy makers who are working non-stop to limit the economic damage caused by lockdowns Small businessmen who are fighting for survival of their small businesses while protecting employees who work for them Teachers who adopted to remote teaching to make sure that their students continue to get educated  Class of 2020: The seniors who are graduating this year are missing one of their biggest celebrations in lif...

This week's blog is inspired by all time best historical novel by Charles Dickens "A Tale of Two Cities"   which is set between London and Paris during late 19th century. Dickens' opening sentence (source Wikipedia) below could be as applicable in today's historical time of world-wide pandemic! "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us......" Last 6 weeks had shown the big disconnect between two streets - Main Street (Economy) and Wall Street (Markets). So let's look at some aspects of "Tale of Two Streets" with focus on US but is equally applicable to almost any  country in the world. Main Street: Over 30 Million unemployment cl...

The leaders of countries, corporations and even households have Shakespearean dilemma in front of them: To Open, or Not to Open! With phrase "To be, or Not to be", Prince Hamlet contemplates   death and suicide , bemoaning the pain and unfairness of life but acknowledging that the alternative might be worse (source: Wikipedia). Leaders (and every one of us) have same dilemma of whether it's safe to open the economy and reduce the hardships billions of people (from small businesses across the world to migrant workers in developing countries like India) are going thru or keep the extended lockdowns/shelter-in-place to control the spread of COVID-19 to flatten the curve of infections and unfortunate deaths. By no means it's easy decision same way it was not easy for anyone to lockdown countries and shut down economies at expense of livelihood of billions of people. The most important decision for many leaders in their lifetime will decide how world emerges from th...

The month of March ended. This month truly changed the world for now. At the start of month, COVID was contained within China with only single digit infected cases showing up in Seattle area and Italy. In fact first death attributed to coronavirus in America happened just before the month started. And at end of month, deaths in America due to virus had crossed 5000 and daily toll almost reaching to 1000+. China was the epicenter of pandemic in Jan and Feb. Europe became the epicenter during March and towards end of March, USA (especially New York) had become epicenter of this pandemic. There are many experts busy thinking of "what-if" scenarios - what if WHO and China would have been more forthcoming and transparent about seriousness of spread; what if Trump had ordered total lock-down in Feb or NY governor Cuomo had prepared NY state better or New Orleans had cancelled its annual Mardi Gras. Many many what-if scenarios. Yes of course many of these would have helped contain ...

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...