Seeking Alpha by Adding Beta

As we are approaching holiday season and end of 2020, markets seem to have already moved into 2021 and as incorporating likely outcomes in 2021 with continued upward movement. Markets are trading close to all time highs (even after discounting last few days of sideway moments). Let's look at the 5 "V" Factors which are at play. Virus: COVID-19 virus would continue to dominate our lives well into 2021. We are into 3rd wave and this wave is even stronger than first two waves. Daily infections in US are over 150,000 and hospitalizations are also increasing at alarming rate. Various states and local governments are going back to curfews and partial lockdowns. Restaurants which saw some signs of life are being shut again. Even Thanksgiving holiday would be different this time with limited attendance at dinners and "no rush" Black Friday to start the most important holiday shopping season. Lack of coherent policy and fatigue of staying at home is causing this surge. ...

Congratulations to President-Elect Joe Biden and Vice-President-Elect Kamala Harris for winning the historic 2020 elections with highest vote count (~75 million). Congrats to American voters for participating with highest turnout (% of eligible voters) since 1900. This is what makes democracy and nation stronger. President Trump - despite his style got over 70 million voters (second highest of any candidate received ever). There was no blue wave as predicted by pollsters losing their credibility once more. Democrats lost few seats in house and did not flip senate yet. Georgia is new battleground with 2 runoff senate races on Jan 5 which would decide control of senate. That could become $300 million election. Georgians have the power to decide the course of nation for this decade. Joe Biden's VICTORY can also be his agenda for next 4 years! Let's break it down the VICTORY agenda V irus Control: COVID-19 Pandemic changed the world, narrative of the election and American Preside...

As history has taught us, empires rise and fall. We had seen this with Roman empire, British Empire, Ottoman empire and many more. Same can be said for companies. But even fallen empires or companies can rise if they can learn from their falls and innovate to prosper the new changing world. Apple had proven this when it came back from its almost bankrupt status in 1997. Let's look at some of companies which have been under decline for years for many reasons - some of which were their own mistakes (GE and Boeing), changing industry (Oil to green), disruptive new industries and behaviors (streaming, online advertisements) and some of them were just unlucky due to COVID which no one was prepared for. Now that companies and populations have learned to live with COVID and 2020 is 2 months away from ending, let's look at some of the companies (old empires) and see how they may perform in months ahead. Basic filter I used to define "empire" is that company must be at least 5...

The 2nd surge of COVID infections is gaining momentum across many countries with US continuing to lead in number of cases and deaths. President Trump's COVID and outbreak at white house in last two weeks demonstrated that even highest and most secure facility in world could not prevent COVID penetration..the blame goes to administration for not taking precautions (the way they would take against terrorist threats). It feels that our own personal house is more safer than White house.  Markets had their best week since July when similar summer surge was happening and it continued to make highs till end of Aug. It a way markets are delinking from COVID story. We are at similar juncture and 4 factors would matter most for future direction. Economy: Q3 economy should show ~25% growth compared to Q2 (when it went down by 30+ % due to sudden lockdowns in March). That would be highest growth ever recorded for US economy. Over weekend, I visited St. Pedro's Square in San Jose Downtown f...

In American political jargon, an  October surprise  is a news event deliberately created or timed or sometimes occurring spontaneously to influence the outcome of an election, particularly one for the U.S. presidency (Source: Wikipedia). Well... it started last week due to unfortunate timing of death of Supreme Court Justice Ruth Bader Ginsberg. President Trump and GOP senate members wasted no time in starting the process of nominating conservative judge Amy Coney Barrett. This by far could become most important election issue and hence can be qualified as October Surprise. Once justice Barrett is confirmed, Supreme Court would be 6-3 with conservative majority (first time in 100 years) and could have long term implications on many key decisions. This is one of the most important policy power Presidents and Senate members have and hence winning these elections matter so much. President Trump is the only president in recent history who got to nominate three Supreme Co...

As mentioned in previous blog, Sept started with its reputation and markets did had some volatility with Nasdaq near correction territory (10% down from peak). In a way its healthy so that some froth is out from market and newbie day-traders can get the lesson that markets do go down also! Apple is back below historic 2 trillion market cap and Tesla is back to pre-split "reasonable" valuation. More on this later... Sept also means start of football (American football...not to confuse with Soccer) season. Normally fall weekends are filled with college football on Saturday and NFL on Sunday. Unfortunately most of the college football is shut down (for legit reasons... no in-person classes..so it doesn't make sense to have in-person games). NFL is taking lessons from NBA bubble season and starting games with almost no crowd. Let's see how it plays out. At least there would be something to watch on Sunday afternoons and Monday/Thursday nights and follow the teams. This ye...

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...