By Nigam Arora & Dr. Natasha Arora
Reckless Government Policies
In the U.S., the government continues to recklessly borrow and spend.
The national debt now exceeds $35T.
Post election, the agenda of both Republicans and Democrats will result in more borrowing and more spending.
A Hedge
Prudent investors are looking for a way to hedge their portfolios from the risk of reckless U.S. spending. Moreover, your wealth is in dollars. If the U.S. continues to spend recklessly, the dollar may fall and reduce your true wealth.
True Diversifier
At a time when the stock market is very high, diversifying between stocks is not enough. Investors need a true diversifier that is not correlated to stocks.
Japanese Yen
The Japanese yen works as both a hedge and a true diversifier as it is not correlated to stocks.
Bank Of Japan
The Bank of Japan has finally raised interest rates. This is helping the yen.
Key Points
Here are the key points:
- In The Arora Report analysis, more rate hikes are coming in due course. As the Fed cuts interest rates, the interest rate differential between the U.S. and Japan will shrink. In theory, this should make the yen stronger.
- Not that long ago, the yen had fallen to 160 yen to a dollar. In the long term, yen can rise to 120 yen to a dollar.
- This position also acts as a hedge against reckless government policies of excessive government spending and borrowing in the U.S.
- The position is also uncorrelated to stocks and thus provides true diversification.
- In case of wars and conflicts that do not involve China, the Japanese yen tends to act as a safe haven.
- This is a very long term position.
Zones
The ETF of choice is Invesco CurrencyShares Japanese Yen Trust FXY.
For those following the Good Way, the Buy Now rating is *** (To see the locked content, please take a 30 day free trial).
For those following the Best Way to buy zone is ***.
The allocation is *** in the Core Model Portfolio. FXY is not in the Lower Exposure Model Portfolio.
What To Do Now
Those in the FXY may consider continuing to hold. Those not in FXY may consider following the parameters above.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
