By Nigam Arora & Dr. Natasha Arora
Signal(s) to enter, add, reduce, exit, hold or change.
From the Afternoon Capsule:
There is a report that tomorrow, Bank of Japan (BoJ) will discuss changes to the yield curve. If BoJ makes a major change, it will have major negative implications for the U.S. stock market.
In addition to providing potential gains, this position will also act as a hedge if changes in yield control in Japan negatively impact the U.S. stock market.
Yield control by Bank of Japan has artificially kept Japanese yen low relative to the dollar. If Bank of Japan changes yield control, the yen should start rising.
This is a long term position. Sooner or later, the Bank of Japan will have to act.
The Carry Trade
Many hedge funds and institutions have borrowed heavily in Japanese yen because of low interest rates and invested the borrowed money in the U.S. market. If the Bank of Japan changes its policy and the yen starts rising, such funds and institutions will start unwinding the trade, causing money to flow out of the U.S. markets.
ETF
The most common way to execute this trade is in the forex market or in the futures market. However, in this service, signals are not given in either one of these markets. This service exclusively uses ETFs to make it simple for members.
This trade is using ETF FXY that represents long Japanese yen against the U.S. dollar.
Allocation
The allocation is 🔒 (To see the locked content, please take a 30 day free trial) in the Core Model Portfolio. There is no allocation in the Lower Exposure Model Portfolio.
Buy Zone
The buy zone is 🔒. It is trading at $66.81 as of this writing.
The Plan
The plan is to increase the allocation if Bank of Japan meaningfully starts changing its policy.
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This post was just published on ZYX Global Multi Asset Allocation Alert.
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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.
