By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Long Term Perspective
Please click here for a 46 year chart of the 30-year U.S. Treasury yield.
Note the following:
- Pay attention to the trendline on the chart.
- The chart shows that the 40 year bull market in bonds is over.
- Last year, The Arora Report made a major call. The prior similar major call by The Arora Report was in 2009. That call was to back up the truck and aggressively buy stocks. The 2009 call was made at the time of the great financial crash when S&P 500 had lost half of its value and most portfolios had lost 70% – 90% of their value. Most Wall Street strategists were issuing sell signals. Hindsight shows that the 2009 Arora call was spot on, as the call was made at the exact bottom before the start of a great bull market.
- The Arora call made in 2022 was that the 40 year secular bull market in stocks had ended due to four megatrends ending. To help our members shift their thinking to prosper in the new era, for the first time since 2009 a special live event was held titled “A Forward Look At Investing 2023 – 2030.” If you missed the event, a recording is available in Arora Ambassador Club.
- Yesterday, 11 months after the Arora call on the four megatrends ending, Fed Chair Powell and President Biden confirmed that two of the megatrends have ended.
- Powell confirmed that the deflationary era had ended, resulting in the end of the long bond bull market.
- One of the four megatrends behind the Arora call was the end of the 40 year bond bull market.
- Biden spoke to the nation and proposed spending $100B for Ukraine, Israel, Taiwan, and the southern border.
- One of the four megatrends behind the Arora call was the end of the peace dividend since the Berlin Wall fell and the end of the Soviet Union.
- The road ahead will be different from the road behind. To prosper in the new era, it is extremely important for investors, investment advisors, and money managers to not be stuck in the thinking that was appropriate for the 40 year secular bull market era. If you stick with the old thinking, not only will you miss out on prospering but you will lose money.
- In the present new era, you can make more money than you could in the 40 year secular bull market. To make money in this era, the first mental shift you need to make is that volatility is your friend. You simply need to learn how to use it to your advantage.
- By shifting your thinking now, you also gain an edge over Wall Street that is still stuck in the old thinking. You cannot blame Wall Street, because human nature as it is, it is very hard for institutions to change. Think of an analyst who got a job on Wall Street when he came out of college at 22 years old. Now he is 62 years old. In his 40 year career, all he saw was a secular bull market.
- Setting aside the foregoing long term perspective, for the day, institutions are hedging ahead of the weekend risk of a potential event in the Middle East.
- A U.S. warship intercepted missiles fired from Yemen by Iran backed militias towards Israel.
- There is risk of wider escalation.
- Institutions are also concerned about spending another $100B on wars at a time when national debt is over $33T and there are large budgetary deficits.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Microsoft (MSFT) and Meta (META).
In the early trade, money flows are negative in Nvidia (NVDA), Tesla (TSLA), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOG).
In the early trade, money flows are negative in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
Momo Crowd And Smart Money In Stocks
The momo crowd is *** (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is *** stocks in the early trade.
Gold
The momo crowd is *** gold in the early trade. Smart money is *** gold in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is *** oil in the early trade. Smart money is *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
We have previously shared with you that a spot bitcoin ETF can add $1T to bitcoin market cap. Crypto investors are excited and aggressively buying bitcoin (BTC.USD).
Markets
Our very, very short-term early stock market indicator is ***, but keep in mind that it is a Friday. Short squeezes tend to start on Fridays. If a short squeeze starts, the indicator will turn positive. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking down, and bonds are ticking up.
The dollar is range bound.
Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.
Gold futures are at $1989, silver futures are at $23.29, and oil futures are at $89.26.
S&P 500 futures are trading at 4288 as of this writing. S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.
DJIA futures are down 88 points.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of ***, and short term hedges of ***. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
Traditional 60/40 Portfolio
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
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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.
