By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

What Does Buffett Know?

Please click here for a chart of  Berkshire Hathaway (BRK-B).

Note the following:

  • Warren Buffett is the most successful investor of our time.
  • Buffett’s company Berkshire just reported that its cash holdings hit a record $149.2 billion.
  • What does Buffett know that Wall Street is missing?  Buffett is holding record cash at a time when the stock market is hitting new highs.
  • The chart shows that since May Berkshire stock has been rangebound.  Berkshire has been buying its own stock.  Considering the amount of cash that Buffett is holding, he could have easily bought even more shares and run up his stock like many other companies are doing.  Buffett clearly decided not to do so.
  • Apple (AAPL) is a large holding of Berkshire.  Buffett could have chosen to substantially increase his position in Apple to use more of his cash holdings.  But he clearly chose not to do so.
  • Buffett is known for buying large companies.  Buffett clearly chose not to do so.
  • The inference is Buffett thinks the stock market valuations are too high and there is more risk than generally anticipated.

Infrastructure Bill

Congress has passed the infrastructure bill.

Tesla

Elon Musk conducted a Twitter poll asking if he should sell 10% of his Tesla (TSLA) stock.   Twitter voted ‘yes.’  This is a clever move on Musk’s part to cushion the potential fall in the stock.  He may have decided to sell the stock to pay the taxes on the option exercise instead of borrowing money to pay taxes.

The observation here is that Tesla stock is down only 5%.  If it was not for the speculative bubble in this market, the stock would have been down 25 – 30%.

This indicates that the speculative bubble is not likely to bust in the near term. 

Crypto — $3 Trillion

The total capitalization of cryptocurrencies has now reached $3 trillion.

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🔒.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒  oil in the early trade.  Smart money is 🔒.

For longer-term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  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 up and bonds are ticking down.

The dollar is weaker.

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 $1822, silver futures are at $24.36, and oil futures are $81.75.

S&P 500 futures resistance levels are 4713 and 4900: support levels are 4600, 4460, and 4318.

DJIA futures are up 150 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds 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.

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This post was just published on ZYX Buy Change Alert.

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Nigam Arora

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

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.