By Nigam Arora & Dr. Natasha Arora

Terrorist Threat

Please click here for a chart of  Dow Jones Industrial Average (DJIA).

Note the following:

  • First and foremost we are politically agnostic. Our sole job is to help investors.  This post is not about politics or terrorism, but about how certain events may unfold and impact investors in the very long term.
  • We do not expect any impact of Afghanistan on the stock market in the short term.
  • The chart shows the impact of the 9/11 terrorist attack on the stock market.
  • The chart shows that investors bought the dip running the market higher than where it was on 9/11 in no time.
  • Now there is the potential of an attack significantly worse than the 9/11 attack.
  • The Chairman of the Joint Chiefs of Staff, Mark Milley, has admitted terrorist threats may occur sooner than Biden indicated.
  • There are reports that terrorist organizations similar to ISIS and Al Qaeda have already started moving personnel to Afghanistan to set up bases for the purpose of major attacks on Europe and the United States. The movement is apparently taking place through Pakistan.  Terrorists want to build their organizations in Afghanistan at lightning speed to emulate the lightning speed with which the Taliban have taken over Afghanistan.
  • At the time of the 9/11 attack, the Taliban were a primitive rag-tag organization.  Now the Taliban are highly sophisticated and their morale is high.
  • Any new terrorist attacks on the United States or Europe are likely to be more sophisticated and more impactful.
  • Now the Taliban have taken possession of highly sophisticated modern American weapons.
  • There are reports that the Taliban plans to recruit former Afghan military personnel trained to use U. S. weapons.
  • There are several differences this time.  There is an increasing need for investors to diversify outside the United States.
    • China has emerged as the biggest strategic rival of the United States.
    • In 2001, China was not allied with the Taliban.
    • This time China hedged its bets and has already recognized the Taliban as a legitimate military and political force.  There is speculation that China will recognize the Taliban government.
    • Afghanistan has great mineral wealth.  With the proliferation of electric vehicles and green energy, there is a bigger demand for these minerals. China wants these minerals.
    • The U. S. has imposed sanctions against Iranian oil.  In spite of these sanctions, China has become the biggest buyer of Iranian oil.
    • China has the ambition to build a pipeline from the gulf to China.
    • The sum total is that the developments in Afghanistan will help China in its strategic rivalry with the United States.

Tapering

There is a report that the Fed is feeling boxed and may be forced to start tapering sooner than what the Fed had been indicating.

Momo Crowd And Smart Money In Stocks

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Gold

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

Oil

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For longer-term, please see oil ratings.

Markets

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Interest rates are ticking down and bonds are ticking up.

The dollar is stronger.

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 $1780, silver futures are at $23.68, and oil futures are $66.34.

S&P 500 futures resistance levels are 4460, 4600, and 4900: support levels are 4400, 4318, and 4200.

DJIA futures are down 97 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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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.