Take A Clue From Powell And Biden – Prepare Now To Prosper In The New Era

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 Meta Platforms Inc META and Microsoft Corp MSFT

In the early trade, money flows are negative in Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is 🔒 stocks in the early trade. To see the locked content, please click here to start a free trial.

Gold

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

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

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

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

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

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.

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.

The Arora Report is known for its accurate calls.  The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.  Please click here to sign up for a free forever Generate Wealth Newsletter.