We are committed to continuously improve our service. In
this quest, we are adding two new features.
- Under every open position and every open
position that has not filled, there is now a
separate section clearly marked -- "What to do
now?".
- We are now also providing a breakdown of our
indicators for stock market in addition to the
composite conclusions.
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ARMAGEDDON DISCOUNT/PREMIUM |
Markets throughout
the world are pricing in as high as 20% chance of
Armageddon. This phenomenon has caused discounts in the
stock markets as well as premiums in commodities, U.S.
Treasuries, Japanese bonds, and German bunds.
Our models show that the hard data does not support such
a
high probability of Armageddon. In due course, these
discounts and premiums will narrow giving us an
opportunity now to position ourselves for decent but not
spectacular returns.
Some times over a short period of time, perception is
reality and facts do not matter. This is precisely the
environment we are in now. Our research going back 100
years shows that in such an environment the best course
of action is to be more concerned about the return of
capital than the return on capital.
If hard data supported the 20% probability of
Armageddon, we would have employed a strategy similar to
what we used in 2008. In 2008 when most investors were
losing big money, those following our models made a boat
load of money. This was accomplished using
inverse ETFs, i.e., positioning the portfolio to profit
from the markets going down.
This is just a reminder to our long-term subscribers and
information for the new subscribers that our models are
designed to hit home runs both in up markets and down
markets.
Currently we are in no man's land. The data is very
noisy with no clear trends. In this environment, in
addition to being on the defensive, we will focus on hitting
singles and doubles. At the same time, we will allocate
a small portion of the capital to be positioned for
potential home runs.
The potential to hit home runs again in the future is very
high as the discounts/premiums related to Armageddon are
likely to narrow. However, we cannot enter a lot of
positions because a vast majority of asset classes and
subclasses are neither cheap nor expensive. We buy them
when they are cheap and we short sell them through
reverse ETFs when they are expensive.
The key to making money in this environment is lots of
patience, holding lots of cash, and the willingness to
pull the trigger when a certain asset class or subclass
becomes too cheap or too expensive
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ALLOCATION UPDATE
LOW RISK MODEL
Any open recommendation that
is not addressed here is considered withdrawn. |
(We recognize that each
investor is unique. Subscribers to the ZYX Global
Multi-Asset Allocation Alert range from highly
sophisticated institutions to individuals just starting
out.
The common thread between all of our
subscribers is that none of them are gun slingers, place
heavy emphasis on risk, are long-term oriented, and do
not want to trade often. Within the boundaries described
above, our subscribers range from ultra conservative to
aggressive.
There is always a balance between waiting for better
prices and missing opportunities.
Aggressive investors may make their buy decisions based
on the risk reward matrix and ignore the buy zones as
well as suggested buy points. On the other hand,
ultra conservative investors may be content with missing many
opportunities and holding out for purchases at the lower
end of the buy zones. Growth investors may fall
somewhere in between aggressive and ultra-conservative
investors.
It is a matter of individual preference.)
TBF
This position profits from higher risk appetite in the
world, economic growth in the U.S., higher interest
rates in the U.S., and higher inflation in the U.S.
What to do now?
Those holding the position may continue to
hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $38.50 -
$41.85. The suggested buy points in the zone are
$38.73, $39.52, $40.31, and $41.52.
XLK
This position profits as the demand for
technology grows and as large cap technology stocks come
back in favor.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $21.11 -
$23.51. The points in the buy zone are $21.11,
$21.61, $22.13, and $23.16.
SMH
This position profits as demand for
semiconductors grows and higher risk appetite comes back
in the market.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $27.00 -
$30.85. The points in the buy zone are $27.11,
$28.16, $29.52, and $30.26.
OIH
This position profits from a growing demand for
products and services related to oil and gas exploration
and production.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $126.00
- $141.85. The
points in the buy zone are $127.11, $130.51, $134.26,
and $140.56.
FONE
This position profits from the proliferation of
smartphones.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $23.00 -
$25.96. The points in the buy zone are $23.11,
$24.26, $25.44, and $25.61.
TUR
This position profits from economic
growth in Turkey and positive events in the Middle East,
Russia, and Germany.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $48.00 -
$54.50. The points in the buy zone are
$48.51, $50.61, $52.56, and $53.71.
BOS
This position profits from falling prices of base
metals such as copper, nickel, zinc, and aluminum.
What to do now?
Those in position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $16.50 -
$18.40. The points in the buy zone are $16.50,
$17.11, $17.61, and $18.00.
VVR
This position represents senior bank loans and
mainly produces income.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $4.00 -
$4.88. The points in the buy zone are $4.21,
$4.52, $4.67, and $4.88.
EUO
This position profits from the euro falling
against the US dollar.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the
position in the buy zone. The buy zone is $15.00 -
$17.60. The points in the buy zone are $15.11,
$15.52, $16.11, and $17.02.
TTF
This position profits from the lifting of political
uncertainty and the resulting growth in Thailand.
What to do now?
Aggressive investors would have filled 1%
allocation around $13.20.
Growth and conservative investors would not have
filled yet.
The
buy zone is $10.50 - $13.50. The points in the buy zone
are $10.61, $12.16, $12.65, and $13.30.
Our goal is to build a 5% position on dips.
Large accounts should not use TTF and may use THD in
accordance with the earlier Quick Alert.
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ALLOCATION
UPDATE
LOWER RISK MODEL
Any open recommendation that
is not addressed here is considered withdrawn. |
(We recognize that each
investor is unique. Subscribers to the ZYX Global
Multi-Asset Allocation Alert range from highly
sophisticated institutions to individuals just starting
out.
The common thread between all of our
subscribers is that none of them are gun slingers, place
heavy emphasis on risk, are long-term oriented, and do
not want to trade often. Within the boundaries described
above, our subscribers range from ultra conservative to
aggressive.
There is always a balance between waiting for better
prices and missing opportunities.
Aggressive investors may make their buy decisions based
on the risk reward matrix and ignore the buy zones as
well as suggested buy points. On the other hand,
ultra conservative investors may be content with missing many
opportunities and holding out for purchases at the lower
end of the buy zones. Growth investors may fall
somewhere in between aggressive and ultra-conservative
investors.
It is a matter of individual preference.)
TBF
This position profits from higher
risk appetite in the world, economic growth in the U.S., higher
interest rates in the U.S., and higher inflation in the U.S.
What to do now?
Those holding the position may continue to hold.
Those not in the position may consider adding the position in
the buy zone. The buy zone is $38.50 - $41.85. The
suggested buy points in the zone are $38.73, $39.52, $40.31, and
$41.52.
CSMA
This position profits from merger and acquisition activities.
What to do now?
Those holding the position may continue to hold.
Those not in the position may consider adding the position in
the buy zone. The buy zone is $19.66 - $21.02. The
suggested buy points in the zone are $20.11, $20.38, $20.65, and
$20.77.
EUO
This position profits from the euro falling against the
US dollar.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the position in
the buy zone. The buy zone is $15.00 - $17.60. The points in
the buy zone are $15.11, $15.52, $16.11, and $17.02. .
FONE
This position profits from proliferation of smartphones.
What to do now?
Those in the position may continue to hold.
Those not in the position may consider adding the position in
the buy zone. The buy zone is $23.00 - $25.96 The
points in the buy zone are $23.11, $24.26, $25.44, and $25.61.
XLK
This position profits as the demand for technology grows
and as large cap technology stocks come back in favor.
What to do now?
This position is currently not in the allocations and is
an open recommendation that has not filled.
This position may be added on dips to the buy zone. The
buy zone is $21.11 - $23.51. The points in the buy zone
are $21.11, $21.61, $22.13, and $23.16.
The objective is to build a 5% position on dips.
SPLV
This position profits from the lowest volatility 100 stocks in
the S&P 500 index going up.
What to do now?
This position is currently not in the allocations and is an open
recommendation that has not filled.
This position may be added on dips to the buy zone. The
buy zone is $22.22 - $24.70. The points in the buy zone
are $22.22, $22.76, $23.32, and $24.36.
Our goal is to build a 6% position on dips.
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Leading economic
indicators from across the world are fed into the ZYX
Global Multi-Asset Allocation Model. Computers
figure out which indicators have the highest correlation
with the performance of various asset classes, sectors, and
sub-sectors.
Higher weights are dynamically
FOREWARNED IS FOREARMED
ATTEND THIS COACHING SEMINAR
Click above for details
assigned to the best correlations. The same
process is repeated for the risks. Then our
proprietary algorithms compute two variants of the
proposed asset allocation — a low risk
allocation that attempts to take 85% market
risk and a lower risk allocation that attempts to take
50% market risk. After a
careful review, the results are published in this
alert.
Without bothering you with all the details, here are the
big picture conclusions.
- UNITED STATES
Geopolitical
conditions have always been a big part of our models
for emerging markets. For the first time in
the history of our model, political conditions in
Washington carry the highest weight.
It is all about debt ceiling negotiations in
Washington. August 2, 2011 is the deadline.
In practice, the markets may react prior to August
2nd. As an example, the Treasury Secretary and
Speaker of the House are both out with statements
this morning that a resolution should be done before
Asian markets open. Asian markets open around 9:00
PM EST.
There is also the possibility that a down grade of
U.S. debt from AAA to AA may occur before August
2nd.
Not only is it important that an agreement be
reached, but it is also important that the agreement
be meaningful. An agreement that simply kicks
the can down the road is likely to lead to
downgrades of the U.S. debt.
It may seem that a good agreement should lead to
higher stock prices, higher bond prices, higher
commodity prices, and lower gold prices. It
may also seem that no agreement or a bad agreement
should lead to lower stock prices, lower bond
prices, lower commodity prices, and higher gold
prices.
The markets are perverse.
They do not always act in a manner that seems
logical to the less informed. The reality is
that in the short-term the reaction of the markets
is going to be determined by the gap between what
actually happens and how the street is positioned.
"The
street" is a Wall Street term that aggregates
positions of the vast majority of the big players.
The reality is that no one knows for sure how the
street is positioned relative to the debt
negotiations. It used to be that those with
inside information always had a huge advantage.
But now, the gap
between those with accurate inside information and
those without inside information but armed with
highly complex algorithms such as, The Arora Report,
Ltd., has narrowed.
The bottom line is that we will stay
defensive.
We are now publishing a summary of the composite of
each category of our stock market indicators.
We do not bother you with details, as each category
contains a large number of indicators.
- Economic Indicators:
Negative
- Fund Flows:
Negative
- Commodity Price Movements:
Negative
- Relationship Between Currencies:
Negative
- Sentiment: Neutral
- Insider Buying:
Negative
- Earnings Momentum:
Mildly Positive
- Risk Appetite: Neutral
- Quantitative Indicators: Neutral
- Technical Indicators:
Extremely Positive
- Geopolitical Indicators: Negative
- CHINA
China has been the engine of
world growth over the last two years. The growth in
China continues to slow. Interest rates are rising, but
so far they have been unable to arrest inflation.
The government in China has declared victory over
inflation, but economic indicators have not
confirmed such victory.
The model is bearish on China in the short-term,
positive in the medium-term and neutral in the long-term.
We are now publishing a summary of the composite of
each category of our stock market indicators.
We do not bother you with details, as each category
contains a large number of indicators.
- Economic Indicators:
Negative
- Fund Flows:
Negative
- Commodity Price Movements:
Negative
- Relationship Between Currencies:
Negative
- Sentiment: Neutral
- Earnings Momentum:
Mildly Negative
- Risk Appetite:
Extremely Positive
- Quantitative Indicators: Neutral
- Technical Indicators:
Extremely Positive
- Geopolitical Indicators:
Negative
- JAPAN
Japan is the third largest economy in the world.
The Japanese yen is staying extremely strong, which
the model interprets as increasing risk averseness.
About $300 billion will be spent on reconstruction
-- reconstruction may finally get Japan out of
the doldrums.
Equities are cheap, and the model is close to
issuing a buy signal on Japanese large caps.
We are now publishing a summary of the composite of
each category of our stock market indicators.
We do not bother you with details, as each category
contains a large number of indicators.
- Economic Indicators:
Negative
- Fund Flows: Negative
- Commodity Price Movements:
Negative
- Relationship Between Currencies:
Negative
- Sentiment: Neutral
- Earnings Momentum:
Mildly Negative
- Risk Appetite: Neutral
- Quantitative Indicators:
Extremely Positive
- Technical Indicators:
Mildly Negative
- Geopolitical Indicators:
Positive
- INDIA
The rate of increase of inflation has
slowed remarkably. The Reserve Bank of India has
shown an extraordinary commitment to control
inflation as is evidenced by a series of rate
increases much faster than China.
The
model is close to turning bullish on India in the
short- term and remains bullish over the long-term.
We are now publishing a summary of the composite
of each category of our stock market indicators. We
do not bother you with details, as each category
contains a large number of indicators.
- Economic Indicators: Neutral
- Fund Flows:
Negative
- Commodity Price Movements:
Negative
- Relationship Between Currencies:
Negative
- Sentiment: Neutral
- Earnings Momentum:
Mildly Negative
- Risk Appetite:
Positive
- Quantitative Indicators: Neutral
- Technical Indicators:
Positive
- Geopolitical Indicators:
Positive
- REST OF ASIA AND AUSTRALIA
As a result of
unexpected election results, the model is now bullish
on Thailand.
The model remains bullish on Turkey. The
election results are positive. While the world is
starved for economic growth, it is ironic that
Fitch, a rating agency, complains
Turkey
is growing too fast and has threatened to not
upgrade
Turkey bonds to investment grade. Our plan is to add to our
TUR
position at the first sign of a
turn
in the current account deficit of
Turkey. Please keep in mind that this is a very long-term
position
The model is bullish on Vietnam, but we are not
yet buying Vietnam as there may be an opportunity to
buy at lower prices ahead.
The model is bearish on Australia.
- EUROPE
If there are no hitches in execution, the latest
solution for Greece should conceptually work.
This solution is similar to the Brady Bonds solution
for Latin American debt which worked
beautifully.
We expect periodic eruption of concerns regarding
sovereign debts of Italy, Spain, Portugal, and
Ireland.
While attention is focused on the debt crisis,
the economy of Northern Europe continues to exhibit
strength.
Southern European stocks are cheap, but risk
of macro events is also high.
The model has
now turned neutral on Russia from a previously bearish
reading and
is neutral on the rest of Europe.
We are now publishing a summary of the composite
of each category of our stock market indicators. We
do not bother you with details, as each category
contains a large number of indicators.
- Economic Indicators:
Negative
- Fund Flows:
Negative
- Commodity Price Movements:
Negative
- Relationship Between Currencies:
Negative
- Sentiment: Mildly
Positive
- Earnings Momentum:
Neutral
- Risk Appetite:
Strongly Negative
- Quantitative Indicators:
Strongly Positive
- Technical Indicators:
Extremely Positive
- Geopolitical Indicators:
Mildly Negative
- MIDDLE EAST
Middle East problems are not likely to be resolved
soon as Shia Iran seems to be determined to
undermine Sunni Arab rulers who are allied with the
United States. (Sunni
and Shia are the two major denominations of Islam
and these two have been in conflict with each other
for centuries.)
The low risk way to benefit from the developments
in Middle East continues to be Turkey. We are
maintaining our allocation to Turkey.
- LATIN AMERICA
The model continues
to be bearish in the short-term
on Brazil but remains very bullish on
Brazil in the long-term.
The model remains neutral on the rest of Latin
America.
- PRECIOUS METALS
The model is
bearish on silver for the short to medium-term and
bullish for the long-term.
The price of gold in the short-term will be
directly impacted by the result of debt ceiling
negotiations in Washington. In the short-term, gold
is a moderate reward and very high risk position.
- OIL
The model is neutral on oil
in the short-term, bullish in the medium to long-term.
- SOFT COMMODITIES
The model is neutral
on grains.
The model is bearish on cotton.
The model is mildly bullish on sugar.
The model is neutral on meats.
- OTHER COMMODITIES
The model is bearish in the short-term on base
metals including copper, coal, and natural gas.
The model is neutral on chemicals.
The model is close to turning bullish on steel
prices in the U.S.
- FOREIGN EXCHANGE
The model is bullish on the U.S. dollar for the short-term.
The model is bullish on Japanese Yen for the
short-term. The model is bullish on Russia for
the short-term. The model is bearish on the
currencies of Europe, Australia, China, India, and Brazil
for the short-term.
- REAL ESTATE
The model continues to be
bearish on apartment REITs in the United States.
The model has turned slightly bearish on
office and shopping mall REITs in the U.S.
The model has previously made a lot of money by
investing in Asian Real Estate.
From a macro picture, the model is bullish on
real estate in India and frontier markets. The
model is bearish on real estate in China and Asian
tigers. The model is neutral on real estate in
the rest
of the world.
DENSE
FOG SLOW DOWN
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Pick the Low Risk or the Lower
Risk or customize the model for your preference by picking and
choosing from the two variants and using the Risk Reward Matrix.
Buy the ETFs that you and/or your advisor deem fit for you at
your sole discretion after studying the Risk Reward
Matrix. As an option, conservative investors can choose to
enhance returns and lower risk by waiting and buying only when the ETFs
pull back to the specified buy zones. Ultra conservative
investors may consider buying closer to the bottom bands of the
buy zone at the risk of missing the opportunities