To gain an edge, this is what you need to know today.
Dominating Artificial Intelligence
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MSFT stock is being used to illustrate the point. There are two dominant forces driving the stock market this year: market mechanics and artificial intelligence. Microsoft is the leader in artificial intelligence software and services.
- The chart shows MSFT stock fell on Friday. The fall in MSFT was due to the ouster of Sam Altman, the CEO of OpenAI.
- OpenAI is the developer of ChatGPT.
- Microsoft is the biggest investor in OpenAI. Microsoft's AI initiatives are centered around ChatGPT.
- Altman was fired at OpenAI after he lost the board’s confidence. Apparently, there was a culture clash at OpenAI. OpenAI is a not-for-profit organization with a for-profit arm. The clash occurred between those who want to slow and be more deliberate about AI development for public good and those who want to rapidly make money from AI.
- OpenAI has hired Emmett Shear as its new interim CEO. Shear was co-founder and ex-CEO of video game streaming service Twitch. Twitch is now owned by Amazon.com, Inc. (NASDAQ:AMZN). Shear has been in favor of slowing AI development.
- Microsoft tried to get Altman reinstated as CEO of OpenAI but failed. Now, Microsoft has hired Altman. Microsoft has also hired former OpenAI President Greg Brockman.
- In The Arora Report analysis, Microsoft did not appear to have much of a choice. Altman and Brockman could have joined a competitor such as Alphabet Inc Class C (NASDAQ:GOOG). On the surface, it seems to be a good move by Microsoft on its quest to dominate artificial intelligence.
- The chart shows that MSFT stock has moved up on Microsoft hiring Altman and Brockman. This is not good news for Alphabet and Amazon. For those who want to take their investing in artificial intelligence to the next level, there are several podcasts on artificial intelligence in Arora Ambassador Club.
- Last week, Microsoft announced two new semiconductor artificial intelligence chips.
- Before his firing, Altman was reportedly trying to raise billions of dollars from Middle Eastern investors to start a semiconductor company to compete with NVIDIA Corp (NASDAQ:NVDA).
- Nvidia will report earnings after the close tomorrow. These earnings will be closely watched and may determine the next move in the entire stock market.
- A fortune is to be made in artificial intelligence over the next seven years. It is not going to be a straight line. At times, it will be treacherous. You will need expert guidance. There is no better resource than The Arora Report. Please click here to see our carefully selected list of 18 artificial intelligence stocks to watch.
- 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 negative in Alphabet and Amazon.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is 🔒 in the early trade. To see the locked content, please click here to start a free trial.
The momo crowd is selling gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
There is speculation that OPEC+ will cut oil production.
The momo crowd is aggressively 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 (NYSE:USO).
Bitcoin (CRYPTO: BTC) is range bound.
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.
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 seven 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.