"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra: Buy Gold and China. Sell short on pretty much everything else. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

Twitter: @kherriage

Karl Bessey

Mary Dee

Mike Budny 
Twitter: @kherriage

Friday
Nov172017

VRA Update: 25,000 Year End Dow Jones. The VRA Approach to Crushing the Market, Sentiment Back to Heavily Bullish Readings.

Nov 17, 2017

Good Friday Morning all. A big recovery day in the markets yesterday, with 1% to 1.5% moves higher across the board in the Dow Jones, S&P 500, Nasdaq and Russell 2000.

As we’ve covered here often, in powerful equity bull markets like the one we are in today (globally) corrections are short-lived, quickly reversed and soon thereafter lead to fresh all-time highs. This is what we witnessed the beginning of yesterday. Take a look at these internals:

1) 4–1 across the board, advances to declines

2) Almost 10–1 new highs to new lows

3) Nasdaq at close to 10–1, up volume to down volume

The internals of the stock market make up an important element of the VRA Investing System. Even during the “pause” the markets internals held up well. Were this to be a large decline in the offing, the internals would have been negative, over a 7–14 day cycle. We did not get a whiff of this…instead, we saw a near immediate reversal move on heavy volumes.

Combined with the manner in which investor sentiment flipped from bullish to bearish over the course of just one week…along with record numbers of investors buying the VIX (fear index)…the VRA System signal was clear; the pause was to be short-lived only. Next up, the year end rally is ON. My DJ target of 25,000 by end of 2017 remains intact.

The VRA Approach to Crushing the Market

Going back to inception of the VRA in 2003, each year we have outperformed the markets (using the S&P 500 and Russell 2000 as benchmarks) in 13 of 14 years. Through the 3rd quarter of 2017, our positions were up an average of 44%, versus just 11% for the S&P 500 and 9% for the Russell 2000.

Going back these 14 years we have had numerous VRA buy rec growth stocks that have risen 500–1000% while also using the VRA System to time our purchases of leveraged ETF’s and big cap domestic/international buy recs, giving us exposure to the broad markets as well.

The VRA has always been aggressive. It always will be. My investing style is not for everyone, for just this reason, but for those willing to invest a portion of your funds in high growth opportunities, well…this is my niche market. This is my USP (unique selling proposition).

I have always recommended building concentrated positions in my favorite holdings because this is how big gains in your portfolio take place. Peter Lynch, the best mutual fund portfolio manager in history (Fidelity Magellan Fund) averaged 28% returns over a multi-decade career. He did this by investing in growth stocks that he loved (great products with great mgt team) and then holding those positions until the story changed.

Remarkably, Lynch made money on just 6 out of 10 stocks he purchased, over the course of his career. 60% is Hall of Fame on steroids numbers for a baseball player but one might think that the best in the business could do better than a 60% success rate.

Here’s the key to his success; Lynch wrote often that the vast majority of the stocks he bought tended to produce small returns for an extended period (sometimes for years)…he used these pullbacks to add to his positions…because once his favorite stocks began to run, they REALLY took off. Lynch made his big killings in stocks that he owned for 3–4–5 years. By that time, he had accumulated big positions in his favorite companies. And his patience allowed him to crush the markets.

My approach with the VRA is similar to Lynch’s, but a big part of my work is timing the markets to ensure we are on the right side of both short and long term moves. Bottom line; I would rather not have to wait 3–4–5 years or more for my favorite investments to soar. And I really don’t want to lose money on 4 out of 10 holdings.

VRA Portfolio Holdings That Have the Potential to Jump 50–100% + With One “Event”

Having worked on Wall Street for 15 years, I know my personal investment psychology. Over the years my clients came to me because my own style matched theirs. I want to beat the markets, year in and year out, but what I really want to do is absolutely CRUSH the markets. I also know thats why many/most of you are here with me today.

In order to accomplish this, we must buy/hold growth stocks that have the potential to rise 50–100% + in very short order….namely on one “event”.

VRA Market Update

Below is a (rather large) screenshot of how various markets have performed through this past Friday. Dow Jones and S&P 500 up about the same (15% and 18%), while the Nasdaq has jumped a big 25% and the Russell 2000 (small caps) pulling up the rear, up just 8%.

The one that gets our attention of course is Bitcoin, up a huge 617%. While I’ve written positively about Bitcoin for years I have never officially recommended it…it does not trade as a stock, and while that’s similar to gold and silver in many ways…I have not yet found a method of investment that would allow me to include it in the VRA Portfolio.

But that should change in early 2018. I received word over the weekend that 2–3 IPO’s will be taking place that will allow us the opportunity to jump on the Bitcoin train, officially. As I learn more I’ll give you an advance heads up. Based on what I am hearing, a February launch looks likely. And no, based on the VRA System I would not recommend buying Bitcoin (or other crypto currencies at todays prices). A shakeout is taking place…we’ll wait until we have better timing…which looks to be a Google-like IPO of a crypto currency system…again, early to mid-February.

What we also see above is the fact that gold has risen some 10% in 2017. Take a quick look at the chart below. We see a most interesting pattern when it comes to December FED rate hikes.

The FED has raised rates twice in December, over the last 2 years. As you can see below, both rate hikes brought with them a huge move higher in gold (and an even larger move higher in the miners).

Following the 12/15 rate hike, gold spiked a big 31% over the next 7 months. Then, following the 12/16 rate hike, gold went on another tear, rising more than 20%in the following 8 months.

See the pattern here?

Next up, the FED will almost certainly raise rates at next months meeting. Should gold repeat its past two spikes, which brought an average gain of 25%, the next move in gold will take it from its current price of $1278/oz all the way to $1592/oz.

AAII Investor Sentiment Survey

The latest readings from the AAII Investor Sentiment Survey, my go-to sentiment survey for more than 25 years. As you can see, bullish percentage has collapsed back to 29.3%, a huge 15.8% drop in just a week, while bearish investors have surged to 35.2% with neutral investors at an also enormous 35.2%.

And folks, this massive jump in pessimism took place with just a small move lower in the markets. Stunning changes. Let me repeat…this is not how bull markets end…not even close. Bull markets end when bullish % is over 60% for weeks on end. Bull markets end when everyone and his/her mother is ALL IN…and are certain that stock prices will soar going forward. Just based on this reading alone, it is highly likely that this short term pause in the markets is close to ending.

We also got this update on the VIX this Wednesday. The VIX index is also referred to as the “fear index”….a gauge of investor optimism or pessimism. What we see below is that investors are buying the VIX more aggressively than at any point this year, which also means at any point EVER.

Never in the history of the VIX have investors been this bearish. As a contrarian you already know what this means….its almost certainly time to take the other side of this equation…the majority is very, very seldomly on the right side of any trade.

OIL Update

Take a look at this 3 year chart of oil. Besides the major bottom that you see below from 2/16, take a look at the explosion in trading volumes.

My mentors taught me that “volume precedes price movement” and nowhere can that be more clear than the surge in oil trading volume below.

Based on everything that I look at, from both fundamentals and technicals, the price of oil is in a multi-year bull market that might just send oil prices back to the $100 levels far faster than just about anyone is forecasting. We certainly have a Mid East war brewing…the sides have been drawn…Saudi Arabia vs Iran (with allies backing both sides that appear ready for a fight). We are positioned here perfectly.

Until next time, thanks again for reading…

Kip

To receive two free weeks of the Daily VRA Updates, sign up at VRAinsider.com

Wednesday
Nov082017

VRA Update: 1 Year Election Anniversary. Bull Market to Ramp Higher Into Year End. Precious Metals and Miners. 

Good Wednesday morning all. Today marks the 1 year anniversary of the election of #45, President Donald Trump. Love him or not, here are the bottom line investment results since 11/8/16.

S&P 500: +21%

Dow Jones: +28%

Nasdaq: +30%

During the last year we've seen an amazing 70 new all-time highs, as the country is reminded of what a pro-growth, business friendly economy is supposed to look like. We've also seen overly burdensome regulations slashed...allowing entrepreneurs to do what they do best...grow their businesses. 

Remarkable. 

But folks, "literally" everything that I see, using the VRA Investing System and my 32 years of experience, tells me that we are nowhere near the end of this bull market. You hear me talk about the following often, but quickly, here are the some of the most important markers. Indicators that I have followed closley since the 1980's:

1) Sentiment; yes...investors have become much more bullish (as you'd expect with this kind of a move higher), but the most important sentiment survey that I follow...the American Association of Individual Investors (AAII.com) that I've followed since the late 80's...shows bullish percentage still under 50%. While its beginning to elevate, yours truly will not become concerned about this market reaching dangerously overbought levels until bullish percentage reaches 60%...and for weeks on end. We're still nowhere near this.

2) Seasonality: in what may be the most important statistical investing fact that exists, over the last 50 years more than 90% of all stock market gains have occurred from November to May. 90%!

And yes, we are now in November. 

We barely had a single whiff of a sell-off during the historically volatile September/October risk filled months, telling us that NOW is when we must be positioned aggressively for higher stock prices. My year target of Dow Jones 25,000 remains intact. 

3) My mentors taught me, at the young age of about 24, that you can track markets by the success in the following areas: income tax receipts, health of the housing markets and health of financial stocks. We see all-time highs in all 3 areas today. Highly, highly bullish. 

Also, by following the Nasdaq (the best barometer for excitement in the markets), we get a great feel of what the future holds. This is where high tech, high growth mometmum stocks reside, which is why so many market timers key off of it. Remember, since the election, the Nasdaq is up a big 30%.

Final point on the markets and the economy: the stock market has always served as a discounting mechanism for the future. It tells us, roughly 6 months in advance, what we can expect economically going forward. Today, the stock market is clearly telling us that both the US and global economy will continue to surge. 

Don't fight the tape...another piece of age old investing wisdom.

In my book "CrashProof Prosperity, Becoming Wealthy in the Age of Trump" I laid out two investing scenarios. In one, I said that "if" we were going to have a bear market and sluggish economy, that it would come early on in Trumps first term (lots of historical precedence for this, during the first year of a new presidency). 

Clearly, that did not happen.

In my second scenario, I laid out the more likely probability that Trump would take the markets to all-time highs, based on economic growth that finally got back to the 4-5% GDP growth of years past. Remember, in not a single year of Obama's 8 years did US GDP hit 2%. Today, we're already back to 3%.

Imagine what Trump might be able to accomplish in years 2-3. 

I am "all-in". The DJ is headed to 30,000....possibly even 35,000...over the next 3 years. If that sounds unllikely or even impossible, consider this; a move to DJ 35,000 would mean that the market would need to average a 16% return over the next 3 years. 

The Dow just had a +28% year. Not impossible at all. 

Finally for this morning, a fresh chart of gold, which is up $9/oz this morning to $1285.

As you can see below, gold has been in a solid uptrend from its December 2016 lows. Everything about this chart says it is about to have a major breakout. Big volume builds confirm this. Once gold breaks $1375/oz, there will be no stopping it.  

Now is the time to make sure your positions are in place in my favorite miners (which move 3-5 x faster than gold/silver). 

Without question, the miners will be the biggest winners in the precious metals space. My target for gold in 2018 remains $2000/oz. Once we surpass $2000 gold, we'll see a Bitcoin-like move higher. Everything that Ive learned over my 3 decades confirms the bull market that's underway in gold, silver and the miners. 

Until next time, thanks again for reading...

Kip

Saturday
Oct072017

Insider Trading and Financial Anomalies Surrounding the Las Vegas Attack

 

Insider Trading and Financial Anomalies Surrounding the Las Vegas Attack
October 7, 2017
Note: With this report, I make no claim to specific knowledge of any wrongdoing or improprieties. Instead, this report includes trading patterns, news releases and/or public record SEC filings. 
We will examine the share price movements of two gun manufacturers (American Outdoor Brands and Sturm Ruger) and the share price movement of MGM (which owns Mandalay Bay). We will also examine additional financial events surrounding MGM, including what can only be referred to as massive levels of insider selling in the shares of MGM, by the CEO/Chairman and MGM officers/directors. As you'll see, more than $200 million in MGM shares were sold in the weeks leading up to the attack.
Background. Interesting Trading Patterns in AOBC, RGR and MGM.
Over the course of my 32 years in the investment industry I have constructed a proprietary investing model that I refer to as the “VRA Trading & Investing System”. In short, its design is to track money flows in the stock market and detect sector and stock analysis/movements that then alert me as to when/where money is flowing in the markets.
For example, prior to the 2016 Presidential Elections, the VRA System noticed that the share price of gun manufacturers had begun to decline rapidly. This was one of our first financial clues that Trump might beat Clinton (Trump's strong support of 2A). As you can see below, American Outdoor Brands (AOBC, formerly Smith & Wesson), hit a high of $31/share in August of 2016. As the bottom began to fall out, it would ultimately drop 55% in price, before hitting its low price of just over $13 on 9/11/17.
The market is referred to as a "discounting mechanism" and as such, it often predicts future events. It certainly did so in the case of the election and the share price of AOBC. 
We see the same trading pattern in gun manufacturer Sturm Ruger (RGR). RGR traded as high as $73 in March of 2016 before ultimately dropping 37%, when it too bottomed within one trading day of AOBC hitting it's lows (9/8/17). Again, my system noted the rapid decline in gun stocks, which led me to believe that Trump may in fact win the election. Remember this point; both AOBC and RGR hit their lows at the same time, just over two weeks prior to the Las Vegas shooting. 
Something Changed in September
Let's now examine the trading patterns of AOBC and RGR in detail, just over two weeks "prior" to the attack. As you can see, AOBC bottomed on 9/11/17 at $13.30 before the spike higher began. From 9/11 to just after the attack, AOBC rose 23% in price. It did so on a noticeable increase in buy-side trading volumes. 
Below, we see the same chart and reaction in the shares of Sturm Ruger (RGR). From it's 9/8/17 lows, RGR bottomed at $46.25 and then spiked to $55.90 just after the attack, for a move higher of 21%.
After falling in price from early-mid 2016 to their early September 2017 lows, the two largest publicly traded gun manufacturers bottomed, then spiked higher, at almost exactly the same time. In addition, buy-side volume increases rose sharply as well. 
And, while not covered in this report (more work is needed), we also saw a spike in call option purchases in both AOBC and RGR, in the days/weeks leading up to the attack.
This final chart shows the share price of MGM (owner of Mandalay Bay) in the days leading up to the attack to present. MGM shares declined more than 10%, from 9/7/17 to recent lows. This decline occurred as some $200 million in insider selling was taking place. 
Bottom line: Beginning in early-mid September to this report, gun manufactures AOBC and RGR rose in price 23% and 21% (on higher trading volumes), while the shares of MGM fell in price by 11% (as $200 million in insider selling occurred). 
MGM: Heavy Levels of Insider Selling
As the SEC insider transaction reports below detail, from 9/5/17 to 9/12/17, approximately 6 million shares of MGM were sold by officers and/or directors of the company, totaling approximately $200 million in proceeds to sellers. Included in this group is the selling of approximately 450,000 shares by MGM CEO and Chairman James Murren (a seller of size since late July) and who appears to have sold more than 85% of all holdings. We also see that MGM Board member Grounds William Warwick sold 176 million shares of his MGM stock on 9/6/17. 
We have no indication that MGM insiders sold these 6 million shares due to any advance knowledge of the 10/1 attack. I am not making that claim. I am simply pointing out facts that cannot be in question.
But I will make a few observations:
1) If MGM/Mandalay Bay were to lose law suits associated with this attack, the downside risks to MGM share price may be extensive. 
2) We also know that MGM CEO James Murren was appointed to the Homeland Security National Infrastructure Advisory Council by President Obama in December 2013. This fact could make for some interesting depositions, as it relates to exactly what type of advanced security systems Mandalay Bay had in place, leading up to and on the night of 10/1/17. 
"The National Infrastructure Advisory Council is tasked with providing the president with advice on the “security of the critical infrastructure sectors and their information systems.” The council is composed of a maximum of 30 members, appointed by the president, from private industry, academia and state and local government."
3) I am also aware of the fact that MGM put options activity spiked as well (needs more work), beginning at the same time gun stocks were rising and MGM was falling in price. 
4) For those curious about the trading in other major Las Vegas Hotel casino stocks, during this same time frame, this also needs more work. However, I can report that at the same time MGM's share price was falling, the share prices of Las Vegas Sands (LVS) and Wynn Resorts (WYNN) were actually rising.
Closing:
In closing, let me repeat; I make no claims or assertions that anyone mentioned in this piece has done anything nefarious. They likely did not. 
The question I might ask is, "Did someone else profit from the heinous acts of 10/1/17? Possibly the planners?"
Like many of you, I am interested and I am asking questions. I also remember that during 9/11/01, reports surfaced widely in the financial media that "many, many millions" in profits were made off of the purchase of put options in the shares of United Airlines and American Airlines, the two airliners that operated the four aircraft that were hijacked on 9/11 (among other well-documented reports of large put option purchases in numerous companies that had the most exposure to a shocked US economy). 
There's more...like the recent trading pattern in OSIS, which makes "detection systems" of all kinds (similar to their subsidiary "Rapiscan", which makes the TSA body scanners that were put in place following 9/11). Many are wondering how long it might be before we are forced to walk through similar devices, as we enter hotels/casinos.
I will continue to follow this story. Should you have information that might assist in my research, you can reach me at kip@vraletter.com.
I am a proud American. I want the best for our country. Wherever the truth leads us, that is where we must go. Follow the money.
Kip Herriage
VRALetter.com

 

 

 

Tuesday
Sep192017

VRA Update: Beating Mr. Market. Liquidity Continues to Flood In. 

As the markets continue to ride the wall of worry higher, hitting fresh all time high after fresh all time high, the VRA Portfolio is not only participating, but once again, beating Mr. Market at its own game. Here are the numbers for 2017:

S&P 500: +12%

Nasdaq: +20%

Russell 2000: +6%

VRA Portfolio: +41% 

The VRA Portfolio is aggressive...always has been and always will be...and it can be most closely compared to the Russell 2000 (small cap stock index). At 41% for the VRA (to 6% for the R2K), we are outperforming the small cap index by 6.8 times (or 680%).

About once a quarter I like to cover some VRA Core Principals and Portfolio Management concepts, especially important for our newer members but key reminders for us all. 

1) Again, the VRA is highly aggressive in our approach. I use the VRA System, a proprietary combination of fundamental and technical analysis, to help place us in the highest return investments possible. The VRA approach is not the right approach for everyone, but if you practice smart money management and portfolio diversification, the VRA can help you to crush Mr. Market (as we've done here for 13 of 14 years). 

2) Most use the VRA in addition to their conservative holdings (bank savings, bonds, retirement funds, insurance, etc). Only you know what the appropriate mix is, for your investment goals and your individual risk/reward personality. 

3) I never recommend more than 10 stocks. My goal is to crush Mr. Market and to do so with a diversified, but still concentrated approach. Over the years I've seen investors that hold 50-60 or more stocks in their personal portfolio. How they stay on top of all of them, I do not know. And, when they do have some big winners, the overall portfolio barely budges. If this is your approach, I would recommend instead the use of index funds, which give you both diversification and the ability to capture the returns of the major indexes. 

That's it really. Again, from my 32 years of doing this, day after day, the investment style that I recommend is the exact style that I use personally. I am a trend following investor that combines technical analysis (based primarily on price movement) with the fundamental analysis that was drilled into me on Wall Street, plus the wild card that only time can provide...a contrarian minded instinct, applying investor sentiment to keep us on the right side of market timing. 

Not all VRA recommendations will make us money. On those that go the wrong way (with a change in fundamentals or negative price action) we will take our losses and move on...removing emotion from the equation...while letting our winners run.

Important Point: Please remember to login to your VRA Members Site, at least once/week, to view the VRA Portfolio and make sure you are positioned properly. Also please remember that I am unable to provide individual investment advice....my Wall Street days are long behind me...but I will reply to your emails personally, and answer your questions the best way I am able to. 

VRA Market Update

Some big developments caught my eye over the weekend, as I ran my VRA scans and screens. Let's cover these...

1) EVERY major US equity index is now sitting at Extreme Overbought levels. While this does not mean that the markets are going to have a major correction, it does mean that we must tread a bit more carefully. Folks, it's from these types of extreme overbought readings that short term and painful sell-offs can occur. As you know, I watch the markets internals closely, and while I see no signs of an impending and sharp sell-off on the horizon, its the things that we cannot see that usually catch us by surprise.  

2) While I prefer the AAII Sentiment Survey, as you can see below, the USA Today Fear and Greed Index now sits at 77 (it was was 17 3 weeks ago). As a contrarian, we must be aware of these changes in investor sentiment.

3) Yes, P/E multiples are high...but they do not determine market direction. Instead, liquidity determines market direction. And man, do we have lots of liquidity in todays continued record low interest rate environment (which is fueling M&A activity and share buybacks). In addition, and for the first time in history, 3 central banks are adding to already massive debt holdings by also purchasing stocks. The PBOC, BOJ and SNB now own trillions in equities and buying more with each passing day. 

Its for all of these reasons...plus the fact that the world is returning to nationalism rather than globalism (a transformational event that few talk about) that I continue to be bullish on the markets. My 3-4 year DJ target remains 30,000+.

4) Inflation is returning...I write about it often...and this is another propellant for higher equity prices. The 1000+ PHD's at the FED seem to be missing the return of inflation, but we see it everywhere we look.

Check out the chart of gold below. Inverse head and shoulders patterns can be an indication that much higher prices are on the way. Once gold breaks $1400/oz, $1700 becomes my next target. Of course, the real leverage is in the miners...we'll make fortunes in this group over the next 1-3 years.

Until next time, thanks again for reading....

Kip 

Thursday
Aug312017

VRA Update: Hurricane Harvey

Just a brief update and many, many thanks for your prayers and well wishes. We continue to be among the very, very fortunate...our home is dry and we are safe...but the number of our fellow Houstonians/Texans that cannot say the same is just staggering. Hurricane Harvey has left our area (as the waters continue to rise) and has now pummeled more of the Texas/Louisiana coast as it moved north. Absolute devastation for 100's of miles. You're never fully prepared for the horrific damage and destruction that water can inflict. We're looking at many months of recovery and rebuilding...but also know this; we will get the job done. 

Thank you again for your many calls, emails, texts and tweets...they are greatly appreciated. For those that would like to help, my advice is a donation to the Houston Food Bank at houstonfoodbank.org. Food, supplies and shelter are stretched thin. They do great local work.

Final point on Harvey. Anyone that believes the US is a deeply divided country...that we are a racist country...that we are a country at war with one another, is either a fool or is purposely misleading. Ignore the MSM that wants only to divide us. Fools indeed. Houstonians/Texans and all that have helped our area in time of real need are making this point better than I ever could. I have never been so proud to be a Houstonian, a Texan, an American. 

Thank you again.

Kip