"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

Thursday
Aug112016

VRA Update: Oil is Surging...So Are Stocks. Two Radio Interviews Tomorrow

Heads up: Tomorrow (Friday) I will be appearing on two radio shows. The first is 11:15 AM EST, on the Sam Sorbo Show, which is syndicated nationally on TRN (Talk Radio Network).

Then, also tomorrow, I will be on Wayne Root's radio show (790 AM, Las Vegas. 790talknow.com ) at 8:20 PM EST. Hope you can join me on both...I'll be covering our stealth bull market, the hottest sectors to invest in and I'm sure Wayne and I will include some political observations as well. 

Oil - Surging More Than 5% Today. Dow Jones up 125 Points

One of the keys to global stock markets, as we have been covering here at the VRA, is the direction of oil prices. Namely, if oil has in fact bottomed, then we can be even more certain that stock prices are headed higher as well. 

Yes...everything that I see tells me that oil has bottomed. I continue to believe that we have seen the lows and that while a quick recovery to $60 or $70/barrel isn't in the cards, we're also not headed back to sub-$30 prices. As long as oil can maintain a steady move higher, the pressure on energy stocks will continue to dissipate...and buyers will begin to come back into the group (forcing shorts to cover some very large position sizes). 

The Macro Story Behind Oil. Bullish for Broad Markets. Bullish for Banks, China and Biotechs.

A bottom in oil is also a primary reason for the solid move higher in financial/bank stocks (their loans to energy co's will be repaid...most of them, at least). And, because the financials make up roughly 30% of the S&P 500, this is also very good news for the broad markets. Just another reason for us to remain bullish on stocks.

Combined with the hugely important (but seldom talked about) broad based move higher in base/precious metals...taking them to 2-3 year highs...I continue to see a global reflation trade underway. And yes, I see a bottom in the biotechs as well...this group is still down BIG from it's highs...and as we've been covering, I see a major catch-up trade in the works. 

Finally, here's the updated 3 year chart for oil. The decline from over $100/barrel has been brutal...but once the price of oil broke its 2 year downtrend line, I stopped being bearish. Now, it's also surpassed its 200 day moving average...while its 50 dma remains at $46, so more work to do to go full-on bullish.

But take a look at the volume expansion...similar to the increases in volume that we have seen in the miners and biotech, this increase in volume tells us that the big money is coming back into oil. 

Boy oh boy...would this ever be good news for this horribly beaten down sector. I know lots of my neighbors would begin to breath a little bit easier as well (the layoffs have been tough).

Here at the VRA, I am not ready to make energy stock additions to the VRA Core Portfolio. At the same time, rising oil prices will help in making us massive profits with our existing positions.

Lots of reasons to hope for a continued recovery in the price of oil...either way, the lows are in place. 

Kip

 

~In Gmail select: Always display images from kip@vraletter.com~

Thursday
Aug042016

VRA Update: Bank of England Surprises...Much More Global QE Headed Our Way. Plus, VRA System Updates

Good Thursday morning all. The streak of seven consecutive down days for the Dow Jones came to a close yesterday with an average gain of .27% in the Dow and S&P 500. Once again, in the investment theme that we have adopted here at the VRA, both the Nasdaq and Russell 2000 continue to outperform their large cap brethren, with more than double the percentage gains (.70%, avg. gain). 

Oil (up 3.75%) bounced off of sub $40, just as we had targeted, and should a sustained move higher take place it will be in sync with the global reflation trade that the VRA spotted back in January. Every major metal (base and precious) is now trading right at fresh 1 year highs...with the exception of all-important copper (however, copper is still up 15% from its January lows).
 
Bank of England Takes Aggressive Action
 
As the VRA has been predicting, global central banks are in the process of taking (additional) aggressive actions...it's all they know how to do, of course. This morning, the Bank of England (BOE) surprised the markets by not only cutting rates by .25% (from .50%), but also announced that they are expanding their QE program by $90 billion (in USD). The news that caught the markets by surprise...just not us here at the VRA...is that the BOE will also begin purchasing corporate bonds (joining the ECB, PBOC and BOJ).
 
Folks, back in 2009 (at the tail end of financial crisis) very few would have believed that central banks would launch global QE that would then total more than $10 trillion in size just 7 years later. Of course, we also know that the BOJ and PBOC are aggressively purchasing equities as well...something that is no longer just an open secret. And, if you somehow still believe that the ECB and our own FED aren't active in the stock market, just give it a bit more time...that cat will be (officially) out of the bag soon as well. 
 
Don't Fight the Tape or the FED
 
You know one of our most major macro themes here; Don't Fight the Tape...Don't Fight the Fed. We may not agree with the actions of central banks globally, but that's ok...because our job is to make money in the markets, regardless of central bank insanity. 
 
And of course, if it weren't for central bank fiat currency printing presses (running 24/7 no doubt), we would not be sitting on these massive gains in precious metals and the miners. Combined, across our holdings in gold, silver and the miners, we have gains of more than 1300%...since January. 
 
Let me repeat; I continue to hear...from my best sources and trusted experts...that just as the BOE surprised today, we will see ramped up global QE from Japan (BOJ), China (PBOC) and Europe (ECB).
Yes, this means that ZIRP (and negative rates) will continue for much longer than most believe is possible. For our intents and purposes, it also means that PM's and miners will continue to soar...we are still in just the first inning of what will be a record setting bull market in PM's...but it also means that central banks look to be winning the battle for equities. 
 
BTW, the breakout to fresh highs in both PM's and the miners should now begin to pick up speed. The VRA System shows a move through $1400/oz in gold in the near term, and silver could continue in its outperformance. 
 
VRA System Update
 
Here's the most recent VRA Trading & Investing System analysis. All US indexes continue to be bullish, and the overbought status that the markets fought through in July is now very close to a thing of the past. 
 
VRA Momentum Indicators
 
S&P 500: 60%...still slightly overbought (down from 99% on 7/24). 
Dow Jones: 71% oversold (was 99% overbought on 7/24)
Nasdaq: 81% overbought (still outperforming)
Russell 2000: 59% overbought (has pulled back to solid buy levels)
 
Combined, the VRA Momentum Indicators have pulled back to just slightly overbought, and while near term downside risk remains, we are pulling right back to solid short term support levels. 
What continues to impress me most are the daily market internals. While not as strong as they were from March to July, take a look at the internals from yesterday...on what was just a smallish up-day. 
 
Advances led declines by more than 2-1 on each major index and up volume/down volume continues to surpass 2-1 as well. Again, not a hugely positive day, but when we take a look at fresh 52 week high/lows, the stats continue to blow me away, with 182 new highs and just 52 new lows.
 
2nd Quarter Earnings Update
 
Through yesterday, 80% of companies have reported earnings. Yes, the 71% that have beat on the bottom line is better than expected, but the real surprise has come from revenues, where co's are beating by 73%. Importantly, this is the first quarter of revenue growth since the 4th quarter of 2014.
 
Still, we have now had 5 consecutive quarters of earnings decline, the longest streak since 2009. And yes, I do believe that this trend is about to reverse...it's one of the major reasons that stock prices are rising now, as the markets continue to anticipate 6 months out. 
 
Combined, this paints a picture for us of a market that continues to broaden....and yes, we see the same characteristics globally as well. As a reminder, the percentage of retail investors in the market remains at a 19 year low. Once investors become far more bullish, we will become much more concerned...but until then, we will continue to invest heavily in our favorite sectors and companies. 
Until next time, thanks again for reading...
 
Kip
Thursday
Jul142016

VRA Update: US Markets HIGHLY Overbought; Headed Higher Still

Let’s get this out of the way, right away; US markets are now trading at 98% overbought (based on VRA Momentum Indicators). This is most typically when bad things happen to stock markets…but folks, this market has proven the shorts wrong time and again…and we know why: 

1) Central bank easy money…manipulation...forcing stocks higher

2) Negative interest rates (globally) have resulted in huge fund flows into the “positive rate” US…from Europe and Japan (and from China, where investors just wanted out of their own system).

3) And the story we’ve been telling for many, many months...share buybacks and M&A activity…both at record levels.

The share repurchase story got even bigger this week, as we learned that in just the S&P 500, companies bought back $161 billion in the first quarter…and have authorized $357 billion in buybacks through June.

Still, the VRA System would not allow me to recommend a major US equity index…be it the Dow, S&P 500, Nasdaq or Russell 2000…because each is trading at 97% overbought (or higher).

Rarely do we see this…and rarely does it not result in, at minimum, a decent sized pullback. But…as we know…central banks have a LOT of firepower. And boy oh boy, have they shown the world that they intend to use anything and everything at their disposal.

When you hear people say ‘Don’t fight the FED”…this exact scenario is what they had in mind.

Don’t Fight the Tape

I’ve written about this 2-3 times over the past month…but it’s significant enough to include it here, again.

Now that the market has hit a new high…after not doing so for over a year…research tells us something very interesting about what happens next:

The 21 other times in history that the S&P 500 closed at its first 52-week high in at least a year, including the times the index fell into bear market territory in between, the market was higher three months later 95% of the time, by an average of 11%, and higher a year later 95% of the time, by an average of 22%, according to data provided by MKM Partners and Krinsky.

The four previous times the S&P 500 made its first 52-week high in at least a year, without an intervening bear market—February 1995, November 1984, January 1961 and March 1954—the index was higher after three months each time, by an average of about 8%, and higher a year later each time, by an average of 28%, according to MKM data. 

As they say, history doesn’t always repeat…but it often rhymes.

I was also taught…as a young stockbroker by one of the legends in the business (his mentor was on Wall St during the ‘29 crash)…that the market anticipates 6 months out. Right now, the market is telling us that things “will” be better, in 6 months time…maybe a great deal better.

In part, I believe the markets are telling us that regardless who wins, Trump or Clinton(s), the US economy will improve...and that earnings have likely ended their 5 consectutive quarters of an earnings recession. 

BTW, if it feels like we are being whipsawed by this insane market, it’s because WE ARE. But through it all, one thing has held up…the markets internals have been very, very solid. That’s the biggest stock market “tell” that I know….

We will stay nimble…and we will stay heavily invested in PM’s and specific mining companies that will profit most from rapdily rising inflationary pressures, as we saw this morning in the Producer Price Index (which ran semi-hot in June at .5%). I have also warmed up a great deal to emerging markets...a number of painful bear markets globally have seen their lows, in my view. 

The risks to the market…heck, the risks to the world…seem to be ever present and growing. We will keep our eye on the prize…as we continue to “bash Mr. Markets head in”.

(We have some massive gains this year, with profits of more than 1200% in just two VRA Core Portfolio holdings).

Until next time, thanks again for reading…

Kip

 

 

Friday
Jul012016

VRA Update: How High Can They Go? 

Good Friday morning all. What a week! Brexit scared the sh*t out of the markets, but our friendly neighborhood central bankers were standing by to manipulate stocks AND bonds higher. 

Wow...just...wow.

Over the last 7-8 years I have said the following more times than I can remember; "financial events are occurring that no one alive (or dead) have EVER seen take place, nor would they ever believe that they could possibly take place". 

Negative interest rates in 35% of ALL global government debt. Central banks that openly admit they are buying stocks and manipulating markets on a regular basis (Japan and China). And folks, if you don't believe that the ECB and our FED are active in the equity markets, let me be the first to tell you that the word "gullible" is not in the dictionary. 

In other words, hell yes they are manipulating our stock markets!

Just like the 98% depreciation of the US dollar since the FED was first created in 1913, we continue to see absolute financial insanity from our central bankers of today. What a terrible year 1913 was...we not only got the FED but we got the IRS in 1913 as well. Woodrow Wilson...thanks for nothing.

Precious Metals and Miners at Fresh Two Year Highs

I guess we should be thanking central banks. If it wasn't for their ongoing currency destruction (and absurd decision making), we would not be sitting on massive gains in precious metals miners. Gold and silver are surging higher again this morning ($1335/oz and $19.14/oz), but again, the big gains are taking place in the miners. GDX is trading at $28.40 in the pre-market, a fresh 2 year high.

I think it's safe to say that we are killing it. Since January 20th, we have 1184% gains in just two of our mining stocks. 

Here's what I find interesting this morning. The VRA momentum indicators show GDX at just 80% overbought...once this level hits 95% we can begin to get a little concerned about short term pullbacks....but at current levels, it is common to see huge breakouts...like the one happening now.

I continue to see this as the beginning of what will be the most incredible bull market in history...and I offer this chart as my evidence.

This is a 5 year chart of GDX (below). I've featured GDX charts for a long while now, but we see something pretty amazing in this 5 year chart. First, take a look at the explosion in volume since the move higher began. Now, compare it to the volume when GDX was hitting all time highs back in 2011.

Could there be more of a stark difference?? In my 31 years I have never seen a volume expansion of this nature. And remember this...trading volumes in the broad market continue to shrink! This makes the events occurring in GDX even more impressive.

Stocks are a leading indicator....always have been...and GDX is speaking to us loud and clear. The move higher is going to be stunning (to most). 

Finally, take a look at the blue lines I have inserted. As of this morning, we have broken the first line, putting GDX at a fresh 2 year high. Now, we begin to target the top blue line...because thats where GDX is headed next. The top line sits at $37.75, meaning we have another $10/share move on the way. That's another 37% higher...obviously, my favorite miners will continue to ramp higher as well. 

Central banks may destroy the financial system as we know it...I believe they are doing this right now. But that gives the smart money investor some off the chart opportunities. Sadly, 99% of the planet will suffer a great deal from the carnage thats on the way. Just another major reason that I appreciate and respect our VRA Community. We'll be here together...surviving...and yes, prospering greatly.

Until next time, thanks again for reading...have a great July 4th all. Stay safe, stay frosty. Here's this incredible chart...

Kip

 

~In Gmail select: Always display images from kip@vraletter.com~

Tuesday
Jun282016

VRA Update: Trend Reversal. 1098% Gains in 6 Months...in Just Two Stocks

By now you've probably already heard, more than $3 trillion in global stock market losses took place over the last two trading sessions. An all time record, for back-to-back trading sessions.

This morning, let's put these global losses in perspective...but not just from the last 2 days...let's instead take a look at declines from the past 13 months. In no particular order, here goes:

Germany: -25% from the highs

Italy: -37% from the highs

China: -24% from the highs

Japan: -27% from the highs

These are brutal declines. And the economic picture that they are painting is even worse...as in, if people aren't worried about a global depression, they must be smoking crack. This may sound like I am trying to be cute...I am not. This is as real as it gets, and those that are not preparing today will almost certainly regret it tomorrow. 

What about US markets? Most will be likely surprised to see these numbers:

S&P 500: -6%

Nasdaq: -12%

Russell 2000: -16%

Bottom line on US and Global Stock Markets: Equity markets had one last shot at rekindling a bull market. US indexes needed to break out to fresh highs on the current move. Instead, following the Brexit shocker, we are even further away...and the global kicker is that leading international markets are right back into confirmed bear market, crash mode. 

US traders will be watching the markets technical levels closely. After zooming lower through the 200 day moving averages on EVERY major index, and combined with the global devastation in stocks, going forward we can expect one primary trading strategy to be employed by the smart money: sell any major rally attempt...also, short any major rally attempt. 

The trading we have seen so far is nothing close to "capitulation"...and while it's too early to say that the markets will crash in the near future, I see major short term risks in US stock prices:

1) margin calls: unless stocks rally sharply...then manage to hold those gains...selling pressure from margin calls will act as a constant weight on the markets.

2) central bank anxiety: in every country where negative interest rates have been deployed, stock markets have been destroyed...led by absolutely massive and record losses in bank stocks. In the 90's, the term was "bond market vigilantes"...this group forced Bill Clinton into cutting government spending, eventually leading to a surplus. Now, I see "bank stock vigilantes" exercising their own brand of financial justice. Here in the US, the banking index is off a huge 25% from the highs. In Europe, the losses are 50-80%...just brutal devastation in the banking world. The vigilantes are shorting every rally in bank stocks...and there is little to nothing that the powers that be can do about it.

And yes...fear and panic are quickly setting in among central bankers and their commercial banking brethren. Negative interest rates have been the disaster that everyone with half a brain knew they would be. There's blood in the water now, and if I am correct, the selling pressure is nowhere near complete. Global markets are flashing "bearish engulfing patterns", technical speak for, "holy sh*t...will the selling pressure ever end?" 

BTW, did you happen to catch Alan Greenspan, on Bloomberg or CNBC, over the last 36 hours? I'll just repeat two of his comments:

1) "This is the worst economic/financial situation that I have seen in my professional career" (and no...he was not talking about Brexit/Europe...he was talking about conditions right here in the US).

2) "This ends in inflation". Of course Greenspan is right. And there's this; Greenspan is also a huge gold bug, recommending that we should go back on the gold standard. 

Folks, there's a reason gold and silver are up 23-25% since the start of the year. And there's a reason why here at the VRA, we are making absolute fortunes, with gains of close to 1100% in our top 2 mining stocks (combined), since the bull market kicked off in PM's on 1/20/16.

Remember, the precious metals/miner bull market is just now getting underway. Before it's over, gold will break $10,000/oz and silver will break $175/oz. But the real action will continue to be in the miners, as they appreciate 3-5 x faster than the metals themselves. 

The precious metals bull market of our lifetime is upon us. If you own the right companies, a wealth affect on steroids is underway. 

Until next time, thanks again for reading...

Kip