"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

Wednesday
Dec282016

VRA Update: Struggle to Dow 20K. Repeat of 1 Year Ago? Another Reason to Love Precious Metals.

Hope everyone had a very Merry Christmas and that you have an even better New Year and 2017. 

This past Friday I wrote the last word of my second book. Waves of relief! "CrashProof Prosperity 2.0, Becoming Wealthy in the Age of Trump" should be out of final edits this week.

Typically this is the slowest week in the stock market...but before we decide to phone it in for the next few trading sessions, let's remember what happened at exactly this time last year.  

On 12/29/15, the Dow Jones closed at 17,720, posting solid 100 plus point gains and signaled to many that we would finish the year on a strong note and then rip and roar higher as we started 2016.

But the markets had their own game plan...

The very next day...12/30/15...the Dow struggled and wound up closing 120 points lower. And the final trading day of 2015 was even worse, wth the Dow losing 175 points. It was this loss...175 points on heavy volume for New Years week, that got everyone's attention. Then, once we kicked off 2016, it was a blood bath...the Dow lost another 280 points on 1/4/16.

Before the sell-off was over, the Dow would plummet 2000 points in just over 3 weeks. An 11.2% loss in the Dow, and losses in the Russell 2000 that would more than double the Dow's loss. 

It was a blood bath in stocks...and the VRA was perfectly positioned for it.

By the time we sold (1/14/16), our combined profits from 3 positions would total 139%.

Today, I see signs of what could well be a repeat from this time last year. Everyone has Dow 20,000 baked in the cake...market internals "might" be just strong enough to get us there. But what then?? And, if we fail to reach Dow 20K, look out below...the waves of selling pressure could be enormous. 

Know this; if the internals continue to break down, the sell off will be ugly.

Precious Metals/Miners 2017

The article below appeared on Gold-eagle.com over the weekend and its a most important one. As you'll read, gold...as a percentage of total global financial assets, today trades at a level of 9 times less than it did in 1980. Today, gold makes up just .58% of all global financial assets. Remarkable!

The VRA continues to believe that January 2016 marked the beginning of the bull market in gold, silver and mining stocks. I see the same for base metals and oil/nat gas as well. It's called the "reflation trade" and almost certainly marks the return of inflation to global economies. 

No one should be surprised...central banks around the world have been printing their currencies in reckless abandon for years...essentially since the 2008 financial crisis kicked off what historians will recognize as the beginning of "global currency wars". In fact, we see these everywhere we look today. 

And please, do not be fooled. Inflation is defined as the "printing of fiat currency". That's the Mises definition...and its the only one that has ever mattered. Keynesian economists will soon be made to look the dunces that they are, from the NY Times Paul Krugman on (you'll be able to read all about this when CPP 2.0 is released).

Here's the article on gold holdings...just another major reason to own gold, silver and the miners. 

Until next time, thanks again for reading...make it a good holiday week

Kip

 

Gold As A Percentage Of Global Financial Assets

gold forecast

In 2014 Total Global Assets Topped $105 TRILLION (i.e more than $105,000,000,000,000)

(Source: http://www.gold-eagle.com/article/making-case-12000-gold-and-360-silver)

An astronomical amount by any standards. Interestingly, only a small fraction of this monumental amount has been allocated to gold investments. Here below is the record of gold investments since 1980. To be sure a brief history of gold investment demand will indubitably put our analysis into sharp perspective.

In the late 1970s the price of gold soared to the then all-time high of $800/oz…fueled by runaway inflation of that period that propelled gold investments skyward.

(Source: Moore Research Center, Inc)

The price of gold soared from about $160 in 1976 to a little over $800 in early 1980. It is imperative to note that in 1980, gold investments as a percentage of Total Global Financial Assets had reached 5.0%. Hoverer, gold investment demand then began to wane for many of the following years until the new century began in 2000…when the price of gold finally bottomed. In that year gold investments as a percentage of Global Financial Assets had also bottomed at 0.19%.

(Chart Source:  SRSrocco Report: https://srsroccoreport.com )

By 2001 gold investments as a percentage of Global Financial Assets began a slow methodical climb until the 2011-2012 period…when gold again make an all-time peak at over $1,900. Understandably, the price of gold then slowly began to decline in concert with the diminishing gold investments as a percentage of Global Financial Assets (which dropped from 0.85% to last year’s 0.58%.  Think about it:  Gold investment as a percentage of Global Financial Assets were nearly 9 Times greater in 1980 than it is today. To be sure the implications and ramifications of the above are mine-boggling. Here is another chart focus on how minuscule recent gold investment is as a percentage of Global Financial Assets:

(Chart Source:  SRSrocco Report: https://srsroccoreport.com )

Gold Forecast:  In the event gold investments as a percentage of Global Financial Assets again rises to 5.0%, it means 0.05 X 105,000,000,000,000 = $5.25 Trillion ($5.250,000,000,000) will flood into gold. This begs the question:  What might be the impact of a tsunami of increased gold investments hitting world markets?

Here Are The Estimating Rationale

  • Total global gold production is estimated at about 3,000 tonnes.
  • 3,000 tonnes is equivalent to 96,450,000 troy ounces (as there are 32,150 oz/tonne)  
  • Value of one year’s global gold production at $1,150/oz is about $110 Billion

Consequently, in the event gold investments as a percentage of Global Financial Assets again increases from 0.58% to 5.0%, the demand might explode exponentially to $5,250,000,000,000 ($5.25 Trillion).  For this reason this analyst does not dare try to predict how high the gold price will be turbocharged as a result...when this happens. 2017 looks to be a Golden Year for precious metals investors.

Wednesday
Dec212016

VRA Update: VRA System Analysis; Major Disconnects and Extreme Readings

Good Wednesday morning all. Before we get the latest VRA System update, allow me to share some personal insights on where we are today in the intersection of politics and the investment markets. Some of what I will share here is "emotion" based...and we know exactly how terrible emotion based investing can be. For example, emotional investing was dead wrong about Brexit (after 2 days of heavy selling, the markets soared higher). Of course, emotional investing has been equally dead wrong about Trump winning, with an all out assault on 18 fresh market highs. 

In each case...and there are many, many other examples we can point to out throughout history... investors that acted on the emotion of fear/greed, and that followed what the overwhelming majority "believed" would be the most likely move in the markets, turned out to stone cold, dead wrong. I have fallen into this trap many times over the years...and each time I feel like a freaking moron for having done so. Human nature can be a bitch to overcome...even when I am staring at my VRA System screens each and every bloody day.

My most recent (and painful) example of having missed by a country mile was Brexit. Within 36 hours of the vote to leave the UK, the VRA System was flashing 95% oversold in the broad markets (S&P 500, Dow Jones, Russell 2000). I should have been ALL OVER these readings, encouraging all VRA Subscribers to go 100% long bullish leveraged ETF's.  

But I did not. I missed it. And I suck for missing it. I apologized to you then and I apologize again today. Simply no excuse for falling into "fear mode" when I should have recommended aggressive action on the long side. 

I made a promise to myself then that I would not make that mistake again. Let me add that the election of Trump was a bit different...the markets never reached anything close to the levels of oversold that we saw from Brexit...but the reaction has been nearly identical...the markets have soared higher (and I have been bullish on the markets since April).

It's with this recent history of Kip missing one of the most obvious of situations (Brexit buy) that I present the following to you this morning. What we are seeing are extreme readings among highly interconnected investments. As you'll see, the VRA System sees the potential for some dramatic reversals...reversals that could bring high levels of volatility and near immediate reversals in the following sectors:

1) S&P 500

As you can see below, the SPX is trading not only near record territory but is highly extended, trading at 2% above its 200 dma. May not sound like a lot, but for the worlds largest equity index, it's a large premium. Selling pressures are building and the RSI has reached extreme levels. However, we have yet to turn down through either the 5 day ema or the 10 day dma, meaning that it is too soon to go short the SPX.

 

2) Russell 2000

With the R2K, we see a much different story from the SPX. The R2K is a full 16% above its 200 dma...very close to the largest premium of the past 10 years plus. Other measurements (RSI, MFI, MACD) confirm that this index has almost certainly run too far too fast. The R2K has also benefited greatly from a sharply rising USD (almost always bullish for small caps as they do most business in the US, versus large cap multinationals that depend far more on exports). The R2K, based on any/all available history that we can find, is ripe for a correction.

3) US Dollar

This is where I see things as being most interesting. The 10 year chart below of the USD is pretty remarkable. As of today, the USD is 7% above its 200 dma. Again, compared to the R2K, it may not sounds like much...but it is...big time. I can find just two instances over the last 10 years where the USD has been this extended, and that was in 2008 and 2010. As you can see, the dollar surpassed its 200 dma by even larger margins...hitting as much as 13-15% above its 200 dma.

But its the action that followed these premiums that concern us today. Shortly after reaching these extremes, the USD began to reverse course. The most interestingly parallel was the 2010 rise was then met with a plummeting USD, reaching losses of 15% in less than 3 months.

Today, everyone is a dollar bull. Emotional investing...potentially at its worst.  

4) GDX (miner ETF)

As we know well, precious metals/miners have traded in the exact opposite direction of the USD. But folks, this pendulum looks to have swung much to far. GDX is now 24% under its 200 dma, a level that I can find exceeded just 1-2 times (during the 2013 sell-off of sell-offs, as the manipulators crushed PM's).

Before the mini-rally that took place yesterday, GDX had reached 92% oversold...extreme oversold levels. Should the USD begin to reverse, the snap back move higher in PMs and the miners will be fierce. The smart money is using this correction to buy up cheap gold/silver/mining stocks.  

  In summation, yes...we will almost certainly hit 20k on the Dow. But what then??

The VRA System...being 100% emotion free...says that its likely time for reversals in each of the above sectors. Most specifically in the USD, R2K and GDX/PM's.  

And remember this; once a major bogey like Dow 20k is reached, past high profile bogeys have then resulted in sharp and dramatic reversals...if only for a few days to a couple of weeks. I remain long term bullish on the market...but its time for some imbalances to correct.

Finally for this morning, I continue to collect data on our end of year/seasonal trades. Once the VRA System has clear readings on our specific targets I will begin to get that info out to you. For my money, the coming spike higher in the miners are a great possibility. In addition, should the VIX (volatility ETF) continue to flash "buy", we could be taking action here as well. Ignoring emotion...acting on VRA signals.

Until next time, thanks again for reading...

Kip

Thursday
Dec082016

VRA Alert: Patterns Tend to Repeat. This Pattern Made VRA Clients....

The Exact Pattern That Made Us 837% is Here Again

(plus 2,119% since 01/14)

Here’s the link…it will only be up for 72 Hours 

http://vrainsider.com/vrasales

Kip Herriage

Editor/Publisher VRA (2003)

Tuesday
Dec062016

VRA Update: The Market Got This Wrong. Gold is Headed Higher

This morning, I'm going to focus on a single issue. Post election, like many of you, I have been surprised at the reaction in precious metals and the miners. The conventional wisdom was that a Trump victory would mean "lower stock prices and higher gold prices"...and of course we've seen just the opposite...making the conventional wisdom, conventionally wrong...again!

In retrospect, we can make sense of it.

1) the majority is almost always wrong

2) Clinton, not Trump, was actually the "fear candidate". Allow me to prove my point. Since the election, we've heard very little about the second amendment being in trouble. Of course its not...Trump won. Had Clinton won, and trust me on this, leading gun maker Smith & Wesson would not be down 25% (as it is), post election. Nope...SWHC would surely be up another 25%.

If you really want your mind blown, consider this; SWHC was trading near its all time high of $30 over a month before the election, when it topped and began its decline, meaning that the stock market (through SWHC's fall) was actually predicting a Trump victory...back in late September/early October. I find this most interesting...especially with SWHC trading all the way down to $21.40 today.

3) Golds initial reaction was a BIG spike higher...$40/oz higher...a spike that (like Brexit) lasted all of about 1 hour. Since that short term top, the actions been almost entirely in the other direction...for both gold and silver (most interestingly to me, as other base metals are soaring higher). 

Since 11/9, gold has dropped 9.6% ($1173/oz) while silver has plummeted 10.9% ($16.84/oz).

Here's why: the "market" sees Trump as pro growth and pro "fiscal policy debt"....versus HRC, which the market saw as more of the same "slow growth, central bank-led monetary policy". It's this single identifier of "fiscal...aka, government-debt based growth", versus "monetary, aka, QE central bank-based growth" that has been the primary reason for gold/silvers decline".

And you bet....I am saying that the markets are getting it wrong (famous last words, I know).

Here's What I Predict is About to Happen: Gold and Silver Spike Higher

1) the majority is waiting for the FED to hike rates, before moving back into gold/silver, at what they hope will be really cheap prices...just as happened at the end of 2015, as the FED hiked for the first time in over a decade. THE MAJORITY...as almost always...WILL BE WRONG.

2) The smart money knows what I am about to tell you; precious metals always perform best when "real interest rates are negative". To figure "real rates" take the 10 year US Bond (currently yielding 2.35%) and subtract inflation (currently around 2%, if you believe the governments made-up figures...I'll explain COLA's at a later date...you'll know exactly why the govt cheats when figuring inflation figures...as any retiree on govt benefits can tell you).

Based on real-world inflationary data, real rates are clearly negative today....a major positive for gold...which also explains why gold is up 10% since the beginning of the year. 

3) Now, check this out. If you believe...as I believe...that all of the signs of rising inflation are here, and that inflation will rise faster than interest rates...then you must also believe that gold will continue to move higher, in a Trump presidency. And BTW, there can be NO doubt that global debt totals will continue to rise...most likely, in scary fashion, another bullish reason to own gold. And global risks? No...geopolitical surprises are not likely to go away.

Finally, over the last 4 days, the miners (GDX, mining ETF) have outperformed gold on a relative basis. This has always been my "go-to" indicator before major moves higher in the past.

At the risk of pissing off the stock-market gods...the markets have gotten precious metals wrong, to date, post election. If I am right, gold, silver and the miners will soon rally back above their 200 dma...and 2017 will be a banner year.

And no...I don't believe a strong USD will matter...much (we'll cover that going forward)

Until next time, thanks again for reading...

Kip

 

 

Tuesday
Nov292016

VRA Update: The Trump Effect

We’re back at it with a full plate of events and news…and what promises to be a very busy end of the year in the markets.Over the last two December-January periods, the VRA has produced “focused” VRA Alert Trades…where I outlined clearly and specifically, exactly what to do. The key point being that you had plenty of time (and advance info) to prepare and execute our trades.

Combined, we booked profits of close to 600%. I tell you this today because I see 2-3 potential trades today…eerily similar…that we may begin taking action on in the next 1-2 weeks. 

The Trump Effect

I am getting information from a number of sources…well-connected…that tell me President Elect Trump is going to shake DC to its absolute foundations. Sure, lots of this #draintheswamp activity will be entertaining…even righteous…but its also likely to cause increased volatility and risk.

Here are some quick-hitters on Trump…as we move forward we will get into these more aggressively, along with how we will profit from them. 

First, some important, if random, Trump observations to date:

-Trump is a master of persuasion & psychology. Perception = reality. Winning=perception. Perception + winning = next 4 yrs. 

-Yes, a new American optimism could take markets to crazy extreme levels (and investors still positioned bearishly) Or...as history shows...markets could tank as high probability recession occurs. Regardless, the moves will be large and sustained. At this point, anyone that underestimates Trump might want to start rethinking their views. The evidence is building for you skeptics…this guy is a winner.

-Might Trump expose the FED and bring markets down 30-50% (he also appoints 4 new FED govs plus the Chair & Vice Chair)? Would a real 9/11 truth commission send an already divided country off the deep end? Might a combination bring social unrest…even civil war? Will the near-immediate outlawing of sanctuary cities mean that states like California begin to encourage something similar to anarchy?

- Remember, after markets finally hit new highs (which just happened) following a full year of not having done so, US markets then gain 10-20% over next 6-12 mo's (on average). 

- Will the bond market vigilantes return…for the first time in 35 years? 

-Have we seen a generational low in interest rates? How high might rates rise and will the increase make it impossible to pay for our obligations?

-Lets not forget the stats on first year of a prez. Recessions and 20-30% market losses are common.

Much to consider. The VRA System will prove more valuable than ever. New trends are emerging…my plan is to ride them to huge gains. Trumpmania is here. 

Kip