"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

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Mike Budny 
Twitter: @kherriage


VRA Update: Perfect Selling Climax - Miners

In previous VRA Updates, I've covered the MSM and their "official" reason for the sell-off in precious metals and the miners. Hint: their "fear" is higher interest rates...a subject we have addressed from all sides in the past...and a subject we have completely debunked, in the past. The three best bull markets, in modern times (last 40 years), have occurred when rates were rising. 

For now, let's take a look at what I believe represents a near perfect selling climax...because I believe we've just had one in GDX (miner ETF). A selling climax takes place at the back-end of a correction. Their personality is extremely high volume, huge large-block selling pressure and a brutal day of negative percentage losses. Some might call this a shake-out...but they would be wrong. Selling climaxes are singular creatures...they resemble nothing else of their kind. 

Here's what I see:

1) as we work down the chart you'll see the price action at top. The pullback went exactly to the 200 day moving average (dma), which is the rising red line. For technicians, this is THE most important moving average. "Bullish versus bearish" technical trend analysis is determined by this moving average.

For my theory of a selling climax to hold up, GDX must remain at, above, or just slightly below the 200 dma...at least for a few days. Then, it must once again begin to rise in price.  If not, fresh selling will begin to appear. 

2) in the second message box/circle that I've included, we see Tuesdays massive volume of 232 million shares...18% more volume than GDX has EVER recorded. If I am correct, the volume will remain light for the next few sessions(nothing like 232 m)...and then pick up steam again as the price moves higher. 

3) The fact that we not only had a huge decline, with massive record-setting volume...and then add the fact that the drop took the stochastics to 90% +, extreme oversold readings (bottom of chart). 

Combined, this looks like a perfect storm...when it comes to selling climaxes. These are high probability, highly trade-able patterns. When added to the fundamental reasons that I like PM's and the miners, it's my absolute belief that we can use this pattern for big profits.  

This looks like a perfect selling climax.


Until next time, thanks again for reading...



VRA Update: If The FED Raises Rates, The Money Cartel Wants Trump to Win

If you’re like me, and if you’ve become sick and tired…jaded really…about Janet Yellen’s FED meetings, then you’re also joining more than 80% of all investors in the stock market that have come to distrust the FED and their constant threats of a “FED rate hike”. And Barron’s surveys are pretty widely trusted. Yes…we’ve been down this road…in fact we’ve driven thousands of miles, down this exact rode. 

As you can read below, in an excellently researched piece from the LA Times, while the market is putting the odds of a FED rate hike at less than 15%, research shows that over the last 35 years there has been just ONE rate hike within two months of a presidential election. 

And no…tomorrow’s FED decision will not become the second time.

In fact, let me take this a step further; Should the FED raise rates tomorrow, we will know with certainty that the financial/central bank cartel wants Trump to win.

Yes, you heard that right. And folks, you can take this one to the bank…in my absolute view...so let me repeat for clarity. If interest rates go up tomorrow (roughly 2PM EST announcement), we will then know that the FED and shadow money gang is ALL IN for Trump. 

Here’s how I know this to be true. A FED rate hike is NOT expected (again, just 15% of Wall Street experts predict one)…meaning that US and global markets will go into a tizzy, should the FED surprise everyone with a hike. Remember, the stock market hates surprises. We also know that the FED rarely raises rates just before an election (once in 35 years). 

We also know that elections are about the economy. “It’s the economy, stupid”…THE catch phrase that put Bill Clinton in office (along with Ross Perot, the independent that got 19.7% of the vote…making a second Bush term impossible. 

Ipso facto, should the FED raise rates, the status quo will be upended…and HRC is the status quo…and the FED will have told us loud and clear that they want Trump to win.

I could be wrong…but somehow I don’t think the FED wants Trump to win…do you??

VRA Market Update

In my next update I will include complete VRA System analysis…sector by sector. But for now, know this; the broad markets have worked off their overbought levels and look primed for another move higher. However..and this is important…the major averages are now below their 50 day moving averages. In order for the market to continue higher, this must change. 

As I’ve been writing, the markets are also waking up to the possibility of a Trump presidency. And, while I happen to believe this would be a major long term positive for the economy and stock prices, lets never forget that “the market hates surprises”.

Beginning this weekend, I began seeing signals that Hillary could well leave the race…handing the reigns over to either Uncle Joe or Bernie. The rumors are out there…this is not merely a conspiracy theory…leading Dem’s have admitted that the conversations have happened. If the establishment is as nervous/panicked about a Trump prez as I continue to hear…and if they see HRC as having no chance to win…this is the week that the change would need to be made. Stay tuned…again, in my view, the change would have to be made this week. HRC can blame it on her health…bow out gracefully…and Dems can put all their weight behind Biden (my pick), whom their polls show could beat Trump.

Barring a shock to the market…a FED rate hike or replacing HRC on the ticket…I see the market headed higher still. Here’s why:

1) the internals have been incredibly strong for the last 6 months. The kind of strength you rarely see…and that should take time to dissipate. 

2) After not having hit a new high for over a year, studies show that a new high then produces signifiant gains over the next 6-12 months (10-22%, on average).

3) Interest rates at near zero percent mean that TINA (there is no alternative)…the huge M&A deals and buybacks will continue…removing even more tradeable shares from the market.

4) Investors are overwhelmingly bearish…bull markets simply do not end, when investors are bearish. Bull markets end when investors are euphoric and quitting their jobs to day trade. 

To this end, I am looking for opportunities to go long.

Until next time, thanks again for reading…



Here’s the FED piece…again, if they raise rates, they want Trump to win. 


Is Fed Politically Biased? A Look At Interest-Rate Decisions As Elections Near


Los Angeles Times


The presidential election was exactly four weeks away and Federal Reservepolicymakers were wrestling with the potential political blowback of lowering a key interest rate to stimulate the economy.


One official said he "thought it was conventional wisdom that we weren't expected to act so close to an election," according to a transcript of the closed-door Oct. 6, 1992, meeting. Another said that there was "a strong argument that the credibility" of the rate-setting Federal Open Market Committee "would be hurt by our doing something close to an election."


Finally, Fed Chairman Alan Greenspan weighed in.


"I wish we had the luxury to sit back and do nothing until after the election, as is the conventional procedure of the Federal Open Market Committee," he said. "I don't think we have that luxury." Nonetheless, the committee voted not to change rates.


Every four years, the independent Fed faces the same predicament: how to try to manage the economy without appearing to favor either party's presidential nominee.


Those concerns will be front and center this week as Fed policymakers meet to consider a small hike in their benchmark short-term interest rate in the midst of a heated campaign.


But this time the stakes are higher because of sharp criticism of the central bank from both major political parties. And experts said that probably reduces the already low chances of a rate hike before the election.


Last week, Republican presidential nominee Donald Trump fired his latest shot at the Fed. He said Fed Chairwoman Janet L. Yellen "should be ashamed of herself" for keeping the rate near zero for so long.


"It's staying at zero because she's obviously political and doing what Obama wants her to do," Trump told CNBC.


Yellen is a Democrat who was nominated by Obama in 2013, although she's continuing the low-rate policies begun by her predecessor, Ben S. Bernanke, a registered Republican in 2005 when he was first nominated for the job by President George W. Bush.


A rate hike could slow the economy and that might hurt the chances of Democratic presidential nominee Hillary Clinton, whose economic policies are largely a continuation of Obama's.


Clinton said Trump shouldn't be commenting on Fed monetary policy actions. But she's been critical of the Fed for other reasons.


This past spring, Clinton joined many top liberals in criticizing the lack of diversity in the Fed's leadership and called for bankers to be banned from serving on the boards of the 12 regional Fed banks.


Yellen has said that the upcoming election won't factor into the Fed's interest-rate decisions.


"We are very focused on assessing the economic outlook and making changes that are appropriate without taking politics into account," Yellen said at a June news conference when asked about the effect of the election.


But history shows that a desire at the Fed to appear non-partisan has made rate increases rare in the weeks before a presidential election.


That has helped pushed down the odds of a small hike this week — already a long shot because of some lackluster economic data — to about 15 percent, according to a closely watched barometer by the CME Group futures exchange.


Investors and analysts have mostly written off any chance of an increase at the Fed's next meeting on Nov. 1-2 because it is so close to Election Day.


Bernadette Kilroy Martin, associate director of the GailFosler Group, a business advisory firm, studied the impact of presidential elections on interest rate moves and found only one hike within two months of an election — in 2004 — since the Fed's rate-setting committee began announcing its decisions in 1984.


Economic conditions in 1988 and 1996 pointed toward the need for increases, but the Fed held off on moves within two months of the election, Martin found.


The Fed has cut the interest rate within two months of a presidential election on three occasions since 1984, she said.


A rate increase is designed to slow the economy while a rate cut, which lowers the cost of borrowing, is intended to stimulate growth.


Speculation that the Fed has affected presidential elections — intentionally or not — are not new.


White House tape recordings show that President Richard Nixon pressured Fed Chairman Arthur Burns to enact an expansionary monetary policy to improve Nixon's chances of re-election in 1972. Burns pushed such a policy through the Fed, though it's not clear if it was because of the pressure.


Interest rate hikes to battle high inflation in the late 1970s under Fed Chairman Paul Volcker are partly blamed for President Jimmy Carter's defeat in 1980.


And former President George H.W. Bush attributed his 1992 re-election loss to Greenspan's failure to cut interest rates more aggressively during the 1990-91 recession.


"I reappointed him and he disappointed me," Bush said in a 1998 TV interview.


Former Fed Vice Chairman Donald Kohn, who retired in 2010 after a long career at the central bank, said it was "as non-political an institution … as you could design."


"I've never heard anyone — and I went to 30 years of FOMC meetings — say we should do this because in some sense it would favor one side or the other. or we shouldn't do it for political reasons," said Kohn, now a senior fellow at the Brookings Institution think tank. "It really hasn't been a factor."


Still, because the Fed chair and governors are nominated by the president, questions about their political leanings arise during campaigns.


Lael Brainard, a Fed governor nominated by Obama in 2014 after she served as a top Treasury official in his administration, has fueled such speculation by contributing $2,700 to Clinton's campaign. Fed policymakers aren't barred from giving money to presidential campaigns, but such contributions are unusual.


Barney Frank, a Massachusetts Democrat and former House Financial Services Committee chairman, doesn't think the economy is strong enough for a rate hike right now. But he said the risk that a hike before the election would be interpreted politically is another reason for the Fed to stand pat.


"This close to an election, there should be a bias toward not acting rather than acting," he said.


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. 



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


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...

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…