"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

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

Wednesday
Nov092016

President-Elect Trump! Market, VRA System Update

Good Wednesday morning all. Like many of you, before last year, I was never a Donald Trump fan. Never watched The Apprentice. Never purchased Trump Vodka or Trump steaks. 

But that was then. I have since come to have a great deal of love/respect for this man...love for his courage...love for his strength...and how could we not? Sure, the lying and hoaxing MSM media painted him out to be Hitler (literally). BHO and Michelle said things they should be absolutely ashamed of, not to mention scores of Dem "leaders" that should crawl under a rock, posthaste, never to be seen in the public eye again. 
 
But Trump, and team, remained steadfast...never taking their eye off of the prize.
 
As I told my wife...around 3 am...our Presidents should inspire us. Make us want to be better people. Lead by example, with broad shoulders, making us believe that "anything is possible". 
 
I was too young to consider these things with Reagan. And nothing about presidents since have brought these emotions out in me. Not GW. W, no way (9/11 Truth). Certainly not our sexual deviant in chief, WJC. And by no means our current, community organizer in chief (if you like your doctor, keep him/her. Like your plan, keep it...these are right up there with "Iraq had WMD's"...from a domestic policy sense. Straight up lies. Shame on you, sir).
But Trump? I see greatness in this man. You may not....I respect that completely...but I am very hopeful for the next 4 years. The country wants to come together...desperately...and Trump's speciality is The Art of the Deal. 
 
I remain concerned about his safety. Lots of powerful, criminal, global forces that never want to see him set behind that desk. Stay safe Mr President Elect. You have a powerful mandate...all 3 chambers...made possible by a CHANGE election. Use that power wisely...we will be watching...and I will be writing about it.
 
VRA Market/System Update
 
Hitting several items quickly....get this out before the market opens.
 
1) after dropping limit down 5%, the markets have come back...down just 50 points now. Short term, the risk remains to the downside. Wall Street consensus is that we will fall 1000 points on the Dow. Like Brexit, a multi-day event. I believe this may be the case. 
 
2) Gold is up $25, but had jumped $50 overnight. You know my thoughts...gold/silver will be massively popular investments going forward. The miners have another 2 years...minimum...of spectacular gains. Note: I will be more aggressive in trading and taking short term gains in our leveraged ETFs...more to follow on this soon.
 
3) I LOVE the biotechs! 
4) I believe we have seen long term tops in FANG stocks (Facebook, Amazon, Netflix and Google). These stocks are not Trump stocks. Trump stocks have ACTUAL value...and these stocks trade at ridiculous valuations. 
 
Finally, and this is the downside folks, the days of central bank control of ALL asset classes look to be over. No, this is likely not good news for most stocks. It's absolutely not good news for emerging markets. I believe the odds of a global depression are greater than 50%...in just the next 2 years. An honest reset must take place. Then, a Reaganesque bull market. 
 
Here at the VRA, we will be ready, regardless. 
 
Right now I'm wondering which suit/tie to wear to the inauguration. I'm doing my best to convince Wayne Root to take me as his plus 1. 
 
Stay frosty...portfolio changes coming soon.
 
Until next time, thanks again for reading. Welcome to the Presidency, Mr. Trump!
 
#draintheswamp
#MAGA
#lockherup (HRC belongs in prison...that ain't going away...she should hope for a quick pardon).
 
Kip 
  

 

Thursday
Oct062016

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...

Kip

Tuesday
Sep202016

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…

Kip

 

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

JIM PUZZANGHERA, DON LEE

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.