"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. Kip Herriage's newsletter is my financial Bible."

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

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Journal Archive
Twitter: @kherriage

Thursday
Aug152019

Economic Data Points to Acceleration of Growth. We Repeat, No Recession. Capitulation Signals. Interview with WAR.

Good Thursday morning all. We’re in the dog days of summer. Low volume sell-offs, like yesterday, during one of the worst months of the year (August). Not even close to a big enough reason to sell. We’re also seeing classic signs of a reversal higher as the TRIN (short term trading index) closed at 3.65. Anything above 1.5 is excessive bearishness. We saw excessive bearishness in the put/call ratio as well, meaning that more investors were buying puts than calls. Both are used as contrarian indicators. We’ll repeat, based on our work, it’s likely that the lows for the year are in place.

Thanks again to our great friend Wayne Allyn Root (WAR!) for having me on his TV/radio show again last night. While sheeple are losing their heads over an 800 point down day and amid (propaganda) calls for “recession, recession recession”, WAR’s instincts are spot on as always. We’re in complete agreement; events in China have pretty much no chance of causing a recession here in the US. Here’s the link for those that weren’t able to join us; https://soundcloud.com/user-640389393/kip-herriage-live-on-the-wayne-allyn-root-show-raw-and-unfiltered

The prior guest last night was Fox news legend Bill O’Reilly. If I listened to his economic reporting on the economy and housing, I would probably be bearish as well. O’Reilly stated that “the housing industry is in a serious slide, with mortgage delinquencies on the rise, a big warning sign to the US economy….”

There’s just one problem…O’Reilly got his facts 100% backwards. Mortgage delinquencies are at 16 year lows. The US housing market is rock solid and getting stronger (as we’ve covered here often and why we now NAIL, 3 x Housing ETF):

Busy start to the day. Economic data just coming in (retail sales and Philly, empire Fed), all with “solid” beats to expectations. I’ll repeat…there is no recession on the horizon. Not even close. In the interest of time, allow me to paint a picture for you via my Twitter account:

 

If I am wrong…if an inverted yield curve is going to push the US into recession…remember these analytics;

Should a recession occur, based on inverted yield curves from 1950, a recession would not take place for 19 months and a stock market top would not occur for 12 months. In addition, the average gain for the S&P 500 (over the next 12 months) is 15%. In other words, an inverted yield curve is BULLISH..for at least the next 12 months.

Yesterdays trading also gave us a number of capitulation signals. Again, the TRIN closed at 3.65…the highest reading in 4 years. And 94% of volume was selling..another classic sign of selling pressure exhaustion. It’s mid-August folks…vacation time…light volumes, with few around to buy. We’re in bull market confirmed status. Don’t fight the tape, don’t fight the Fed.

10/12 VRA Investing System screens remain bullish. We’re still in “back up the truck and buy” territory. Make sure and login to your VRA Members Site to ensure you are positioned correctly. We are big believers in monthly dollar cost averaging. By year end, we believe you’ll be glad you did.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

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Also, Find us on Twitter and Facebook

Thursday
Aug082019

The Most Hated Bull Market of My Career. Stunning Investor Sentiment Readings. VRA Investing System Nearing 11 of 12 Screens Bullish.

Good Thursday morning all. To give you an idea of just how out of whack investor sentiment is, with US markets just 5% or so away from all time highs, check out last nights AAII Sentiment Survey reading.

21.7% bulls (down 16.8% on the week) with 48.2% bears (up 48.2% on the week). Over my 34 years of doing this…and I’ve voted in this survey for 30 years…these readings are more evidence of our long stated belief that this is the most hated bull market of my career. Folks, this is not the sign of a market top. This is the sign of a market that wants to roar higher. Investor sentiment is that powerful of a force. 21.7% bulls are just (barely) off the low readings from the week of the 12/24/18 capitulation.

We see similar readings in the Fear and Greed Index, with a reading of 25 (extreme fear). While not near its all time low readings of 1 (yes ONE!), from 12/24/18 (the single biggest buy signal of my career), a reading of 25 confirms AAII readings just fine for us.

The VRA Investing System sits at 10/12 screens bullish…we are very close to moving to 11/12 screens bullish. If the Russell 2000 and transports were above their 200 dma, we would be 11/12 today. The VRA System has only hit 11/12 screens bullish twice in its history. In Parabolic options we added two call positions over the last two days. SMH and QQQ. It’s likely that the lows for the year are in place.

What’s the one goal of central bank rate cuts? To stimulate economic growth. Exactly how do rate cuts begin the process of stimulating growth? They force money out of bonds, into equities. With central banks cutting rates all over the world, all we have to do is follow their lead. It’s TINA time folks. There Is No Alternative to stocks.

Of course, these global and coordinated rate cuts are extraordinarily bullish for precious metal’s and miners as well. Remember this from our recent updates; the best bull markets for Pm’s and miners occur at the same time that stock markets are soaring. That’s exactly where we are today.

Note: as we return to “risk on” mode, don’t be surprised to see precious metal’s and miners take a breather. Trees don’t grow to the skies. I expect any pause will be just that. Take a few minutes to watch this video from Bill Murphy, head of GATA. Bill thinks a sizable default on delivery could be underway right now. Know this; Bill is the man. No one knows the criminality and fraud of the manipulation of the PM market better than Bill. After you watch this you will know more about the PM market than 99.9% of Wall street gurus or CNBC talking heads.

https://www.youtube.com/watch?v=BfTvQb2PZ-Y&feature=youtu.be

U.S.- China Trade

If China is the biggest risk to US markets, we have almost no downside risk. Not really….not beyond a ST (early August) selloff.

I’ve made it a point to understand Trump. Here’s what I believe is happening. Trump is ramping pressure…putting the fear of God into China. Communists back down to one thing and one thing only…power.

China has no real power. Again, not really. I’ve written about this often over the years…the only power China enjoys came from 2 decades of weak US/global leadership that enabled China’s theft of other counties GDP.

Look at whats happening in Hong Kong. Mainland Chinese leadership….Xi and team…believes that Hong Kong protests are taking place due to US interference.

They’re almost certainly right. If China takes the bait…as in another Tiananmen square from 1989…China will lose control. Protests will spread to mainland. This is a communist countries biggest fear.

Look, all of this is potentially risk off news. I’m not blind to that. But this is also when trend followers get paid. Buy the fear.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

Sign up to join us for our daily VRA Investing System podcast

Also, Find us on Twitter and Facebook

Thursday
Aug012019

VRA Quick Hitters. J Powell is a Mess. Record Gold Purchases by Central Banks.

Some quick political/economic hitters to start the day…

1.) The last two nights of Dem debates…holy batshit crazy…what a circus. Judging solely from the feedback of long term moderate D’s, the left has gone completely off the rails. Until we see evidence to the contrary, the US remains a center-right country. Center-right voters have NO interest in a) open borders, b) decriminalization of illegal immigration, c) Medicare for all, aka the destruction of private health insurance or d) spending 10’s of trillions combating the hoax that is man made climate change.

If this is the best that the left has to offer, yes, it is possible that Trump could come close to the ’84 avalanche that Reagan put up against Mondale, when he won 49 states and 525 electoral votes.

2.)How bout that Fed presser with J Powell. All was going just fine, following the Fed’s 1/4 point Fed funds rate cut (just as expected) and ending of QT, or quantitative tightening (just as expected) but then J had to go off script and hint that this cut could be a “one and done” by saying “this is not the start of a lengthy cycle of rate cuts”. J Powell should be kept away from microphones…and sharp objects.

Our view is unchanged. The Fed will keep cutting. Stocks keep going higher. Longer-term, the US 10 year could be headed as low as 1% (just over 2% today). After Trump wins next year (knock wood), Powell is likely out of a job.

3.) Gold/miners sold off on Powell's disaster, as the dollar rose to new cycle highs. I have just one comment here; buy the dip. Gold and the miners have broken out…overbought sell-offs are a gift. Check out this piece on the record level of gold purchases by central banks. Wonder what it is that the smart money knows?? #GotGold?

https://www.ft.com/content/b62ebb1a-b3a6-11e9-bec9-fdcab53d6959?list=intlhomepage

VRA System Update

The VRA System remains at 10/12 screens bullish. Much higher prices await, something we received economic confirmation of this week as July’s consumer confidence reading came in with a BIG beat of 135.7 vs 124.3 in June. We’ve always viewed the consumer confidence reading as an LEI (leading economic indicator). When animal spirits are present, as today, the consumer is buying and businesses are building. Folks, we’re not always right…but on this forecast we are highly confident; The Trump Economic Miracle is still in the early innings.

If you’ve been with us here at the VRA for long, you’ll remember that we 1) predicted Trump would win (wrote a book about it), 2) predicted the DJ would hit 25,000 in Trumps first two years and have been forecasting DJ 30,000 by year end, DJ 35,000 by end of 2020 and DJ 50,000+ by end of 2024 (assuming Trump wins. If not, we are OUT).

No one has been more bullish…or frankly, more right…than the VRA. But we finally found someone that has higher estimates than us. Tom Lee of FundStrats is out with a year end 31,000 target on the DJ, based on interesting analytics that point to a 14% move higher by year end (details below). 

Many saw this as an “incredibly important” week. Over my career I can recall many “incredibly important” weeks like this. Here’s what I also recall about those weeks; they almost always turn out to be a non-event. Here at the VRA we’ll be surprised if we get much in the way of fireworks. Instead, we look for existing trends to remain in place. Those trends are:

- Higher stock prices

- Lower bond yields

- US economy continues to surge

- Skepticism of a final trade deal with China (their loss)

We remain long and strong. DJ 30,000 by year end.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

Sign up to join us for our daily VRA Investing System podcast

Also, Find us on Twitter and Facebook

 

Thursday
Jul182019

Multi-year Breakout in Precious Metals and Miners.

The Train has left the Station for Precious Metals and Miners.

Gold, silver…and most especially the miners…had major moves higher. VRA holdings in this group up a combined 140%+ in the last 3 days, but folks, this move looks to be only just beginning.

GDX (Miner ETF and underlying structure for NUGT) traded a nice 84 million shares, which provides additional confirmation on the breakout for us. If you’ve been following our work for long you know that we want to see back to back days of 80 million + shares traded in GDX for rock solid confirmation that the next major move higher is “on”.

Of the bullish signals for PM’s and miners, none is more bullish than when the miners are leading the commodity price higher. Check out the relative strength chart below of GDX to Gold. Beginning last September, GDX began to significantly outperform gold. Because the leverage is in the underlying equities, this is just what a PM bull wants to see. As can be seen, the outperformance is actually picking up speed.

Our next target is $30+ for GDX. Roughly 13% higher from here. And it’s nice to see others begin to confirm our work on relative strength analysis. When the miners lead, our most powerful moves occur.

ST trading note: yes, the miners are approaching extreme overbought readings. But check out gold. Nowhere near overbought. Not even close. Gold looks ready for a sharp move higher…which of course will propel the miners as well. Just how its supposed to work, in major breakouts in this space. And look at the volume build. Chart perfection.



A final note on this group; in the recent past, following big moves higher, the manipulators have commonly taken down gold/silver overnight. That didnt happen last night. Tells me the move higher will continue. All VRA miners remain a buy.

Investor Sentiment

Lastly for today, here’s the latest AAII Sentiment Survey. Bulls have finally surpassed both bearish and neutral readings. When this survey starts approaching 60% bulls we’ll begin aggressively taking profits in our US broad market lev ETF positions.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

Sign up to join us for our daily VRA Investing System podcast

Also, Find us on Twitter and Facebook

Thursday
Jul112019

Energy is Building, We Must Be Long and Strong. My Thoughts on J Powell Testimony.

We are in the early innings of an economic boom. If you’ve been positive on the Trump economy these past 2.5 years you’ve no doubt been called every name in the book. My favorite is when permabear trolls call me a racist bigot Russian puppet…all because I am bullish on the US economy and our markets. My best advice is to ignore the glass is half empty crowd. They’ve been wrong…they’ll stay wrong. We are headed into the best economic boom of my lifetime.

The VRA Investing System remains at 10/12 screens bullish. This is the closest we’ve been to 11/12 screens bullish in “forever”. The chart I posted in our VRA Update earlier this week resulted in quite a bit of feedback. Yes…over the last 18 months, the DJ is up just 150 points. 1/2 percent higher over the last 18 months. No, this is not bearish. This is a highly bullish set up.

Think of it this way; even as the US economy has continued to expand…even as earnings have continued to grow and p/e multiples have continued to contract…the markets have gone nowhere for 540 days. The end result? Energy has been building. Significant energy, in our view, that will propel the markets sharply higher from here. We see this energy in consistent, broadening market internals. This is when big moves higher take place. DJ 30,000 by year end.

Yes, we remain at overbought levels in the broad market. This is when we use pullbacks to add to positions.

My Thoughts on J Powell‘s House appearance yesterday

1) lower US rates do NOT imply a recession is nearing. Lower rates are an acknowledgment that the global rate environment is in the process of changing…radically.

It means that rates will stay low for a very long while…financial engineering designed to propel economic growth. I am perfectly fine with this.

2) Powell's word of the day was “uncertainty”, meaning that the FED will 1000% cut rates at their meeting later this month.

He also said, as the Fed has said repeatedly, that the Fed wants “more inflation”. Because I am an analog man living in a digital world, this mindset is mind-blowing to me.

We want “more” inflation”? Alrighty then….we’re gonna get it. What loves inflation more than anything? Read point 3.

3) This is the best looking fundamental and technical set up in gold/miners since 2002/2003. I remember this time frame well.

Like then, the 200 dma has turned sharply higher…nearing parabolic. This is when momentum based moves higher take place.

With rates plummeting around the world, the set-up for easy money govt policies is sending MAJOR long term inflationary signals. Gold loves this signal. The miners like this signal even more.

4) the broad market is set for a melt-up move higher. That 18 month consolidation period is in our rear view mirror.

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Until tomorrow morning, thanks again for reading….

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

Sign up to Join us daily for our VRA Investing System podcast

Also, Find us on Twitter and Facebook