"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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Twitter: @kherriage

Thursday
Apr192018

Anatomy of the VRA Investing System. Crushing the Market. A Case Study From the Recent Market Correction.

The VRA System was built to remove emotion from my investing. It was built to have us out of the markets in times of turmoil (or short) and in the market when the bull wants to run. We used the VRA System to book 150%+ in net gains from last September through January/February of this year, when we were stopped out. We avoided much of the pain from the 12–13% correction, as we went to cash on our broad market positions.

But all of that changed at the end of March. The VRA System compelled us to go long, once again.

 

 

Anatomy of the VRA System

The VRA System combines fundamentals, technicals and investor sentiment…the 3 most important elements of investing (in any/all asset classes).

Lets first take a look at the technicals. As we’ve covered here often, the double bottom we’ve just experienced is highly bullish and will serve as a springboard for the next major advance.

Here’s the 1 year chart of the S&P 500, the largest and most important stock index on the planet. Compare the points below (circled) to my comments.

1) While not a perfect double bottom (the Dow Jones was close to perfect), we see a .10% difference between the February and April lows. Double bottoms (that hold) are ultra bullish. This was, in fact, a “higher low”. Most bullish.

2) Importantly, the lows also occurred on declining volume. If volume had increased on the second bottom, it would have almost certainly sent the S&P 500 to new lows. If you see someone that says “volume does not matter”, know that you are listening to an investing charlatan. Volume analysis is a most important tool…one that I have used for 3 decades in technical analysis.

3) The S&P 500 held the 200 day moving average (dma) on each test. Had the 200 dma not held, we would likely be short the market today…rather than long and strong.

4) RSI (Relative Strength) never broke 30. Instead, it held this most important level twice…another double bottom retest.

5) MACD flashed a much less severe reaction to the second sell-off….another positive divergence that told us the lows were likely in place. It’s own “higher low”

6) Stochastics flashed a double bottom “heavily oversold” reading of 83%, on both occasions.

7) MFI (money flows) flashed “higher lows”….the upslope from the 2/9 lows told us that smart money investors (thats us) believed the lows would hold and it was time to “buy aggressively”…just as we did.

By learning the 3 most important sides of smart money market analysis (fundamentals, technicals and sentiment), for the rest of your investing days you will be able to apply this knowledge, enabling you to time the markets as well as individual stocks/ETF’s.

Heres a segment from our late March, early April VRA Updates on the fundamental reasons that we have remained bullish. It covers all of the bases.

As you know, I am bullish on the broad market (I’m even more bullish on our VRA Portfolio). We look to have double bottom lows in place, just as Q1 earnings are about to kick in. That’s just one of many reasons I’m bullish.

Should the lows be in place, those that are bearish on Trump, and out of the markets, will be forced to begin buying back in at higher prices. Those that are short, will be forced to cover (and then go long as well). And those huge numbers of put option buyers will be forced to sell those puts and then buy calls.

We look to be set up beautifully for a rocket-ship like move higher. When all 3 components of the VRA System line up (the fundamentals, technicals and investor sentiment), we must be long. Period.

We will look back at this time frame and realize a golden opportunity was staring us right in the face.

Major VRA System Points of Interest:

1) By Wednesday of next week, more than 150 S&P 500 co’s will have reported earnings. 90% of all earning reports will be out over the next 3 weeks. Earnings will be sensational…I expect CEO comments about Q2, Q3 and Q4 earnings will be rock solid as well.

2) The forward P/E multiple on the S&P 500 is now 16.3. Just 18 months ago it was 23. 12 months ago it was 20. Do you see a trend here?

Earnings growth of 15% is driving down P/E multiples to their lowest levels in years. Value investors have no choice but to find this overwhelmingly bullish…even the Trump haters must admit that an earnings revolution is taking place. US economic strength is powering ahead…and tax reform is only now making its way through the system. If you are underestimating the power of Trumps tax reform, you will likely miss one of the quickest surges in US economic growth, in history.

3) Once earnings are announced, reporting co’s are allowed to continue their share buyback plans. According to SEC rules, there is a roughly 5 week period (before earnings are announced) that prevents co’s from repurchasing their own stock. The market has missed this demand. Remember, it’s estimated that total buybacks in ’18 will top $850 billion, an all-time record times 15–20%.

4) Look for mega sized mergers and acquisitions to be announced during the 2nd quarter. $30 billion to $80 billion + in size. Again, tax reform is the reason. Some $4 trillion is headed back to the US financial system.

5) Finally, according to the VRA System, investor sentiment continues to flash “buying opportunity”. Bearish sentiment is at extreme fear levels, while the markets remain in “confirmed bull market” status. On Friday, the TRIN closed over 2.5 for just the 3rd time in the past year. This signals “investor panic”. As contrarians, we MUST use this as a buying opportunity.

— -

Late last night we got the latest investor sentiment readings from AAII. Looks very much like the two year lows in sentiment, from late March, matched up exactly with the correction lows.

No system is perfect. But I’ll put the VRA System up against all comers. I believe the results speak to this. Combined with our small cap VRA Portfolio holdings, in my view, we could not be positioned better today.

The VRA Portfolio has 2400%+ net gains since 2014.

Until Next time, thanks for reading…

Kip

Tuesday
Apr172018

Market Melt Up is Here. My Top Stock Picks of all Time. Nothing Beats Fundamental Research.

It appears that the shorts have been trapped. They’re on the wrong side of the market and must now cover their shorts and go long. This is usually a process that plays out over weeks, but the process should provide a strong underpinning for US stock prices going forward. Combined with strong earnings, a rocketship like move higher looks to be directly ahead.

Combined with the many reasons that I remain bullish, the odds remain high that the 2/9 lows will be “cycle lows”, meaning that any pullbacks must be bought.

Take a look at how the S&P 500 has performed when investor sentiment has reached “extreme bearishness”, as it sits today:


 

The melt-up looks to be here. As of writing this DJ up +250 points. The shorts are about to help us make money (as they cover and then go long as well).

Stay long and strong…looks like a big move higher is here.

My Top Stock Picks of All Time

The following is from a VRA Update from around this time last year. Making 1000% returns is the best way to fund our retirement accounts.

“VRA Update (from March 14th, 2017)

I found some interesting notes in my research. The following are my best all-time stock picks (in chronological order). On each of these, know this; a) I did the original research and b) I had my clients in them “heavy”:

One: Ultra Petroleum. This was my first monster grand slam. Most of you know this story as I’ve shared it often. Recommended at .15/share and it went to $200/share (in roughly 8 years). But yes, I did sell “most” of my own shares by $7. I felt super smart at the time…not so much today…but I had many clients in Ultra as it soared towards $200. (Ultra was the #1 performing US stock of the decade). $10,000 turned into more than $5 million in 8 years.

Two: JB Oxford (one of the first online brokers). Had everyone buy it below $1/share and within a year it went to $23. Hand to God, we sold all of our shares in the $22 range. 2000% Profits.

Three: Dynegy (energy provider). A local company that I got to know pretty well. Following the Enron scam, many believed that Dynegy would follow with their own implosion. The stock got hammered from $110/share to .50/share…but I began buying and recommending it aggressively at .75/share. In 8 months, we sold our positions in the $6 to $7.50 range.700% Profits

Four: Ivanhoe Mines Following the onset of the 2008 financial crisis, I began recommending Ivanhoe in the $2’s. In roughly 11 months, we sold our positions at an average price of $22. 1000% + Profits

Over my 33 years in the investment industry, I’ve built my business by ferreting out 10–1 return, home run growth stocks. Frankly, if more “investment gurus” paid attention to research fundamentals, instead of over the top marketing nonsense, they might be able to pick winners like this as well.”

Until next time, thanks again for reading…

Kip

Friday
Apr132018

VRA Update: Trump Bull Market, Phase 2. Q1 Earnings, Buybacks, M&A Take Center Stage

Good Friday (the 13th) all. Other than avoiding black cats, I have no superstitions for today. Instead, following yesterdays sharp move higher, DJ futures are ramping higher again this am, following dynamite earnings from JP Morgan and Citi, kicking off what should be the best quarter for US earnings in more than a decade. Possibly two.

I’ll repeat; if you’re not long, you are almost certainly wrong.

I continue to be stunned by feedback from the bears. They see things in the charts (and stars even) that simply do not make sense to me. We have what looks to be a MAJOR double bottom low in place…and a highly bullish technical backdrop…that tells us that we MUST be in this market.

I’ll draw your attention once again to my late night update from Tuesday:

“If my theory is correct…if we are in fact living through a mirror image of the Obama bull market…then we likely know which segment of the country is OUT of the stock market. We also know which segment of the country is short the market/buying puts on the market.

Half the country is bearish. I believe that half is on exactly the wrong side of this bull market. A bull market that could take the DJ to 40,000 by the end of 2020.

Fear…and lots of it…is everywhere. As contrarians, we know what to do.

I’m a Trump fan. I am hyper bullish on the US economy and the future for US stock markets. I believe we should use the mirror image of the previous bull market to stay very long and very strong. The VRA System is highly bullish…right now. We must be greedy when others are fearful…especially when what they are most fearful of is President Trump.”

I well remember the pain that I felt being on the wrong side of the bull market during the second year of Obamas first term (because we nailed the 3/09 final bear market lows within 5 minutes). But in that second year, and following the flash crash lows, it was very hard for me to even consider being bullish. I believed that Obama might crash the US economy. But I was wrong…the markets kept rising…ultimately forcing me to become bullish as well.

Importantly, this is exactly where the Trump bears reside today. They believe that Trump will send us back into the stone ages. That Trump is the worst thing since the Bubonic plague. They cannot imagine being bullish on either the US economy or on stock prices.

Trump bears are heavily short. They own a sh*tload of puts. That’s what makes a market, of course, but thats also what will be a major driver for higher stock prices going forward, as they are ultimately forced to cover their shorts and then go long as well. Just as I was forced to do back in 2010/2011.

Now, its time for share buybacks (in massive quantities), plus record setting levels of M&A…all driven by Trumps historic tax reform…to push US markets to new all time highs, yet again.

Since the election, the S&P 500 is up 25%…the DJ is up 33%…and Nasdaq is up 37%. We’ve now had our 10% correction…that is behind us…the train is now leaving the station. FOMO is about to return, in a big, big way.

Now, are you prepared to be stunned? Check out the latest sentiment readings from AAII. 26% bulls and a BIG 42% bears! As contrarians, we know what this means….BUY BUY BUY.

Combined, based on everything that I see and readings from the VRA System, my year end target for the DJ remains 30,000 (23% higher from here).

Until next time, thanks again for reading…have a great weekend.

Kip

To receive access to our full VRA Membership and daily updates(including our VRA Portfolio with buy and sell recommendations, featuring 2400% net gains since 2014), sign up to receive two free weeks from the VRA at www.vrainsider.com/14day

Tuesday
Apr102018

VRA Update: The Lows are in Place. Mueller Raids Trumps Attorney. China Blinks in Trade War. 

By mid-afternoon yesterday, the DJ was +440. Excellent trading day, all around. 3–1 positive market internals across the board. Then the slide began…the DJ lost 400 points of those gains, finishing higher by just 50. The culprit? Special Counsel Mueller. When you raid a “sitting” US Presidents long time personal attorney, its safe to say the gloves are off. If Attorney/client privilege no longer applies to our president, you and I have no chance of protecting confidentiality.

Imagine if this had happened to Obama while he was in office. His personal attorneys office, raided by the FBI. Or even HRC, as her legal team deleted/destroyed 33,000 emails that were already under congressional subpoena. No doubt, the ACLU would stand by both their sides 1000%. Doubtful they’ll do the same for Trump.

So, that’s what drove the markets from their 440 point DJ highs. But overnight, we got some interesting news out of China. President Xi blinked. As I write DJ futures are higher by 330 points. As we’ve covered here often, China will fold like a cheap suit. This will be one of Trumps easiest victories. Any negative news from China going forward is a “buy the dip” opportunity.

As you know, I am bullish on the broad market (I’m even more bullish on our VRA Portfolio). We look to have double bottom lows in place, just as Q1 earnings are about to kick in. That’s just one of many reasons I’m bullish.

 

Should the lows be in place, those that are bearish on Trump, and out of the markets, will be forced to begin buying back in at higher prices. Those that are short, will be forced to cover (and then go long as well). And those huge numbers of put option buyers will be forced to sell those puts and then buy calls.

We look to be set up beautifully for a rocket-ship like move higher. When all 3 components of the VRA System line up (the fundamentals, technicals and investor sentiment), we must be long. Period.

We will look back at this time frame and realize a golden opportunity was staring us right in the face.

Major VRA System Points of Interest:

1) By Wednesday of next week, more than 150 S&P 500 co’s will have reported earnings. 90% of all earning reports will be out over the next 3 weeks. Earnings will be sensational…I expect CEO comments about Q2, Q3 and Q4 earnings will be rock solid as well.

2) The forward P/E multiple on the S&P 500 is now 16.3. Just 18 months ago it was 23. 12 months ago it was 20. Do you see a trend here?

Earnings growth of 15% is driving down P/E multiples to their lowest levels in years. Value investors have no choice but to find this overwhelmingly bullish…even the Trump haters must admit that an earnings revolution is taking place. US economic strength is powering ahead…and tax reform is only now making its way through the system. If you are underestimating the power of Trumps tax reform, you will likely miss one of the quickest surges in US economic growth, in history.

3) Once earnings are announced, reporting co’s are allowed to continue their share buyback plans. According to SEC rules, there is a roughly 5 week period (before earnings are announced) that prevents co’s from repurchasing their own stock. The market has missed this demand. Remember, it’s estimated that total buybacks in ’18 will top $850 billion, an all-time record times 15–20%.

4) Look for mega sized mergers and acquisitions to be announced during the 2nd quarter. $30 billion to $80 billion + in size. Again, tax reform is the reason. Some $4 trillion is headed back to the US financial system.

5) Finally, according to the VRA System, investor sentiment continues to flash “buying opportunity”. Bearish sentiment is at extreme fear levels, while the markets remain in “confirmed bull market” status. On Friday, the TRIN closed over 2.5 for just the 3rd time in the past year. This signals “investor panic”. As contrarians, we MUST use this as a buying opportunity.

Until Next time, thanks for reading.

Kip

To receive access to our full VRA Membership and daily updates(including our VRA Portfolio with buy and sell recommendations, featuring 2400% net gains since 2014), sign up to receive two free weeks from the VRA at www.vrainsider.com/14day

Thursday
Apr052018

VRA Update: Rally Caps Engaged. Double Bottom, 800 point DJ Surge.

Fear and greed moves the markets, most certainly at extremes, and have we ever seen plenty of fear and greed over just the last few days. The MSM flipped from wall to wall coverage of “Russia Russia Russia” to “China China China”, and as usual, scared many investors into panic selling their positions.

For our VRA Members, as we covered yesterday, panic is not an investing strategy. Instead, and in high likelihood, the markets lows are now firmly in place.

When we can time the markets well…and while never perfect, the VRA System gets us out near the highs and back in near the lows…leveraged ETF’s on the most attractive market sectors (again, according to the VRA System) gives us the ability to beat Mr Market. I have no other goal, with the VRA Portfolio.

With a clear double bottom (and near perfect retest) now in place, this is when the smart money has a clear and distinct game plan. This is the time to be heavily invested in the broad market. With Q1 earnings, share repurchases and M&A activity directly ahead….all positives and due in majority part to Trump’s tax reform…now is the time to be long and strong.

Our exit strategy is clear; we are heavily long, expecting a surge higher, and will only take profits in 2 situations; 1) the markets reach extreme overbought levels and then begin to show internal weakness or 2) the markets instead reverse and take out their double bottom lows.

I continue to expect higher prices…we are well positioned.

I also want to give a shout out to my very good friend Wayne Allyn Root for his tweet from yesterday.

 

In my view, this is the reality that the markets are waking up to. We have few reasons to be fearful of China…but China has MANY reasons to be fearful of the US. Among the replies to Wayne’s tweet, the most common reply from Twitter trolls went something like this: “oh yeah? Doesn’t China own all of the US’s debt? If they stop buying, the US economy will crash!”

It’s a common misconception. First, should the US government debt market implode, China would implode right along with it. A more symbiotic relationship, there is not. And second, heres the list of the largest US debt holders. Chinas on it….but at $1.2 trillion, their total holdings make up less just 5% of all govt debt outstanding.

 

 

And I’ll repost this tweet as well, for our newer VRA Members. If you have not seen The China Hustle, I highly recommend giving it a gander;

 

 

Folks, this is why China has never been included in the MSCI emerging market index, despite China making up 90% of all emerging market equity capitalization. Should we get another sharp sell-off, China tariff related, think back to this VRA update and use it as a buying opportunity. We’ll crush China in any trade war…of course they know this…which is why there will not be one. Bank on it.

 

 

FEAR OF MISSING OUT (FOMO) is back on. From Mondays opening 700 point lows, this was my view…it remains my view…and then some:

 

Will we have another 2000 DJ move higher, over the next 10 days as well? If I told you I had that answer you should never listen to a word I say, ever again, but I am confident in saying “its certainly possible”. The combination of fundamental and technical positives line up very, very well.

Yet, just this week we’ve seen numerous market timing gurus switch from bullish to bearish…right at the lows…remarkably, according to the VRA System. They clearly do not have access to VRA momentum screens:

With current US economic strength, we see no signs of an impending recession. Instead, we see signs that the US economy is on track for a full year 3% GDP, at minimum.

Market corrections are never a fun experience. With a bit of good fortune, we’ll survive the current one and get into the heart of Q1 earnings season next week. This is when US share repurchases can resume, a major driver for higher stock prices (matched with lower supply).

The lows are in place. It’s time to be highly bullish, once again.

Until next time, thanks again for reading…

Kip

To receive access to our full VRA Membership and daily updates(including our VRA Portfolio with buy and sell recommendations, featuring 2400% net gains since 2014), sign up to receive two free weeks from the VRA at www.vrainsider.com/14day

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