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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.

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