"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"

Subscribe to our Blog!

* indicates required

Twitter: @kherriage

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

Also, find us on Twitter and Facebook

Thursday
Mar292018

VRA System Flashing Strong Buy Signals

Good Thursday morning all.

VRA Market Update. VRA System Shows 11/12 Screens Bullish

As you’ve seen/experienced with me over the last week or so, my life can be a tortured existence. I live and breath the markets….and for those that do as well, life ain’t always easy.

The current market turmoil reminded me that it is impossible…absolutely impossible…to completely remove emotions from our investing. I compare it to acting…or speaking in front of an audience…the day that your nerves/emotions cease to exist, you’re probably in the wrong place at the wrong time. It comes with the territory. But it must also be controlled…

As I was writing up this mornings VRA Alert, with our new positions, that was the feeling I had; was it too soon to act? Is there another big leg down coming that I am missing? Are the bears actually right, this time?

But that’s also when I remind myself that this is exactly why I built the VRA System. Making money in the markets FORCES us to “buy low”. It is simply not possible to buy low when everyone is bullish. We must buy low when everyone is bearish. And man oh man, do we see that bearishness in the sentiment readings and put/call levels.

Here’s why:

We got the following sentiment figures last night:



Only in a small handful of times in my 3 decade career has sentiment been this overwhelmingly bearish…in a major bull market, no less…where the market has then continued lower. Extreme sentiment readings like these are one for the most powerful contrarian indicators of all time. Period.

And check this out. For those on Twitter, I recommend that you follow @sentimentrader

As you can see below, when the put/call ratio has been this bearish for an entire week, the S&P 500 has then gone on to rise 48 out of 51 days. Holy put/call ratio…



And I’ll remind you of the other reasons I am bullish, as we head into Q2:

1) the economy is rocking. Period. Earnings will be sensational. Again, period.

2) Over the last 20+ years, following a negative Q1 stock market performance (and this will likely be a negative Q1 barring a 600+ point close higher in the DJ today), the second quarter has been negative only twice.

3) Share buybacks have been in SEC lockdown….zero co’s that report on a calendar year have been allowed to buy a single share back over the last 5 weeks. Certainly helps to explain the selling pressure/lack of buying. But that all begins to change next week, as co’s report Q1 and are once again allowed to start buying. Remember, estimates are that buybacks will top $850 billion this year, an all-time record x 15–20%. Removing supply from the markets, allowing demand to then send stock prices higher.

4) Congress is out for another week. Over the last 50 years, 90%+ of all stock market gains have occurred between November-May and when congress is out of session.

I could add a few more…like its pretty impressive that the broad markets have held above their 200 dma, in light of the bad news of late…but you get the picture.

Investing is about probabilities. Using all knowable information and then pulling the trigger. That’s why we acted this morning. And guess what? If I am wrong…if the markets want to continue going lower still…we will set our stops and get sold out. Then, should we actually drop beneath the 200 dma and the VRA System switch from bullish to bearish, we will as well.

But that day is not today. Instead, I believe we timed this with near perfection. Easy to say with the DJ +270 as I write…but check back with me at the end of the day 😃

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

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

Kip

To receive updates like this Daily sign up to receive two free weeks from the VRA at www.vrainsider.com/14day

Also, find us on Twitter and Facebook

Friday
Mar232018

VRA Update: China Trade War — Bring it On! VRA Market, VRA System Update

Good Friday morning all. Yesterdays 700+ point drop in the Dow Jones (-2.9%) and 2.5% decline in the S&P 500 caused both the Dow and S&P 500 to break through the “higher lows” that we have been discussing in our daily updates…a bullish technical pattern that has now been violated. Futures are up modestly this morning, so we’ll see what the day brings.

If you were able to join us on Waynes show last night, you heard me say that I could not be more positive on the US economy and US equity markets….medium to long term…absolutely nothing has changed here. However, especially in the use of leveraged ETF’s, I do not take chances. When the ST technicals break down, I have zero interest in being caught up in the downdraft. My goal, as a trend following investor, is to be on the right side of the market, literally as much of the time as possible. This is how we beat the markets as they rise and how we avoid portfolio killing mistakes in times of correction.

Here’s the link to last nights interview. We got into a number of topics, from my market view, China trade war, Federal Reserve fiat currency money printing inflation and the continuing reality of a Trump economy that will right the US ship for many years to come.

http://usaradio.com/2018/03/22/wayne-interviews-kip-herriage-ceo-of-vertical-research-advisory/

CHINA TRADE WAR: BRING IT ON

In the interest of time, here are my tweets from last night, on the possibility of a trade war with China.

 

Please hear me on this…I know what I speak of, on this most important subject. China may have 1.3 billion people and presumed to be the next global economic powerhouse, but much of this is merely an illusion. Back in the 80’s, the fad was to have your kids learn Japanese. They were buying up the world, including a ton of US companies and US real estate. Japan was all the rage. For years we were forced to read cover stories in every major US publication that said Japan had passed us by.

At one point, the land surrounding the Imperial Palace (a mere few blocks) was valued at more than all California real estate combined.

But then, Japan ran into a buzzsaw. They ran into the very focused will and might of the US. For 19 years Japanese real estate prices fell. Beyond brutal. And the Nikkei (their Dow Jones) fell some 70% over the same time frame. #Don’tMessWithTheUnitedStates

 

Now consider these two points about China today.

One: They are BURIED in debt. Over just the last couple of years their government debt has soared to near Japan levels, with a current debt to GDP ratio of 250%.

Two: Their accounting is crap…its highly fraudulent and untrusted, on the Chinese mainland. It’s been so corrupt, and for so long, that until just late last year mainland China equities were not even allowed to be included in the MSCI Emerging Markets Index, the global benchmark for institutional investing. Think about this for a moment; China is THE powerhouse in emerging markets but even when finally included in the MSCI (later this year) Chinese stocks will only be allowed to make up less than 1% of the entire index. Stunning really.

Of course, Trump and his economic team know all of this. China knows it as well. China has so much more to lose in a trade war with the US that should they be dumb enough to enter into one, we will crush their economy just as we crushed Japan. And remember, China is still a totalitarian state. Their leaders rule with an iron fist…which might be ok when the Chinese economy is rolling…but should economic conditions reverse, the level of popular unrest in China could easily grow into a civil war. This may seem like hyperbole…but it is not. Again, Trump and team know these facts well.

Bottom line; we will almost certainly NOT have a trade war with China.

The one major question that I don’t have the answer to today is this; exactly why are US stocks going in the wrong direction? I have my theories…I’m working on that VRA Update now. I will likely do a podcast over the weekend and share those thoughts with you. I’ll also cover each of our story stock growth stocks in the VRA Portfolio. And, the VRA Portfolio has been updated as of this morning. Make sure and login regularly to ensure you are positioned correctly.

VRA Sentiment Update

You know my thoughts. The technicals are mixed but the fundamentals remain incredibly solid. But man oh man, is everyone getting bearish. Not just my Twitter stream (where its hard to find a bull), but we’re really seeing it in sentiment.

Take a look at this weeks AAII Investor Sentiment Survey, released Wednesday night:

33.2% bulls, 38.3% neutral and 28.5% bearish. Investors are swinging bearish…quickly…not the readings we see at historic market tops (remember, the majority is rarely right).

 

Finally, lets consider one chart this morning…the Dow Jones:

Yesterdays decline broke the “higher low” of 3/2. The bears next target is now the 2/9 lows, which happen to coincide exactly with the 200 day moving average, at 23,345. Should we reach that level all eyes will be whether or not we’ll then have a double bottom, followed by another sharp move higher.

Interestingly, should this occur, it would also take VRA momentum oscillators to “extreme oversold” levels. This is what we’ll be watching. And btw, both the Nasdaq and Russell 2000 are holding well above their 3/2 “higher lows”.

Until next time, thanks again for reading….

Kip

To receive updates like this Daily sign up to receive two free weeks from the VRA at www.vrainsider.com/14day

Also, find us on Twitter and Facebook