Journal Archive

"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
Jan312019

Bears Are Capitulating, Perma Bears Getting Smoked. My Day with CNBC and Twitter

Good Thursday morning all. The bears have started to capitulate. We see it in short covering and we see it in the data (put / call ration, collapsing VIX Index, volume and internals).

Capitulation is a process ... this market melt-up could continue for an extended period. We'll know if any significant reversal is in the cards by the internals and key market leading sectors (tech, small caps, growth, momentum). As always, we'll give you an advance heads up. Still a whole lotta perma bears getting their cleaned clocks, including the biggest gurus on the planet.

My Day with CNBC and Twiiter.

Over the years I've gone from being a religious CNBC watcher to pretty much not at all...just for breaking news and interviews only. The later was absolutely the case once it became clear that Trump had a chance to win the presidency. CNBC turned into the Hate Trump Network, 24/7. Hard pass. And what a failure. Within 6 months of Trumps victory, CNBC's ratings were said to have dropped below the Childrens Network Business Channel, which mostly features counting butterflies and puppies (or so I'm told).

But...CNBC has gotten better. I'm back on, meaning that I keep it running on mute in the background for breaking news and interesting interviews. Earlier this week, one of the panels was getting into Apples earnings, which would be released after the close. The entire set was bearish. Apple was going to $140 or lower, according to Mr. Wonderful. Yes, this jackass actually wants people to refer to him by that name (and I typically like Canadians a lot...Kevin O'Leary evens that scale).

Point being, even after one of the largest and most successful co's on the planet...one with more than $245 billion in cash...and had already dropped by 38% in price (from $231 on 10/1/18 to $142 on 1/3/19), these "gurus" were certain that Apple would keep getting their clock cleaned. 

And then Apple reported earnings. Boom. Earnings beat, positive comments from Tim Cook and a big 6% move higher in the share price. 

If you watch CNBC, I highly encourage you to do so only for the most relevant information to you. NOT for their buy/sell recommendations. I think maybe readers believe I'm joking when I say that the investment experts on CNBC do not publish their track records. Not a joke...they do not...their performance is that horrible. Remember, 90% of all active money managers do not beat the markets, year in and year out. Why should we be surprised to learn that CNBC wants to keep these figures buried deep. 

On top of Apples move higher, Boeing announced a monster earnings beat with BA trading up a big this week. Same with chip maker AMD, a big earnings beat, withs shares surging nearly 20% yesterday.

Folks, not to pat ourselves on the backs too much, but we did say....day after day after day...that the December sell-off was an aberration. A mistake. That looking forward, investors will realize it was the buying opp of the year. That the Christmas eve massacre marked signifiant capitulation lows. That we MUST be buying aggressively, 

In all humility, we nailed it. This is why the average VRA Portfolio holding is up more than 30%, from 12/24/18, pretty handily beating the S&P 500 gains of 13%. Frankly, it was one of the easiest calls of my career. J Powell's FED spooked the markets, at a time when liquidity was nonexistent and 150 hedge funds were already closing their doors and going through end of month forced liquidations. The FED...once again...our biggest risk. 

The "recession is coming" group is beginning to look laughably silly. But these perma bears seem to be full on self hating masochists. A nasty lot of deeply negative fear mongers that appear to root for global anarchy. Global depression is on their annual Christmas wish list.

Precious Metals

Gold, silver and the miners are spiking again this morning. This breakout looks to be legit.  Gold and GDX (miner ETF) are right at "significant" breakout points. Check out these charts

 

 



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.

Experience the Vertical Research Advisory free for 2 weeks!! For a limited time we are offering a 2 week free trial to the Vertical Research Advisory, visit vrainsider.com for more details.

Also, Find us on Twitter and Facebook

Friday
Jan252019

Precious Metals and Miners: The Move of a Lifetime is Beginning

Good Friday afternoon. If you’ve been with us a while you know our views on gold/silver and the miners. Fundamentally, they MUST be owned. Precious metals are the antidote to fiat currency. The world is awash in debt that can NEVER be repaid. Governments and central banks have done the rest of the damage, printing our currencies into oblivion, as evidenced by the 97% depreciation of the USD since the creation of the FED in 1913…another financial Frankenstein from the worst president in US history, Woodrow Wilson (he also brought us the 16th Amendment/income tax).

If you’ve ever wondered “what the hell happened to our financial way of life”, aka, why is it that both spouses have to work to bring home the same benefits that a single income produced just 30–40 years ago, now you know the answer. Currency debasement. Currency inflation. US dollar destruction.

USD currency destruction lies at the heart of most all our financial issues. Period.

As a side note, this also explains todays manufactured culture wars, aka 99% of the “news” we’re force fed today. The powers that be do not want us talking about currency destruction or the dangers of a runaway, unregulated FED. They do not want us talking about soaring inflation (which sits at 10%+ today). They do not want us talking about The Patriot Act. They do not want us talking about multiple 6 figure college costs. And they don’t want us owning precious metals.

I committed numerous chapters to these subjects in both of my CrashProof Prosperity books. Nows a good time to go back and read them. Inflation is coming…on a global and massive scale. As inflation first returns (and its happening now…those 2% CPI reports are full of deception), it will be a major positive for global equity markets. Again, at first. This view is at the heart of my DJ 35,000+ call by end of 2020. Early inflationary breakouts are HIGHLY bullish for equities, as history has demonstrated often.

To be crystal clear, we should own “physical” gold and silver (not hypothecated gold/silver ETFs). And we should own mining stocks….thats where the real leverage lies. Leverage of 3–5 times historically, meaning that in PM bull markets, the miners actually outperform gold by 3–5 times.

The VRA has been bullish on PM’s (and miners) from 2003, where in my second-ever buy rec I recommended gold and silver. Gold was below $400/oz. Silver was below $5/oz. We’ve also locked in well over 2000% in net gains from our recommended miners.

I know this sector. I know this fundamental story. I love PM’s and miners, particularly in todays climate.

Let me also remind that our VRA 10 x Buy Rec Fortem Resources (FTMR) has a significant stake in “City of Gold”, a massive 465 square mile concession in Myanmar. I’ll have more on this soon, just know that Fortem CEO Marc Bruner and COO Mike Caetano have BIG plans for City of Gold. Just another reason to own Fortem. Here’s the link:

http://www.fortemresources.com/resources/mining/city-of-gold/

And folks, something big is taking place right now in PM’s. The technicals are flashing all kinds of buy signals. MAJOR buy signals. Lets take a closer look. First up, here’s the chart comparing the miners (GDX, miner ETF) to gold itself. In big bull markets, the underlying equities outperform the commodity.

We see it clearly in this chart, as GDX has “significantly” outperformed gold since early September. This is a most important indicator, one that few are talking about today. But we see it…we love what it’s telling us.

 

 

Gold has just broken out as well. Gold is now above its 200 dma with a golden cross occurring this week (50 dma crossing 200 dma). Big technical buy signals here.

 

 

We see the same in GDX. Back above its 200 dma with a golden cross nearing. We have yet to see volume confirm the move, but with the breakout that I expect, ramping volume in the miners is near. Once GDX breaks $25, look out above.

 

Now is the time to have your positions in place. Gold, silver, and the miners. To learn more sign up for our Free 14 day trial at VRAInsider.com and you will receive a copy of our report on investing with Precious Metals & Miners.

The move of a lifetime, for precious metals and miners, is beginning.

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.

Experience the Vertical Research Advisory free for 2 weeks!! For a limited time we are offering a 2 week free trial to the Vertical Research Advisory, visit vrainsider.com for more details.

Also, Find us on Twitter and Facebook

Thursday
Jan172019

What Recession? Our Minimum Move Higher Has Been Met. Dow Jones Technicals and Market Update.

Good Thursday morning all. Bit of a quiet morning so far. Morgan Stanley (MS) reported earnings and it was a big miss, with the shares down 5% as I write. But folks, have you seen what the financials have done this week? Big, 8–10% moves higher, post earnings reports from Citi and Goldman Sachs (the vampire squid) with regional banks seeming to beat estimates across the board.

Again, we simply are seeing no real signs of a recession. But out of respect to the bears, I’ll add this; no one on the planet knows exactly what will happen next. Stocks “are” a leading indicator of economic growth, so we must pay attention to what the markets are telling us. But the markets aren’t a perfect indicator of recessions either, which we’ve seen time and again as bear markets occur “without” a recession taking place.

This is why I created the VRA Investing System. It’s steered us right for many years. The VRA System told us that something very wrong was taking place in early 2007. I must have written 100 updates that went like this “with the FED hiking rates 17 straight times from 2004–2006, and with mortgage co’s closing their doors left and right, real estate is sending us warning signs”.

And then again, as the markets bottomed in March, 2009, the VRA System had us aggressively buying. Those March 2009 lows, which we called within 5 minutes (documented), proved to be THE lows.

Today, the VRA System sits at 8/12 screens bullish. Our biggest concerns are the FED (don’t fight the FED) and the fact that our indexes remain well below their 200 dma (day moving averages). Otherwise, the fundamentals in the US remain solid. Mixed bag, for sure…which is why we cannot allow ourselves to be lulled to sleep. But I’ll repeat…December was an aberration. A capitulation of importance. That remains our view.

 

Today, on the back of earnings misses and a short term, overbought market, we’ll get a good sense of what this market wants to do. If we can overcome this mornings DJ -100 futures, on the heels of some not so great news, and if the market can continue to climb a wall of worry and find a way to move higher still, there is no better market “tell”. As always, we’ll be watching the internals closely. Yesterday brought us another day of across the board positive readings. $3 trillion in money market funds on the sidelines, plus a return of share buybacks and M&A activity, tell us that a whole lot of bears are likely on the wrong side of this market.

Dow Jones Technicals

In late December we began pointing to our minimum move higher, which we placed at 24,200. We hit this level exactly yesterday. 24,200 was a 50% retrace from the early October highs to the 12/24 Christmas Eve massacre lows. Let's take a look at the chart of the DJ and see what might happen next.

Again, we have now reached extreme overbought on some momentum oscillators (stochastics and money flow) while relative strength still has a ways to go. But let’s also remember that markets/stocks that reach overbought and remain overbought (without falling) are the single biggest bullish sign that we’ll ever see. And check out that selling climax volume in December. That big red line of volume we see was the single biggest sell side volume in history. Forever is a long time. Selling climaxes also mark significant turning points in the market (which also matches the many reversal indicators we’ve talked about often…sentiment, internals, analytics).

 

If the markets can find a way to move higher, in the face of the items laid out above, then it's telling us much higher prices are on the way. That's just what I believe we’ll see.

EARNINGS

I’m reviewing Q4 earnings news, which are so far MUCH better than the perma bears led us to believe that they would be. As of Tuesday’s close, here are the readings from the 28 S&P 500 co’s that have reported to date:

- 86% are beating bottom line estimates, with EPS growth of 27.4%.

- 54% are beating top line estimates, with revenue growth of 8.1%

Folks, these are excellent numbers. If there’s a recession on the way, shouldn’t earnings start reflecting it by now?

And check out this graph of S&P 500 revenue growth, in particular, the surge following the election. Consistent growth of 10%+, with EPS growth consistently above 15–20%. Again, no signs of recession. And yes, who the president is matters a great deal.

 

Bears are insistent that Trump’s tax reform was a 1 year 1 off. That tax cuts were merely a sugar high.

My view? They are not just wrong…they are dead wrong. We expect EPS growth of 10–15%+ in 2019 with revenue growth of 8–10%+. Again, no recession.

Your Emails

I don’t include your emails as often as I’d like to, but here’s one that is timely:

Will from Tx:

“Kip, you talk about the upside potential in your top growth stocks but don’t talk about the downside risks. Two of your top picks are sub $1 penny stocks and I’ve been burned in low priced stocks before. Can we really have confidence that these will survive and make us money?”

Great question Will. My view of penny stocks has been that most are like roach motels. It’s easy to get in…not so easy to get out. So yes, the risks are real. And yes, the VRA is very aggressive in recommending these. However, if you read yesterdays update you may have noticed that my top picks of all time….Ultra Petroleum, JB Oxford, Dynegy and Ivanhoe Mines…were all sub $1 penny stocks when I recommended them. Evaluating risk is what we do.

Factually, the price of a stock rarely matters to me. As long as the company has great potential, with solid management and little to no debt, then it does not matter to me what the current price is.

This describes each of our growth stocks/story stocks, today. None have any debt to speak of, with each having heavily invested management teams with a track record of success. We want a CEO that is a proven winner. A proven founder/builder of co’s. And, one that is invested heavily in the success of his own company (not just there for his 7 figure salary, like so many CEOs today).

And, as we’ve seen from “blue chips” like Enron, Worldcom, PG&E and GE, the risks in $50–100/share blue chip stocks are every bit as real. I’ll repeat, I would rather own VRA growth stocks…across the board….than most blue chips today.

I have a hard time getting the CEO of most blue chips on the phone, but I can pick up the phone and call the CEO’s of small cap co’s with relative ease. I like this fact.

And the obvious…we’re here to crush Mr Market. We’re here to make 50–100% + gains, as regularly as possible. It’s simply not possible to do this in the vast majority of blue chips.

This market wants to go higher. The VRA Portfolio now has an average gain of 30% per position from those 12/24 lows. And we’re just getting started.

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.

Experience the Vertical Research Advisory free for 2 weeks!! For a limited time we are offering a 2 week free trial to the Vertical Research Advisory, visit vrainsider.com for more details.

For our latest free updates tune in to our daily VRA Investing Podcast atVRAInsider.com or subscribe to our free blog at kipherriage.com

Also, Find us on Twitter and Facebook

Thursday
Jan102019

December Was a Stock Market Aberration. VRA System Market Internals Flashing Buy Signals. Housing is Solid, Housing Stocks are Cheap.

Good Thursday morning all. Our broad market recovery move higher continued yesterday as FOMC minutes were released that showed Chairman J Powell and Fed Governors explicitly “meant to say” that their December rate hike came with dovish expectations going forward (aka, rate hikes are off the table for a while). But folks, thats not at all how the markets treated Powells comments in December, as air pocket selling and a perfect storm of negativity resulted in the worst December since the onset of the Great Depression.

For those that track seasonal patterns in markets (like us), it also pointed US indexes in the right direction. Asian markets followed our cue from last week with solid 4–5% moves higher.

Not only is January typically a strong month for stocks, known as the “January effect”, where investors buy cheap stocks after tax-loss selling in December, but historical data suggest this month is poised to be even better than normal. That’s because it comes in the third year of the presidential election cycle, which is typically the best for equities.

In pre-election years since 1950, the S&P 500 index has delivered its best returns in January, posting an average gain of 3.9% for the month, according to our friends at the Stock Trader’s Almanac. Part of the reason: Incumbents typically implement new policies ahead of a presidential election in an effort to boost the U.S. economy and make re-election more likely.

One factor that could boost stocks is a thawing in trade tensions between the U.S. and China. Tuesday, Wilbur Ross (Commerce Secretary) was on CNBC and made the point that we’ve made here for more than a year; this is not a trade war…it’s not even about tariffs…this is about China’s rampant IP theft. Ross also stated “these talks WILL result in a resolution into the 3/1 deadline”.

Signs of a strong U.S. labor market and dovish commentary from Federal Reserve Chairman Jerome Powell on Friday helped alleviate some economic concerns and powered our 3% + rally in the DJ on Friday. The FED has been the biggest enemy to investors of late, but this looks to be moderating. Big plus.

Ed Clissold, chief U.S. strategist at Ned Davis Research Group, said he is advising clients to buy industrial stocks and other cyclical sectors such as energy, an area that typically performs well in the latter stages of economic expansions.

“The market doesn’t need a trade resolution to rally, but it certainly would be a big help,” Mr. Clissold said.

And let’s not forget my favorite piece of analytics; since 1946, in the year following mid-term elections, the S&P 500 has been higher 18/18 times with an average gain of 15%.

And this piece of remarkable research from LPL. 24 of the 25 biggest gains for S&P 500 have taken place when SPX is “below” its 200 dma. That’s where we reside today…now the battle is on to recoup the 200 dma for our broad market indexes. As we start trading today, SPX is 6% below its 200 dma.

 

 

Our view continues to be that December was an aberration. Now take a look at our market internals from yesterday. Better than 2–1 readings in both advance/decline and up/down volume.

 

 

Importantly, yesterday marked the first ‘back to back to back” positive readings in the internals since 10/1. This looks to be an important pattern change. We first saw the internals begin to break down in early October…we covered it often here…the readings became brutal and selling pressure followed. Today, we want to see a continuation of another new pattern; “buy the dip”, with the knowledge that this mornings DJ futures are -123 on the backs of weakness in retail. We’ve come a long way in a short period of time…some form of cooling off period and smallish retest should not surprise. But I’ll repeat…the lows are in place…buy the dip is the strategy we will continue to employ.

 

 

A great find by bull markets.co. The percentage of stocks above their 200 dma have risen from below 11% to more than 27%, inside of one month, has occurred just 2 times. In both cases, the S&P 500 was sharply higher over the next 3–6–9 &12 months with 1 year gains of 16% and 39%.

 

 

And check out this chart of Hong Kong (Hang Seng Index). We now have a higher low with a break above the first downtrend line. China’s markets began to display positive relative strength to US markets in October ’19. When China’s markets get hot, they can get white hot, quick.

 

 

Yesterday we saw two home builders (Lennar and KB Home) report disappointing earnings…but that’s not what I was watching…I was watching the reaction in their share prices. Both LEN and KBH finished up more than 8% on the day. Remember, its not the news that matters…its the markets reaction to that news.

XHB (Housing ETF) began to display positive relative strength to the S&P 500 (from 10/19 on) and is up 16% from the 12/24 Christmas eve massacre. Continue to buy housing on weakness. The lows in housing are in place.

 

 

Until next time, thanks again for reading…

Kip

Experience the Vertical Research Advisory free for 2 weeks!! For a limited time we are offering a 2 week free trial to the Vertical Research Advisory, visit vrainsider.com for more details.

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

For our latest free updates tune in to our daily VRA Investing Podcast atVRAInsider.com or subscribe to our free blog at kipherriage.com

Also, Find us on Twitter and Facebook

Thursday
Jan032019

Happy New Year, Buy The Dip. Apple, Another Important Tell. VRA System Internals Improving. Is China Going the Way of Japa

Good Thursday morning all. Hitting as many quick hitters as possible this morning.

1) One of my investing icons has always been Peter Lynch, of Fidelity Magellan fame and author of one of the best investment books you’ll ever read (One Up on Wall Street). Lynch averaged 28% returns for his Fidelity fund. We’re talking about 2 decades of outperformance. Best fund manager we’ve ever seen.

Lynch believed in building positions in companies that he understood, with great products and visionary management, and then holding those positions until and unless things changed. His quote goes like this “in most cases, we made little to no real money in my positions for the first 1–2–3 years…but then we got the payoff in years 4–5–6, often seeing gains of several hundred percent in a single year. By this time we had built large position sizes so the gains actually mattered to our total performance.”

This was the approach that made sense for Lynch. Its also how I’ve been able to book gains of 500–1000% + over the years in our favorite growth stocks/story stocks. 2019 will be the year that small caps reverse their losses from 2018.

2) Yesterday we wrote the following:

“Important VRA Market Note: today may be an important trading day. Many of the biggest market rallies are initially signified by lower opens (like todays -400 DJ) that then get reversed completely, with the market moving higher for the rest of the day. We have panic-like levels of fear in this market. A wall of worry that should give us short covering fuel for the fire. Combined with large levels of bullish fund flow as we start the new year (pensions, retirement funds, share buybacks and insider buying), its important that we see a solid recovery, marked by improving VRA System Market Internals.

Also, this Friday Fed Chair J Powell will give his first speech since setting off a firestorm of stock selling via his post rate-hike speech of mid-December. Look for big, policy making statements from Powell on Friday. Equity markets “should” rally higher into this.”

— -

The markets responded just as we had hoped, with a nice rally off of -400 in the Dow Jones and an across the board move higher in each broad market index. More importantly, here are the internals. Better than 2–1 positives in advance/decline and up/down volume. Talk about a pattern change from the last 2.5 months. MOST important for the VRA Investing System (which sits at 8/12 Bullish Screens today).

This is exactly what we want to see going forward.

This morning, with Apple (-9% this AM) slashing earnings guidance for the first time in 15 years, we see DJ futures -300 as I write. Today, we’ll get another opportunity to judge this markets “tell”. Once again, I expect our markets to move higher throughout the day. When “bad news” stops knocking the markets lower, there is no more bullish market tell…period.

3) Heres the latest AAII Survey. Sentiment remains at “extreme fear” levels, with just 33% bulls and 42.8% bears.

 

And the CNN Fear and Greed Index sits at 12. Again, extreme fear.

 

 

We are contrarians, most certainly when it comes to extreme sentiment readings on either side.

Buy the dips.

4) CHINA — Another Japan??

I’ve written often about the parallels of China today versus Japan of the 80’s and 90’s. At the time, the world believed that Japan was in the process of overtaking the US (economically and even culturally) with parents teaching their children Japanese and Wharton Business School (among many others) teaching Japanese management practices to a young US audience.

At the time, Japan was buying up US properties left and right, including dramatic overpayments on many (including buying the Pebble Beach Golf Course at 5x its present value).

But then the US got serious about Japan…as did the rest of the world. Japan quickly found themselves overextended and the tide began to turn. What followed was a 75% drop in the Nikkei Dow and a 19 year bear market in Japanese real estate. A brutal lost two decades for Japan.

Trump’s actions with respect to China were never designed to be a “trade war”, but unless China wakes up to the worlds demands that they learn to complete honestly on the worlds economic stage, this mornings news that China’s economy is contracting could soon become an ongoing albatross for China’s economic future. With debt/GDP of 270% today, can China afford to make this kind of colossal mistake?

 

 

I look for China to have a good 2018. I believe they know their history and do not want a repeat of Japan’s two lost decades. China’s markets were the worst performing of all major markets in 2018. This will reverse in 2019.

Until next time, thanks again for reading…

Kip

Experience the Vertical Research Advisory free for 2 weeks!! For a limited time we are offering a 2 week free trial to the Vertical Research Advisory, visit vrainsider.com for more details.

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 14/15 years.

For our latest free updates tune in to our daily VRA Investing Podcast atVRAInsider.com or subscribe to our free blog at kipherriage.com

Also, Find us on Twitter and Facebook

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