"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
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

Friday
Mar162018

VRA Update: Record Equity Inflows. Supply and Demand Highly Bullish. Investor Sentiment, Still A Major Positive.

Good Friday morning all. Another mixed day in US markets yesterday, but this time it was the Dow Jones that rose more than 100 points while the rest of the market was mixed. Still, the markets did not decline into the close…and thats a positive…breaking the 2 day streak of weak closes.

If you’ve been with us for a while, you know that I’ve been bullish on the stock market for years…with intermittent periods of profit taking…using short term (ST) tops to take profits and then using deeply oversold levels to get aggressively positioned on the long side.

We’re not day traders…but we’re certainly “opportunity traders”…this is how the VRA System was constructed and how we’ll continue to crush the markets.

Check out the news from this morning. As reported in these pages more than 2 weeks ago, my Wall Street sources were telling me that they were preparing for record levels of fund inflows…investors aggressively re-entering the stock market. We’re now seeing proof that this is absolutely the case, with record inflows of $43 billion last week and estimates for more than $700 billion for 2018 (another all time high).

 

If you took Economics 101 you know the basic principle of “supply and demand”. More than anything, supply and demand controls the movement and behavior of all investment classes….be it equity, debt, currencies, housing…you name it. Today, demand for equities is surging. I see no evidence that this will reverse anytime soon.

Combine this with the estimate of more than $800 billion in corporate share repurchases in 2018 and you have a powerful combination of bullish forces that will continue to propel stock prices higher this year.

The fundamentals….for both the US economy and US equity markets…are overwhelmingly positive. And yes, at some point, this will cease to be the case. At some point, the markets will reverse. The US economy will go into recession. At some point. But that point is not now. I continue to miss the perma bears view that stock prices have topped and a vicious crash awaits. But they remain…and thats just fine by me…that’s what makes a market. We need someone to keep shorting and selling us their cheap shares.

Technically, as long as we remain above the most important moving averages…the 50/100/200 dma…we must remain bullish. Even for ST traders, when the major indexes are above their 8/21 dma, there is simply no good reason to be bearish.

My views remain unchanged; DJ 30,000 this year. DJ 40,000 by end of 2020.

INVESTOR SENTIMENT

Below are the readings from yesterdays AAII Investor Sentiment Survey, my go-to sentiment survey for 30 years. Today, bulls have picked up some steam, with bulls at 36.8%, bears down to 21.3% and neutral investors remaining at a still high 41.8%. Remember, at the January highs, bulls hit 60%, so todays 36.8% tells us that investors remain skeptical of the bull market…exactly the kind of negative sentiment we want to see, as contrarians. I’ll repeat; once bulls reach 60–70%…for weeks on end…yours truly will begin to take some money off the table. When this happens, we will have reduced our holdings by a significant amount.

Below is yesterdays reading from the CNN/Money Fear and Greed Index. Today, it sits at 30%….a “fear” reading. In January, it hit 80%. At the 2/9 lows, it dropped all the way down to 8%.

We have no position changes…no reasons to take new actions…as the market sits today. I expect the market rally to pick up speed, once again. But I’ll also add that, from a current news perspective, that Trumps position on trade/tariffs…along with his changes in administration (rumors abound that more are to come soon), have the markets a bit on edge.

Finally for this morning, consider the following…from a macroeconomic point of view. Just two years ago…just prior to Trumps election…the number of countries with GDP growth above their two year average sat at 24. Today…again just two years later…the number of countries with GDP growth above their 2 year average sits at 34.

As we’ve covered here often, the global reflation/growth theme is very much alive. We see it in global range expansion breakouts and we see it in GDP growth. We also see it in the growth of oil demand, which may well produce our next VRA Buy rec. Energy stocks have pulled back of late, along with the price of oil, which could be setting up another great buying opportunity.

I encourage everyone to login to your VRA Members Site regularly. As a rule, we keep our position sizes to no more than 10–12. My goal is to be diversified…but not overly so. We want positions that are concentrated enough so that when we book our big gains, our portfolio actually feels the gains (rather than holding 50+ stocks, where even 100% gains barely move the needle).

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

Tuesday
Mar062018

VRA Update: Social Media Bears Out in Full Force. The Correction is Over. MAGA Bull Market.

We look to have timed this market correction well. Yesterdays 336 point move higher in the Dow has taken it out of the “trouble” zone….but, the best looking moves higher have taken place in the S&P 500, Nasdaq and Russell 2000. Each remains in short term “aggressive buy” mode, based on VRA System readings.

The VRA uses (roughly) 70% fundamental analysis and 30% technical analysis and for our most important/major moves we employ the 50/100/200 dma…for more short term trading purposes we use the 8/21 dma. It continues to look VERY much to me like the correction is behind us. The moves higher, from EXACTLY the 100 dma have been near perfection, Highly bullish. In addition, Europe is showing 1% gains across the board with Hong Kong up a big 2% and Japan surging 1.8% higher. In my view, based on VRA System readings and my 3 decades of instincts, we must continue to be positioned for the next advance to new all-time highs.

Fundamentally speaking, the US economy is in great shape…for the all of the reasons we cover here often…plus new signs of economic power that we see daily:

 

If you’re on social media (and I’m a twitter guy), you see it all. The crazies, the dummies, the Mensa level geniuses, the socialists, the capitalists and of course the Trump haters and the Trump lovers. Well, the bears are out again, trolling me on Twitter like we’re about to have a stock market crash (no…we are not). I’ll come back to the markets in a moment.

Years ago I made the decision to keep politics out of the VRA…as much as possible, that is…but its no secret that I am a major Trump supporter. I predicted he would win in late 2015 and unlike essentially every politician I’ve voted for, he has not let me down. I’m an independent that has voted for both D’s and R’s…I have always strived to be objective with my vote…and were it not for President Trump I honestly would fear for the future of our great country. In my view, we were one wrong choice for President away from a systemic/planned economic collapse. I am certain of this. I also covered this most important topic in my book “CrashProof Prosperity, Becoming Wealthy in the Age of Trump.” Planned economic crashes, like the Great Depression, give enormous power, to a much larger government. When people are desperate, they’ll take the help from wherever they can get it. Saul Alinksy explains it all in “Rules for Radicals”…just don’t read it right before you go to bed.

I only mention politics and Trump this morning because this ties in directly to the direction of both the stock market and the economy. From the night of the election, as the DJ futures lost 1000 points on the reaction to Trumps win…to the 39% spike higher that ensured since…Trumps economic policies are once again giving Americans from all backgrounds a fighting chance. This is MAGA time.

I also remind bears of the following…the reasons that I have been bullish since Trump was elected:

1) Earnings are growing at a 15% clip….best corp earnings in a decade.

2) The untold benefits of tax reform are just now kicking in. Trumps tax reform will prove more powerful than Reagans…in my view…and Reagans tax cuts paved the way for a DJ that more than doubled during his final 6 years in office.

3) Red tape over-regulation is quickly dissolving…this is a massively under reported story.

4) $4 trillion in offshore funds being repatriated into the US (hugely positive)

5) Infrastructure deal is coming…$1.5 to $3 trillion in size (jobs, jobs, jobs)

6) Consumer confidence at an 18 year high

7) And one of my personal favorites…both US and global markets have entered “range expansion”. Range expansion marks new all-time highs in markets/sectors. Range expansion bull markets are the most powerful kind…and they mark the birth of a new bull market…a bull market that can power higher for years and years.

8) Finally, due to the stronger economy, higher earnings and tax reform, US co’s are buying back shares and using M&A at a rate not seen in decades, if ever. This has the effect of reducing the number of public co’s and the number of available outstanding shares to be bought. Its simply supply and demand, really. In just the last 9 years, the number of US public co’s has shrunk by some 60%. Highly, highly bullish for both the ST and LT nature of this bull market.

For those that want to beat the markets…and I’ve yet to meet an investor that does not…we must use corrections like the 10% one we’ve just seen to ensure we are positioned for the gains to come.

Since 2014, the VRA Portfolio has a total net gain on all positions of 2413%

Lastly, at the beginning of the year I recorded the following video…it provides additional perspective on how my background (small town East Texas nobody to Wall Street slayer), VRA long term success/game plan and how we position ourselves, in good markets or bad (and there really is no bad market…not as long as we are on the right side of it).

Here’s the YouTube link: https://www.youtube.com/watch?v=8-8y21NvwCw

Until Next Time, thanks again for reading.

Kip Herriage

Founder/ Publisher Vertical Research Advisory (2003)

Also, find us on Twitter and Facebook for future updates.

Friday
Mar022018

VRA Update: VRA Performance. Still Crushing our Benchmarks. VRA Market Update. Welcome to March and April, HIGHLY BULLISH.

Before we get to this weeks sell-off, and the panic level sentiment that has come flooding back into stocks, here are our performance numbers for 2018:

The VRA Portfolio has a net gain for 2018 (on all trades and current holdings) of +4.6%. Annualized, this gain equate to +27.6% for the full year.

How are we stacking up versus the broad markets? Both the Dow and S&P 500 were down (slightly) for the first two months of the year, but our nearest benchmark, the Russell 2000 Index, was is down 1.9% to start the year.

Bottom line; in Wall Street parlance, the VRA Portfolio is outperforming our nearest benchmark (R2K) by a very big 39% (annualized basis). Since 2014, we have a total net gain on all positions of 2413%

Over the weekend we will update the VRA Portfolio in your VRA Members Site, as we do at the end of each week.

VRA Market Update

With yesterdays 400+ point drop in the DJ, we’re reaching important support levels that could determine whether or not we have a retest of the February 9th lows (23,264). Based on VRA System readings, we want to see the DJ hold the 24,400 level on a closing basis. For the S&P 500, this number is roughly 2650. With futures off 1% this morning, both of these support levels may be broken…but its not how we open that matters…its how we close.

The reason being given for the sharp drop yesterday was Trump’s position on imposing tariffs, on both steel and aluminum, to countries flooding US markets with cheap product. Why anyone is shocked, I have no clue. This is exactly what Trump ran on…and its a big part of the reason that he won. This is what MAGA is all about folks….restoring power to US manufacturing through “fair trade”…not the easy manipulated “free trade” that US president after US president has endorsed.

 

Trump continues to baffle those that still don’t get him. How interesting has this week been…he’a managed to tick off gun owners and staunch 2A advocates (winning over some on the left) while also ticking off traditional conservative economists on free trade, and again, getting high praise from those on the left (unions, chief among them).

This is what makes Trump, Trump. Its my studied belief that we’re witnessing 4D chess level political triangulation…right here, right now…on a number of important issues.

Back to the markets…fear induced panic levels are shooting up, once again. Take a look at the CNN/Money weekly survey…its all the way back to 8…extreme fear. As contrarians, we know that these readings mark far more bottoms than tops and we should look to invest accordingly.

We also learned this week that the AAII Investor Sentiment Survey saw bulls drop to 38%. Remember, just over 1 month ago, this level stood at 60%.

Yesterdays selling pressure also saw the put/call ratio close at 1.29 (extreme bearishness) with the VIX (fear index) rising some 22%. Again, all of the signs of extreme bearishness…market crashes RARELY happen when everyone expects them to.

Still, because of the level of aggressiveness in the VRA…its how we crush the markets year after year…we will not take dumb risks. Again, should we need to enter stop losses, we will do so…and we will do so without flinching. But no…I do not believe this will be necessary.

March and April, Highly Bullish.

Welcome to the month of March, historically one of the most seasonally bullish months on record (April is right there with it). Remember, 90% + of all stock market gains (going back 70 years) come between the months of November — May. I’ve know this fact for a long while…yet each time I say it/write it, it still surprises me.

Below is research from LPL…March and April, since 1950…hugely positive. And when March is positive, it tends to be VERY positive, with an average gain of 4.1% over the last 20 years. (h/t to @ryandetrick, one of my favorite Twitter follows).

 

February was also the first down month since Trump was elected. Hey, it had to happen at some point.

Bottom line; the Dow rallied some 2400 points in less than 2 weeks…its now been followed by -1000 points of losses in the DJ. This is normal backing and filling. Again, “normal”…and represents an opportunity to buy our favorite investments while they are on sale.

It looks VERY much to me…again, based on the VRA System and my 33 years of doing this daily…that the bears will be proven wrong. Tens of billions of inflows into equity funds are on the way…combined with a rapidly recovering US economy, I see few reasons to be concerned. But as always, should the VRA System give us a warning shot across the bow, we will take action by placing stops in our most exposed broad market positions.

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

Kip Herriage

Founder/ Publisher Vertical Research Advisory (2003)

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