VRA Update: I May Be Crazy, But the Zika Virus Concerns Me FAR More Than it Does Wall Street

Feb 04, 2016

Since we're all friends here I can speak honestly. I'm either going crazy or the whole of Wall Street is badly missing the risk that is the Zika virus.

I know, I know...the uproar over the Ebola virus was short-lived and it didn't really hurt the stock market.

WRONG! 

In less than one month, during October of 2014, the Dow gave back over 1100 points...a crushing 6.6% decline, as Ebola was feared to become a global epidemic...it absolutely freaked the world out (in case you've forgotten, like everyone in the investing world has, apparently).

I can find pretty much NO ONE that is talking about the investing risks from Zika.  I think this is a mistake...possibly a very big one.

Question: now that Zika has it's first confirmed US transmission via sex (Austin, TX), we know with near certainty that it can be passed from person to person 'readily" through bodily fluids (and of course, mosquitos), let me ask all of our female readers this; "Knowing that the virus can cause children to be born with terrible birth defects, would you travel to another country where you could be exposed to the Zika virus? Would you allow your daughters to travel to these countries?"

I think we all know the answer to these questions....not no but HELL no!

But it gets much worse. Because men can get Zika as well, they in effect can become carriers, and then infect women. Question for men: "knowing these risks, would you travel to a country where you might get the Zika virus?" Now, most guys tend to think they are bullet proof...so the percentage might be a bit lower than women...but not my much...at least that's my view.

Don't Believe Me? Ask the CEO of Royal Caribbean (RCL), who appeared on CNBC earlier this week, just as his stock price was whacked by 17%...in a single hour of trading...and right after the company reported earnings that were actually pretty good. 

I watched the interview carefully, and what I saw was a CEO that was desperate to convince viewers that Zika had "nothing to do with RCL's stock price getting hammered". He actually said something like "no, we're not hearing from customers that Zika is a concern". I call major BS on this guy! The truth was written all over his perspiring face. Trust me...he gets it. I think we should as well.

VRA Market Update

The near 300 point loss in the DJ was the real deal. I am seeing clear signs of things starting to break down...a market that's looking very broken. And the wheels are really coming off overseas and in high yield debt, currency markets. 

Check this out; Wall Street earnings reports have become a joke to those of us in the industry. During the QE driven bull market, more than 80% of co's reporting beat their estimates. They should beat them...these same co's spoon feed the numbers to the analysts...and they do it just right...to ensure that they "beat the street estimates", ensuring that their stock price will "pop".

But all of this has changed now. But again, I can find very few on WS talking about this....still in denial, is my best guess. 

Here's the deal: Through yesterday, less than 55% of all reporting co's have reported EPS beats. Worse yet, fewer than 40% are beating their revenue estimates! This is bigger than big, and it tells us corporate earnings are MUCH worse than anyone really wants to talk about.  

You know my thoughts...the bear market highs are behind us. The coming move lower should take us to fresh cycle lows...and it should not take long. 

Finally, every up open in the stock market is a gift to us short sellers...this is exactly when you want to initiate, or add to, existing VRA market short positions.

BTW....I want to be dead wrong about Zika...somehow, I don't think that will be the case. Just another black swan risk to add to the pile.

Stay Frosty, 

Kip 

VRA Update: The ACTUAL 2016-2017 Playbook

I've yet to hear a single, not one mind you, Wall Street/FED economist...certainly not many portfolio mangers...speak the truth as to why global financial markets are trading like a brutal recession (at minimum) is just around the corner.  

There are just two reasons why this might be; 1) they truly don't see the downside risks (economists) or 2) they have been instructed to "talk up the market"...so that their firms can sell their own positions (this happens ALL the time...something to keep in mind when you hear a portfolio mgr talking up their books).

Over the decades, I've gotten to know no fewer than 10 of Wall Streets top economists, and there was one thing that always stood out to me. Our best and brightest economists are...as a group...weak-minded, complete pushovers. When I would question them, over a drink or cup of coffee, as to their positions, few ever had the ability to back up their views in anything that you might call "confidently". This observation baffled me. How can these really bright folks be so weak?? It also explains how they get everything so incredibly wrong. 

Each year, the Wall Street Journal publishes their year end views from a collection of more than 100 top US economists. My firm was Oppenheimer, and their top strategist just happened to be my personal mentor. His name was Michael Metz and I've written about him often in these pages. Michael was the first to teach me that "these economists are wrong every single year. If you want your clients to make real money in the markets, take anything they might say with a big grain of salt. You're better off taking the other side"  

As clear proof of the sad state of affairs with our top economic brains, think back to early 2008. We were already seeing a large number of subprime lenders close their doors, and the stock market was obviously telling anyone that would listen that "something is very wrong here". 

Yet, the worlds best economists and market gurus routinely said "yes, we see a slowdown in housing and access to lending, but we do not view these as serious economic risks to the US economy".

The quote above is actually from THE WORLDS TOP ECONOMIST at that time, FED Chair Ben Bernanke...just 6 months before Lehman Brothers failed and the market route was on. Yep, the same guy that sees all of the economic figures long before anyone else, completely missed one of the worst market/economic crashes in all of US history.

But folks, remarkably, it gets worse. Like, much worse. Speaking to a congressional committee, under oath and all, Bernanke said the following, just 3 months before panic had set in and Bernanke and Treasury Secretary Paulson were begging our countries top leaders for a $700 billion bank bailout. Under oath, Bernanke said, "the housing slowdown is worse than we had expected, but we still do not see warning signs that the slowdown will have a serious impact on the overall US economy. We see the risks of a recession as small"

Again, this was just 3 months before the US actually entered "The Great Recession"!  

HERE'S WHY I BRING THIS UP TODAY:

Consider the following; 

1) the bond market, just this week, began signaling the first recession call.

2) we are IN an actual earnings/manufacturing recession, now!

3) global credit spreads have widened to such a degree that the odds of avoiding a recession are now 1 in 3 (in up to 70% of major economies). Yes, the actual odds in the debt markets tell us that a recession is almost certainly imminent.

4) After decreasing for more than 30 years, we are now reaching the end of the most powerful debt super cycle in world history. Rates have fallen dramatically since the early 80's, and played a massive role in the expansion/availability of credit, thus boosting global GDP levels to all time highs. 

5) the signs are clear to anyone that will simply pay attention...listen. The coming debt crisis/contagion, as marked by the end of our planets historic debt super cycle, is just now beginning to make itself known. Already, trillions have been wiped from equity markets, and the signs are everywhere that massive bankruptcies in the energy space are now moving into the rest of the global economy.  

6) just today, I heard Goldman Sachs top economist (Jan Hatsius) say the following: "with the US employment picture as strong as it is today, the odds of entering a recession are slim".

How is it possible that Hatsius is still getting snowed by the methods our government reports on employment?? It's now been proven that last months strong employment data, with 290,000 jobs created, was pulled straight out of the air! The gains were based on "modeling". What we know instead is the LFPR is at his lowest level since the 70's, with more than 93 million Amercians that still cannot find a full time job. 

7) Let me ask you each a question; from what industries do you see major employment gains taking place over the next 1-2 years; Energy? Banking? Retailing? Travel/Tourism? Technology? From the strength in global economies??

In just the last quarter, already announced layoffs from the group above total in the "hundreds of thousands". Yet somehow, our government will likely find a way to spin this into POSITIVE job creation. Don't believe it.

THIS "IS" 2007/2008

Don't believe the economists that can't shoot straight. Their backwards looking data collection is lame and only ensures that they are unable to forecast the future. Folks, this is the beginning of the next great financial crisis...it's on our doorstep. But this time, there will not be enough QE to rescue everyone...debt contagion of this magnitude is going to overwhelm the entire system.

The VRA will continue to do the ACTUAL research...we want to see what's directly ahead of us....not behind us. Once this bear market rally is over, we will be even more aggressively short...once again.

Stay Frosty,

Kip

vraletter.com

VRA Update: Using the VRA to Make $250,000 - In One Year. Plus VRA System Update

Jan 19, 2016

Good Tuesday morning all. Yes, we are still in the early stages of what will be a rolling bear market, ultimately taking stocks down another 25% plus. I've seen nothing that is changing my mind, and the VRA System seems to get more bearish with each passing week.

This doesn't meant that we will not have bear market rallies....we always have and we always will, which is why we've been busy booking some rather huge profits of late. 

At the end of this update we're sharing some feedback from a long time VRA Subscriber. And yes, we fully plan to book massive profits going forward as well. 

As of Friday's close, here is the latest VRA System Forecast:

My short term, proprietary momentum indicators show us at 91% oversold...each time that we get close to reaching a highly oversold reading of 95% plus (along with heavy, panic selling), the market manages to rally for a day or two. This may seem like a welcome relief to the bulls, but it's actually the worst thing that they could hope for. For us to reach even a decent technical set-up...one that might allow the markets to stage a 1-3 week counter-move higher...we should first get that highly oversold, panic driven selling climax. And so far, we've seen nothing like this. 

Instead, we get a "controlled burn"...which lulls investors into thinking that the lows are near, if they just hold onto their stocks. Sure, we hit 300% on the put/call ratio on Friday, and in a normal correction I would say that the short term lows are in place. But just as we are seeing in the oil markets, I see nothing that would tell us the final lows are in place.

Just over a week ago, I placed a poll on Twitter (@kherriage)...one that many of you likely voted in. The end result was that 70% believed stocks were going much lower, while just 30% believed we were near a bottom. Bearish, absolutely....but nowhere near where we will see these numbers at an actual bottom (85-95% bearish).

This weekend I placed a similar poll on Twitter, but asking the question about oil prices. With an hour to go before the poll ends (and more than 1500 votes in), 57% believe oil is going "much lower", while 43% say that we are "near the bottom".  

A huge thanks to everyone that is both following me on Twitter and voting in our polls! But folks, as you can clearly see, the numbers are nowhere near where they should be for any kind of bearish capitulation.

For those that might say, "but Kip, surely you don't believe there is anything scientific about your Twitter polls", and while I absolutely get your point, I have given this quite a bit of thought...and I believe we can use my Twitter polls to our advantage...to continue booking world class returns (along with VRA System of course).

I'll explain more in future updates, but consider this for the time being; if we assume that most following me on Twitter are "like-minded"...and studies show that this is absolutely how Twitter works...then we can also assume that most following me are "already" highly bearish and expecting sharply lower prices. 

So, for my polls to reflect just "mildly bearish" readings, tells me that even MY group of followers remain complacent. Give this some thought...because I can assure you that smart money investors the world over are looking for "market tells" just like this one. More to follow...but if you have yet to vote, please do so now (and if you aren't following me on Twitter, then you know exactly what else to do as well). 

Bottom line: I believe its this level of complacency that will doom many investors to painful large losses going forward. And I will continue to use any dead cat bounces to ensure that we keep "bashing Mr. Markets head in"!

Finally for now, a big shout out to PR from South Carolina on his success in using the VRA. As PR knows, his results would have been even better if he had not missed some key buy/sell rec's. But hey, it's hard to quibble over $255,000 in net profits. 

"Kip, all I can say is “thank you!”. I’ve been with you for 3 years but decided last year to follow you, and to do exactly as you recommended. I didn’t have any expectation of these results. In addition to the VRA, I joined Extreme Options in September. My results - VRA account turned $40k into more than $200k. Extreme options turned $25k into $128k.The crazy part is that I missed 4-5 very profitable trades. 

$65k that turned into $320k. 400% in profits!  As long as you have the VRA, I will be a loyal subscriber. How the hell you do this almost perfectly I still have no clue, but my entire family thanks you! PR - S. Carolina"

These are the emails, tweets and phone calls that we love to get here at the VRA. It's why I do what I do. But as I've said many times before, I can make all of the successful rec's possible, but it's your money and your decisions that deserve the credit. I think it's safe to say that PR has been "staying frosty".   

Until next time, thanks again for reading...make it a good week.

Kip

vraletter.com

VRA Crash Update: Do Not Fight the Tape, Do Not Fight The FED

Jan 13, 2016

The markets are rolling over hard. Opened 100 points higher (DJ), and as I've said each and every day, "Sell/Short any bear market that opens sharply higher" This ones a real Investing101 folks...and now...the DJ has closed down 364 points. Incredibly, and in something I have not seen in 30 years, according to the VRA System, investor complacency has actually risen over the last two weeks. Delusional...

A Flash crash looks very likely...as always, most investors will sell right at the bottom...many thousands of Dow points lower.

I've been listening/reading the "gurus" and have yet to hear a single one say "Don't Fight the Tape, Don't Fight The FED"...as it applies to where we are NOW. The FED is "raising" rates and the tape has turned "negative". Wake up guru's...this is a most important market fact...one that we won't ever forget here at the VRA.

Bottom line: if you are long this market, you are fighting the FED!

Rigging the VIX

The VIX Index (volatility) is STILL just 25?? In this market?? You know my thoughts...."somebody" wants to keep the VIX low so people don't freak out...which is exactly what happens in the investment world each time the VIX breaks 25. This is absolutely a market "tell". The question is, how long can they continue to use it to support stock prices. My guess...not much longer at all. 

NEW BEAR MARKET TRADING MINDSET??

THINK ABOUT THIS; when we are short the market, we get concerned when the markets are heavily oversold...and for good reason...it could well be headed for a reversal and a move higher. 

But think back to the 7 year bull market we just came out of. When "that" bull market was at 90-95% overbought, in MANY instances it would simply keep moving higher! That's the kind of strength that was behind the most recent bull market. Thanks QE!

So....stay with me here...why shouldn't the reverse be true as well?? In a brutal bear market, I believe we should get used to the markets continuing to go sharply lower, even as they are continually oversold, and in the 90-95% range. Let's not forget this interesting possibility folks...

The internals are once again pathetic...with a 3 day weekend coming up, we could easily see the sellers get "panicky". 

Stay Frosty...make sure you are positioned to survive the recession (or worse) and bear market.

Kip

VRA ALERT: Crash-Bear Market: Stage One Underway

Jan 06, 2016 (7:30 AM)

MUST READ ALERT: STAY FROSTY!

Good Wednesday morning all. The world is in turmoil this morning...yes, again...for another morning. I don't like this anymore than you do, but if the world is going to falter and falter hard, we owe it to ourselves, our families, and friends and our businesses, to make sure we survive...and yes, thrive.

Everything I have been saying is happening...right now. 

This is Stage One of the 2016 Crash.

-Crash Alert...we could see a global stock mkt crash at any point (losses of several thousand Dow points, much worse elsewhere). 

- US Dow futures are down another 2%, or 300 Dow points, with a full 60 minutes to go before the open.

-Oil crashing to fresh lows...down another 3-4% this morning...under $35

- End of Debt Super Cycle...it's building and will rear its head for all to see soon. Contagion will be fast.

-WW3...Middle East on fire, N Korea's first use of atomic bomb, Global Terror (CIA invented or not). 

-Global Depression...folks, you have no idea how wrong I want to be. I absolutely depress myself sometimes...in case you are wondering. But I must continue to follow my research...wherever it takes me. 

-That "feeling" I told you about a few days ago? Like 9/11/01, I don't get the sense the "event" has happened yet.

This morning, I saw a fairly respected market "guru" in both TV and print, and his advice to investors was to "be calm...all is fine". Quite possibly the worst advice you will ever hear about this market...this economy...this world.

Here's my reply to him...which I just heard back from (both are included below)

My Email to Guru:

"Anyone that reads the headlines to find out why the mkt is moving in one direction or the other, might want to reexamine their inv strategy. Remember the whole "market anticipates 6 months out" thing? Also, remember this; the S&P 500 drops 36% in the average recession. Anyone think this one is going to be average? Crash Alert out for 3 weeks on my end...how you can tell people to be calm and that all will be fine, is just startling" 

Guru's Reply:

"You and I may know this, but not all investors can handle this kind of environment".

Folks...I have no idea how to reply this this, except what I just sent back: 'This must be the ultimate in condescension and lack of any real respect for your audience. You are a charlatan and you hurt people. Quit your job....today."

VRA SYSTEM/MARKET UPDATE

Yes, we are positioned perfectly...but we also don't want to be left holding the bag when we are 1300% short in the overall market (combined % from our HEAVY positions in leveraged ETF's).

Also, make sure you continue to buy gold! Up another $10/oz now but will soon EXPLODE higher. Yes, $10,000/oz plus is still my target. Yes, I love the miners too (VRA Core rec's NUGT and VGZ)....just remember that they are still traded as "stocks" and will be volatile (and great investments). 

Quickly, here are the levels to watch; VRA System sees minor support at Dow 16,675 with MAJOR support in the Dow 15,700 region. Based on futures, we may open fairly close to the first support level of 16,675.

IMPORTANTLY,  the VRA System is still not close to being even 90% oversold. At just 79% overall, we could fall for another 2-3 days before a bottom is in place. HOWEVER, if we drop another 400-500 points real quick, we could get to 88% or so by tomorrow (maybe).

Finally, if you're getting your advice from anyone that has not lived though at least 1-2 REAL bear markets, then you likely know why they are complacent today. They don't have true perspective as to how bad this will get. After 1987 Black Monday, 2000 Dot-com top/bomb, followed by 9/11/01 and then 2008-2009 Fin. Crisis, I can say in total candor that I am prepared. Which means, if you've been following the VRA's advice, you are as well. And your roughly 2000% in "net gains" (yes, net of losses) of the last two years is about to move even more sharply higher. 

Stay Frosty...I doubt we will take profits today....the crash is just now kicking in. But please...stay near your VRA Updates (delivered by email, of course).

Kip