VRA Investment Update: Q2; JP Morgan Misses, Taiwan Semi Beats. Team Lockstep. "Quite Frankly" Interview.

Good Thursday afternoon all. Yesterday's recovery move higher, on the backs of that horrendous CPI report, was intriguing. Yes, each index finished lower but “well” off of their lows as the semis actually finished up nearly 1% with internals that were only slightly negative. 

Yesterday’s June CPI data came in at a very ugly 9.1%, well above estimates of 8.8%, with month over month inflation rising 1.3%, also worse than estimates.

Welcome back to 1980–1981. 

Year over year, gas prices up 59% with food prices up 12%…these are the headline readings that matter most.

And another big negative with average hourly earnings down 3.6%, which takes away (entirely) the argument that people are making more money, which blunts the harms of inflation.

The Fed is already set to hike rates .75% this month. The temptation will be for them to hike by 1%, something we were in favor of back in January/February when it would have actually made a difference. But today, the Fed is hiking into a radically slowing economy. If they want to guarantee a recession, hiking rates aggressively from here will do it.

Any decline in the markets, going forward, will be much less about inflation and much more about recession. That may not be an easy case to make for economists with unemployment at just 3.6%, consumer/corporate balance sheets in good shape and still solid housing and transportation markets, but stagflation is a tough nut to crack.

Also, know this; the employment data is nowhere near as strong as the official data implies. It is, for all intents and purposes, rigged to make this administration look better. Again, if the Fed hikes aggressively from here they are guaranteeing a recession.

In fact, Bank of America is out this week with a forecast of a (mild) recession this year, with estimates for unemployment to jump to 4.6% in early 2022.

This morning's early trading, like yesterday, is back to “ugly” on the heels of JP Morgans earnings miss to go along with their mixed guidance, saying that “consumer spending is still strong” even as they added $428 million to loan loss reserves for a (future) weak economy, resulting in an earnings miss of 28%. JPM opened 5% lower on the news.

Know this; the Fed is hiking into a (radically) slowing economy. This will be the 5th policy error by J Powell and his team of fiat currency printers in just 6 years. #EndTheFed

On the flip-side of JPM are the earnings this AM from Taiwan Semi (TSM). Just as our VRA tech insider forecast earlier this week, TSM registered a solid beat to earnings to go along with solid forward guidance. TSM was up close to 2% yesterday and is tacking on another 2% this AM.

Reminder: the semis (SMH, the semi ETF) have already been destroyed, with losses of 40%….just from last November…to their recent lows of 7/5. There is no more important group to watch than the semis. They were the first major group to go into a bear market and I fully expect….folks I’d put this close to 100%…that they will be the first to lead the way out of this bear market. The semis lead the market in both directions. Watching SMH closely. This morning SMH is only slightly lower and remains some 9% above its 7/5 lows.

Quite Frankly TV

Last night I was on “Quite Frankly” (link below) and we covered the “intentional destruction” of Team Biden and this horrid leadership in place via a rigged election. I’m re-posting what I wrote last month….team lockstep does not have our best interests at heart. The midterms cannot get here soon enough. 

Team Lockstep: The Communist Takedown of America

None of this ever made sense. We’ve always known something else was going on here.

- The onset of mass censorship (as Tyler says often on his podcasts, the good guys are NEVER the ones backing censorship). 

- The rigged 2020 presidential election

- CV Insanity, all over a flu that 99.9% survive

- Forced lockdowns, business closures

- Forced jabs. Take ’em or lose your damn job…which one’s it gonna be?

- Open borders. America is being invaded.

- Russia-Ukraine war. The wag the dog money grab (to the most corrupt country on the planet) that’s doing its part in ramping global inflation/food shortages.

- Food distribution plants catching fire/blowing up all over the country

- Baby formula shortages, the shutting down of pipelines and limiting oil/gas exploration, 40 year highs in inflation. 

All of this is happening while 90% of our elected officials…the Uniparty Ruling Class…marches right along in silence/agreement….in complete lockstep. It’s pure Cloward-Piven. 

* None of this is easy for me to write. I am a lifelong optimist that knows America is the best planet on earth and know that our best days are ahead of us. I am certain of it. I see an America that is being overwhelmingly red-pilled with midterm elections that should mark utter devastation for the Democrat Party. The kind of devastation that takes Dems decades to full recover from. 

* At the same time, this is no longer up for debate; we are witnessing attempts to intentionally destroy America. The ultimate goal of communists is to crash the American economy/financial system, making Americans desperate and fully dependent on the State. That’s how they plan on winning. We must all be on high alert. 

Note: last night I was on “Quite Frankly”, a show that originates out of New York, with one of the more insightful and eclectic hosts on the airwaves (Frank). Just a great guy…true Patriot and lover of America…with a large and diverse global audience. Here’s the link to the clip….I’m on for 30 minutes (starting about 20 minutes in): https://www.quitefrankly.tv

Until next time, thanks again for reading….

Kip

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VRA Investment Update: Smart Money Hour, New Pattern? No Recession."Insane EU Energy Agenda."

Good Thursday morning all. Tuesdays afternoon comeback was impressive (coming off of a near no-bid open…real fear) led by Nasdaq’s 400 point swing higher, and we got a glimpse of that yesterday as the Dow went from -150 to +220 in less than an hour, marking back-to-back afternoon reversals higher. This is the pattern change that we want to see emerge. Nothing makes the shorts more nervous than this kind of late day action. 

Inflation is clearly plummeting and likely economic growth along with it, although yesterdays ISM services data beat estimates with a better than expected reading of 55.3 (recessionary fears kick in with sub 50 readings).

This week’s trading looks like there is less concern about inflation but with growing fears of a significant economic slowdown. Oil was down because of concerns that demand is dropping due to a sharply slowing economy but there are still inflationary pressures in food and other areas, so the danger of stagflation remains real. Weakness in the Euro is a particularly good indication of how fears of a recession in Europe are gaining traction. Putin appears to be winning on all fronts and Western leaders hardly seem to care less about the hardships their own people are experiencing. The situation in Europe is much worse than in the U.S., with the UK almost certainly already in a recession. 

Without question this mood is impacting U.S. markets, even as our economy has held up much better than other parts of the world. The data to date does not support a recession in the US, but with Biden as president it will frankly be a shock to me if we avoid one. Still, the economists that tend to get it most right (Ed Hyman and John Paulsen among them) simply are not seeing a recession in US; not with unemployment at 3.6%, home prices near record levels, a transportation industry that is still zooming and consumer net worth right at all time highs.

Again, Ed Hyman, the economic guru at Evercore, sees a slowing US economy with inflation that is absolutely easing but still sees no recession in the cards…but he may also be sending a message to Fed Chair J Powell (who its rumored reads Hyman’s work). A message something like this: “pay attention to the data JP…because it is quickly changing…or you’ll risk sending the US into a recession”.

The overall market is in bad shape…this has been an ugly bear market…but there are components that continue to impress, with strong relative strength from the exact ETF’s/indexes that started their bear market in 2021. We in fact have had a rotational bear market for more than a year with the indexes covering up the weakness in most stocks. 

Will we now see a reversal of the action with FIFO (first in, first out) continuing to lead the way higher? From ARKK (Cathie Woods Innovation ETF) to XBI (Biotech ETF) to IPO (Renaissance IPO ETF) to KWEB (China Internet ETF), each of these market leaders (pre 2021) that first led the way into this bear market, then went on to bottom on 5/12/22. Those lows have held. We continue to find this interesting and the longer it goes on the more likely that it may represent an important market tell.

This market is so hated…from most every point of view…we are due for one rocket ship of a bear market rally. 

Here are the signs of capitulation: 

1) The percent of co’s trading below the value of their cash and short term investments is at an all time high.

2) Optimism on global growth has fallen to an all time low (contrarian signal)

3) The AAII percentage of bulls is at its second highest level on record. The previous peak marked the markets lows in March 2009

4) And this big buy signal…money managers hate stocks.

Decades Long Analytics Point to Strong Second Half

1) AAII Investor Sentiment Survey. We’re coming off of back to back to back (historical readings) with less than 20% bulls (last nights reading was 22.8% bulls). Readings of less than 20% bulls have occurred just 10 x since 1987. Following each reading below 20% bulls, the market (S&P 500) has been higher 100% of the time over the next 6–12 months with avg gains of 13% and 23%.

2) The S&P 500 is down 21% for the year, which is the worst first half to any year since 1970. In previous years where the S&P 500 was down at least 15% through June (going back to 1932) the final six months of the year were higher 100% of the time (5/5) with an average return of 23.7%

3) Going back to 1962 when the previous 6 months took the S&P 500 down more than 15% (combined)…as now, with 21% losses…the next 6 months were then higher 100% of the time (7/7) with an average gain of 17%. Over the next year, the S&P 500 was also higher 100% of the time with an average gain of 29.6%.

VRA Bottom Line: 

If there was ever a market facing a “wall of worry” to climb, this is that market. Yes, we are in a bear market and yes, short term moves higher should (likely) be treated as bear market rallies. However, we’ve already fallen 24% in the S&P 500, which is the average bear market decline without a recession. In addition, most stocks have been declining and in a bear market for more than a year with the average stock losing more than 50% in value. This is also our 3rd bear market in 4 years and we should continue to expect everything to keep happening faster, meaning that bear markets can very quickly turned back into bull markets. 

I believe most stocks have bottomed, certainly in the VRA Portfolio. As covered above, investor sentiment, analytics and our VRA technicals were so bearish/oversold that we must be bullish.

Granted, the bears are still in control of this market but should the Fed be able to engineer a soft landing we’ll be left with a stock market that’s already been hit hard but without the accompanying recession. Did you see that the semis fell a total of 40% (when they got hit again on Monday). 40% losses in our most important tech sector and leading indicator of global business activity….thats a serious bear market. J Powell, are you paying attention? 

We want to see this 2-day pattern of strong afternoons continue and we really want to see the internals begin to improve. They were rather hideous the last 2 days. But as we’ve been covering here often, the first half of 2022 was so brutal…a worst 5 all-time…that investing probabilities and analytics point to a second half should be a barn burner to the upside. Possibly even a bull market within a bear market. Enough to make the bears nervous enough that they start covering their shorts…aggressively. With the midterms approaching, Biden needs at least one thing going for him. I’m pretty sure a quick talk with J Powell could get the stock market moving in the right direction.

Insane EU Energy Agenda

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Tyler here with you for this part of today’s update.

For years the EU has pursued their climate change agenda. Rejecting all forms of what they see as “unclean energy”. This has left much of Europe vulnerable on the energy front, and they are now on the brink of recession as natural gas prices have soared 700% since the start of last year.

As the energy crisis only appears to be getting worse in Europe, yesterday the EU voted to allow natural gas and nuclear energy to be labeled as green investments.

The legislation does not go into effect until the beginning of next year, but it will allow for much needed cash flows back into natural gas and nuclear energy. 

As we have seen time and time again, government intervention causes more problems than it solves.

For example, at the beginning of this year Germany decided to shut down half of their existing nuclear plants. They had planned to decommission all nuclear plants by the end of 2023 and phase out the use of coal by 2030… only to have an energy crisis not even a year later… and so then they decided to classify nuclear as “green energy” again.

Doesn’t it seem backwards to cut out nuclear before they cut out coal? That’s because it is, and it is all part of the scam that is ESG Investing. Now I’m sure those who came up with the ESG idea hoped to bring about a cleaner future. However, as we have learned from history, the road to hell is often paved with good intentions. This latest debacle is a great example.

Here are the facts

Germany has spent over $580 billion dollars on “renewable energies” such as wind and solar since their climate change initiative began. During that time energy prices have risen 51% in Germany (2006–2018).

Studies have now shown that Nuclear energy produces roughly double the amount of energy compared to solar and wind, and for about half of the cost. If Germany had spent the $580 billion on nuclear instead of on “renewable energy” (wind and solar), many believe they would now be producing more clean energy than they needed.

As countries like France have proven, nuclear power is a fantastic, low-cost, low-carbon energy option that is crucial to the future of energy production. Unlike Germany, France has continued to be a leader in the use of nuclear power. France got roughly 2.2% of its energy from coal as of 2020. While Germany got 28.8% of its energy from coal in 2021.

France now generates 2X more electricity from clean energy than Germany, and France pays about half as much for electricity compared to Germany.

Not only is Germany rushing to extend the life of nuclear plants, but European countries are now being forced to bring coal plants back online.

Clearly this isn’t really about creating a cleaner environment for future generations is it? No, ESG is a scam intended to funnel money from the energy markets into the pockets of ESG investment managers. Instead of providing affordable energy, climate czars are padding their pockets.

Unfortunately, Germany and most of Europe are running out of time to implement these measures. 

Now they have to resort to last ditch efforts like reopening coal plants as Germany says, “gas shortfalls could trigger a Lehman Brothers-like collapse, as Europe’s economic powerhouse faces the unprecedented prospect of businesses and consumers running out of power. The main Nord Stream pipeline that carries Russian gas to Germany is due to shut down on July 11 for ten days of maintenance, and there’s growing fear that Moscow may not reopen it.”

If only there was someone who could have warned them years ago that Europe’s reliance on Russian energy was a crisis in the making… Oh yeah, Trump did that 4 years ago and the German’s laughed at him.

GOLD

Gold has been knocked from near all time highs of $2078 to $1736/ounce over the last 4 months. Likely because inflation is collapsing even as the dollar keeps going higher. Gold has held its value better than most assets but now sits 16% off of its highs. The thinking from gold bears is; if we’re going into a tough recession (without QE on the horizon), “everything” is going lower. Gold has now pulled back to an area of strong support and is hitting heavily oversold on the VRA System. Keep buying physical gold and silver and VRA 10 Baggers. Pullbacks are a gift.

Energy stocks have also pulled back to their 200 dma and are a strong buy here. The chart below of ERX (2 x Energy ETF) makes
clear that we are at solid support, the sell off has been on light volume and we are hitting extreme oversold on VRA System.

Until next time, thanks again for reading…

Kip

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VRA Investment Update: Strategy Update. Pattern Changes, Fed 'Flexibility". The Anatomy of Bull & Bear Markets

Good Thursday morning all. Right at 3 months ago we began our planning for the Biden bear market and issuing our VRA Strategy Updates. We sold our VRA leveraged ETF holdings that focused on tech by selling TQQQ (3 x Nasdaq 100 ETF) and selling SOXL (3 x Semi ETF). We sold TQQQ at $45.94 (it fell to $25) and we sold SOXL at $34.85 (it fell to $18). We’ve also taken 112% in profits over the last 7 months (3 trades) in ERX (2 x Energy ETF).

VRA Strategy Update; that was then and this is now.

Our primary view is that; a) most stocks have bottomed, b) investor sentiment is so bearish that we must be bullish and c) we are buyers.

As we cover here often, most stocks have been in bear market for over a year. But today, if there’s a single piece of analytics that investors should be aware of, I believe this is it. 

After the first 100 days of 2022 this is the 4th worst start to a year for the S&P 500 in history. That’s the bad news. Here’s the good news. When we look at the previous worst starts ever for the S&P 500 we see that the rest of the year the market was higher 100% of the time with an average gain of 19.1%.

Got that? Based on history, going back to 1932, the worst starts to the year are then followed by markets that rise 100% of the time into year end and do so with rock solid profits.

AKA, bull markets follow bear markets…a theme you’ll see repeated throughout this VRA Strategy Update.

Pattern Changes and Fed Flexibility. 

As we’ve been covering over the last week or so, pattern changes appear to be emerging. From 3 straight days with a 600 point move higher in the Dow Jones, to continued improvement in the internals, to excellent smart money hours, this bear market is taking on a new personality. It may only be the set-up for a strong bear market rally, with still lower lows in our future, but I continue to believe that…for most stocks…the lows have already been seen. We are buyers. 

And another potentially massive pattern change…the Fed just committed to “flexibility”, the single word from the Fed’s FOMC minutes yesterday that turned stocks sharply higher on a dime.

Tylers podcast from Tuesday set this week teed up the Fed’s FOMC minutes of yesterday…a sneak preview of what looks to be taking place today. 

There is a new line of thinking beginning to emerge that the US economy is so clearly slowing (housing, trannies, retail and tech/social media/advertising is getting smashed) that the Fed will soon
signal that their aggressive rate hike scheme may not actually be quite so aggressive after all. Again, this matches our thinking. The Fed has been actively jawboning the markets lower, 
doing their best to slow/reverse inflationary concerns. But most of it is just that…talk. 

We just got a bit of confirmation from overseas as well as the ECB is now telegraphing a change to their runoff schedule for QE. Remember, the ECB is still actively involved in QE and is not set to stop buying govt debt until July.

The ECB is essentially acknowledging what we’ve been reporting in the VRA for the last few months. Their economy, post shutting down their banking business with Russian oligarchs and the insanity of attempting to block Russian oil/gas from European markets, has the European economy headed into a recession. 

Late Tuesday, ECB head Christine Lagarde said on Bloomberg “we’re not ready to say that the economy could be headed into a recession but we are watching closely, as always”.

That’s central bank talk for “yeah…a recession is just around the corner”.
We certainly see the US bond market taking note, as the 10 year yield has plummeted from 3.17% (5/9) to 2.74% (chart below).

 From a yield of just 2.3% in late March to a high of 3.16% on 5/9, this sharp ramp higher in rates resulted in the last wave of selling pressure in US stocks. 
Now, with the 10 yr yield reversing course, if the markets are beginning to discount aggressive Fed rate hikes…certainly with everyone already bearish and out of the market…a significant rally could be dead ahead. 
As deeply oversold as the markets are, along with the extreme fear readings of numerous investor sentiment surveys, the markets are ready for a relief rally (at minimum).

NVIDIA (NVDA): The Anatomy of Bull and Bear Markets

Bear markets make even the greatest of co’s look like the ugliest of car crashes. This is especially true in tech stocks.
It’s even more so in the semiconductors, which lead the markets in both directions. This is why you hear Tyler and I harp on and on about the semis.
There is no single group that matters more, when determining market direction and market personality. “Are we in a bull market or bear market?” can be determined most by watching this one group. 

Yesterday after the close, NVIDIA announced earnings and the stock got slammed as much as 9% after hours on a warning over chips and the lockdown in China. 

But that’s not the story I find most relevant. It’s the anatomy of a bear market that makes the NVDA meltdown relevant right now, in late May of 2022.

In the chart below, we see the very definition of an amazing stock. From nowhere, in 2016…just $6/share…a little company called NVIDIA began
to catch fire, as gaming and crypto currencies got red hot. No company did it better. 

From that 2016 starting point until November 2021, NVDA soared 5600%, turning a $10,000 investment into $560,000 in just 5 years.

This is where the relevance to today begins. When we drill down to Q4 2018 we see that NVDA had its first 50% + meltdown (in short order), dropping from $72/share to $30/share in roughly 4 months. 

From there it began its rocket ship move higher to $364/share, which it hit this past November. Buying into that 50% collapse made investors fortunes. But, it was a brutal Q4 bear market.
Sound familiar? 

Now, check out what’s just happened, again. In less than 6 months NVDA has…once again…imploded more than 50% (just as it did in Q4 2018).
And once again, this implosion is due (almost exclusively) to Fed rate hikes. China smyna…the land of semis/tech has been shellacked by central bank “awfulness”. 

BTW, on my podcast yesterday I called my shot…predicting that NVDA just hit their bear market lows of $152/share, down a stunning 56% from Novembers highs. VRA Portfolio Note: we own SOXL (3 x Semi ETF)

** The question that I believe smart money investors are asking themselves today is “at what point do great companies and sectors once again become a screaming buy?”

And this is when we must also take another look at Cathie Woods Innovation ETF (ARKK). Here’s that theme again…greatness, neutered by the brutality of a Fed engineered bear market.

From March 2016 to February 2021, ARKK soared from $13/share to $158/share, an 1100% move higher. No, its not the insane move higher that NVDA had, but we’re also talking about an ETF…rather than an individual stock…and $10,000 invested into the ARKK ETF turned into $110,000, in just 5 years. 

And now, look what’s just happened in 15 short months. ARKK just imploded 77%.

** And once again, the question that I believe smart money investors are asking themselves today is “at what point do great companies and sectors/ETF’s once again become a screaming buy?”

I’m not recommending either NVDA or ARKK here today (we own SOXL and our own portfolio of 10-baggers). I’m making the larger point that bear markets brutalize even the best investment stories. And I’m also making the point that bear markets end…and give way to even greater bull markets. 

Many believe we are at the precipice today, staring into the abyss, with fears of a systemic meltdown, World Economic Forum (Team Biden) style, featuring depopulation and a world war that might just end us all.

It’s essentially impossible to find anyone that’s bullish on US stocks. Again, that was pretty much me 3 months ago…but at my core I’m too much of an optimist on America and Americans to throw in the towel. 

Its the singular thing I’ve respected most about Warren Buffett and the great Peter Lynch; they always want to invest in America…because no country is better than America…and America always makes a comeback. Betting against America has been a losing proposition 100% of the time. 

And Buffett and Lynch also know that bear markets give way to new, and far more powerful, bull markets. 

From the S&P 500 to Nasdaq to Russell 2000 to the semiconductors these leaders just plummeted 20–50% + and did so in short order.

Many stocks are down 50–60–70%, (again, including Cathie Woods ARKK and its 77%, 15 month meltdown). BTW, Cathie Wood has never been more bullish.

Woods and her team of investing rain men/women just put out a research paper stating “advancements in AI will soon produce annual GDP growth of up to 50%/year”. 

As you can imagine, the pushback against Wood on this “out there” claim has been fierce. But man oh man, is Woods ever smart. No way am I betting against Cathie Wood, just as I wouldn’t bet against Elon Musk. Woods largest and most successful holding for years has been Tesla (although I did buy it cheaper than Wood).

Here’s the bottom line truth; today, there are so many bears that a true contrarian must be bullish. It’s not much more complicated than that. 

Again, I’m not calling a bottom. But I am saying that investment opportunities abound and that yes, most stocks have already bottomed. 

This wall of worry is about to be climbed.

VRA Bottom Line: I believe we will look back and see this bear market for what it is…a reset in both the economy and the markets…and that the best of America (and a newly red-pilled world), lay directly in front of us.

Until next time, thanks again for reading….

Kip

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VRA Investment Update: CPI at 40 Year High. Thanks Again Biden. Textbook Bottom and Bear Trap. Gold and Miners Love Rising Rate Cycles

Good Thursday morning all. The much awaited CPI data is out and its a hot number, with inflation hitting a 40 year high as the CPI posts a 7.5% annual gain in January. Honestly, don’t most of us look at this number and say “what do you mean it only rose 7.5% year over year…based on what I’m paying for stuff it feels much more like annual inflation of 20% +.”

Lets see, what’s changed over the last year? Thats right, we got a new president…the basement dweller with “81 million votes”. Not sure about you but I cannot find a single person that will admit to voting for Biden. 

The markets were flat in advance of the CPI data but immediately went south, with DJ now -225 and Nasdaq down a bigger 260 (-1.8%). 

In the bigger picture, this market has been on an absolute bull run, following what looks to this market watcher to have been a perfectly set “bear trap”, as I explained in our VRA Podcast yesterday. 

The 1/24 market bottom and the corresponding move higher has been “textbook”, so far. 

First, we had the 1/24 capitulation…classically completed on a sharply lower Monday open, just as the average Nasdaq stock had already collapsed by more than 50%.

Second, tech…led by the semis…have led the way higher. Nvidia (NVDA), which we highlighted in yesterdays VRA Update, has been a nonstop freight train higher…up a big 6.5% yesterday…and +22% from those 1/24 capitulation lows. 

Third, our VRA Investing System continues to pick up “significant pattern changes”, both in market internals and key leadership action, as the smart money hours are flipping back to bullish as well. Yesterdays internals were the best readings of 2022, with 80–85% up volume (NYSE, Nasdaq)…6:1 for Nasdaq…and another big day for advance declines. Back to back, fantastic days.

VRA Bottom Line: The markets have zoomed higher from the 1/24 lows. In just 2 weeks, a 2300 point move higher in the DJ (+7.5%) and a near 1400 point move higher in Nasdaq (+10.6%) and a BIG 16% move higher in the Semis (SMH)…and we remain buyers of dips, in our VRA Portfolio Positions. 

We’re still in the most seasonally bullish time of the year, equity inflows and share buybacks are piling in and the biggie; we’re still just entering year 3 of a new bull market, driven by (still) solid corporate earnings and record amounts of global liquidity. As we’ve said now for 18 months plus, this is a structural bull market, with the Trump Economic Miracle (still) serving as its springboard and corporate financial engineering emerging as a dark horse element for sharply higher prices. 

Plus one of mine and Tyler’s favorites; we told you several months ago that Biden was already a lame duck president…that’s now being recognized as fact…and the markets love DC gridlock as much as just about anything. They also love (early) rate hikes…but that looks like a stat that many market watchers have (oddly) yet to figure out. I think they’ll get there…”

Gold and the Miners LOVE Rate Hike Cycles 

Check out this 20 year chart of gold below, marked by points 1–6.

Point 1 is where I first recommended gold and silver, in my 2nd ever VRA Update in 2003. Gold was $375/oz….silver was $4.75/oz. 

What followed was the rising rate cycle of 2004–2006 (17 straight rate hikes) when gold that more than doubled in price. 

Point 5 was the next rate hike cycle (2016) as the Fed jacked rates higher 8 times in Trumps first 2 years. Again, gold doubled in price.

They REALLY love rising rate cycles. 

Finally, here’s golds 1 year chart, featuring a pennant formation (even the flagpole is in place). I believe a big breakout is nearing.

Until next time, thanks again for reading…

Kip

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VRA Investment Update: The Fed Statement & Powell Presser Had Little in Common. Dovish! Markets Have (Likely) Bottomed. Sentiment is Screaming "Buy".

Good Thursday morning all. Following another wild day in the markets, here’s what looks to matter most. The last 3 days have brought severe intraday weakness…Powell made sure of that yesterday…but on each of the 3 days the smart money hour was “bullish”. On Monday we recouped 1200 points in losses….500 on Tuesday…then 500 again yesterday. Markets that rise in late day/smart money hour trading are typically anything but bearish. 

But just a horrible presser…the worst I’ve seen in my career. He was nervous, stuttering and stammering, completely non-committal and man oh man does this guy like to blabber. The markets have no confidence in the money printing rock star, whatsoever. From +500 to panic selling to someone cutting his mic. Of course, the second his mic was cut, it was lift off.

Quick recap of JP’s (latest) disaster of a presser, which I forced myself to go back and watch again last night:

- It was even more dovish than I remembered it. Powell committed to “nothing”, as he said a version of “we don’t yet know” more than 50 x. 

- He opened by saying (exact quotes): “The economy is slowing. The implications for the economy are uncertain and its causing great hardships for families. We have not yet made decisions on exactly what we will do”.
 
- Does any of the above sounds like 4 rate hikes in 2022 to you??

- Again, the FOMC statement read NOTHING like the words that came out of JP’s mouth. Importantly, the statement made clear that they would NOT start selling bonds (they own $9 trillion), but would instead let them “roll off” or “run off”, meaning they will simply let the existing bonds mature. Again, that’s not QT. 

My read: Obviously, inflation is the Fed’s biggest concern. Yellen (Treasury Sec and previous Fed Chair) is now a full-on political creature. Hiking rates aggressively in a midterm year and causing a severe bear market potentially in the process is NOT what her boss wants to see happen. JP likely has Q1 to get inflation under control, hence all of the jaw boning and supposed hawkishness. 

The markets have little to no confidence that JP know what he is doing. They’re right to have that view, certainly with the fact that he’s already made 4 major policy mistakes since taking the job.

VRA Bottom Line: Mondays lows should be THE lows. Thats:

- 33,150 on the Dow (34,168 today)

- 4222 on SPX (4349 today)

- 33,150 on Nasdaq (13,542 today)

** If these lows are taken out (by more than a hair), lower prices are likely into the first rate hike…then blast off higher. But I see Mondays lows holding. Next up: we must regain the 200 dma’s.

Sentiment HIGHLY Bearish (that’s bullish):

Folks, it’e getting harder to find bulls on Wall Street. But I promise you this; if we get the move higher that Tyler and I expect, these same gurus will tell us that they bought the dip. I was actually a bit surprised to see this yesterday. As flattered as Tyler and I might be that GS (vampire squid), Citi and JPM are following our market calls, you know our views as contrarians; we almost always feel more comfortable when we are in direct opposition to what the NY swamp has to say.

BUT…in this case, since we’re leading and not following, we are in complete agreement. 

This is still setting up as a strong rally into weeks end. Likely longer. 

AAII Sentiment Survey is hitting the highest levels of bears since the final 2 weeks of CV insanity, March 2020. Bulls are a measly 23%. 
Again, if you’re a contrarian (this guy), you are salivating to add to your positions…as we’ve just done.

** Futures are solidly higher as we start the day. I think these gains will hold and I look for another strong smart money hour. 


CV Insanity is officially over in the UK. Who would have thought they would end the ridiculous policies of masking and jab mandates before we did in the US??



God Bless The Truckers! Largest convoy in history. 50,000 trucks and more than 1.4 million people. US truckers are on their way now as well. Who knows, this might be enough to give (more) Canadians a backbone. 

https://twitter.com/MaajidNawaz/status/1486508908093087751



Until next time, thanks again for reading…

Kip

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