VRA Investment Update: The Rubber Band, Stretched Too Far. Semis; Extreme Oversold on Steroids.

Good Thursday morning all. 

Following last Friday's jobs report the markets moved sharply higher, only to give up all of its gains and then close lower by 1% across the board on concerns that Russia would cut off European gas supplies (which happened). However, its my view that this news is baked in the “fear cake”….another “buy the rumor sell the news” event that we believe will send this market higher from here.

Folks, everyone is SO bearish on Europe…and frankly the US as well…that I’ll be surprised if we see much more downside from here.

Did you see the massive rallies throughout Europe over the weekend, protesting high gas prices, giving more money to Ukraine and the war itself? Major support is building for Russia. The people of Europe have seen enough. Let’s see if it makes a difference. This was all over social media throughout the UK over the weekend. We feel your pain, UK.

Two points on US Markets

1) no, the US is not in recession. Just not possible with unemployment rate of 3.7% and more than 300k jobs being produced.

2) yes, we can absolutely expect unemployment to rise, but not by as much as the permabears expect. The Trump Economic Miracle is still in place. It was constructed to power the US economy for more than a decade, and with Trumps tax cuts and deregulation still in place (yes, most of Trumps economic policies are still intact) and his anti-China, America First policies still bringing China to their knees and the “reshoring” of US jobs a VERY real thing, the gloom and doomers still have it wrong on the US economy. 

Caveat; yes, we have an America-hating President that was installed in 2020. God knows hes doing everything possible to tear down the economic miracle that Trump built, but if his address to the nation last week is any indication, no one is listening. When even your besties in MSM refuse to carry your prime time address, you know your reign is ending. Imagine that; when you call half the country domestic terrorists and threaten the use of F-15’s against them, that message actually turns people off. What an absolute loser.

Let’s Go Brandon. The midterms are just 2 months away. Get ready for a red-pilled America to make their presence felt and for absolute gridlock in DC (the markets love DC gridlock). My wish remains; make Trump Speaker of the House. PPV the House hearings and pay off the national debt.

VRA Market Update

Roughly 3 weeks ago we began advising that the VRA Investing System had reached the broad market designation we refer to as “extreme overbought on steroids”, our most overbought readings and when bad things tend to happen in the market. Because we expected the pause/pullback to be just that, and not the resumption of a major new move lower, we only recommended pausing any new purchases of our broad based market ETF buy recs (we always use monthly dollar cost averaging to add to our VRA 10-baggers). 

But today, the script has flipped. We have reached the same level of extreme oversold (Short term) that we hit just before the markets bottomed in June. We are buyers here.

Take a look at our market leader, the semiconductors (SMH)….because we are essentially there…a hair away from extreme oversold on steroids. Each of our VRA momentum oscillators (RSI, MACD, Stochasics and MFI) are red-lining extreme oversold (only RSI has a bit of daylight left). 

The SMH rubber band has stretched about as far as it can go. We are right at the point where significant moves in the other direction take place. In addition, the descending blue trend line that’s been in place since late March and has acted as resistance should now act as support. SMH remains some 8% above its bear market lows of early July. 

We look for this “higher low” to hold and for SMH to reverse higher from here.

GOLD: Helene Meisler, one of our long term favorite market watchers and technicians, put this chart out of gold over the weekend. 
In early March, gold had a bearish island reversal. On Thursday, gold had a bullish island reversal. We remain in the most bullish time frame of the year for gold.

Finally for today, I once again must post the most powerful set of analytics of my career.

The markets LOVE moving higher once the midterm lows are in. WOW.

Until next time, thanks again for reading….

Kip

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VRA Investment Update: FOMC Minutes, Dovish. Extreme Overbought, Patience. Housing, Still Powering the US Economy.

Good Thursday afternoon all. The Fed minutes from the July meeting are out and, surprise surprise, they show a Fed with multiple members expressing concerns about tightening rates too much. Good. That means they are actually following the data, which is exactly what they are supposed to do. The countdown is already on for early next year when the Fed starts cutting rates again, as inflation is turning into disinflation and next year will turn into full-on deflation. This of course is a bullish set up for stocks. 

Gold rallied a bit on the dovish Fed news, but the miners (GDX) still closed down 3% on the day. Not that I can make sense of this, because it makes no sense. We are in the most bullish time frame of the year (first week of August til mid-October), with sentiment flashing big buy signals and commercial players bullish. The chart of GDX still shows an early pattern of higher highs and lows over the last month and GDX remains in a rising channel. Still high probability that this group rallies hard over the next 2.5 months and into year end. Goldman Sachs target of $2500/oz gold remains in place. We are buyers of VRA 10 Baggers and physical gold and silver. 

Extreme Overbought, Patience

The markets are working off their extreme overbought readings, a process that takes time and patience. This market has been so strong that I expect any pause should be short-lived. S&P 500 futures positioning shows the largest short position since June 2020, meaning a short covering rally could continue to be a driving force for higher prices (along with underinvested fund managers).

We avoid adding to our broad market positions when we hit extreme overbought on the VRA Investing System. Again, patience and discipline the key here. But with the “melt-up into the midterms”, as Tyler covered well in his podcast yesterday, we’ll also be surprised if this overbought pause turns into a steep sell-off. 

VRA Leading Economic Indicator “Housing” Still Strong, Powering the US Economy

Housing, the most important leading economic indicator for the VRA Investing System, continues to power the US economy. Over the last 2–3 weeks I have reached out and spoken with 7 VRA Members that are leading business owners and entrepreneurs in the housing, real estate and mortgage markets across America, covering the most important economic segments of the country. Each repeated a a very similar story to me; yes, things have cooled off but the housing and real estate markets are still very vibrant, even strong. Cash buyers are still everywhere, with homes selling in near record time. I was struck by their positivity and bright outlooks. Alphas all. I love speaking with entrepreneurs.

As always, we should guard against the permabears of the myriad sites like Zero Hedge and the plethora of doom and gloom purveyors that see economic depression and housing crashes around every corner. There is a psychological operation in place in this country…the Cloward-Piven design…to demoralize and depress us. Designed to make us weak and vulnerable. We must reject this communist tactic used to take down republics/democracies. America is undefeated…and communism always loses in the end.

But yes, as quickly as mortgage rates have risen, the red-hot housing market has cooled off. The Fed’s rate hikes and hike-a-mania rate hike jaw boning has worked, along with 40 year highs in inflation, to cool off the 20% per year home price appreciation. Ed Hyman, true guru economist at Evercore notes that we now have recessionary readings in housing in the US. That means growth has gone beyond slowing…it has stalled almost completely. This was by design by the Fed. So far, so good.

All of this has people asking: Is today’s housing market in the same predicament that it was over a decade ago, when the 2007–08 crash caused the Great Recession?

The short answer is: no.

1) For the 53.5 million first lien home mortgages in America today, the average borrower FICO credit score is a record high 751. It was 699 in 2010, two years after the financial sector’s meltdown. Lenders have been much more strict about lending, much of that reflected in credit quality.

2) Home prices have soared, as well, due to pandemic-fueled demand over the past two years. That gives today’s homeowners record amounts of home equity. So-called tappable equity, which is the amount of cash a borrower can take out of their home while still leaving 20% equity on paper, hit a record high of $11 trillion collectively this year, according to Black Knight, a mortgage technology and data provider. That’s a 34% increase from a year ago.

3) At the same time, leverage, which is how much debt the homeowner has against the home’s value, has fallen dramatically.

Total mortgage debt in the United States is now less than 43% of current home values, the lowest on record. Negative equity, which is when a borrower owes more on the loan than the home is worth, is virtually nonexistent. Compare that to the more than 1 in 4 borrowers who were under water in 2011. Just 2.5% of borrowers have less than 10% equity in their homes. All of this provides a huge cushion should home prices actually fall.

4) There are currently 2.5 million adjustable-rate mortgages, or ARMs, outstanding today, or about 8% of active mortgages. That is the lowest volume on record. In 2007, just before the housing market crash, there were 13.1 million ARMs, representing 36% of all mortgages.

5) Mortgage delinquencies are now at a record low, with just under 3% of mortgages past due. Even with the sharp jump in delinquencies during the first year of the pandemic, there are fewer past-due mortgages than there were before the pandemic.

“The mortgage market is on very historically strong footing,” said Andy Walden, vice president of enterprise research at Black Knight.

“Mortgage credit availability is well below where it was just before the pandemic”, according to the Mortgage Bankers Association, suggesting still-tight standards.

The biggest problem in the housing market now is home affordability, which is at a record low in at least 44 major markets, according to Black Knight. While inventory is starting to rise, it is still about half of pre-pandemic levels.

“Rising inventory will eventually cool home price growth, but the double-digit pace has shown remarkable sticking power so far,” said Danielle Hale, chief economist at Realtor.com. “As higher housing costs begin to max out some buyers’ budgets, those who remain in the market can look forward to relatively less competitive conditions later in the year.”

VRA Bottom Line: until and unless the US housing market cracks, the US economy will remain on firm footing. Combined with our second most important leading economic indicator (transportation), which continues very near all time revenue levels in the US, the foundational strength of the US economy remains intact. If we have a “real” recession (NBER) it is unlikely until mid-late 2023 (at the earliest). As a reminder, by the time economists pronounce that an official recession has begun we are already out of it, with stock prices on average 15–20% higher. 

Combined, here’s what this bear market most likely represents; a stock market, economic and housing reset. We have been aggressive buyers of the market, and specifically VRA Portfolio holdings, since late May. Never bet against America.

9/11 Gave Birth to The Patriot Act Which Gave Birth to the Deep State. Must Read.

If you want to know how we got here, here’s the piece that makes everything clear. The Patriot Act was written long before 9/11 and then enacted just 5 weeks after the attacks. 
The Patriot Act produced the deep state and very importantly, our 4th branch of government, the Intelligence Branch. This is the branch that is our shadow government. The actual deep state. This is the branch that rigs elections and starts wars. This is the branch that decides who gets elected and how they vote. The branch that tells the Justice Dept and FBI what to do. This is the imbedded evil that Trump and patriots all across America are fighting. Everyone is talking about this piece (thanks to VRA Member David S for sending my way). Read/share. 

https://theconservativetreehouse.com/blog/2022/08/11/part-1-why-did-the-doj-and-fbi-execute-the-raid-on-trump-the-story-behind-the-documents/

This is What Happens When Elections Cannot Be Rigged

Liz Cheney got absolutely smoked last night by Trump-endorsed Harriet Hageman, losing by 37 points, the fourth loss loss by an incumbent since 1968. 

Trump has now taken down 3 dynasties; Bush’s, Clintons and Cheneys. Trump is the closest thing to George Washington this country has had, since Washington himself (now Mr. President, please focus on staffing and avoiding deep state events, like plandemics). Cheney will of course head right to CNN/MSNBC where she will be celebrated by Deep State, Uniparty America-haters.

Until next time, thanks again for reading….

Kip

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VRA Investment Update: The Bear Market Rally We've Been Waiting For. Welcome to Unlimited QE.

Good Friday morning all. Another big market comeback yesterday, featuring a Dow Jones that rallied from -350 to close +162, led once again by Nasdaq (+1.4%) and Semis (1.7%) and our new repeating pattern of MUCH better internals. This bear market rally looks and feels like it has the potential to be the first big one that we’ve had to date. The kind of move higher that makes even the permabears start questioning whether the final market lows are in place. 

Our view, over the last month, has been:

-Inflation is peaking (looking definite now, but we’re still left with stagflation)
-Interest rates have peaked (almost certainly now)
-The dollar should reverse lower (underway but not a lock)
-Still no (definite) signs of impending recession (that’s a 2023 story)
-Analytics tell us to expect a strong move higher for stocks, into year end (likely the most convincing data of my career).
-Investors are (much) too bearish (still the case, especially among fund/money managers)
-the next big move in the semiconductors will be the tell (up 22% from 7/5)
-gold, silver, miners & energy are buys (explosive moves higher nearing)

Our VRA Strategy Update from June 23rd:

“VRA Strategy Update.

The economy is slowing, inflation is peaking, yields are topping and investors are too bearish. These are my views. If we are going to have the bear market rally that Tyler and I expect, the action of the last two days is pretty much exactly what you’d want to see. A solid day on Tuesday (Dow +640) followed by yesterdays sharply lower open and then sizable rebound. Nothing makes the shorts more nervous than this kind of action.

And each day we get closer to the end of June is a good day. Soon, beginning of month and quarter equity inflows begin. Sizable buying.
At the same time, share buybacks are occurring at record levels and insider buying has flipped to aggressive. 

This market should move higher into July. And we have some fresh (and powerful) analytics to back it up.”

* And this was the single piece of analytics that we’ve been most focused on (also from 6/23)…it points to a move higher into year end that could be a rocket-ship:

The S&P 500 is down 21% for the year, which would be the worst first half to any year since 1970. The good news is that in previous years we were down at least 15% through June (going back to 1932) we then saw the final six months of the year higher 100% of the time (5/5) with an average return of 23.7% (h/t LPL).

However, trees don’t grow to the sky overnight. This happened a couple of days sooner than expected but as Tyler covered in great detail on his podcast yesterday, each of our broad market indexes (Dow, S&P 500, Nasdaq and Russell 2000) have now reached extreme overbought on our short term VRA Momentum Oscillators. Over the last 18 months +, each time we’ve reached this level of overbought the end result has been a near term reversal lower. 

Below we see it in market leader, SMH (Semi ETF), which is at extreme overbought on stochastics and is also hitting a downtrend line that has served as solid resistance going back to the beginning of the 40% collapse in the semis (January). The vertical blue lines show what has happened the last two times that the semis hit this level of ST overbought…near immediate reversals lower. 

VRA Bottom Line: what happens next, to both our broad markets (and especially the semis) is most important. Because we have yet to hit “extreme overbought on steroids”, our VRA designation for extreme overbought on all of our momentum oscillators, if the market/semis can continue to move higher…in essence breaking this repeating pattern of the last 18 months…nothing could be more bullish. I’m thinking that this time is going to be different. I think this is the bear market rally that has staying power. The one that makes permabears extra nervous…and forces the shorts to get squeezed. That’s how we are playing it. 

More on the TPI (Transmission Protection Instrument) from the ECB:

Tyler also covered the TPI in detail. Yesterday the ECB launched another central bank tool of financial engineering, via the introduction of the TPI. Unlimited QE. Zero transparency. This move from central bankers gave the middle finger to the world, reminding us all exactly who our financial masters of the universe are. We reiterate our forecasts of the last year; by approx 2025, interest rates in the US will be negative. QE will only ramp higher from here. We’re already seeing a collapse in rates in the US, with 10 year yields falling from 3.48% on 6/14 to 2.8% this morning. 

And look what’s taking place in Germany, Europes most important bellwether country. Inside of a month 10 year yields have fallen from 1.66% to 1% this morning. The ECB hiked rates to zero percent yesterday but as always, central banks follow, they never lead. Next up, likely by Q1 2023, the ECB will be cutting rates once again. We’re all turning Japanese…just as we have been since 2001, when Japan was the first country to launch QE.

Until next time, thanks again for reading….

Kip

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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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