VRA Update: Should We Stay or Should We Go?

As I wrote last week, with less than 3/4 of traders expecting the FED to raise rates on Thursday, the risk in the markets is clearly to the downside. 

It's exactly this kind of scenario that beckons all card carrying contrarians to ask the obvious question; should we act with the majority... those expecting the FED to stand pat...or should we take the flip-side of the majority view, sell everything and then go 100% short stocks? Should we stay or should we go?

As uncomfortable as this makes me, everything that I see tells me that there is little chance that the FED acts to increase rates. Instead, this is the most likely scenario that I see playing out. I'll go out on a limb and assign an 80% probability to the following, when the FED announces that they are NOT raising rates:

1) The FED will announce that they will break protocol and will meet again in October (their next scheduled meeting is in November, as they meet every other month). The "hint" being that they may raise rates in 30 days. The drama continues...just as these self-appointed, financial masters of the universe, prefer it. 

2) In their official statement, the FED will announce their reasons for waiting to move; which will highlight a) recent domestic and international (China) volatility/weakness, and the forward affect on US GDP b) continuing slack with inflation expectations, c) US dollar strength d) ongoing destruction in oil (commodity) prices and resulting job losses, and finally e) US wage growth, which continues to lag.

3) The FED will be lambasted widely for the spectacle of it all...just as they should be. Central banks have taken complete control of every sector of the global economy. They can pretend all they want that their desire is to return to a "normalized" interest rate environment, but it's exactly their previous actions of the past 7 years that make this desire impossible to achieve. 

4) Finally, regardless of what the FED does, we will see a massive "relief rally" following the news. Importantly, should the FED raise rates, this rally will only kick in once the initial fall-out is over. At most, I see a decline back to the 8/24 lows, but quiet likely, not to that extent. 

Should the FED keep rates unchanged, as I expect, the relief rally will begin immediately, with gains of 500 points + in minutes...followed by add-on gains in the next 1-2 days. 

This is as "on the record" as I can be. And no, you will almost certainly not find these kinds of exact and specific predictions elsewhere. If I am wrong, our portfolios will take an immediate hit...there's little doubt about that. Either way, I encourage everyone to keep some powder dry...because the trading opportunities following the FED news should be "special". 

To add credence to my precious FED predictions, there’s a very interesting article in the WSJ this morning about central banks that have increased rates since 2008. More than a dozen central banks have raised rates, only to have to reverse course and then cut them again aggressively…with each now being far below the initial interest rate level where they first raised rates.

But this is the most important point that I could make, regarding the FEDs decision on rates; the Bernake and Yellen FED is the most market & politically driven FED that we have seen...certainly in our lifetimes, if not all time. It's for this reason, above all, that I expect the FED to keep rates unchanged. 

Let's keep some powder dry…gonna be an interesting week. 

 

Kip

vraletter.com

VRA Profits Continue to Roll In. + 510% Net Gains in Last Two Months & 1900% Total in Last Two Years

Aug 27, 2015

Without question, these last couple of weeks have been incredibly difficult for the average investor, both here and globally. Most emerging markets have losses of 30% to 50% off of their annual highs, and in the US, we've just experienced our first "true correction" in 4 1/2 years, with the major indices falling more than 10% from their peaks (anything over 10% is considered a correction, with anything over 20% considered a bear market).

BTW, market corrections are not only healthy, but they are actually REQUIRED, in order for a bull market to continue it's advance (a point that few "TV guru's" is making). The fact that we went 4 1/2 years without one is off the charts amazing...in fact, it's an all time record.

We've been much more fortunate here at the VRA, as we've been able to navigate the highs/lows well, which has allowed us to continue putting up market smashing returns. Over the last two months, as most stocks were beginning to fade quickly, we have recorded net profits of 510%.

During this time, we've had a total of 10 trades (buys/sells..closed out positions), and our record is 9-1. This puts our industry leading total at more than 1900% in net gains over the last two years.

As I tweeted on Thursday, "anyone that was able to come out of this market insanity with their portfolio intact should feel great about themselves...as this makes you the truly smart money." Now, the key is keeping our heads screwed on straight with our eye on the prize. It's quite likely that the worst may be over, but folks, trust me when I tell you that this recovery will almost certainly NOT be straight up. Take a look at the following 1 year chart for the S&P 500. Talk about ugly...this is what a chart looks like when you drop 1100 points within an hour of the open on the Dow and 225 points on the S&P 500.

So, what are we to make of this chart? Well, I can tell you right away that I HIGHLY doubt we are headed back to fresh highs anytime soon. Keep these levels in mind; Dow Jones: 17,790 & S&P 500: 2075

These levels are where the 200 day moving average of both indices reside, and there's one thing I can pretty much guarantee you; once we start to approach these levels again, you can bet your bottom dollar that the shorts are going to come out in full force (not to mention the 50 dma as well...something I will alert you on in future updates). 

Bottom line: in order to get back over the 200 dma, we need additional gains of more than 7%...and it won't be easy. Only then, will technical analysts like myself be willing to flash the "all clear" sign for a healthy bull market. So yes...it's pins and needles time until then for Mr. Market.

Kip

vraletter.com

VRA Update: The Perma Bears Are Out AGAIN!

Beginning this week, I have started to see all of those same perma-bears calling for ’The Big One”…the global stock market crash that they have been predicting for years. 

Once again, they will be proven wrong. Here’s how I know this to be the case; VERY FEW experts ever see a "big one" coming…in fact, in my entire career, I have yet to see more than 1-2 people get this kind of prediction right. Let that sink in….because right now, all of those same “little boys that cry wolf” are calling for THE BIG ONE.

 

Folks, crashes are called a crash because they tend to catch almost everyone off-guard. That just ain’t the case right now….

 

As to China, I have just finished reading some incredibly interesting analysis by the IMF (intl. monetary fund) on the recent moves out of China, and the devaluing of their currency. Turns out…and this is pretty big guys and girls…that this is EXACTLY what the IMF and World Bank had been recommending China to actually do.

 

Why? Well, in order for China’s Yuan to be included as a so-called "world's reserve currency", they have been advised that they MUST join in with the rest of the planet, and they must weaken their currency.

 

Having said that, I STILL want to see a selling climax before taking aggressive action on the long side. Ideally, that would mean a Monday morning major sell-off….on big volume. THAT would be “seeing the whites of their eyes”. Also, we just haven’t reached big time oversold levels yet…as crazy as that may seem.

 

Finally, and this is pretty compelling….as of this week, 56% of all S&P 500 stocks are already in correction territory, with more than half of these down over 20% from their recent highs. The current sell-off isn’t actually new….and it may well be entering its final phase soon.

 

I want to act…I see 2-3 really interesting opportunities, but not quite ready to catch a falling knife. This does feel like lower prices need to occur first…the question is, how much lower?

 

Kip

vraletter.com

 

Profits Booked: Important Portfolio Comments & Your Emails

Since June 29th, or just over 3 weeks, the VRA has booked fresh profits of 236%...not a bad 3 weeks, but now, it's time to look forward. Where is the market headed next, and where will our future profits come from?

To answer a couple of emails that have already come in, NO....I am not quiet ready to go short the market. We could be missing out on an opportunity to make money as the overall stock market drops, but I'm not ready to pull the trigger...but yes...the time could be fast approaching.

Ideally, here's what I would like to see; Apple reported earnings after the market closed today. Should Apple have reported a good number (which they did not) and the stock fail to move higher, this would be considered a "breakdown", and would also mark a triple top in the stock since February. With the narrowing action that I'm seeing in the market already, combined with poor market internals all around (new highs/new lows, up/down volume, plus very poor money flows and a plummeting money supply figure), the VRA Trading & Investing System would consider a major Apple breakdown as "soft" confirmation that a short term top (at minimum) is in place for the market. These are the kinds of "tells" that long term market pro's look for...we are as well.

WHEN we take action, we will once again use leveraged ETF's and put options to profit from the downside action. 

PORTFOLIO COMMENTS:

1) PRECIOUS METALS: The breakdown in PM's and miners is as ugly as it gets. And, because it coincides with the breakdown in oil and every other major commodity that I track, I don't know that we have enough reasons to believe that a final bottom is in place (although yesterdays selling sure did resemble a selling climax...wow...huge volumes, in fact, the LARGEST one day volume on record in GDX. We may well look back and see that yesterdays lows were THE lows). I am not removing our buy recommended PM stocks from the VRA...I have far too much confidence in their long term potential to do so. Remember, nothing has changed with our global debt scenario. The collapse that we've just seen take place in Greece will be repeated time and again in the years going forward. Ultimately, the coming calamity in fiat currency and sovereign debt defaults will cause precious metals to soar to prices that most cannot fathom today. But no one said that it would be easy...and making money in PM's and miners certainly has not been. 

 2) MONEY MANAGEMENT: Folks, please listen to me on this point...and it's one that we will address further on our conference call next Tuesday, which literally everyone should make an effort to attend (and no, it will not be recorded); the days of buy and hold investing are over...I don't see them returning...at least not in the next few years. Unless you are ok with making a few percentage points with index funds or mutual funds (if that...most are losing money), you must become at least somewhat active in your approach to money management. It's your money after all...and no one cares more about it than you. Letting it just sit there makes little to no sense...not in today's world. If your investment professional is telling you otherwise, show him the VRA results...then compare results with his/her advice.

Over the last couple of years, I know from working with many of you that have adopted the VRA approach to investing, which can be summed up like this: "we aren't day traders...but with the help of the VRA Trading & Investing System, we have a time-tested formula for consistently beating the stock market like a red-headed step-child." I've been at it with the VRA for over 12 years now, and I fully intend to be here doing this for another 12 (God willing). Should you desire to take full advantage of our approach at the VRA, I have one major mindset point to share with you: with the start of each new day, view your portfolio "from this point moving forward"....instead of, "the things that happened in the past are overtly influencing my investment decisions of today". If this point is not clear to you, I will get into more detail on it on the call next week. This point is MOST important...and it's the exact mindset of every smart money investor that I know.

YOUR EMAILS:

"Hi Kip, just want to let you know how much I have appreciated everything that goes into your VRA letter. I have subscribed to a lot of investment newsletters over the years but none that come close to your combination of insight and results. My heartfelt thanks for everything you put into it as well as your salt of the earth style. You've got a subscriber for life! FK, Vancouver"

 

Thanks very much FK. You and I go back a long ways, and I've enjoyed your feedback and alternative views on any number of subjects over the years. In a recent email you mentioned that you admired my candor with the mistakes at the VRA, as well as the victories...and I'd like to address this more fully here. One of my investment hero's is Peter Lynch, who said that he made money on just 6 out of 10 investments...all while averaging close to 28%/year in his illustrious mutual fund career with Fidelity.

He also told us that the 40% that he lost money on drove him crazy...a point that I connect with a million %. This was one of the issues that troubled me most on Wall Street (losing money for clients), and while I no longer have clients in the same sense (as a newsletter guy), I still feel that same sense of pain when positions like PM's fail to perform as expected....or worse, that result in actual losses.  At the same time, I know that "taking losses" is every bit as important as "taking gains", and that you cannot be a successful investor without recognizing the importance of both sides of the investment coin.

 

Will we be able to duplicate the 1900% net returns from the last 19 months going forward? Candidly, those odds are likely not very high...it's been a magical point in time...and all of this has happened with key stocks yet to participate and precious metals trading like death warmed over. 

But here's what I can say with absolute confidence; as long as we continue to apply ourselves 100%...and as long as we stay true to the VRA Trading & Investing System, I like our chances to continue dominating the stock market a great deal. And, my personal goal is to BEAT that 1900% over the next 19 months...

 

"Kip, I've been here close to 2 years and I read every update closely. Your work is unlike anything I have read. While my portfolio has grown nicely, I am disappointed that my returns have not matched the VRA's (the fear and greed that you write about often). I can tell from analyzing your Core Portfolio this is because I have not followed all of your options buys and more short term trading. I am 74 years "young", and in your opinion, should I be more active and follow all of your VRA buys? Thanks so much. My wife and I love your work. GR, New Mexico"

 

Thanks GR...and to your wife as well. Your question is really about your "Personal Risk/Return Mindset/Equation". Are you willing to take on greater degrees of risk in search of higher returns? And, only you (and your wife) can answer that. Your age of 74 yrs (young) is not even applicable in my mind. In today's world, 74 is still young in my mind as well...and as long as you are clear thinking, then taking advantage of all VRA buy rec's should absolutely be the case. GR, just being honest, the VRA could go through a dry period and have a number of large losses in a row. While that hasn't been the case, it doesn't not mean that it cannot happen...so as long as you manage the size of your positions, and continue to diversify, you should be fine.   

 

"Kip, I am sure that you hear this all the time, however, I feel that you can never hear gratitude too often. All of us following and hopefully engaging in your VRA advise are feeling on top of the world.  And, yes, I do believe you are the only one that has predicted both China and Greece correctly. I don't want to speak on everyone's behave, but I am sure all will agree...

We are blessed to have someone with your passion and expertise in the financial field guiding us to great rewards. It does not matter if someone is investing $100, or $1,000,000; the returns we are reaping are making great changes positively in our bank accounts.

Again, I thank you for your special knowledge. MW, Lansing Michigan"

 

Thanks very much MW. You've followed our buy/sell rec's closely, and I'm very happy for your results. While I may have been right about Greece, we still have work to do, but yes...we'll take our combined 86% returns in China over the last two weeks! Again, thanks for the kind words....this is my passion...and I am equally blessed to have you and the VRA community in my life. 

 

Stay tuned...in this kind of market, we could be taking fresh action at any time. I am literally running VRA System screens every 1-2 hours.

 

Until next time, thanks again for reading...Stay Vertical!

 

Kip

vraletter.com

 

1500% Gains In 18 Months - Here’s What Happens Next

1500% Gains In 18 Months - Here’s What Happens Next 1558% to be exact…this is the “net” gain of all Buy/Sell VRA Recommendations since the beginning of 2014. If another investment advisory has done better, we have yet to find it (every buy/sell documented). Regardless of how busy you may be, take a few minutes to read THIS update. It is that important. Even if you don’t subscribe to the VRA, following my "4 Point Investment Outline" will help to ensure you are on the right track...because I have yet to meet anyone over the last 30 years that wanted to have “less" money.  Bottom line: over the next 1-2 years, it's my strong belief that the points below WILL happen... Everything You Read Next is Based on My 30 Years of Experience, Combined with VRA Trading & Investing System Analysis  ONE: Stocks are going MUCH higher. I have been covering the reasons why for some time, but consider the following; a) Only 35% of the public is invested in stocks...conversely, bull markets end when everyone and their mother's Uber driver is giving out stock tips. b) Even IF interest rates begin to rise, they could actually double from here and stocks would still be cheap...where else is there to invest and get a decent return? c) With 3 major central banks using massive QE programs (Europe, China, Japan), and another 20 countries slashing rates, this flood of fiat currency will continue to find its way into stocks. No...stock prices will not go straight up (they never do) but I expect US markets to ramp up to 30% higher. This is a stock pickers environment...this is MY environment...and I am targeting gains of several thousand percent before a final top is in place (and yes, we will also make a fortune as the markets reverse course). TWO: Are you positioned in the VRA Stock of the Century? I have followed it since the company was formed and know it extremely well. While no one can tell you exactly where its share price is headed, I can tell you that I am highly confident that it's going 1000% higher, minimum...(specifics for VRA Subscribers). THREE: With interest rates in the US finally ready to begin moving higher...yes, for the first time in 9 years...the conditions are becoming perfect for the next major bull market in precious metals. My forecast is that this will be THE bull market for PM's. I may not be the smartest gold bug around (because I'm really not one), but VRA Subscribers have made several thousand percent in PM's and mining stocks since 2003, and we will have have you positioned extremely well as PM's zoom to levels that many cannot fathom today.  FOUR: Buy Europe. Again, the ECB has just gotten underway with their $1.2 trillion in QE, and trust me...it will total $2 trillion + by the time they are done. European stocks are still well off their highs (as opposed to here in the US), but just as with US QE, European stocks have huge amounts of liquidity coming their way.  As the VRA also predicted (to the exact day), the dollar has topped out versus the Euro, and this will add even more leverage to our gains.  FINALLY...as I said earlier...nothing goes straight up, and it will take some work to beat the last 18 mo’s 1500% + in gains, but with the VRA Trading & Investing System and 30 years of unmatched experience, my goals are set even higher. When the markets get too overheated, we will take profits and then use the VIX Index (fear index), put options and ETF's to hedge ourselves, as well as make further profits.  I've said this many times over the last year, but I have to say it again: this is the exact investment environment that the VRA was created for. We have one..."maybe" two years before the market tops out. We will have already booked massive profits...just as the public finally jumps back in with both feet. Until next time, thanks again for reading... Kip PS: for those that are serious about investing, but have been hit hard in the past by Wall Street “experts”, ask us about the  “VRA Financial Recovery Program”, by emailing to: verticalresearch@mindspring.com   Kip Herriage Founder/Publisher, VRA (est. 2003) vraletter.com @kherriage (Twitter)