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VRA Investing Podcast: Another week of All Time Highs As The Roaring 2020s Roll On – Kip Herriage – February 2, 2024

On today's podcast, Kip dives into the continued all-time highs and strong momentum of the current market, exploring the impact of tech earnings and the future of this bull market. Kip also covers the state of the economy and the ...

Posted On February 02, 2024Episode 1318
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About This Episode

On today's podcast, Kip dives into the continued all-time highs and strong momentum of the current market, exploring the impact of tech earnings and the future of this bull market. Kip also covers the state of the economy and the latest jobs report from this morning. Tune into today's podcast to see what the VRA Investing System is telling us looking forward.

Transcript

Don’t look back because the market is closed. Good Friday afternoon, everyone. Kip Herriage here with the daily VRA Investing Podcast. Hope you had a good day today. Hope your week is fantastic as well. Let’s get right to it. Another week. Another week of all time highs, as Tyler loves to say, new highs, beget new highs.

And that is what’s happening here. Remember, bull markets don’t really start until you hit all time highs, according to my first mentor, Ted Parsons. And I think you’ve got a great point. This is when bull markets accelerate. This is not when you need to be concerned. This is when you need to be more aggressive. You need to speed up. You need to have more money in the markets.

That’s the way momentum investing works, and it’s certainly the way new bull markets work. Remember, just in the second year, new bull market since 1952, they’ve been up 100% of the time with average gains. The SPF hundred, about 14%. And of course, we’re looking for much greater returns this year, certainly in tech and small caps, which have yet to really get going. They did from the October lows. They had a parabolic move higher, and now they’ve been bouncing back and forth. I like the chart pattern here. Still see a big move higher in small caps.

[00:01:05]:
But really, the story today, folks, is again, we’ve got a runaway freight train of a bull market here. Roaring two thousand and twenty s is powering ahead, as I wrote this morning, if you ever wondered. Exactly. Okay, kip, what do the roaring 2020s might look like on a day to day basis? Check out today. Look at what’s happened in the last 24 hours. Amazon Meta two of the largest companies on the planet. When companies of this size report earnings and then go up, in Amazon’s case, up almost 8% today. Up meta’s case up over 20% today.

Amazon growing its market cap today by $130,000,000,000. That’s right. With a B Meta growing its market cap by a record one day, $190,000,000,000. That’s the math I had about an hour ago. Don’t know exactly where it ended. But again, this is what happens in the roaring 2020s. We’re seeing more evidence every day that it’s happening right before our eyes. And again, that’s a sign to speed up.

It’s a sign that things are going in the direction they should be going. And I’ve got some other data here I’ll share with you in a second. We are extremely robot levels last week, and then we had a couple of three down days and boom. That was the buy the dip. I mean, these buy the dip opportunities are getting shorter and shorter, which, again, tells you the strength of this bull market. It is a structural bull market of size and scope. Now it’s being driven by liquidity investors, both retail and institutional, realizing they just don’t have enough exposure. They just don’t have enough exposure, folks.

[00:02:35]:
It goes back to what we’ve been talking about for the last couple of years. We had three brutal bear markets in five years, from 2018 to 2023, three brutal bear markets where in each of those bear markets, in each of those bear markets, the average stock lost more than 50% of its value. That’s unprecedented. It’s never happened before. I don’t know if it ever happened again. That’s how out there it is. But the reason that’s significant is that it put people into a form of shock. And you’re like, okay, look, I’m tired of this.

I can’t take it anymore. I’m going to go to cash. I can get 5% in the money market. That sounds fantastic right now. I’ll go do that. But see, it’s in the midst of all that negativity and that fear, right? That false evidence appearing real. It’s in the midst of all of that that the biggest bull markets are launched and look what’s happening, right? Four eyes again. Dow Jones, all time high today.

[00:03:30]:
S&P 500, all time high today. Nasdaq, 52 week high today. We still got a ways to go for the Russell 2000, still get to all time highs again. That’s kind of a gift. The markets, I believe it should be looked at. The markets are giving you a gift because we’re going to get to all time highs in both of these indexes. So the market’s giving you that gift now, and that’s where money should be allocated, in our opinion. Dow Jones today didn’t finish at the highs of the day at one point, just about an hour ago, up a couple of hundred points, still finished up 134 points.

That’s the three tenths of 1%. Up a bet, up three times that amount. Almost up 1.7%. 1.7% should say up a big 52 points. Nasdaq, there’s our leader right there of 1.7%, up a big 267 points. Our loser on the day, rust, 2000, down six cents to one percent. And again, it’s textbook in today. The semiconductors, up 1.9%.

[00:04:25]:
Nasdaq 1.7%. Semis lead Nasdaq. Nasdaq leads up the rest of the market. When we talk about this being a textbook bull market, this is what we’re talking about. Leaders are leading, the followers will follow. That is, since the birth of quantitative easing, folks, this has been the playbook. There’s been no better playbook. The semis leading both directions don’t complicate it any more than that.

And that’s what’s been happening from the bear market lows of October 2022. It’s a repeating pattern that continues to repeat. This is what the basis of technical analysis is, repeating patterns of price action. And so that’s what we have to go off of. But it’s been highly reliable until that pattern breaks. Don’t try to get too cute. Don’t try to get too smart with it. Don’t sell into these rallies tempted to take profits.

[00:05:16]:
Don’t use pullbacks to add to positions. If you don’t have position, use pullbacks to buy the dip and get long. This market, we’re going to be doing that again next week. We’ve got a couple of positions we want to add again, retrospect should add to these Wednesday, Thursday. But look again, you always hate to overpay for something in a big move higher, but I think that’s short sighted. I think the way to look at this is this market is going a hell of a lot higher. So it’s okay, just pay up. You’ll be glad you did in six months, in a year, certainly in two or three years, if we’re anywhere close to being right, which means this is going to be a bull market of bull markets, and these stocks are going a hell of a lot higher.

So again, Amazon met up, just crushed it. Roaring 2020 is right for eyes. Apple disappointed. However, we like Apple here. We don’t own it. We’ve talked about buying it, but we like some other ideas better. But Apple, I think it’s a great play here because, again, investing is never about the past. Investing is always about the future because the markets are a discounting mechanism.

[00:06:21]:
So you have to start thinking like the markets do. What are the markets going to anticipate? Well, with Apple, this is likely going to be the most significant upgrade cycle for the iPhone since the iPhone eleven. We’re on what, the 15 now? The 16 is coming out next. So what’s coming out now is that the new iPhone is going to be the first iPhone that has generative AI on it. Now, what is all that going to mean for us? We’ll find out. But what we’re hearing is this is going to be a significant upgrade cycle. A lot of folks. I’ve got the 14, but you know what? I’m probably going to upgrade to the 16 because I want to see what all this generative AI is going to be like in my handheld computer.

[00:07:03]:
I want to see what does this mean for me. And so we’ll find that out pretty soon. And again, that’s why I think Apple is a good stock here to own, even though, again, we’re looking at other directions here. As far as the earnings season, it’s been rock solid. As of yesterday’s close. Don’t have today’s close yet, but as of yesterday’s close, 175 of the 500 companies SPF 100 reported, 77 beating on earnings per share, 69% beating on revenues. We’ve had better readings. But again, we got to remember we’re coming off Fed funds rates at five and a half percent.

Still at five and a half percent because the Fed is. It’s hard to say they’re making a mistake. I get it. Economy is strong. Look at these tech earnings. I get it, I get it, I get it. But that’s not everything. There are signs underneath the surface that things are weakening and the Fed should be paying attention to this.

And again, we have two Americans now, probably more so than ever. But the point is, the Fed probably has some room to make a mistake here. But I don’t think a whole lot. I really think taking a March rate cut off the table this prematurely. I think we’ll see. It was premature. That’s what I believe again. But a great jobs report makes me look like a dummy with that statement, doesn’t it? Another good job.

[00:08:16]:
I know people are picking apart these jobs reports. Boy, they love to do this, and I’m sorry, but you know what? It’s price action that matters. So unless you want to make a career as an economist, why do you care? Look at the trend. Okay? For example, we just found, by the way, there are revisions. There are revisions higher this month even though they’re saying they’re part time jobs. Again, I’m not going to get that minutiae. But what the markets are operating on are these headline numbers. 353,000 jobs created in January versus estimates 187,000 with a solid revision higher from December.

And the biggie, of course, unemployment rate, the headline number 3.7% unchanged. Estimates for 3.8 for tick up. It did not. Folks, we’ve now had 24 straight months with an unemployment rate below 4%. That is significant. And I think the most significant result from today’s jobs data was that hourly earnings continued to grow, blowing away estimates. By the way, estimates were for a year over year growth of 4.1% for wages. Instead, we got 4.5% year over year growth.

[00:09:25]:
And look, with disinflation as our new norm, and that’s what it is. We clearly have disinflation now, meaning inflation is falling. That’s all it means. Wages are now growing at a faster rate than inflation. Matter of fact, there is no comparison there. And I think there’s still a point that we’ve made for a long time. These jobs reports should be taken with a grain of salt. Yes, they absolutely should.

But here’s what people aren’t factoring in. We’re in a gig economy. The jobs that aren’t showing up, the contract work that is not showing up in these jobs reports. Look at all the folks. There’s a lot more than Uber and Lyft, okay? Look at all the jobs that have been created, the contract jobs created, and the people that are working from home with respect to cryptocurrencies, I mean, this is a multi, multi trillion dollar space now, and this is not being picked up in the jobs data. How many friends do I have personally that are doing their own thing? Maybe they call it a side hustle, but they’re making a lot of money from it. A lot, I’m sure. I bet most people listening to this have a side hustle of some kind.

[00:10:34]:
And it’s something you love doing. You’re making a little money from it. But you know what? Worst comes to worst, you could find a way to make a full income from that. And I’m saying that especially in the millennial generation, the gig economy that they’re taking advantage of and the contract work that they’re doing and the side hustles that they’re doing that are not showing you the jobs report. This is what’s driving the economy. This is what’s driving the economy. And again, I fought these jobs reports for a lot of reasons, but much more so than just the bears love to pick them apart and talking about the official data, because as I’ve said for a long time, and as Trump made very clear, Trump was the first president that said, you know what? Be very careful because you’re listening to fake news. That’s fake news.

That’s fake news. He was right. Well, guess what? That applies to financial data as well. I don’t believe it. That’s why we’re trend followers. That’s why we use price action and we use the fundamentals that we know we can trust, and that’s what we base our work on in the VR investing system. And I think that’s one of the reasons we’ve been successful, beating the market 17 out of 20 years, better than 50% returns last year. And I like our chances to do better than that this year, especially with the holdings that we have here.

But anyway, it was a good day today. Another good day again, all time highs, and now we still got to get there for Nasdaq and for rust 2000. But again, we’re going to get there. What else today? Just a point. Again, another point that, again, I don’t think people are talking about. Look, Atlanta Fed just came out yesterday and their estimate for Q one growth is 4.1%. All right. It’s a daily or weekly tracking thing they do.

[00:12:13]:
So it’s a little bit different. Next week it could be 3.1%, but it’s trending higher. It was 3% last week, now it’s 4.1%. We believe gdp growth is going to continue to trend between 3% to 5% plus in the years to come. And that’s why rates are going to keep coming down, because we are in a powerful innovation and disruption cycle. These are broadly disinflationary. This is something new for most people that they haven’t really experienced this. We had this 95 to 2000 and the.com melt up, but this is much broader in scope, much more powerful, I believe.

And this ongoing innovation and disruption is disinflationary. So it’s bringing down the cost of both the consumer costs, producer prices coming down for an extended period of time. It’s the combination of innovation and disruption that will continue to drive lower prices. And I don’t think the Fed’s figured this out yet. They will. They’ll get there and that’s how rates are going to continue to fall, although they didn’t today. Interesting. By the way, the ten year ticked back above 4% today, 4.3% today on the ten year after dropping down to as low as, what, 3.9% yesterday.

[00:13:27]:
But still tech stocks exploded higher. That’s interesting, is it not? Because tech stocks, growth stocks are normally the ones that suffer from higher rates. They’re very reactionary to that. Didn’t get that today. I think that’s the tell. I think the markets have figured out that rates are going lower. I would look for rates to plummet lower next week. Okay.

I fully expect that to be the case. I still believe the Fed is going to cut in March, and we still got some inflation data coming out and the jobs report before that March meeting. So, yeah, I’m sticking by that. I don’t think Tyler agrees with that call, but I’m sticking by that call. All it’s going to take is a blow up in regional banks or a bad economic or inflationary report. And trust me, I tell you, the Fed will be on their heels like white on rice, okay? Because the one thing they fear more than anything is deflation. And if I’m right about what’s happening with this powerful innovation disruption cycle and ongoing disinflation, it doesn’t take a whole lot for bankers to get very afraid of the word deflation. It’s the one thing they fear more than anything else.

[00:14:36]:
That means debt’s not being issued, debt’s not being repaid. Right? Deflation is what they hate. They love inflation. They hate deflation. That makes their job that much harder. And then you talk about a possible deflationary spiral, and that’s the kiss of death for the banking industry. So again, it’s going to take one bad report and watch what happens here. So we’ll see, again, as Tyler pointed out in our pre podcast meeting, how much of this move higher is because of beginning of month fund flows.

We’ll find out next week. But the action was very good today based on these strong tech earnings. And again, it’s not the news that matters. It’s the market’s reaction to that news today. It was a roundly positive reaction to great earnings news, certainly from those two big companies. All right, let’s look under the hood today. There’s a disconnect here. As strong as the market was today, the internals were not good.

[00:15:37]:
Right? So we had better than two to one negative for advanced decline. NYSE. NYSE volume was also negative on the day by about $700 million worth of trading for the advanced decline for Nasdaq, also negative. Look at this. Nasdaq up 1.7% today, and the eternals were close to two to one negative. Right? Even volume was negative. Excuse me, hiccups. Even volume was negative for Nasdaq also, by about $700 million worth of trading.

So again, that’s a disconnect. That’s a little concerning. But again, the primary action here, the price action day was good. And also, we did have about 120 more stocks hitting the new 52 week high than 52 week low. So that was a positive there. But the internals today, this is a clear negative for the internals and it wasn’t much better, by the way, in the sector watch, of our eleven sectors, S 500, we had six finish higher, five finish lower to the upside. Communication services, we got smoke this week just reversed, of course, today with the earnings of companies like meta that are in. Communication services, up 4.6% today.

[00:16:48]:
Big move higher there. Consumer discretionary up two and a half percent. Tech up 1.3. To the downside, utilities down 1.8%. With this big spike higher in rates today. And real estate also down 1.2% on the day in our commodity watch. There’s one more thing I wanted to point out again, talking about us, not if you’re concerned about all time highs. Could that be a sell signal you’re talking about? Internals weren’t great.

Short term, you know what? I think the dips will continue to be very short lived. Okay. But medium long term, I’m going to tell you something now that should give you a lot of confidence that this move higher is just getting started. We got the readings today on percent of SBF. Hundred stocks above their 50 day and 200. And we track this very closely because it gives us great direction at market peaks and market trouts. Okay? And so when you’re at only 62% of the SPF, 100 above the 50 day, where we are now just 62% and only 71% above the 200 day, folks, back in January, as we started the new year in January, these readings were 93% and 81%, and we’re at 62 and 71 now. So we are forever away from overbought readings in a very important metric, even while we’re hitting all time highs, this should give you confidence that we’re nowhere near an important peak.

[00:18:15]:
The kind that we could have a shakeout of 5710 percent, possibly because those happen on a regular basis. Right. Even the 95 to 2000 melt up. Nasdaq up 583%. Okay. But even during all that, Nasdaq had five corrections of more than 10%. Some of these, 1450 and 60%, and one of a bear market, a bear market in about four months of 32, 33% for Nasdaq. Right.

So, I mean, that’s when a lot of people thought it was over. Okay, it’s over. Look at all getting destroyed. It’s over. It’s over. No, that was a year and a half before the end of the.com melt up. And then Nasdaq went parabolic for that final 18 months or whatever. So the point being, we’re not at any kind of extremes where you got to worry about this ending.

[00:19:05]:
Again, I think a real key point, it may sound simplistic. I think it’s an important point when you just get to all time highs, which you just started doing now, that’s the birth of a newborn market. That’s what Ted Parsons believed. Again, I think there’s a lot of truth to that. As far as your 401 ks, long term money, I would just continue to add those positions and then for maybe short, more short term trading money. Of course, we’re always looking for that perfect sell off that gives an opportunity to buy our favorite stocks 5710 percent below. I just don’t see that on the horizon right now. I just don’t see it just too much strength in this market.

It really is. And I think Rich Ross, who’s the tech savant at Evercore, we published this this morning. Just great work he does, man. He’s just still super bullish. And he makes a great point that again, with tech and semis leading the way, everything follows. And he also, like we believe Rich Ross believes the tenure is going to 3.2%. That’s his low end target. Again, we’re just over 4% now.

[00:20:05]:
I think that’s exactly right. I actually think that we may be at 3% by the election this year. That’s how much lower I see rates going. I think once the Fed, because Fed front running is that powerful. Once the Fed indicates, okay, rate cuts are on, they may have to cut a lot faster than they think. Because you know what? This is not like we have an economy where everybody is flourishing and everything is doing great. We’re at the beginning of that wealth creation starting to take place, but we still see pockets of illiquidity. We see it on these sell offs, right, where everything goes down.

That’s not a sign of a lot of internal strength. So I’m not trying to worry anybody. I’m just saying that I think the Fed is going to be much more concerned about this than they’re letting on right now as things develop. And I do think we’re going to get a march rate cut and then another cut before the election. Remember, we only have three rate cuts or three fed meetings outside of the march meeting before the election. So they don’t have a whole lot of time to get their cuts in. And the market’s still anticipating, what, six cuts for the year. So you see, they may have a meeting where they have to go full point.

[00:21:13]:
We’ll see. Again, I think that might come with some negative news for the economy. And I’m actually not seeing that right now. But again, it’s kind of my spidey senses this is kind of sticking to my crawl. And when I get this feeling, frankly, they tend to be more accurate than not. And I’m an out there guy. I tell you what, I think if I’m wrong, I admit it. But we go with our calls pretty strong.

And look, we were saying when the tenure is 5%, we’ve been right from there. And I think this move lower in rates is just beginning again because of disruption. Innovations making everything cheaper, this is the way it works, especially in a powerful cycle like that. So it’s very exciting to what’s happening now. These companies talking about the power of AI, it’s filtering throughout society now, both for not just companies and for government entities, but also for consumers as it becomes more and more readily available for us to take advantage of. We use it daily here. We use it daily and it’s a big help to us. So I think it’s probably most people are starting to get accustomed to know, and these know pretty soon you do a Google search, and I’m not sure you want to use Google as an example, but you do an Internet search and boom, you’re finding out not just what the answer is to a trivia question, you’re getting answers to how you should be invested, how your business should be structured right where the opportunities are in the short term, and maybe what companies you should acquire.

[00:22:39]:
Remember, we still have not gotten to that phase of this bull market yet, where ipos are going crazy. Okay. I love talking about this because we are going to get. It’s my crystal ball. We are going to get there. We’re going to get to a time frame like the 95 to 2000 melt up, where over 100 companies a year were going public on the day of the IPO. They were going up more than 100%. Right.

There was more than 100 companies doing that multiple years. And then there were several, like, I think there were two years where there were more than 50 to 75 stocks that went up 300% on their first day of trading. So IPO market is dead right now. M and a market is not dead, but it’s not anywhere near its peak. And I can tell you, I know from investment banker talk, there are so many private companies that have yet to go public. When this dam starts to break, it’s going to be exciting, but it’s important that that happens at the right time. We’re just not quite there yet. You get a lot of companies going public now, you can kill a bull market, right? Look what the spacs did.

[00:23:42]:
The spacs. The market was rampant and rocking and rolling during Trump. And here are these thousands of spacs that come out or whatever, and they’re mostly junk, but they sucked up capital. Sucked up capital. And that money was premature. That hurt the markets. Right? It’s one of the reasons we had three bear markets in five years, but we’re not there yet. But all of this is all being cooked.

It’s on the grill. It’s being smoked right now. Come back and check in about three to six months as these ipos start rolling out, because that is the cycle we’re in. We’re just not there yet. I think that gives a lot of visibility with where we’re going to be and the reason we can be so confident in our investing now in this generational bull market, which is what we see. It’s a generational bull market. Okay, finally in a commodity wash today. Here we go.

[00:24:38]:
I was just running charts and looking at a chart of gold it just struck. Look at a chart of it. You’re going to see what I see. A clear series of higher lows. A nice triangle pattern emerging. Gold’s ready to go. Gold, it didn’t do it today. And maybe I’ve been a broken record.

I’ve been wrong in the miners. Look, there’s no question about that. Been dead wrong in the miners. We use them to dollar cost average in because I know they’re going to pay huge dividends because they’re so cheap. They’re turning at 30 year low multiples compared to where gold is now. Mining stocks are just, they’re in great shape financially. They have very little debt. They’re just underloved and under owned.

[00:25:17]:
So we’ll be ready when it starts. But we need gold to lead the way, frankly, the miners should lead, that’s a better tell. But gold has been leading. We’re only $120 away from all time highs. Gold today was down 16 again, love the chart here. 2055 an ounce. Silver today down forty six cents an ounce at down 2% at 22. 76.

Copper on the day, down three pennies a pound at 381 a pound. Crude oil today down dollar 48 a barrel at 72 34. And finally today, bitcoin down 88. Very quiet day. Hovering just above 43,000.

Hey, folks, always appreciate you listening. Hope you had a great day and even better weekend. We’ll see you back here again on Monday after the close.

Podcast Newsletter

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Time Stamps

00:00 Bull market strengthens, buy the dip opportunities shorten.
05:16 Use pullbacks to buy and add positions.
06:21 Anticipate significant iPhone upgrade cycle with generative AI.
10:34 Gig economy driving economy, despite fake news.
13:46 Sticking to belief in Fed cutting rates.
17:14 Short-term dips short-lived, long-term upward momentum starting.
21:37 Innovations driving lower rates and AI impact.
23:03 IPO and M&A markets not at peak.

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