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VRA Investing Podcast: Broadening Market Action, More Evidence of Strength and Momentum – Kip Herriage – March 13, 2024

In this episode, Kip discusses the current state of the market, highlighting signs of broadening market action and the resilience of certain sectors despite perceived negative news. He emphasizes the strength of the US economy and ...

Posted On March 13, 2024Episode 1342
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About This Episode

In this episode, Kip discusses the current state of the market, highlighting signs of broadening market action and the resilience of certain sectors despite perceived negative news. He emphasizes the strength of the US economy and provides insights into the structural nature of this new bull market.

Transcript

Don’t look back because the market is closed. Good Wednesday afternoon, everyone. Kip Herriage here with the daily VRA investing podcast. Hope you had a great day today.

Broadening action is taking place. More evidence of that now. Tyler covered some of this topic yesterday as well. We get smart money hours continue to be strong, not so much today, but this has been the pattern.

And we have another pattern is developing. It’s actually been building and that is the markets are going up, even if the news is perceived to be bad. Saw it yesterday with the CPI data. Everybody was right away, oh, it’s a hot number. It’s a hot number. Futures dropped lower and then boom, on a dime, turned higher again. Tyler covered this in detail yesterday, but that is a sign of a market that wants to go higher. Nothing puts the fear into bears worse than action like that when individual company has bad news or yesterday’s case, CPI data was bad, but the markets couldn’t care less.

[00:01:01]:
Yeah, that’s a sign that the markets want to go higher. And so we’re seeing those kind of things. Plus, broadening action is clearly taking place. I’ll cover this more in a moment. But all time highs in the banks, right? All time highs in housing. These are pillars of a strong US economy and they’re discounting mechanisms. What are they telling us? The market wants to go higher a lot. Energy stocks now moving.

The gold miners are moving again. Banks are moving. Global markets are moving. And folks, we still haven’t hit all time highs yet in small caps. We’re still, what, 14, 15% away? Something like now probably 14%. I run the numbers probably 14% away there. And so again, as my mentor, mission Ted, love you, man. My mentor Ted Parsons would say bull markets don’t really even start until you get to all time highs.

That’s when the real party starts. And that’s just now happening. So we are just the second year of a traditional, classically defined bull market. And again, since 1952, the second year has been positive. There’s so much analytical data that points to the same thing. It points to a market that is going higher. And again, it’s structural. It’s structural in nature.

[00:02:14]:
That’s what’s so key to this. I think it’s what so many people are missing. People tend to get so caught up in watching mainstream media, certainly watching this crap on CNBC and are, it’s called television for a reason. They are lies. It’s really propaganda, but it’s uninformed and they know that fear sells. So that’s why you get so much of that. And again, I know there are a lot of people that watch, and I’m sure Newsmax applies as well, thinking that at least I’ve got some version of honesty here. But you’re not getting that.

You’re getting the fear, you’re getting the propaganda. So they make us all think that things are horrible. Yeah, there are some things that are horrible. We have a wide open border that could become an absolute nightmare if they flip the switch. Right. No question about it. But those are in the minority. The economy is strong.

Most people are doing really well. And there are two Americans, granted. I mean, I know it’s a touchy subject for a lot of people. I come from poverty, so I’m very comfortable talking about this subject. It doesn’t bother me at know. I get a kick out of being on Charles Payne’s show on Fox Business, of course, making money. Great guy, Charles Payne. I get a kick out of being on a show because I think two or three different occasions, he’s kind of called me an elitist.

[00:03:39]:
I’m like, this guy does not know my background is almost similar, is almost identical to his. I wasn’t raised in Harlem, but you know what? I was from the Harlem of Texas. That’s pretty much where we were. No, I think know the media is always going to spin things and make them sound worse. I know this is a smart audience here, and I don’t mean to mansplain or whatever I’m doing here, but I think it’s an important point that gets overlooked because so many people think, how is this market going up? They cannot figure it out. I know these people. I talk to these people. I could name some names of people.

You know, these are conversations that I have with these people and they’re like, wait a minute. This is not compute. This is a bubble. It’s going to pop, right? When’s that going to happen? No, it’s not a bubble. The market’s cheap and it’s going to keep rising because the economy is in good shape. Corporate earnings are soaring against a structural bull market. More than that, this is a generational bull market. I loved Rich Ross’s.

[00:04:41]:
For those that are VRA clients here, Rich Ross is one of our go to guys. He’s the technical savant, if you will, at Evercore. And Ross has been Ryder’s reign on this bull market. He was a little late to get there, but when he flipped to bullish, he’s been right there with us. And I love his work because really quality work, great charts and he hits all the hot notes. But he has now raised all of his targets into first quarter 2025. He’s now looking for 6000 on the SV. 100.

That’s 900 points from here, right? That’s 2700 points equivalent in the Dow Jones. And my guess is he’ll raise it again because 2700 points from here might sound like a lot. It’s not. That would only put the Dow Jones at like 42, 43,000. Folks. We’re going to blow past 50,000, then 60,000, then 70. This is where this market is going. This is why it’s a generational bull market.

How can I say it with so much confidence? Kip, how the hell do you know this? Look, obviously, no one’s got a guarantee. That kind of goes without saying. But again, we’ve been right on this. We wrote a book, and pretty much everything we wrote in that book has come true so far. And the big bribe. And by the way, this is something I cannot wait, really, to bring up on Charles’s show. I think the next time I’m on, I’m going to have to go there. He’s just going to abuse me for this.

[00:06:11]:
We wrote in the big bribe, a section that Joe Biden was going to have his Bill Clinton moment, and he was going to have a rock and roll stock market with a strong economy. And again, Bill Clinton, legend. Okay, legend. I don’t believe a president will ever do what he did, which is. And it doesn’t involve Monica Lewinsky. This is actually something a little different. I’m amazed. Now, by the way, I talked to younger generations, right? Gen Y, Gen X, whatever they are, and they don’t know who Monica Lewinsky is.

Now, she’s in a lot of rap songs, so they kind of figured that out. But a lot of people do not know who she is. Anyway. I’m not talking about that. I’m talking about the Bill Clinton that had a stock market over his eight years. That went up, on average, 27% a year, SBF hundred, up 27% a year, average during his eight years. No president has done better. I don’t think one will ever do better.

But he also had, of course, 95 to 2000. He had the meltup, the.com melt up. So you see the parallels. This is why we draw that parallel, and this is why we’re so confident, because this market, structurally and foundationally speaking, is so much more sound than 95, 2000 meltup was. Those companies were garbage companies that just happened to put.com on the end of their name. I got to tell this story. I’ve told it before. It’s been a while.

[00:07:33]:
One of the companies I took public and not around anymore, they were bought out. So I’m going to go ahead and give you the name. One of the companies that I helped take public found them, discovered them, brought them to. I was with Raymond James at the time, brought them to investment banking. I did a lot of work with energy companies then, still do. And love that space mining as well. Anyway, Edge Petroleum was the company’s name and took them public. It was a very good.

The. I had all the clients, friends of the company, they were all know. And it was an amazing one year spent together doing this and building, going to road shows, all this stuff, right? And so after they went public, gas prices started. This is primarily a gas company, Gulf coast natural gas company, drilling for EMP exploration company, and the stock price started going down. Right now, there were a couple of board members that had never been on a board of a public company, much less a company that had just gone public. And so this guy Stan, I won’t give his last name, but Stan, an older guy, older jewish guy. Just a warrior. He was a warrior.

[00:08:45]:
He was just an old warrior, is what he was. But he also had a great guy, by the way, too. He came up with the idea that the problem with edge petroleum and the reason the stock price was going down is they didn’t have.com on the end of their name. He wanted to make the company Edge petroleum.com. And honestly, I thought it was a joke. When he ran it past me, I kind of chuckled and moved on. Next thing you know, I’m getting a call from the CEO or chairman of the board. I don’t remember.

They’re like, we have a board meeting tomorrow. Would you please come and address this? Because now most of these people, and he was like, this is incredulous. Most of these people want to put.com in our name so our stock price will get hot again. So I showed up at the board meeting and they said, kip, why don’t you just give us your thoughts? I said, this is the dumbest idea I’ve ever heard. You’ll be laughed out of the industry. Now, your stock price may go up for a month or two, but after that, the shorts will come in. Your company will be destroyed. You’ll lose your credibility.

[00:09:47]:
You cannot do this. You just simply cannot do this. So it didn’t happen. But again, the companies that were.com, most of them, 90%, were garbage companies. They’re out of business in just a few years. Matter of fact, I think it was over a ten year period, 90% of those companies went out of business. This is not that, this is real. These companies are real, real revenues, real earnings.

I mean, growing businesses, obviously market caps of several hundred billion dollars to the trillions that did not exist then. This is a whole new thing. Again, it’s a generational bull market of size and scope. This is why we keep saying this is the time to stay locked, to end. All right, when things change, we will tell you. And I think we’ve got some pretty good. I’m going to write this up tomorrow. By the way, we have some pretty good indicators that we look at to tell us when we’re going to have a short term top.

We just haven’t had it yet. Right? On the VR investing system, we’ve gotten too heavily overbought and kind of extreme overbought on some of these pushes, but not really. This has been a rotational market. A lot of these big tech Tesla, which is a company we love and own, it’s not doing very well right now. It’s one of our ten baggers and it’s been in the toilet down to 169 now. But again, phenomenal company is going to go a whole lot higher. And again, these are gifts, right? When these stock prices go down, they are gifts. And that’s why we believe in monthly dollar cost averaging for the growth stocks that we own.

[00:11:15]:
I learned this from Peter lynch. He didn’t teach me personally, but this is something he believed in. He believed in continuing to buy every month, every year. Put new money into your favorite companies and then just forget about them. Just put dollar cost, dollar cost, dollar cost, dollar cost, same amount every month, same dollar amount every month into your favorite positions. And then if you know Peter Lynch’s background, I mean, no one’s ever done better in the mutual fund business. Of course, he’s been long retired, averaged over 29% a year for fidelity Magellan fund. You imagine that 29% a year in a mutual fund of that size.

It was the largest around at the time, before Blackrock and Vanguard, et cetera. But lynch was a legend. And that’s what he did. He bought, he continued to buy. And he said, look, unless something changes, why would I change my mind? So unless there was a material change, the product stopped working, the management changed, there was some kind of upheaval in the company, some kind of a controversy that would change the story materially. Unless that happened, he didn’t sell. He just kept buying. And then his average holding period, I think, was over well over five years.

[00:12:28]:
He said, this is in his book, one up on Wall street. Great book. He wrote in there. And I think you put this in multiple books, by the way, that he didn’t make money on the vast majority of the companies he invested in until years four and five. But from years five to ten he got paid. And so that is, again, I think the smart money approach, it’s the approach I can use and not worry about my holdings. Right. Because we stay in active conversation, active discussions with the companies that we invest in.

So we’d like to think we have a pretty good idea something is going wrong there. Management changes, again, some kind of issue with the company, the product, et cetera, but that kind of removes the tension. And look, every now and then you got to take a loss. I mean, that’s just part of the business. Right. But anyway, that helps us and that is our approach here. But again, we’re not seeing any signs. One of the key signs we look for to tell us we’re at levels where we should take some profits or hedge is that the percentage of the S 500 above the 50 and the 200 day gets over 90%.

[00:13:36]:
We’re like in mid 70% range now. We’re nowhere near levels that we think we should be selling and taking profits or really even hedging. Now, we did put on a hedge around the Navidea earnings. It was three weeks ago or so. You know what? It was insurance. It didn’t work. We lost 13%. We had a stop and got stopped out.

That’s just insurance. That’s how it works. Right. And so it didn’t work. But Navidea, if they had disappointed, this market was going a lot lower. Right? But they didn’t, did they? And so again, that’s this whole AI generative AI theme that’s working so well and will continue to work. Kathy Wood had some remarkable research out. I referenced it in one of our letters last week and I’m working on memory here, but I think it’s pretty close right now.

[00:14:27]:
Revenue, combined revenue for generative AI is in like the $22 trillion range. It’s going to 200 trillion. She says these are the market caps of the companies that work in this space. So she says these companies are going.

 

This recording was cut short due to a technical difficulty. We hope you have a great evening and we will see you back here tomorrow for the stock market close.

Podcast Newsletter

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Time Stamps

00:00 Markets rising despite perceived negative news.
03:39 Similar backgrounds, media spins, important overlooked point.
08:00 Successful business took a downturn, affecting stakeholders.
10:36 VRA system overbought, tech stocks down, gifts.
13:01 Concerns over management changes and business performance.

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