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VRA Investing Podcast: Bullish Trends Amid October Market Volatility – Kip Herriage – October 07, 2024

In today's episode, Kip dives into the pulse of the markets, reflecting on an intriguing October as we navigate through what many consider the most volatile month in the election-year cycle.

Posted On October 07, 20241475
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About This Episode

In today's episode, Kip dives into the pulse of the markets, reflecting on an intriguing October as we navigate through what many consider the most volatile month in the election-year cycle.

Transcript

Don’t look back because the market is closed. Good Monday afternoon, everyone. Kip Herriage here with the Daily brewery investing podcast. Hope you had a good day today. Hope your weekend was fantastic as well. We had a very good week last week, which is interesting because coming into Friday, it didn’t like it was going to be that good of a week. But the markets finished higher again than a four straight weeks in a row for every major index. So interesting that we come into October, which is now everyone knows is the worst month of the year in election year cycle.

It’s also the best month of the year to be a buyer. This is when your best prices are achieved, buying typically on a bad October stretch. And then you get ready for the big rally. Of course, you’re now entering the best, the most bullish quarter of the year, which of course is the fourth quarter. So I can tell you from speaking to a lot of people and from knowing a lot of people in the business and following people on social media that are pretty good at what they do, almost everyone feels exactly the same way. People have raised some cash. There’s nervousness. We’ve got tensions, geopolitical tensions, of course, Iran and Israel, and oil prices spiking now, yields spiking.

[00:01:13]:
The VIX today was up 18% today, 18% in the Vix. So we’re going to cover that today. But I can tell you what’s happening here is that almost everyone feels the same way. We expect the market to go higher to year end, but right now there’s a lot of trepidation, a lot of nervous, lot of anxiety about what’s happening here. We see it a little bit differently here. We think that this market is really going to continue a melt up into the election. And I’ll walk you through that. We actually talked about it some last week.

I wrote it up this morning. And a little more detailed analysis of why. I think regardless of what happens, the market’s going higher. Uh, that’s the conclusion that I’ve reached based on my latest conspiracy theory, which I’ll talk to you more about in just a moment. But it’s a big week ahead, too. Uh, by the way, I’m a conspiracy theorist because I like being right, so let’s just put that out there. I know I speak for a lot of you as well. Um, big week, fed minutes.

Uh, this week we got the CPi and Ppi. Also this week, uh, again, latest inflation data, which I can tell you now, is going to be tame. It will be around 2%. It will probably beat expectations. I think it will beat expectations again, just more evidence and more proof that inflation is in our rearview mirror. Although all the bears are starting to talk about again, aren’t they? Because yields have ticked up a little bit. That’s a technical event. Again, we’ll cover that more in just a moment.

Look at the charts. You’ll see what I’m talking about. But what else do we have this week? Tesla. We got Tesla and their big robotaxi unveiling on Thursday. We’ll find out. Is this going to be another buy the rumors sell the news event Tesla? Or is this going to be a milestone event? I think it’s going to be, because I think they’ve got a lot of surprises in store. Along with the unveiling of the robo taxi, they’re less expensive ev, like in the mid $20,000 range. I believe that’s going to be unveiled.

[00:03:04]:
And I also think we’re going to hear a lot more about autonomous in general. Not just the robo taxi, but full self driving and the advances that they’ve made there, along with, aih, maybe get a little surprised on Optimus and robotics. So it’ll be heavily watched for sure on Thursday afternoon. And we’ll be covering here, of course, in the VRA podcast. What else this week? Is that enough? Is that not enough? Yeah, that’s enough. We’ve got a lot going on, but we do think it’s going to be a melt up, move higher, continuing, because this is that bull market and we’re going to have a lot of years. If we’re going to get to 100,000 on the Dow Jones, we’re going to have a lot of years. So the market’s at 2025 30%.

Again, not all that different from this point of view of 1995 to 2000 bull market, which I still remember really well. We didn’t know what was going on. We just knew stocks, especially tech stocks, kept going up a lot. We knew the IPO market was red hot. We knew the mergers and acquisition markets were red hot. Did you hear what I just said there? We understand we’ve already seen a hot stock market. Right? We under, we recognize that, but we haven’t seen a hot IPO market that has not come back. Right.

These are telltale signs that we are early in this bull market. Also, mergers and acquisitions, while solid, have not made their big move higher yet either. Again, these are things that happen in the middle innings of a major bull market. We haven’t even scratched that surface yet. So as we said, now for two years. The bull market started two years ago this month, on October 13, 2022. If you follow us. You know, that’s when we went aggressively long.

[00:04:45]:
It was one of the top three capitulation events of my career. And we went, we bought the text, we bought semis, we bought tech. We called the bottom that within five minutes of the bottom, by the way, I might add. And it was the bottom. But we’ve also said from that timeframe that every dip should be bought. Buying the dip would continue to be the smartest, smart money strategies, and we will get that opportunity a little bit with what happened today. Let’s start with the markets. I’ll tell you what happened today on the internals and also some interesting things happening with the share buybacks, which should reach another record this year.

But you know that they’re not even happening right now. There are some happening, but 96% of all s and p of 100 share buybacks, which, again, is such a, such a driver for every bull market. But certainly of this one institutions, I mean, the largest buyers of stock are their own companies. What does that tell you? Okay, 96% of share buybacks for SB 500 companies are not taking place. They’re in the blackout window around earnings. So that’s going to continue for about another week, and it’ll start to lessen up again. We get earnings starting this week as well on Friday. Bank stocks, the major bank stocks of JP Morgan, Wells Fargo, Citi, bank of America report on Friday.

And then, of course, within about seven to ten days of that, we start really getting the deluge of the tech earnings. And that’s really the most closely watched. Should be another good earnings season. I expect that it will. And again, we are, we’re buyers. We have actually, to be clear, we have paused our buying. We now sat, just over a week ago, we paused our buying. We did that because we had extreme overbought levels on the bureau investing system.

[00:06:29]:
We just use discipline there. That’s when we don’t buy, we don’t sell. Not that we couldn’t, we could, but we recommend holding, not selling, but pausing our buying of new positions. And so that’s where we are still right now, we’re working off those overbought conditions. They are coming off, by the way. Matter of fact, tech stocks and semis in particular, are starting to reach oversold levels. That’s a positive step. Matter of fact, I believe the semis finished hard.

They did semi finished higher, one tenths percent higher on the day. So, again, that chart looks very, very good. To us, first of all, the markets today, Dow Jones finishing off the lows, but not by a whole lot. Really. One point, we’re down about 500 points, closed down 398 points, down nine tenths of 1%. Rough 2000 also down nine tenths, 1%. Trifecta. SV 500 also down nine tenths of 1%.

Nasdaq was down more, down slightly more, down 1.2%. Again, the semis did finish higher on the day of note today. Two things we’ll talk about briefly here. What’s happening geopolitically with Iran and Israel has called oil prices to skyrocket. Okay, but look at a chart. Yeah, they’re skyrocketing, but from a very depressed level. So you’re seeing short covering taking place for two reasons. Iran, Israel, what’s going to happen there? But of course, we now have another hurricane, Milton, I believe they’re calling it to contend with, which is already a category five, supposed to strike in the Tampa area on Wednesday.

[00:07:59]:
And after what just happened with Helene, you know, this is, this has the markets nervous and for good reason. Oil prices skyrocket, the VIX skyrocketed, yields jump again as a nervous market. We’re already in October. This is the month of October surprises. So you can see investors being a little timid here, and that’s what we saw today. But again, the VIX up 18% today to 22.64 last trade, ten year yield now back over 4%. It’s been since July that they were over 4%, 4.02%. But again, I would recommend that you look at the charts of the ten year yield and look at the chart of oil, and you’ll see very clearly both on a yield basis for the ten year and oil.

Both hit extreme oversold levels just a couple of weeks, a week, a week to eight days ago. And so they were due for a bounce anyway. But now we have geopolitical tensions, now we have these back to back hurricanes sending oil prices skyrocketing higher. So this is not really a reflection of the economy or something that’s going to continue to be an issue because rates will continue to go lower, the speed of the move lower is the question, because we do have a solid economy. But I remind everybody, you know, everyone’s saying the economy, we’ve been saying again now for a couple of years that the economy is rock solid and will remain that way. We’re one of the few voices saying it again. We are in the roaring 2020s. But remind everybody that if you take a look at, I’m sorry, 1 second here.

I lost my place. Yeah, but if you take a look at what’s happening again with the, with the ten year yield and with oil prices, again, you see they’ve both spiked higher. But we believe this is temporary news, a temporary move, hopefully. And, you know, all we can do is send our prayers and hope the people of the Tampa and Florida area and wherever the storm goes after that are safe because this doesn’t like it’s going to be a massive storm that’s going to hit the Florida coast. So trepidation anxiety around October, very normal, is setting up for an expert buying opportunity. Now, as we talked, started talking about last week, and as I remind you today, wrote it up this morning, I think this market’s going higher for two important reasons. First of all, remember on Friday we got 785,000 jobs created in the employment data in the government sector. That’s why the jobs report was so strong.

[00:10:39]:
The unemployment rate would have been 4.5% instead of the 4.1% that it wound up being reported as. Because of this almost record, that’s the second greatest number of government jobs ever created in a single month. And this would be all by itself is number one. Except Covid, ex Covid, that set the record for government hires. So again, that has bond yields sparking higher on. But do we believe, do we believe that data? I don’t. All right. I think most people don’t.

This is about, it’s the economy, stupid. James Carville, of course, the political advisor to Bill Clinton, he was the first one that kind of said that. And it’s the economy, stupid. It’s everything about the economy. If the state, again, I’m a conspiracy theorist because I like being right. If the state is going to try to help kamala win, they want the data to be economic data to be good, and she does need the help. As you may have seen, Trump has the largest lead he’s ever had in the betting markets. I don’t know that I’ve ever trusted polls to begin with.

Real money, though, being bet in these betting markets. Yeah, I’m much more apt to trust that. And I think he’s got the largest lead. He’s had an eight point lead over Harris. And I believe that’s for the now, that’s just to win the election. Right. So we’ll see how that plays out. But she’s certainly getting all the help she can get.

[00:12:05]:
And the state, of course. Do we have any doubt? Do we have any doubt who the state capital s wants to win? This election? No. Do we have any doubt that there have been known to rig things? Absolutely not. They rigged an entire election. They launched a pandemic against us. Right. So, yeah, they’ll do whatever they need to do, and I think it’s not talked about enough. Remember, the Fed just cut rates by 50 basis points.

92% of economists said it would just be 25 basis points. We were in the 50 basis point camp. We got that right. 92% of economists did not. So that’s the price of markets. Then we saw China coming with their $500 billion. That’s us money, $500 billion stimulus bazooka. Of course, that reignited.

The chinese markets have gone crazy since then. We own chinese tech stocks. We’re very happy to receive those gains. After that group being dead for two years, pretty much right after we bought it, I just did nothing but go sideways. Had a couple spikes here and there, but now this is the real move. We think it is a real move, by the way. And the chinese tech stocks specifically are dirt cheap. They’re trading at multiples that we haven’t seen in a couple decades.

[00:13:14]:
But again, all of this is designed, I think, in some degree, to help Harris win, maybe to a large degree. But the interesting thing is, if that’s the case, then, yeah, you’d expect if economic data is going to be positive. Again, we get Cpi, Ppi this week. If economic data is going to be positive, if the market’s going to go higher based on strong economic data, well, we also have the flip side, where the markets may also be discounting a Trump victory. So the markets are smarter than all of us combined. Always have been, always will be. They see things that we don’t see. They anticipate things we have no way of anticipating.

Follow the market, you get your answer. It’s talking to us. We just have to listen. So that’s two reasons. That’s two strong reasons that the market may and I believe will be going sharply higher into the election, which is now, of course, just less than a month away for the Kamala Harris rig job, potentially. And of course, the market’s discounting a Trump win because I’m here to tell you, if Trump wins, the market’s going to go bonkers. Okay. The stock market is going to go bonkers.

We already have a very strong structural bull market, a strong structural economy. If Trump wins, look out. This could be a melt up into a true melt up into year end. So I think there are two good reasons there. Once we get past this hurricane and this geopolitical tension, assuming nothing really bad happens with Iran and Israel this weekend. Well, you’re setting up for a great buying opportunity here. You really are. So that’s how we’re going to be trading it.

[00:14:45]:
I believe that we’ll be pausing or taking our pause of buying off. I believe that’s going to come off this week. We’re starting to look, by the way, if you’re with us for our parabolic options program, you’re going to see an update from us tomorrow with a couple of new targets. We’re starting to outline what those targets are going to be. And we’ll also, of course, with the VRA investing system, update you in the VRA portfolio about reengaging our buying in our broad market positions, which we have again paused just over a week ago. What else today? I shared a chart this morning with folks, our folks on China and chinese Internet stocks. Parabolic is exactly the description of what’s happened here, but it’s also an extreme overbought on steroids. That’s our most overbought designation.

We have also paused our buying in chinese tech stocks. We own k web kweb. We’re holding it for sure because I believe this bull market is going to continue in China for some time. Big catch up move coming here, folks. But right now we have paused our buying. Also of note for those that know who Rich Ross is, Rich Ross is the quant. He’s the technician at the CMT at Evercore. And we followed him here for a long time.

Does really good work. Rich had turned bearish and I think realized that was probably not the way to go. And so he has flipped back to being bullish now. Matter of fact, he’s aggressively bullish. Of course, he points out that semis and tech will lead the way and that we’re soon to enter the best period of the year once we get through this little window of negativity we have as far as seasonality that we’re in now. But the market’s clearly broadening. It’s broadening not just in the US but globally. And this market wants to go higher.

[00:16:36]:
But again, I’ll make one final point. If you look at the charts of ten year yield, got to make this one more time. And of oil, you’re going to see that these are charts of stock areas you probably do not want to buy and own. Now you want to own bonds because the yields are going to go lower. It’s an inverse relationship there, of course. But as far as oil goes, I would not be a buyer here. I think if this hurricane passes and if nothing horrible happens in the mideast, I think oil prices will resume their move lower for the time being, although we have a buy recognition on energy stocks. So again, one thing is not the other.

Energy. Energy companies are making money hand over fist, true cash cows right now. And we think that continues even if oil prices do slip back to below dollar 70 a barrel. If Trump wins, it’s going to be drill, baby, drill. And that is a recipe for lower oil prices, at least probably in the interim. Okay, let’s take a look under the hood today. We had pretty good internals today for a market that was down this much. For example, in NYSE.

We’ll start with that. Nyse down volume was only 58% today. Nasdaq down volume was only 52%. There’s almost, almost even on volume for Nasdaq. Again, the internals have remained very strong. We also had, and once again, we have not had a negative day of new 52 week highs to 52 week lows since the August 5 bottom, which was the bottom for this, for this move, higher today. Another beat. Even with the market down as much as it was, we had 263 stocks hit a new 52 week high to just 160, hitting a new 52 week low.

[00:18:21]:
The most negative of today was advanced decline, just, just worse than two to one negative on both NYC and Nasdaq. But again, I have just make the point at this kind of a day, this kind of a down day, which not huge, but noticeable. Right. Call it 1%. If this kind of day happened last year, these internals would have been far more negative. Again, this is a sign that the market’s broadening. Investors are coming back to the party. They know the train’s leaving the station.

And this is, I would consider this to be a hiccup. I think my conspiracy theory is I think it’s going to, I think it’s going to win out. Again, I got to tell her. I wouldn’t be saying it right, but I think we’re going to have a very good move higher in the month of October. But again, this is a nervous period for investors because bad things do tend to happen in this month. Election years. Again, also negative for the time being anyway. In our sector watch today, we had, this is not pretty.

This would qualify as ugly. We had ten of eleven sectors finished lower, led to the downside by no huge damage here. Utilities were down 2.3% again with rates higher. Communication services down 2%, consumer discretionary down 2%. Not much damage done elsewhere. The only sector higher again, energy on the back of oil. Prices ramping higher again today. Energy up four tenths of 1% in our commodity watch.

[00:19:53]:
Gold today down $5 an ounce at 2061. Again, gold. And the miners cut gold in particular last week. As we told you, gold hit extreme overbought on steroids. That’s our most overbought designation. We paused our buying in gold and it’s working off that. Above levels, just like the markets are okay. But again, that’s not a reason to sell.

It’s just a reason to pause your buying as those conditions dissipate. As far as overbought oversold today, down $6 an ounce at 26.61. Silver down a little bit more, down 1.4%. Of course, silver’s been red hot just right now, just barely below 32 at 31.95 an ounce. Copper flat on the day, down a penny at 455 a pound. Crude oil again, another good day here. Up 3.8% today. That’s $2.87 a barrel at 7725.

And finally, bitcoin. We haven’t been talking about bitcoin a whole lot recently because it’s been pretty dormant. It’s been in a trade range between the all time high of 74,000 and down to a low of 49,000, mostly much more tighter than that. Right. Most of the trading has been in the 55, 56, 57 range and then up to the 67,000 range, pretty tight. $10,000 of bitcoin range. Now, bitcoin did trade before the market got hit today because again, when the markets get lower, everything must go. Bitcoin did pop over 64,000.

[00:21:23]:
Last trade, 63,110. That’s up eight tenths of 1%. As a reminder, seasonality has now turned positive for bitcoin. Post having. The biggest gains in bitcoin have taken place following their havings. This is. We just had the fourth halving. The average move higher is.

The average is a little skewed because after the first halving, bitcoin jumped 7900% in a year. That was 2012. 2nd having. Bitcoin jumped 2900% in 18 months. 2016, and then third having in 2020. Bitcoin jumped 700% in 18 months. And now we’ve just had the fourth halving. And now we’re entering.

Just six months ago, we had that having and now we’re entering the most bullish seasonal period for bitcoin as well. So we’re expecting a really solid move higher again if Trump wins. He’s already called himself the bitcoin president. He’s been a man of his word. When he makes statements like this about what he’s going to support, I would imagine he’s going to support big, continue to support bitcoin, especially now that he’s got Elon Musk on his side. You won’t find a more tech savvy, forward thinking person than Elon Musk. And of course, he’d be befriended so many in the bitcoin community, by the way, it’s a big voting bloc. I’d have to say that Trump’s going to pick up, I would think, at least 85, maybe 90% of the bitcoin community.

[00:22:51]:
That is not a small community at all. So I think that it’s important. Just like adding, getting RFK junior to join Trump’s team. These things matter a lot, I believe. So are we going to have a blowout like we have with Walter Mondale, with Reagan, where Mondale won one state in one state? I don’t know. I think in an honest election, I would say yes. But we know we don’t have an honest election. We don’t.

Honest voting process right now. We just don’t. So we’re all hanging on by our fingernails here to see how this plays out. But, hey, in a legitimate world, I don’t think anyone would doubt it. Trump wins this going away, and that’s what we have to hope for. And putting it the universe is going to happen because I believe it’s going to. America’s best days are ahead of us. A Trump second term is going to be fuel for our roaring 2020 fire.

All right, folks, they always appreciate you listening. Hope you had a great day and even better night. We’ll see you back here again tomorrow after the close. Bye.

Podcast Newsletter

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Time Stamps

00:00 October: Best month for buying amid tensions.
03:04 Autonomous technology, robotics, bull market developments expected.
08:45 Oversold markets bounce amid geopolitical tension, hurricanes.
09:39 Temporary market spike; potential buying opportunity foreseen.
14:45 Pausing buying, targeting updates; China stocks overbought.
16:36 Avoid oil; prefer bonds due to yields.
22:09 Bitcoin may surge with Trump's potential support.
23:21 Hopeful for Trump's legitimate election victory.

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