In today's episode, Kip dives into the VRA approach to the Fed's rate cut tomorrow, breaking down the potential market reaction, and the significance of these decisions for the economy's trajectory. He also touches on the internal strength of the economy, highlighted by rising consumer net worth and robust housing market indicators. Tune into today's podcast to learn more.

Don’t look back because the market is closed. Good. Tuesday afternoon, everyone. Kip Herriage here with the daily VRA investing podcast. Hope you had a great day today. We’re almost there, folks. Almost.

So exciting, isn’t it? Tomorrow is Fed day. FOMC. We’ll get the minutes. Excuse me. The statement at 02:00 p.m. eastern followed by 02:30 p.m. eastern. We’ll have, of course, Jay Powell’s infamous presser where he, well, he likes to surprise people.

He always has something to say off the cuff and is very reliable when it comes to that. The markets are in a state of disarray when it comes to what the Fed is going to do tomorrow. Tyler, just. Tyler, our resident Fed watcher just said this is most uncertain, that the markets have been going into a rate cut or rate decision in a decade. Usually by now, the markets are completely certain about it. That’s not the case. The latest probabilities from the CME Fed wash tool. So the probability now of a 50 basis point cut is 63% to 37% for 25 basis point cut.

So really call it 50 50, the flip of coin. Markets don’t know and that creates some volatility tomorrow. But the trend, your friend, we know which direction the trend is. And going back to Marty’s wide, almost four decades ago, an infamous quote, don’t fight the tape, don’t fight the Fed, or don’t fight the Fed, don’t fight the tape. We do it in that order of importance. And right now we see that we’re starting, we’re about to start a new Fed rate cutting cycle. We know what the trend is doing all time high after all time high. And I think that’s the takeaway what happens in the short term.

I think if we give a 25 basis point rate cut, there may be an overreaction in the markets, but that’ll be a buying opportunity because we’re starting a new rate cutting cycle. That’s what it cannot be denied. That’s starting. And this is kind of crazy if you haven’t heard this. The expectations are for the Fed to cut rates by 2150 basis points in the next twelve months. Think about that. We’re looking at the Fed funds rate dropping below 3% in the next twelve months, right? Ten year, right now, 3.64. Remember, Fed funds rate is 5.33%.

[00:02:30]:
So the markets are based on the Fed’s dot plot market expectations. Again, 250 basis points in rate cuts in the next twelve months. And so really tomorrow is from that point of view is an odd event. It should cut by 50 basis points. That’s been our call for some time. It’s the right move again because of how ridiculously out of whack and behind the curve that the Fed is to where inflation is now and specifically where the ten year yields are. Yeah, it should be 50 basis points. Interesting.

This morning, the great Ed Hymande, who we’ve talked about often here on this podcast, likely the best economist on Wall street for 50 years, Ed Hymen of evercore and ISi this morning on Bloomberg, kind of surprised me. I just have to be walking by the tv and here he goes saying he’ll be shocked. He’ll be shocked if the Fed doesn’t cut by 50 basis points. Ed Hyman doesn’t normally speak like that. Right? He’s pretty nuanced. Typically. There was nothing nuanced about this. He said, he said multiple times that he’ll be shocked if they don’t come by 50 basis points.

I think the significance of that, even more than Ed coming out with a bold statement, is that it’s widely believed. I had this from good sources, sources at Evercore, by the way, that means it’s coming ultimately from med Hymen. They believe that. And they’ve been told that Jay Powell reads every course work, Ed Hymen’s work on a daily basis, and he should. Ed Hyman’s work is sensational. So he’s also gotten, by the way, more optimistic. Ed Hyman, speaking of, has gotten more optimistic on the economy. This is pretty interesting because this fits so well with the work that we’ve been sharing with you here for the VRA investing system.

What we’re finding that very few reporting on, again, the internal strength of this economy. Hyman reported this morning that consumer net wealth, consumer net worth, it just, of course, hit another all time high. Again, the chart, it is going parabolic. I’m going to share that chart with you in the morning. For our VRA members, it’s now rising at a rate of 11% year over year. That’s current through the most available economic data, 11% year over year growth. And consumer net worth, of course, a lot of that tied to homes, a lot of that ties to the stock market and to liquid assets. But bottom line is a lot of wealth is being built here.

[00:05:13]:
And again, that’s what I think that the bears have really missed. I think the bears have missed anything. It’s been the strength of the economy. And I don’t know how you miss it, because the data is widely available. We’re all pulling from the same data. It’s right there. We talk about it all the time. I share it again this morning, again for our new folks here.

I’m gonna go. I promise you I’ll go real fast because we’ve been talking about this for a couple of years now. Home prices, all time high. Net equity and homes, all time high. Credit scores, all time high. Consumer net worth, all time high. 39% of mortgages. Homeowners have no mortgage on their home, 39%.

Isn’t that amazing? 69% of Americans own a home, at least one home, 39% have no mortgage on that home. That’s also an all time high. So again, this is what we’ve been relying on to say we’re not going to have a recession. The economy is on firm footing. I know that sounds like blasphemy. I know that there are people that really do not care for Biden, and I’m one of those people, by the way, but they just can’t, it’s like there’s a wall there. They just can’t bring themselves to say that things are great economically. They are.

They can’t bring themselves to say that because of who’s in the White House. And I understand that. I also think it’s pretty juvenile. I think it’s pretty, pretty childish to have that kind of a mindset. No one’s saying that Biden gets the credit. And I don’t know the disconnect there. You know. Right.

One, two things to be true at once. Biden gets no credit at all. Right? If it weren’t for Biden, all of this, all these numbers, this data would be even more powerful. We’ll hopefully soon find that out in the election when Trump wins. And that is our call, that Trump will win. He’s got the momentum. And imagine what the economy is going to do then. We’ve already seen this movie, haven’t we? We’ve seen it.

[00:06:59]:
Within the first year, Trump’s presidency, from the election, markets up 40%, GDP growth top 5%. That happened in a year. Imagine what’s going to happen with this, with this economy that now Trump will inherit, which, frankly, is his economy. Again, the Trump economic miracle. I was, by the way, the first person to name it that. It’s in our book, the Big Bribe, the Trump, excuse me, in my book, crash prosperity, the book before the big bribe, Trump economic miracle. Trump’s tax cuts still in place, although they do expire next year. Another important reason to reelect him.

Trump’s cuts to regulation. Over 1000 significant cuts to regulation, bureaucratic nonsense, right to control us. And 90% of those are still in place. Biden really has been smart enough not to touch those or try to raise taxes. And then the third, of course, is China tariffs. Biden’s expanded those. You know, he’s taking it a step further than Trump did after knocking him, of course. And of course, you know, Kamala Harris in the debate, knocking Trump about tariffs, they’ve only increased.

It really is enough. You know, the projection and the gaslighting. If you’re, if you’re aboard a line between being a sane person and a person that’s troubled mentally, their gaslighting is almost enough to push you over, I think. And I think that may be what’s happening here. There are people that are right down the line, very, very close to going off the edge. I’m talking about, you know, being emotionally, emotionally insolvent. And the level of gaslighting and projection that they use, it is straight out of Karl Marx’s belief system of how you. And rules for radicals by Saul Alinsky.

[00:08:52]:
This is what communists teach to take over an economy and to get their way. So anyway, so, yeah, we are, we are. We’re looking for a 50 basis point cut tomorrow. I, Tyler, I asked him for a point blank prediction. Tyler said, yeah, we need 50. But Tyler said, I will not be surprised. I kind of think that Jay pal is going to cut by 25 basis points because that’s who Jay pal is. So we’ll say again at the end of, they won’t matter.

There’ll be some intraday volatility. But I can tell you this, if there is a dip to be bought tomorrow, a significant one, we will be buying it. One caveat to that, we have entered, as of today, the worst two weeks of the year. Seasonality sold it very well this year. That’s something we have to respect and pay attention to. It’s held very well for the last two years. Matter of fact, seasonality has analytics. But on the back end of this, after these two weeks, here comes the strongest quarter, and it’s not even close.

The fourth quarter of the year is the strongest quarter of the year by far more than two times stronger, three times stronger, actually, than any other quarter of the year. So setting up for a very bullish into the year. Of course, we had the election insanity taking place, and again, volatility probably is not going to go a lot lower. I think there’ll be some swings here. And let’s pray to God that these insane leftists aren’t successful in what they’re apparently very committed to doing, taking out President Trump. All right, let’s take a look at the markets today. Again, quiet day today. We had a pretty good open today.

Up a couple hundred points in the Dow slowly gave that back. At one point the Dow was down over 100 points. Dow Jones finished down 15 points. That’s down just a fraction of a percent. SuF hundred was up a fraction of a percent, up one and a half points less. 2000, this is, this has kind of been the story. Small caps are really, we’ve seen this moving before, too. Small caps are trading better.

[00:10:59]:
They’ve been the leader of late, up another three, three quarters of a percent today of the Russ 2000 and Nasdaq today also up just slightly, up to this 1% at 35 points. And finally, our leader, semiconductors flat on the day. But again, they’ve also been a house on fire. Had a great week last week. Semis were up 10% last week. Adword of the gold miners also up 10% last week. Getting, giving a little bit back right now, but still strong in leadership position here. Also, the transports.

Again, this is coming from Tyler and his great sector research. Transports now just 2% away from 52 inc. High up over a percent today. I think that the transports along with the fact that rust 2000 is now moving solidly higher, those are both very good signs for the us economy. We have some further evidence of that. Today. We learned that the Atlanta Fed has upgraded their estimates for GDP growth for the third quarter to 3%, 3% growth. They are expected from the Atlanta Fed for the third quarter.

Also today, all time highs. Okay, yesterday we had Dow Jones. Today. Also another intraday all time high for the Dow Jones and the S and P 500. Intraday all time high and closing high, by the way. And also housing, our leading economic indicator, is no group more important than housing when it comes to forecasting what the economy is doing. House is the biggest thing 99% of all people ever purchased. And so, yeah, it makes sense that housing would be the most important leadership group when it comes to economic direction.

All time high today in housing as well, both HGX and HHB, EXHB, the home builders. Also interesting, I think peer greed index, is it 55? That’s neutral. All time highs in the two most, I think most people would say the two certainly the oldest, most important, largest indexes. Dow Jones, Nasdaq, excuse me, Dow Jones S 500, both not only hitting all time highs today, but that’s happening with the fear and greed index at 55. That’s interesting. As a contrarian, I think we know what that’s signaling, right? All right, let’s take a look at today. We saw this yesterday. Yesterday, the Nasdaq was down 90 points, about a half percent.

[00:13:38]:
But the internals for Nasdaq were solidly positive. Got that again today. Solid positives across the board for NYC and Nasdaq. NYSE today, 1.7 to one positive advanced decline. Nasdaq posited by, we’ll call it about 500 issues, positive advanced decline volume, also solidly positive, 59.7% of volume for NYSE, 61.7% up volume for Nasdaq. And again, just like yesterday, new 52 highs to lows. Check this out. Yesterday we had 748 stocks as combined.

NYSE and Nasdaq, 748 hit a new 50 high to just 105. New lows. Today, more than 700. Again, 702 stocks hitting a new 52 week high to just 78, hitting a new 52 week low. So look, NYSE advanced decline. The breadth is hitting all time highs essentially every day. Now, again, the internals are solid. We’re getting all time highs in the indexes again.

Now we have this great adage from Marty Zweig. Don’t fight the tape, don’t fight the Fed markets, not yet overbought. We’re getting close to stochastics. We’re getting close, but we’ve got a pretty long way to go on some of the other Vra momentum oscillators. So, you know, we may have maybe a little bit of stalling period here before we get into the fourth quarter. But again, we’re going to be buying a dip. We’ve been doing that for two years. Why would we change now, sector wise? Today? Also really good today.

[00:15:17]:
Excuse me, quick refresh. Not, not, not as great as I first thought we had. Apologies. Six sectors finished higher, five finished lower. Upside, 1.4% for energy. Consider discretionary, up six cents. One percent. Industrials up a half percent.

To the downside, healthcare down 1%. Not much else happening elsewhere in our commodity watch today. Again, gold and the miners have been on a serious run. We did see an intraday all time high for gold, and it backed off, down 1260, announced today at 25.96. It is, it has reached short term overbought. That’s only short term, folks. That is not anywhere near heavily overbought extreme robots, just short term overbought stochastics. Silver today down a quarter of a percent at 3104 an ounce.

Copper today, up again, one penny a pound at 428 a pound crude oil up ninety cents a barrel. That’s 1.3% to 69.92. And following the day, bitcoin had a, really, had a pretty good run today. This is seasonality, you know, again, we had the halving, we had the approval for the ETF’s for bitcoin, and now we have seasonality, which is really turning bullish about here. It’s from here to the next year. That’s the most bullish time following the having. This is the most bullish time for bitcoin. Almost right on queue.

Bitcoin got legs today. Today, intraday hit over 61,000 today right now trading at 60,309. That’s up a 4% on the over the last 24 hours. All right, folks, tomorrow’s the big day. You’ll get touter today. Tomorrow for the podcast, our resident fed watcher. He’ll break this down for you tomorrow. Again, fed meeting.

[00:17:08]:
We’ll get the statement at 02:00 Eastern. We’ll get the J Powell presser, which is always exciting, entertaining, is it not? At 230 Eastern standard time, our position again, they should cut 50 basis points. Will they? We’ll find out tomorrow if there’s a, if there’s a shakeout. Yeah, we’ll be behind that dip. All right, folks, thanks again for listening. Hope you had a great day and even better night. We’ll see you back here again tomorrow after the close.