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VRA Investing Podcast: Innovation Revolution, Bank Earnings, and the Roaring 20s – Kip Herriage – January 12, 2024

In today's episode, Kip discusses the impact of Q4 earnings, military strikes in Yemen, the performance of bank stocks., and the significance of the semiconductor industry. Kip also delves into the potential of tokenization and fr ...

Posted On January 12, 2024Episode 1308
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About This Episode

In today's episode, Kip discusses the impact of Q4 earnings, military strikes in Yemen, the performance of bank stocks., and the significance of the semiconductor industry. Kip also delves into the potential of tokenization and fractional ownership of assets, as well as the role of bitcoin in investment portfolios. Don't miss this episode for valuable market analysis and investment opportunities.

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 was fantastic, as well as a reminder, markets are closed on Monday here in the states for MLK day. Hope you have a nice long three day weekend. And of course, we’ll be back with you here Tuesday for our next podcast in our various letters, lot of stuff to report today, a lot of interesting things. A lot of inside baseball. Tyler shared with me some great data here because it honestly felt like kind of a quiet week.

We’re getting ready for Q4 earnings, which kicked off today with big banks. We’ll cover that in a minute. But then this morning, we got the news that the US and UK have launched a series of military strikes in Yemen. Here we go again. More of these cris. So futures open sharply, I say a couple hundred points lower on the back of what were not great bank earnings at first blush. We believe, and have for over a decade, really, that banks are value traps. We avoid this group, I wouldn’t say like the play, but pretty close to it.

[00:01:10]:
Not a lot of excitement there for us. And bank of America, when they announced earnings, was down 5%, and that set the tone, they actually closed down just six tenths of 1%, but also earnings from Wells Fargo, just a horribly run bank. Of course, a lot of fraud has taken place in one of the largest mortgage originators in the country, Wells Fargo, down 3.3% today on earnings. City, which has been another big value trap over the years, actually went up, finishing higher on the day. It was down sharply as well at one point, finished up seven tenths to 1%. And finally, the granddad of them all, the big man on campus and the criminal enterprise known as JPMorgan, had opened lower as well, then rallied throughout the day. At one point, I think I saw it up over 3%, finished down eight tenths to 1%. So we didn’t get a lot of strength from bank stocks.

And, of course, as the saying goes, it’s very true. It’s not the news that matters. It’s the market’s reaction to that news that matters most. So the BKX, the bank index, finishing down 1% today, you’d look at that and go, okay, we’re not to a great start, are we, for Q four earnings? But, folks, this quarter was never going to be about how the banks do, all right? It was never going to be about how banks and financials, although financials are a different cup of tea. There’s again, so many new age, right, so many different kind of financial companies that are out there now that are using financial engineering and helping consumers in corporations. This is one of our big five big bride. Megatrends is financial engineering. I’ll touch on that more in just a moment.

[00:02:53]:
So there’s a lot of creativity and innovation taking place in that space, just not in traditional banks. So that’s why this doesn’t matter. What really matters is, again, look at geopolitics. This has the potential to be something that could really grow into something and metastasize into something highly negative globally. If you saw Tucker Carlson has an update out today, and he’s basically warning, and I think he’s spot on in this. This is what the military industrial complex wants. They want to go to war with Iran. They’ve wanted to for a long time.

Let’s just hope that’s not what this leads to. But on this news, we saw big moves at the open today and actually grew throughout the day in precious metals and miners and crude oil. We’ll cover that in our commodities section a bit later. But again, a lot of volatility open based on these fairly poor earnings from the bank stocks and then this geopolitical strife and tension in Middle east. Let’s cover the markets now because we rallied. This has actually turned out to be a pretty good day today. It could have been an ugly Friday. Markets typically can be very worried about a Friday, especially a three day weekend, because you can’t sell anything for three days.

[00:04:09]:
So I think the fact that the Nasdaq finished positive on the day, SP 500 finished positive on the day, I think those are tells. I think they’re tells. Dow Jones did finish down 118 points on the day. That’s only three tenths of 1%. Again, have been down over 200 points. Rust 2000 also down three tenths of 1%. But you have to say it’s a positive day. But it’s the inside baseball that Tyler shared with me that really tells the real story and gives us that real internal strength of this market.

Check this out from our leaders. Right. If you’re with us very long, you know what the leaders are. It’s the semis. Semis on the week finished up 4.1%. Again, the markets were essentially flat this week. Semis up 4.1%. Nasdaq though, up 3%.

S&P 500 up 1.8%. So it’s a better week than we thought. Right. And the housing stocks, again, another of our leaders, again, there’s no more important sector to the consumer market than housing. Housing is the largest purchase that 99% of the people will ever buy as a home. And so, yeah, housing matters more than any single sector when it comes to strength of the consumer, strength of the economy. Housing today, this week, up two and a half percent. But the biggie.

[00:05:28]:
Drumroll, please. Ten year notes. We got the CPI report out. What was that yesterday, right? These days, kind of merged together for me a little bit, and the CPI data was immediately viewed as being hot. How many times do you see it? Oh, inflation is back. We told you it hadn’t gone away. Oh, it’s going to only get worse. No.

How do I know that? Because the ten year keynote today, this week, closed down 10% on a yield basis, closing at 3.95%. Again, bond yields continue to plummet. We think they’re only going to go lower, and we’re going to be writing this next week. Tyler covered this in detail in his podcast yesterday. I meant to write it up this morning. Ran out of time in my morning letter. But if the government, the BLS, hadn’t made seasonal adjustments, right, if they had not made seasonal adjustments to the CPI, we would have had deflation. We would have had a negative number, a negative print year over year, instead of getting, what was it? 3.4% year over year inflation.

[00:06:39]:
So that’s what’s coming, because that’s the future. We’re going to see both headline CPI and core CPI data, at least over the next few months. Based on the way they calculate these numbers, you’re going to see inflation plummet on an official basis. And what does that tell us? Well, the markets do like rate cuts. The markets really love anticipating rate cuts. And what really likes that? Tech semis. This is the group to go to when rates are expected to plummet along with the miners. I shared this this morning with our folks.

I’ll just read, jump around a little bit here, but check this out. When the Fed is going to cut rates, when their pivot begins, and they’re likely going to cut, I don’t know. I think March, because the CPI data is going to be so weak over the next few months. I think, yes, I think there’ll be a rate cut in March. Again, the bond market leads, the Fed follows. The bond market’s telling you what’s going to come. But check out what GDX has done in the last three big rate cutting cycles. That’s from 2000, 2008, and then also happened in a compressed fashion in seven months in 2016 and then in 2020, GDX in these three time frames went up 400%, then 238%, then 208%.

[00:08:05]:
They’re looking an average of. What is that? That’s 280% gains in GDX when the Fed cuts rates in the last three big rate cutting cycles. And it just so happens, by the way, that the miners today ripped and roared higher, finishing up 3% of the day. Now, we’ve talked about this group a lot. This is really more for probably for our very subscribers and members than just a casual listener. But look, this is a group that we are very well positioned in. We are aggressively positioned in this group. Gold just hit an all time high recently.

The miners have been in a strong rally from the lows of last year. However, they’ve been late of late, they’ve been weak of late. But what stands out to us, first of all, from a technical point of view, there’s a very well defined ascending bullish channel in the miners. Again, GDX, the gold miner ETF, there’s a very well defined bullish channel, and we just bounced off that lower end. So technically, we like this group. We just got a golden cross where the 100 day cross, the 200 day, in a matter of, it won’t be long now. I’m curious, let me just check this, because we have another golden cross, the biggie, where the 50 day crosses, the 200 day coming up. And that’s going to take place, I’m going to say probably next week.

[00:09:28]:
So again, the technicals look great on this. Are we back above the 200 day? Anyway, I think today we jumped back above the 200 day, but it’s been vacillating back and forth just above or just below the 200 day. But then also this morning, we wrote this up this morning for our folks. I would encourage everybody, maybe do a Google search or if you’re a subscriber of ours, we shared this in our letter this morning. By the way, if you’re not, sign up for free weeks. Vrainsider.com vrainsider.com sprott Asset management came out with a fantastic report on gold mining stocks. The title being gold mining stocks, a clear and compelling investment case. I encourage everybody to read it over the long weekend, because, look, this group has been hated.

It’s not just under owned, it’s really hated. Okay, under loved, under owned hated, and it’s been all over the map. But when this group gets going, it’s one of the most exciting groups to be a part of. And I’ve been part of several of these. We’ve actually crushed this ownership of gold miners, gold and silver since I first recommended gold and silver back in 2003, we made a lot of money in this group and I think we’re positioned to make a ton of money going forward. Read this brought asset management case study. I’ll make two points here from this study. I just made one, how GDX does in a rate cutting cycle.

[00:10:55]:
This is what the market is beginning to anticipate. Also, the gold mining industry is essentially in a quasi liquidation mode. In other words, and this is based on both the Sprott and Bloomberg’s research, the reserve life of the top ten global miners has declined by 33% in the last ten years. So the supply is not there as demand continues to pick up. And how do we know demand is picking up? Because central banks last year purchased an all time high, record high level of gold purchases. Based on what we see so far, they’ll do the same this year. 2022, I believe, was just off an all time high. So that’s real smart money, right? Can we agree that central banks are the actual smart money? They’re certainly the big money, and when they’re buying, it makes a lot of sense to follow their lead.

So I’ll leave it there for you. I’d encourage you to read that over the weekend. Miners are trading at 30 year low valuations to gold. This group is cheap. Now, buying something because it’s cheap doesn’t mean you can make money in it. Okay? But when all the other stars line up, and they are now the technicals, the fundamentals, now sentiment, because the group is so hated as a contrarian, you want to buy it? I can tell you again, we are aggressively long in this group, very excited about the amount of money we’re going to make in this, in both junior miners and in physical gold and silver and etfs as well. We use leveraged etfs. And of course, that gives you a great diversification for a gold miner ETF, and it gives you better bang for your buck.

[00:12:31]:
So again, read that report. I think you’ll like it. I think it’ll pay dividends going forward. What else here? I want to make one final note on banking. We’ve covered this so often and I believe we were one of the first to do it. I know I was one of the first to get beaten up about it on social media and when I started reporting this and again, talked about this on my very first appearance on Charles Payne’s show just over a year ago. And I’m going to be on again next week. So I may have to touch on this again.

What we’re also learning from the banks is that mortgage delinquencies now make up just 3.6% of total bank loans. Just 3.6%. Put that perspective, that is just off all time lows. And the all time low was like six months ago. So we’re right. At all time low. So for everybody out there telling you that, oh, we are entering the next 2008 financial crisis, the whole thing is going to implode. Look, that’s what the permavers want us to believe, right? That’s what the fear marketers want us to believe.

[00:13:34]:
Folks, it ain’t true. Nothing could be further from the truth. We are in the roaring 20s. Consumers have rarely, if ever, been in better shape. The facts bear this out. I won’t go through it all again now. But we covered it so often. Home prices, all time high.

Credit scores, all time high. Net acquaintance home, all time high. One third of americans have no debt on their home. Again. Now, mortgage delinquencies, right. At all time lows. Folks, this is telling you how strong the consumer is. And why does that matter? Because 68% of consumers own at least one home.

[00:14:09]:
At least one home, okay? Nothing’s more important than housing. This is the foundation. Tyler covered this when we’re talking about this, and he put it in great perspective. The reason all of this matter, the financial strength of the consumer, the reason this matters is that this is the kind of balance sheet fundamentals for both corporate America and for consumers. Corporate debt is 50 year low, folks. 50 year low to market cap. So it’s both consumer and for american companies. This is the kind of balance sheet data that you see at the beginning of economic expansions, not at the end.

Right? Because right now, consumers have the ability to lever up aggressively because they’re not leveraged up now. They’re not leveraged up now. That means they have the ability to do so, and they will. They always do. As animal spirits return and confidence in the economy comes back, right? Hard to be that confident right now with the sigh of negativity we have and with look at the brain dead guy we got sitting in the White House in DC. That’s why so many people are so scared to death. But that’s a psyop, folks. That’s what we’ve been telling you for a long time now.

[00:15:20]:
This is one of the big reasons we’ve been so aggressive along the stock market, because this move higher is just beginning. And the fundamentals of the american financial economy prove this up. We got it again, again, from the mortgage delinquency data, this is the roaring 2020s. Everywhere we look, we’re seeing this backed up. Not to mention the fact that we are in an AI and innovation revolution boom time again, another of our big bribe megatrims. We spent a lot of time looking into this. Okay? We’re very excited about this today. Larry Fink, the CEO of Blackrock, again, I’m not a fan of his necessarily, but he put out a tweet today with respect to, because he’s a big bitcoin fan, of course, they’re one of the first bitcoin etfs to launch under Blackrock.

Larry Fink said the next step will be tokenization of financial assets. What does that mean? Well, whether or not you love cryptocurrencies, bitcoin, et cetera, you like the blockchain, right? I’ve yet to meet anybody that understands what the blockchain technology represents that doesn’t like it. This is what all these companies are gravitating to. This is why AI is so powerful, because it’s going to give us the ability to again, use the blockchain across multiple asset classes, multiple financial assets, including homes, mortgages, real estate. Folks, this is coming. Tokenization and fractional ownership of assets is going to provide massive amounts of liquidity, okay? Massive amounts of liquidity. Not just liquidity, but again, fractional ownership. Faster transaction speeds, cost savings, improved transparency, greater inclusion, and all assets can be under this.

[00:17:19]:
But Larry Fink nails it today, folks. This is something we’re staying on top of. We are looking for a way to take advantage of this, specifically in the mortgage and real estate industries. If you’re listening to this podcast today, if this is something you know about or have good contacts in this space, please contact us and let us know, because we’re looking for the right company to partner with so that we can begin actually marketing this. We want to help the world find out about the ability to do this. Just give you an example. What if you can go to homeowners all over the country that don’t want to sell their home and don’t want a reverse mortgage? Okay, you want to stay in your home, but you’d like a little liquidity. Well, what about, this is what this provides, folks.

This is what blockchain tech and tokenization and fractional ownership will provide, is the ability to say, maybe take 10% of your home and lay that off in fractional ownership to somebody else. Right? You get the income, you get the 10% value of your home immediately you still own your home outright with all the rights that come with it. And that gives investors the ability to participate in the growth of your asset, of your home. This is all going to be done with twenty four seven live pricing. That’s the increased liquidity and transaction speeds and transparency that we’re talking about here. This is a massive story and it’s just one part of the story of AI and the innovation revolution. And it’s going to apply to multiple industries asset classes. As I put out today, this financial engineering we’re experiencing, again, big part of the big bribe, this AI innovation revolution.

[00:19:01]:
We’re now in the first inning of, probably the top of the first inning of, I believe will take GDP growth to better than 5% for multiple years in a row. This is something Kathy Wood, again, another rock star legend. Okay. She also, of course, is a big bitcoin advocate. Toddler covered yesterday. She has 25% of her assets in bitcoin. Wow. I mean, that’s just amazing.

Okay. She’s a very wealthy person and she’s at the forefront of all this. And she’s of course, the innovation queen, if you will. Her work is incredible. She has an amazing team and she gets crapped on so often. People that really like to hate on her, they’re wrong. All I can tell you is they’re wrong. She’s right, they’re wrong.

And she’s actually saying GDP growth could be better than what I’m saying. She’s talking about GDP growth of 10% a year for multiple years in a row. Folks, this is why the markets are going up now as a discounting mechanism. The markets are moving higher in advance of what’s about to happen. So I’ll move on now. But again, this is something we’re very excited about. If you’ve got expertise in this area, please reach out to us, let us know. Of course, anything that you come to us with, guess what? We’ll partner up on it.

[00:20:12]:
We believe in win win relationships here and every single thing we do. So come to us with your ideas. We’ll form a partnership and we’ll take this to the world by working with the right technology and financial partner that’s at the forefront of making this happen. Again, fractional ownership, tokenization in multiple industries, specifically as we care about housing, real estate and mortgage. All right, so again, the bond market is telling us we’re going to have significant disinflation, which we already have, but it’s going to be deflation going forward. China’s exporting it and now innovation will take care of the rest. This is a magical time to be an american, magical time to be an investor. It’s a great time to have at least some money.

Not to be wealthy, but you got to have some money. And that’s called hard work, folks. That’s how you get that hard work and being smart with your money. What else today? Let’s see. I’ve covered it. One more thing I wanted to. No, that’s the big stuff again. The fact the markets could rally this week in the face of this negative news.

[00:21:18]:
Not great bank earnings. Have the semis continue to lead higher again, up 4.1% this week. These are all big buy signals and I think what’s going to take care of the rest is going to be tech earnings. Next week is earnings pick up. It’s really the week after next we see all the big tech companies start to report and I believe they’re going to blow the doors off. According to Factset, the average estimate for earnings growth for Q four is only like one point something percent like 1.31.5% for the fourth quarter. I think that’s going to be not only on the low side, I think significantly on the low side as technology continues to lead the way higher again. This is the innovation revolution we are just beginning to enter right now.

How exciting, right? By the way, SPF hundred is now to close. Today is just 13 points away from a closing all time high. When that happens, it will join Dow Jones as the only current major index at all time highs. But don’t forget, folks, housing and the semis have already hit all time high. There’s your leadership. That’s where we’re going. They’re telling you what’s going to happen next in the broad markets. Keep buying the dips.

[00:22:28]:
That’s the smart money play. Keep buying the dips. Be confident in that approach. This is the second year of a new bull market. As a reminder, second year of a new bull market has been higher every single year going back to 1952, 100% of the time with average gains right at 14%. But we expect much better this year from tech semis and small caps. And then again, love the miners and special situation stories which we call our VRA ten baggers who we’re very high on. Just looking at my notes here.

All right, let’s move on to the internals today. Mixed bag. But you know what? Mixed bag. About as simple as I can put it, really. For advanced decline, NySE was positive about a couple of hundred issues. Nasdaq negative about a couple of hundred issues call that a wash. Volume was positive for. No, it’s slightly negative.

[00:23:27]:
I apologize. Slightly negative for both NYC and Nasdaq. However, new 52 Kai’s lows came in at about 150 more stocks hitting a new 52 Kai than hitting a new 52 week low. These readings have not been great by the way, of late. But again, remember, we had what, 910 straight weeks of parabolic move higher in the markets. Sentiment went to extreme greed. We’re still kind of there. But now these markets have worked off.

They’re extreme overbought readings and now they’re hitting oversold levels again. This is technically speaking in bull markets of size and scope like the one we’re in now. This is when you’re looking to either put on new positions or add to those positions. That’s been one of the best smart money plays since the birth of this bull market has been buying the dip. I see no reason to change that approach. It’s working. It’s not broken. Why would you change it, right? In our sector watch today, we had seven of eleven sectors higher on the day.

[00:24:24]:
Led to the upside by energy up better than 1.2%. Real estate up eight tenths 1%. Communication service up sixteenths 1%. To the downside, really only one sector, consumer discretionary, down 1%. Pretty quiet elsewhere in our commodity watch, again, gold rocketed higher out of the open, up better than 50 points an ounce at $150 an ounce at one point. Finishing up. Let me finish this right. Finishing up 1.7%.

I’m getting these late adjustments and yeah, 1.7% up $34 an ounce at 2053 an ounce. Silver up 2.9%. Even better for silver, it’s at 23, 36 an ounce. Copper today was down four pennies a pound at 373. Again, crude oil today was up at one point, it was up over 3%. Finishing up on the day, 1.1% at 72, 81 a barrel. And finally today, buy the rumor, sell. The news kicked down on bitcoin, down 3700 as I speak at 42,000, 432.

[00:25:25]:
Of course, we cover this ad nauseam. It’s now had the blessing of the SEC. A lot of people bought in advance of it. Again, we’ve been a broken record with this as well. This is another major new asset class. It is now an officially, you can call it an officially new asset class. It’s not a currency, it’s an investment. But it’s an asset class and it’s new again.

It’s a simple for me, simple. Texas boy. It’s a supply demand story. That’s really what it is. As a new asset that’s got incredible upside potential. It’s now been blessed by the SEC. They can’t unbless it. They’ve already blessed it with only 21 million ever going to be in existence.

[00:26:08]:
With the housing taking place in 98 days, I think it is 97 days from now. Again, it is a great story, and I got to tell you, I think it’s something you can buy here, and I think you can sleep good at night about it again, unless something goofy happens with a hack job of some kind, that’s always a risk. Certainly with something like bitcoin, which is only traded digitally, that’s always a risk. You never want to go Kathy woods at 25% of her assets in it. So who am I to give advice? Just listen to Kathy Wood. Maybe 25% of her assets are in bitcoin. I’m not that aggressive, but I believe it does deserve a role in every portfolio. Unless you’re retired and living off a monthly stipend.

I think if you’re an investor, you deserved and now you don’t have to use Coinbase. Right. By the way, I don’t understand why anybody wants to own Coinbase stock anymore. I don’t get it was down 8% today, but it really had been going down into the SEC approval. Coinbase is 50 week high, is 187. It’s 129 now. But I don’t think that tells the whole story. You go back a little further.

[00:27:20]:
When it was red hot, the high in Coinbase was 364. So it’s 129 now. I don’t understand the allure of Coinbase here. I’m sure I’m missing the story. At one point, I was very high on it. We never recommended it. I’m glad we didn’t. But I think now that you can own these, look, you can own cryptocurrencies directly, unless, of course, you want to have it in your own wallet, have that privacy and ability for asset protection, then certainly it plays a role.

But I think some of the bloom is off the roads for Coinbase. At least that’s my take. But there are so many different ways now to own bitcoin. Of course, directly through these spot ets. All right, folks, that’s it for today. Listen, I hope you had a great week and even better weekend again, three day weekend. We’ll see you back here again Tuesday at the close.

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Time Stamps

00:00 Bank stocks were mostly down on earnings.
05:52 Bond yields plummet, inflation remains high.
08:40 Miners in rally despite recent weakness, technical support.
10:55 Gold mining industry in liquidation with demand.
15:20 Aggressive stock market due to roaring 2020s.
18:02 Blockchain enables fractional ownership with live pricing.
21:18 Bank earnings disappoint, tech expected to surge.
26:08 Bitcoin has potential in every portfolio.
27:49 Coinbase's success waning, various ways to own bitcoin.

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