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VRA Investing Podcast – Kip Herriage – December 14, 2023

We're looking at a market that's signaling a potentially historic run. Markets are extremely overbought, certainly, but that's not deterring our optimism—particularly when it comes to small caps and miners. Get ready for an epis ...

Posted On December 14, 2023Episode 1297
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About This Episode

We're looking at a market that's signaling a potentially historic run. Markets are extremely overbought, certainly, but that's not deterring our optimism—particularly when it comes to small caps and miners. Get ready for an episode full of actionable insights for the savvy investor.

Transcript

Don’t look back because the market is closed. Good Thursday afternoon, everyone. Kip Herriage here with the VRA investing podcast. Hope you’re all doing well today. What a run. Look up parabolic in the dictionary and this market is what you see a picture of. These are pretty rare, but when they start, they tend to go longer than anybody thinks. This is Melt Upville.

This is what we have here. And again, we’ve been very critical of J. Powell and his merry band of money printers at the Fed, of course, for forever. I go back with she or Griffin, long way creature from Jekyll island, author. Of course we go back a long way and had him speak at. I don’t know, he’s probably spoke at 15 of my events over the years. Just a phenomenal human being. And he wrote the book on the Federal Reserve and creation of it, the creature from.

Look, I think if you’ve been paying attention to what the Fed has done, what central banks have done all over the world, and not to mention International Monetary Fund, these ngos that operate like their own private government all over the world, and basically all printing money, but that’s financial engineering. We wrote about this in the book, big bribe. We are only scratching the surface, likely, of where financial engineering is going to take us. Imagine the world’s smartest computers, aka AI, right? We are in the innovation revolution after all. Imagine the world’s smartest computers working with central banks and other entities that can print essentially their own currency. And what could be done here? People aren’t thinking about the future. I think in a way that they did in 1995 to 2000 during that melt up, I’m telling you, we were all giddy with hopes about the future because we saw, once we got email, once we got the Internet, once we got wifi, we’re like, Wifi, of course, came later, but once we got the basics of what we do now, again, email and the Internet, everybody saw, okay, this has the potential to be unbelievable. And then we went a long way without anything really big happening.

And now those companies are really mature. Those leading companies are really mature, highly profitable. I mean, they are our mega caps for a reason. And now there’s so many companies that respond from that. There’s so much innovation taking place. And this is what people are missing. And I think Tyler and I, I will tell you, we have been all over this, as you know, since we wrote the big bribe over a year ago. I think it came out October of 2022, but again, it took us about a year to write it.

So we know this territory pretty well. And the more we researched it, we were just like, holy shit, this is going to be an amazing future. We just got more and more excited. We wrote the book because, again, we talk about a lot, but there’s this massive psyop of negativity out there. I don’t think it’s an accident, but so much of what we see online, financially speaking, is just nonsense. They take a subset of numbers and then they find a way to rig it so it looks far more negative than it is, and then they regurgitate it. It’s its own form of propaganda, and I got my own theories as to why they do it. I’ve talked to it at some in the past.

I won’t get into it today, but the bottom line is there is overwhelming negativity out there that we’ve talked about for a long time. Just as we’re entering this incredibly exciting phase of what’s happening, what’s being built, constructed. Look at space exploration, what’s happening in a good way on the medicine side, some gene research. I mean, there may not be diseases in 20 years, and these may be probabilities at the rate we’re going now. And so it’s a very exciting time to be alive, I guess. It’s always exciting to be alive. And it’s a great time to be an investor and really to be an american. Still the best country on the planet.

I have very little patience for those that say that we’ve lost our way. No, we haven’t. We have crappy leaders that have tried to steer us to communism. It’s our job to make sure that doesn’t happen. Governments only want to get bigger. That’s what they do. This is the battle. This is what we have.

Titles may not really matter, but that’s the struggle that we’re all fighting here. And everyone should be aware of. Know capitalism is going to remain. They have capitalism in China, so that’s going to remain. It’s the power structure and our lack thereof. That’s what the battle’s over. Capitalism is not. They have capitalism all over the world.

It’s not going anywhere. Okay, but it would change forms if now we have oligarchs that run America. You can see we’re headed in that direction. Anyway, with these mega cap companies, they have more power than pretty much anybody in Congress, maybe even more so than the president’s seat. Maybe that’s who the president answers to. But anyway, listen, the Fed did their job yesterday. Again, kudos to JPAL. I actually wrote it up the day before and said, here’s what they’re going to do.

The telegraphing is going to begin. We’ve talked about this a lot here. We’ve been talking about it here for about a month. Along with that front running and of course, the plummeting your interest rates. We’ll talk about that more today, too. It’s good to get your big call. I wasn’t clapping myself. I’m clapping because the rates are going in the direction we want them to, but it’s good to get the big calls right.

Tyler covered this yesterday in his podcast. Again, we pounded the table on this here. These three major inflection points that we’ve been talking about since I think the late summer that we said would be in place, late fourth quarter plus, where we are now. And now they’re all falling in line. Clear disinflation. There is no question we have inflation. Obviously, inflation continues at a much lower level, which is why it’s called disinflation. And that only looks to be speeding up.

That’s what the bond market is telling you right now. And that’s front running. But anyway, we got the disinflation call, right? Our other big call was that the US dollar would resume its long term bear market. When I say that to people, they’re like, wait, the dollar has been really strong. No, don’t look at the one year chart. Look at the three year chart. Look at the destruction that’s taking place in the dollar. And then a counter trend rally.

And now we’re back to the primary trend today. And Tyler, and I’m just looking at these charts together. Pull up a chart of, you know, stock charts. Is a dollar sign, USD. Look at the last two days, these big, massively red candles. All right? There are no buyers and the sellers are swamping anyone that dares get in their way. And so that was our call that the dollar would resume. Dollar is going a lot lower from here, folks.

And of course, this is also one of the big reasons we’re so bullish on precious metals and miners. This exact combination disinflation, not so much a consideration. It is from the point of view of that means lower rates. Of course, that’s good for precious metals. And of course, a dollar, now that’s plummeting like rates are. Those are our major calls. Those are our three major inflection points, and we got them right. Why would we change now? We’re exactly on the right track.

This is now the markets giving us permission to get more aggressive. Right? That’s what the markets now, we’re extreme overbought right now. So you have to pick and choose what you want to get aggressive in. But the market is telling you, okay, Dow Jones hit an all time high yesterday and again today. Of course, let’s cover that. Now, Dow Jones today up 158, up four tenths, 1%. SVF hundred, up two tenths, 1%. Three tenths 1%.

Rust 2000. Boom, up 2.7%. What was up yesterday? Like 6% or something? 5%. No, I’m thinking that’s the miners. 3.6% yesterday, 2.7% today for us 2000, but still 22% to 23% below its all time high. Right. Been a brutal bear market for small caps. Love that group, as you know.

Again, pounding the table on that Nasdaq. A lot of selling pressure came in after the big move higher yesterday, a good open. And then here came selling pressure, folks. That’s just what you see. You’re going to have shakeouts. We are at extreme overbought on steroids, on most of our major indexes in leading sectors. That’s just where we are. Small caps are not there.

The miners are not there. Small caps are getting nearer, though, by the way, because of this parabolic move they’ve had of late. But still nothing like you see with some of the other SBF hundred, Dow Jones and QQQ. And Nasdaq. But again, Nasdaq today gave up a lot of its gains, did finish positive. It dropped at one point down. I saw the Nasdaq down 70, finished up 30 to 27 today. That’s two tenths of 1%.

And finally, semiconductors just will not stop semis, and housing will not stop semis. Up 1.8% today. Again, parabolic move, higher housing. We actually sold a position today in housing, and of course, it just went up higher immediately after selling it. Right? That’s the way it happens. But we loved housing. We loved two groups at the bear market lows of October of last year, October 13, one of the top capitulation events of my career. We pounded the table primarily on two groups, and those were our market leaders and economic leaders.

That’s why these are so important, housing and the semiconductors, right. Semis lead everything in tech, and housing leads everything in the economy. These are two great bellwethers that are tells. And when both of them reflect you, the same buy signal, you just have to just close your eyes and go. And that’s essentially what we did. We trusted it. That’s what the VR investing system is all about. It gives us a certain set of major signals that we look for and indicators.

Again, it’s very simple. Following tech semis and following housing. If they’re both giving you the same signal, then it’s a slam dunk. And that’s really been our approach here. And they just keep going. Today, HCX today, the housing, 5.8% today, right. Just extraordinary. So again, they are extremely bought housing.

That’s why we sold our last position, housing today. Again, we made a couple of hundred percent in it in just over a year. But the reason we sold it from the lows of October, the reason we sold it from lows of October, it was up even more than that. But that was our net gain, the reason we sold it again, that’s our discipline. We trade leverage etfs as much as possible. Some we like to hold longer term because they’re pretty good ones. We like nugt, by the way, is one that I believe the bull market, of bull markets is building in the miners now. So no, we’re not going to trade that, we’re just going to hold it, matter of fact add to it every month.

But that’s not the case with these other leveraged etfs that we trade. So that really was our discipline. We will own housing stocks again, I can assure you of that because this is that bull market and it’s just getting started. So again we got SPF 100 has got to go 1.6% to all time high. Dow Jones again hit all time high again today. So SPF 100 will be first, then Nasdaq will be next. Nasdaq is still 8% below its all time high. And then finally rust 2000 again, 22 20.

I didn’t run the number to close today, 22% to 23% below its all time high. And what a great story for our newer folks here. When you find a group that’s been in a bear market for two years, that’s not just under owned and under loved, but absolutely hated because it’s just has all this, all these stocks have done is going to trade back and forth, but primarily go down for two years. And then you look at the metrics and you go, wait, so small caps are trading at 20 to 30 year lows to big caps on valuation, on valuation basis, what? And then you see the chart start to act better, right? And then that’s when the magic happens. So we are aggressively long small caps and we’re going nowhere with that position. We only add to it. And we only lost small caps in the VR portfolio too. But the Fed did fantastic yesterday we said the telegraphing was going to begin.

It’s begun again with our three inflection points all locked in. Now you’re looking for opportunities to jump in here again. The ten year today, our target in September for the year end on the ten year yield was 4%. Well, we’ve crashed through that today. Then the closed today at 3.93. It dropped to 3.80 something. I saw it closed today. Ten year yield at 3.93%.

1 second. Again, that’s fed front running. So again, it’s been one of our themes for a while now. But when you have the really big buddy, right, and they know even more than we do, we have charts and we have our belief systems and our own research, but they’re being told this from people inside at central bank, say, okay, yeah, we’re done. That’s the big money says, okay, go. And so there’s a very close knit network of that around the world of these sovereign wealth funds and the world’s largest hedge funds in private family offices. Why do you think everybody leaves Congress or leaves the government, goes and gets a cush job where they’re paid millions of dollars a year for, as a consultant. Right? They’re telling them what they’re hearing from their budies that want that job when they leave the government.

So anyway, that’s why technical analysis is so important. And so that’s what’s happening here. Fed front running is happening. Massive amounts of money are going into bonds, and a lot of these folks were short them. So again, that’s a double whammy, right? They have to cover the short sale. That’s a buy, and then they go long. So that’s why you see the speed of this move accelerate the way that it has. I don’t know.

We said we closed at 4% year end. We’re there, we’re below there now. So we think now people have to understand, the last 19 months was an aberration of higher yields. That was an apparition. We’re going to think about that as a very distant memory in the very near future because rates are going lower again. Rates went lower for 41 years, and we just had the great reset, another theme of ours, a different kind of great reset. And now that’s in place. And so now they’ve reset the interest rate cycle.

They did all this. There are no accidents here. All this is done by design. And so it’s a reset. And now nobody has to worry about interest rates being at 0% unless you’re in Japan. It’s remarkable. They’ve held out, but I have no idea how they’ve done it. When Japan goes, that’s the ultimate black swan.

You better make sure you have a lot of gold and silver. That’s why you own gold and silver. It’s for the eventuality that something bad, really bad, is going to happen. And every couple of decades that does. But nothing cataclysmic has happened globally. But something big happens and that’s when your gold goes up ten times overnight. And that’s why we own it. Plus it’s a better store of value than fiat currency is.

But the Fed got it right now. We’ve got fed front running now. The Fed rate hike. Excuse me, the interest rate cycle now has been reset. Who’s to say we’re not going to go two decades of falling rates? Who’s to say that this next time we actually do go into negative rates? Maybe the first go round was just an experiment to see, hey, how would governments function? And they figure out what worked and what didn’t. Who’s to say in two decades that rates won’t be negative 1% in the US and then the government will be earning money on their debt. So no one has those answers. But that’s why again, technical analysis really helps.

And so far this has just been a perfect set up. We think we’re in the sweet spot. And that again we said, obviously it’s been our message for a long time. This is the roaring two thousand and twenty s and this is going to be a bull market that rivals the 1995 to 2000 melt up. That’s been our view for some time. Remains our view. The Fed, they said they’re going to hike rate three times. No one believes that there’s a 74% chance in the futures markets that the first rate cut will happen in March.

That’s why the Fed had to do what they did yesterday. The Fed can’t go from hike, hike, hike, hike, pause, pause, pause and then cut, cut, cut without signaling, without telegraphing. That’s what yesterday was. But that telegraphing, yeah, they may be cutting rates in March. I don’t think so. But that’s what the market is starting to buy into now. Again, this is a perfect set up for equities here and for bonds. Trains left the station.

I think you all get the point. We’re still very aggressively bullish. A couple of things to look at though. Again, we’ve already mentioned we are extremely robot on steroids. Markets that stay at extremely robot and keep going up. It’s hard to find anything more bullish than that, it tells you this thing is going parabolic and then look out. Right? Who knows? This could be a month of. Let’s go straight up.

And that was 95 to 2000. We had those runs. Okay. But there are metrics we look at besides just the momentum oscillators and the VR investing system. One of those is the percentage of stocks above sb of hundred percentage above the 50 and the 200 day. These are very reliable at picking near market tops, short term peaks, right. Not nothing long term, a short term peak and a pretty good shakeout. Well, we’re almost there on 50 day, 90%.

It’ll be higher today. I haven’t looked after the close. Yes. As yesterday’s close, 90% of the s and P 500 is above the 50 day moving average. So that’s a lot. Okay, let me just pull that up real quick. As we close today. Yeah, pretty much unchanged.

89.8% of SV of hundred stocks are above the 50 day. When you get to 93, 95, pretty reliable top indicator. As long as it’s joined by stocks above the 200 day and it’s not the percent of S 500 above the 200 day moving average is only 75%. Only it’s still a pretty big number. Actually come a long way. But again, until we get to 93, 94, 95% and could go higher even. But until we get to that level, we don’t have to really worry about this market being so incredibly overbought that you start talking about, okay, this can’t go on, we’re not there. So that’s good news for those that may be a little late to the party just now buying, I wouldn’t do that.

We own our positions, we’re going to hold them. Now. We are adding to obviously aggressively small caps and miners. That’s what we like to do. When we get a strong buy signal in a group, we go heavy. You’ll see us write about it, talk about on the podcast every day. That’s your signal. That’s what, you know, we’re focused on.

And we are locked in to small caps and miners. Let’s talk about that now. And then we’ll move on here and wrap this up. Pounding the table in small caps. Okay, I’ve already talked about the reasons why, but the chart is another good reason why we broke through really a quadruple top at 198 on IWM today. If you look at pull up the chart of IWM again, the rust 2000 ETF small cap etf a quadruple top over been in place more than a couple of years. Right. It closed today.

Well, it actually closed at 198.21, but it hit 200. So it needs to stay above this level. We’ve said 198 is a breakout, but you’ve seen it like I have. You’ll get a breakout, but it may only last a day or two. It’s a fake breakout. It’s a phony breakout. Right? It’s a trap. It’s a bull trap.

So we want to see IWm stay above 198, even better, above 200. Give us a convincing breakout. There’s a lot of congestion around that level, but great looking chart. And again, it’s approaching extreme robot. But still all the signs and things going higher, we’d look for the next move in IWM to take us to the 208 is a level of some short term resistance. There’s not much there, though. I mean, this thing can go and I think it’s going to. All right.

Really like this group. And then also the miners, again, broken record here. I’ve loved this group for a long time, so I’m a little biased here. I’m a lot biased probably, but I think, again, there’s a massive bull market that’s underway. Impressive melanin miners. I think it’s the bull market of bull markets. I kind of know this territory made a lot of money in this group over the years. Okay.

And I’ve got that feeling. I’ve got that feeling that I had in 2003 when I first recommended them. Gold at 375, silver at 475 an ounce. So I’ve got that feeling. The executives we talked to in the mining space are hyperbolic, as bullish as I’ve seen them. So maybe they’ll remove some of their hedges now they have in place. I mean, that would help anyway. We love the two groups.

Okay, let’s take a look. By the way, Bloomberg had finally, Bloomberg had a thing out this morning. I’m watching it like 530 or so in the morning. And Bloomberg does a segment on is the Fed rigging the election for Biden? I could not believe I was hearing this. Bloomberg, the subject title, the segment was say hello to vice chair of the Fed, Joe Biden. So they think that the Fed is engaged in election rigging. Now that is probably entirely true, but Bloomberg does not typically go into this kind of thing. They spent some time on it.

Interesting, I thought, interesting. You don’t see that kind of stuff talked about. People on tv don’t talk about the Federal reserve if they want to be back on tv much. That’s just on these networks. Like CNBC and Bloomberg. You just don’t go there. It’s amazing Rick Centelli still has a job at CNBC. Nobody else does it, if you’ve noticed.

Okay. All right, let’s take a look under the hood today. Good. Some really good stuff today. Check this out. This is a combination of NYC and Nasdaq. 835 stocks hit a new 52 week high today to just 93, hitting a new 52 e close. It’s been a while.

It’s been a while since we’ve seen that kind of a number. We thought it was going to change. We said the market’s broadening out, right? Another theovirus. And here it is really broadening out. This is the evolution of a powerful bull market. And it’s like, it’s scripted. I know this book. Okay, this is how it starts.

Ipos start to pick up, right? All that $7 trillion in money market accounts starting to come into stocks. Right? When you hit all time highs, people start looking at 401k. Why am I at 80% cash? Oh, my God. What was I thinking? Okay, I got to put money in. This is what’s happening. It’s happening in stages, right? And money keeps coming in. And then here comes their boom, boom, boom, boom, boom. Markets go straight up.

Next thing you know, you got people quitting their jobs as day trade. That’s going to happen in this bull market. People are going to make a lot of money doing it, too, by the way, because they’re just going to go long. These calls that expire every day, and that’s happening, this is beginning. There’s a reason those one day calls and puts exist. They’re really dominating the market action. Now, tell you the truth, it’s a lot of money, and that creates a lot of leverage with these options trades. What you have to do, what other people have to do is they have to go buy the market makers and specialists have to go buy the market to match the call volume.

So I have to write this up one of these days. I’m not an expert at it. This is kind of more Tyler’s territory. I think it’d be something he could really write up well. But anyway, again, this is how the momentum really begins to build increased leverage that’s happening. People are going to start loading up their margin accounts. Right? Again, that’s more money into buying stocks. You’re going to start getting.

We joke about this all the time, but maybe not that funny a joke. But you’re going to start getting tips, stock tips from your Lyft driver, your Uber driver. And taxi, if you still take those, because this is that bull market. This is what happened in 95 to 2000, and I see it pretty clearly. Who knows? Knock on wood. But so far, so good. Again, we put it all in the book, the big bribe. If you haven’t, maybe pick up a copy.

So far, we’ve gotten it all right, including Biden’s bull market, which we also put in the book, having his Bill Clinton moment. Well, Bill Clinton’s economy and stock market did it really well. Now the fed’s trying to rig it for him. Well, maybe they read the big bribe. Who knows? All right, so anyway, good internals today. Four to one positive for NYSE. That’s on advanced decline. Close to three to one for Nasdaq.

Very good. Remember yesterday we had 89.46% of NYSE, a close above its 200 day moving average. I’m sorry, that’s up volume. Sorry, 89.46% up volume. NYSE, that’s massive. Okay, today we had 83% for NYSE, phenomenal. 75% for Nasdaq, also phenomenal. And again, three to five to one positive on advanced decline.

And again, to have 835 stocks in two week high, that is incredibly bullish. And our sector watch today, pretty flat here, actually, six sectors finished higher, five finished lower. But the upside, that’s where the action was. Energy led away higher today, up 2.94%. Oil had a good comeback today. Love energy stocks here. These are cash cows. They are dirt cheap here.

We’re all over them. Energy again, up almost 3% today. Real estate up 2.6%. Rates plummeting. Fantastic for real estate, especially commercial real estate. Materials, that’s the other thing. Why do you think rates are plummeting? Because all this commercial real estate has got to be refinanced. Hello.

Look what happens. Nothing happens in a vacuum. Materials up 1.7%. Industrials up 1.2%. To the downside, consumer staples down 1.5%. But they had a really good day yesterday. And our commodity watch, what a day we had yesterday. Again, I’ve already spoken about the miners here that we love.

Gold over the last two days, up right at 3%. Last trade, 2051, was up just a bit today. I think it was like half percent. Dover put on another 1.6% today. What is that now? Seven half percent in two days. Silver on a serious tear at 24 47. That’s not the sign of a recession right there. Copper, 387 a pound today.

That’s up 2% again. Dr. Copper has been telling you it’s on a buy signal, right. It’s all out of whack, supply and demand wise. And it’s in Contango. Like 20 year lows in a contango. So the futures markets are telling you copper is a buy. That’s fantastic news for the global economy.

No recession. In other words. Again, crude oil today finished up 3% of the day, up $2 a barrel at, what is that? 72 44. Finally on the day, bitcoin flat. This last report here, 42,990. All right, folks. Hey, always appreciate you listening. Hope you had a good day and even better night.

We’ll see you back here again tomorrow after the close.

 

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Time Stamps

00:00 Financial engineering and central banks' future impact.
03:46 Exciting developments overshadowing overwhelming negativity.
09:33 Semiconductors and housing market performing strongly.
12:23 Bullish on undervalued small caps performance.
13:51 Global financial decisions influenced by big money insiders.
16:50 Fed rate hike, interest rate reset. Negative rates?
19:56 89.8% stocks above 50-day average.
25:29 Day trading making people quit jobs for money.
26:34 Stock market optimism and book suggestion.
29:45 Crude oil up 3%, bitcoin flat. Good day.

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