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VRA Investing Podcast: Nvidia Earnings Preview and Understanding an Overbought Market – Kip Herriage – May 20, 2024

In today's episode, Kip kicks off the week with an analysis of recent market strategies, breaking down why groupthink often leads to underperformance among money managers and how to avoid this pitfall. We'll also explore the lates ...

Posted On May 20, 2024Episode 1388

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About This Episode

In today's episode, Kip kicks off the week with an analysis of recent market strategies, breaking down why groupthink often leads to underperformance among money managers and how to avoid this pitfall. We'll also explore the latest movements in Bitcoin and Ethereum, as well as Nvidia's highly anticipated earnings report this Wednesday. Tune into today's VRA Investing Podcast to learn more!


Don’t look back because the market is closed. Good Monday afternoon, everyone. Kip Herriage here with the daily VRA investing podcast. Hope your day was a good one. Hope your weekend was fantastic as well. It is Memorial Day weekend coming up. So we get a good long weekend coming up so let’s make the most of this week.

It’s a big week. We’ve got Nvidia earnings coming up. It’s Wednesday after the close. Talk more about that in a minute. Mike Wilson made the news this morning. Mike Wilson is the chief market strategist at Morgan Stanley, and he finally capitulated. He’s been bearish for. He got 2021 right.

He was short the market. He recommended that folks sell stocks and go short, and he got that call right. The problem is he stayed short. He stayed short this entire time. And he finally capitulated this morning. And of course, the Dow Jones falls 196 points today on the day he capitulates. So the bottom line is he’s finally, he’s on the right side of this, of this, of this ballgame now. So where do you go? Mike Wilson, good to have you with the bulls.

That was a good call. But imagine being short and being bearish in the market as long as you’ve been. That’s the thing that just doesn’t make sense. Everybody gets calls wrong, right. But when you get a call wrong, it’s okay to say I made a mistake and change your mind. Right. When the data points that the charts tell you, the price action points that direction, you just got to get out of that, that wrong, wrong thinking. And it’s really groupthink.

I’ll just. Groupthink’s a reason. I’ve been in enough of these meetings with analysts and investment firms to know what happens. You get a group of people sitting around your table, ten pretty smart people, for example, that all have their own views. And before you know it, one, they’re all being, you know, boiled down to one view where half the room doesn’t even agree with what the group’s final decision is, but they have to go along to get along. And so that’s just, that’s why, if you’re looking for a reason that 90% of all money managers underperform the markets every year, that’s the reason it’s groupthink, and it’s a destroyer of success. And you cannot win with groupthink. It’s not possible to win with groupthink.

But I think that’s why, you know, companies like ours, others that are, that, that are able to beat the markets are able to do that because you have kind of a small contingent of people, in this case, myself and Tyler, that are able to come together and say, yeah, you know what? This is the way we think it’s going to be. This is the right call. And if we’re wrong again, it’s fine. It’s to get stopped out and you get back on the winning side, because discipline matters. And discipline matters whether you’re a short or long. And again, never, never a perma bore or a perma bear. Be right. Big move today in bitcoin.

Back over 70,000. Just a few minutes ago, right now, 69,500. Ether. It’s like ether is going to be approved by the SEC as a. I don’t really understand that. We’d heard that there was almost no chance this is, he was going to prove this. ETF’s for ether, Ethereum. And now it looks like that is going to be the case.

At least it’s headed in that direction. So that’s interesting. Brought a lot of life back into the space. Ether up 16% now. Bitcoin up eleven right now. Apollo Alto Networks announced earnings after the close. Pretty decent size tech companies over $100 billion in size, down 8% after hours. I don’t think that’s going to have any, any impact at all on Nvidia’s earnings after the close on Wednesday.

But if you’ve been joining us here, this is something we’re paying close attention to because the markets are hitting extreme overbought. We’re very close to extreme overbought on steroids, our most overbought designation. And that’s just when bad things happen. And so we are going to be making some portfolio changes this week. We did that today, by the way, in our parabolic options program. And let’s get to it. Dow Jones today down again, down 196, down half percent. But everything else is up today, by the way, Dow Jones, look at the chart.

The Dow Jones is already trading at extreme overbought on steroids. It’s there on every momentum oscillator that we track. We track four of them. They’re all extreme overbought. So if Tyler talked about this last week, if we can get a rotational theme going where the Dow’s down for a day or two, and then Nasdaq was down Thursday and Friday of last week. Right. If you see that kind of rotational thing happen, there’s no reason this market has had a big shakeout just because it’s extreme about, matter of fact, the strongest markets you can be in are the ones that hit overbought levels and stay there. And these rotational themes really help.

We saw that last year played out. We may be getting into another era like that. Again, we take it day by day here. Just giving you a heads up. We are a stone’s throw away from extreme overbought on steroids. By that I mean a couple days of trading, it really does fit with Nvidia’s earnings report. I’d be shocked if they miss. Remember, Nvidia kicked off the AI craze in May of last year while we were having the regional bank crisis.

And here comes Nvidia with their earnings report. It’s like AI is not a fad. Here’s the evidence. Look at our $20 billion in revenue that we didn’t think we were going to have. I mean, it was essentially that and it just shocked the world. And that was the game changer. All of a sudden, no one was worried about regional banks. That was in rearview mirror.

It was Silicon Valley and a couple other primarily California banks. Imagine that, right. That had trouble. There was a New York bank as well. So there you go. California and New York, right? Perfect test case for or blue states getting things very, very wrong. But again, Nvidia kicked it off. I’ll be shocked if Nvidia doesn’t beat.

But it’s more than about that. It’s investor expectations. And so if we get the CEO on his earnings call and if he just has a little less energy than he’s had on past earnings calls or if he says one wrong sentence, you know, that’s how stocks get. Get hit hard. All right? And that would take the whole group down. Just something to be aware of. Because again, this is reaching this level of overbought. This is when bad things happen.

We just, we practice discipline, not always perfectly, because we do think this is that bull market. Matter of fact, we’re pretty confident this is that bull market of the roaring 2020 is a generational bull market. So shakeouts can happen. You know, they happen even in the best of markets. We just don’t want to see something bad come out of Nvidia’s earnings call. I don’t think that’s going to be the case. But having said that, I would not all be surprised to see a shakeout and this could be pretty nasty over a 2345 day period. Something like that.

I’m not predicting it, don’t think it’s going to happen. But that is the setup at this level. Overbought. This is when, again, this is when bad things happen at this level of overbought. So I think anything. Just be smart. There’s nothing wrong with taking some, never go broke taking profits. Take some profits, raise a little cash.

Even if you have to buy back an investment at a higher price, that does not matter. It should not matter at all. This is about having a trading discipline. And I love raising cash. Frankly, I love raising cash. I’ll give you an example. Right now, the one position that we are likely going to sell tomorrow or maybe Wednesday morning, if we want to cut it close, is going to be our semiconductor position. We have two of them, but this is Soxl, which we added three weeks ago.

Well, we’re already at 44% in this. Okay? So we timed it just right against a three time leverage semi ETF. So they moved very fast. But these are the ones that, again, these can be very dangerous vehicles. If you’re on the wrong side, you get smoked. So anytime you can make 40, 50% in three weeks, what’s wrong with taking that profit? And so that’s probably something we’re going to do. But guess what? We focused on this chart this morning. Take a look at a chart of XLE, the energy ETF.

This is on the VRA investing system. This is a perfect setup for us because you got a great looking chart. This then had a shakeout, right? It’s had a shakeout, it’s pulled back, it hit extreme oversold levels, and now it’s formed a tight triangle pattern called a bull flag. And now it’s breaking out of that. But it’s light years away from being overbought. And we love energy. So again, this is that rotational theme that really does work in a market like this. This is why I say it’s been the best trading market of my career.

95 to 2000 was great, but as I said many times, it was a blur. We didn’t know what was. By the time we figured it out, we were halfway through it. We still couldn’t believe these companies were going public and their stocks prices were double. Tripling, tripling on the first day of trading. Not just one or two, we had back to back years of more than 100 companies that went public and doubled on their first day of trading. That was why they call melt up. That’s what that was.

And then we also had like 50 companies a year that went up three times on their ipo day. So that was really where all the party was, was in the IPo market. And then you have, of course, your true blue tech companies they’re also participating. But nothing like the IPO market was. That’s where it was red hot and we just haven’t entered anything like that now. But again, that was a blur. 95 to 2000 was our introduction to a brand new world technology which we didn’t know anything about, you know, online shopping and then soon to be followed by wireless communications. Right.

And that changed everything. The combination of, and of course the iPhone, which replaced the BlackBerry, which I never thought was going to happen. I love my BlackBerry and now I can’t imagine ever using it again. Great movie, by the way. It’s a great movie out with a guy from it’s always sunny in Philadelphia, Dennis, who plays a great angry character. He plays the lead banker that helped put the BlackBerry company together. Recommend it. It’s a good flick.

But anyway, so that was a blur, 95 to 2000. And now we have a second. This really is, this is my second Like environment. And so this is why we try to make sure people that didn’t go through that, that weren’t investing through that, maybe you weren’t even life through that then to understand what this represents, which is we think is a much broader and a much more powerful bull market, it’s probably going to last much longer than And so instead of five years, I think this could go easily into two thousand thirty s and be a very, very special bull market with a lot of wealth creation taking place not just in the equity market but in the economy as well. And I wrote this up this morning because we wrote our book about it, the big bribe, about the vast level of opportunity. And again, I gotta, it’s something that is so inbred in our system.

It’s a psyop of negativity. It’s coordinated. I’m certain of this. It’s coordinated. It’s entrenched. People are convinced that their lives are horrible and all they have to do is turn their tv off, stop reading crap that’s making you depressed and anxious and maybe read manifest your destiny by Wayne Dyer and understand how blessed we are and that, understand that what you think about, you bring about, this is a real thing. And, but you have people that are so into what’s happening in the media and they buy it hook, line and sinker, that things are horrible and they’re not. Things are clearly not horrible.

This, we believe this is the best wealth creation era in us and global history. This happened right before our eyes from the housing boom that is just getting started to the cryptocurrency craze. Again, it’s not just bitcoin. It’s not just ether. It’s not just thousands of other cryptocurrencies. But really, it’s about the blockchain. It’s about tokenization, fractional ownership. We’ve spent some time talking about this in the past, and again, we covered it in the book, and then financial engineering, which, of course, bitcoin is.

And now it’s happening on a scale where it’s not just powerful companies and government entities and central banks can use financial engineering, but it’s now being made available to the rest of us that’s only going to continue to be rolled out. Very powerful. And again, no one’s talking about the millennial generation because they’re powering. Everyone should be talking about millennials because they’re powering all of this now, the largest segment of the population, they’re in the process of inheriting more than $70 trillion. They are born into technology. They get it on a level that my generation cannot and will never understand. Most of us, anyway, speaking for myself, and again, they’re very bright. They’re entrepreneurs, and they love equities, they love housing, they love cryptocurrencies.

And again, they just get it. So. And they’re very, very intelligent. They’re super. If you know millennials, then, you know, one thing is they’re super intelligent, and they know things that, again, they pick up things that they’re street smart, you know? And those are the ones we’re talking about. They’re driving everything. And then we have consumers in America. Again, we’ve talked about so much, but consumers in american companies are in their strongest financial condition in decades.

You don’t have to like that. People get angry when I say that. It’s still a fact. It’s just a fact. Yes, we have negatives, we have inflation, we have open borders. I’m not saying it’s perfect. Show me a country or a time and place. It is perfect.

Right? But, you know, when you have the kind of financial conditions in place right now, balance sheet. I’m talking about balance sheet. Bottom lines for both companies and for consumers, this is the strongest in decades. It’s not debatable. The strongest in decades. All of this combines and of course, the red pilling of America. One of our favorite subjects. Folks, we’ve woken up.

It’s not just happening in the US. The entire planet is being red pilled. This is a really hugely bullish end result for all of us. We know what we want, which is what we don’t, we don’t want communism. We don’t want far left ideology. And so people are waking up to this. And that’s, again, that’s a very good thing. Let’s hope that translates to a lot of votes this November so we can get this clown out of office and then look at the setup.

Just imagine, okay, Donald Trump wins. We already know he gets the economy. We know he’s going to be a laissez faire president. Get the hell out of the way and let us do our job of building businesses and building companies and building careers instead of having to worry about you trying to control every facet of our life with, again, far left population control really is what it is approach to really destroying lives. We get rid of all that with the inherent strength in this economy, again, for both american companies and consumers you talk about, is that what’s happening here now? We’re six months away, folks. The markets discount out six months away. Are the markets already looking at this going, Trump’s going to win and we’re going to do, Dow Jones is going to double in two years. I mean, that kind of energy is built up in this market.

It just is. And so, yeah, I think the markets are starting to discount the possibility that Trump could win. And it’s funny because at the same time, the markets are discounting the possibility of Trump going to win. We had the federal reserve that’s goosing the markets, trying to get their guy to win. And again, if you think the Federal Reserve is above that, let’s just say that you and I have different viewpoints on how we see the Federal Reserve and the uniparty and all these state based systems, again, that control and try to control and undermine us, really. But again, that’s competing forces to make stocks go up and to goose the economy that are both on our side. Again, I think it’s a great setup. As overbought as we are, there are also some real short term positives.

VR investing system is eleven to twelve screens. Bullish. It’s never been, never had that reading before in the 30 plus years I’ve had this. We don’t always have our rating system, but I can tell you the VR investing system has never been as bullish as it is now. The one negatives is geopolitical setup. You know, of course, overnight we learned the iranian president, I think his foreign minister, both died in a plane, in a helicopter crash, you know, probably an accident, probably bad weather. But again, look at what’s happening, Russia, Ukraine, et cetera. And Middle east, there’s a lot of risk out there.

That’s why we’re not twelve out of twelve screens bullish, otherwise we would be. But the positives, this is a very bullish time to be investor. From analytical point of view in a presidential election year, investing from the middle of May through the end of August has been the play. And of course, we’re right there. We’re just now into that. So from again, seasonality point of view, this is a very bullish time to be in the markets. Again, eleven to twelve screens, very invested system are bullish. And also this is just happened in a short window.

This next two weeks happens to be one of the most bullish times for tech stocks. And again, now we come back to Nvidia reporting on Wednesday after the close. So a lot to keep eye on. But bottom line is we have a bull market of size and scope that is structural in nature. And regardless of what happens with the report, regardless what happens over one two week timeframe, even a one month, two minute, two month timeframe, if you’re a long term investor, this is just time to stay locked in. It’s the time to stay locked in and own your favorite stocks that are participating and that are leading and then pay attention, watch the price action. Right. And we think you’re going to do very well in this market for a number of years.

But again, Mike Wilson, Morgan Stanley capitulating today after being this bearish, that’s a story. The fear and greed index, that’s a contrarian story, by the way, the fear and greed index, which of course is one of many sentiment surveys that we follow. This actually isn’t a survey, it’s an actual index. But it’s just flipped over the last month from extreme fear. Now it’s to greed. It was 65 this morning. So that’s not extreme greed. But you see, we’re headed in that direction.

And also last week, the pull call ratio reached levels we hadn’t seen in a very long time, meaning more people were buying calls. And puts at an extreme level as a contrarian, that’s a sell signal. But today that got reversed. Tyler follows pretty closely and just told me put call ratio closed over one today after trading above one pretty much all day, close to 1.04. That’s good. That’s about, that’s what you want to see. With the Dow down 186. That finish the indexes.

Nasdaq up 108, risk 2000 up seven points. As you have 100 up five points. Again, leader here today, of course, Nasdaq for the broad market. That’s good to see. And of course, more important than that, it’s the semiconductors. And they had another very good day today. SMH is semi eTf up 2% today. The three time leverage ETF up 6.5% today.

So it was a good day today outside of, outside of Dow Jones. As long as you’re not Mike Wilson, you had a pretty good day. What else today? You know, we’ve been pounding the table on the miners, right? They’ve clearly broken out here. But again, GDX, the miner ETF still now, even after this move, higher still, 41%. It’s all time highs of 2011. I think this is a group that really doesn’t matter how robotic gets. You just want to buy this group on pullback, own it and buy it on pullbacks. We have our favorite miners here along with ETF’s.

Come check us Dot love this group again, as I said earlier, love energy stocks again. As overbought as we are, there’s some great looking setups here. Chinese tech stocks are another one. Now, do I love chinese tech stocks more than I love us semiconductors are us tech stocks? No, I do not. I made that very clear. No, I do not. But they’re trading evaluations that are like 25 to 30 year low valuations based on earning.

Chinese tech stocks are. And so they’re just washed out. Right. The spring, the rubber band has been stretched too far in the wrong direction. So, yeah, these are great looking buys. And the chart on Kweb, that’s our China ETF that we own in the VRA portfolio. It’s just flashing all kinds of buy signals. It’s broken out of a bull flag pattern, by the way, as has bitcoin.

Now, bitcoin’s broken out of a bull flag pattern today. I’d like to see it close over 70,000. And then I think the move to new highs is going to be quick. And then I think, again, our minimum target year end is 100,000 plus on bitcoin. Tesla chart. You know, it’s reaching a point here. We’re going to see a breakout one way or the other. And we’re big time bulls on Tesla.

So there are a lot of things can be bought here, but semis and tech and some of these, like Dow Jones, again, very exposed indexes at extreme overbought levels. Discipline just says why. Right. It’s just they’re better times act. That’s our approach. I know there are momentum investors that feel just the opposite. They want to buy breakouts. They don’t care about how the oscillators look and how far above the 200 day moving average you might be.

They elected by momentum, and that’s just not our approach. But, hey, everyone’s got their own style, and that’s the key to investing. You find out what that right style is for you. But that’s our approach. At extreme revolt levels. We just want to be patient, raise a little cash, and then we look to slide into other sectors that we like or just sitting cash a little bit. Nothing wrong with having a little cash, right? As my mentor Ted Parsons used to say, rest in peace, Ted. He’d walk around the office saying all along, cash is king.

Cash is king. Dollar. Ten for a dollar. I can see it here, Ted, saying that right now. But it’s a great. It is a great. Is a great looking market long term, as we are in the roaring 2020s, people really don’t like it when you say that. I’m learning that and not that I care.

Boy, you know, again, people are very connected to the downside, very connected to the negativity. If you’re not negative, what’s wrong with you? And I just don’t operate like that. That’s just not how I operate. I’ll leave it there. All right, folks, let’s talk about the internals today. Flat. I mean, very, very flat. Day to day.

Again, this was kind of the internals you start to see at overbought levels, the market just kind of goes through a pause period. Sometimes it’s just a sideway pause. By the way, we don’t have to have a big correction at all, or we just hit all time highs. So it’s okay to spend a few days going sideways. Fast decline for both NYSE and Nasdaq just essentially unchanged. They were unchanged. Volume NYSE was only slightly negative. Looked just like advanced decline.

Nasdaq volume was better than two to one positive. These penny stocks are candid in there, and that’s really kind of making the volume look a little crazy, but. So it’s harder to get a good reading out of this, frankly. But there it is. And we did have today this is good. 474 stocks, a new 52 week high to just 130. Getting a new 52 glow as this market continues to broaden and get stronger. And again, we’re at all time high.

So what are you looking for? Right, Kip? But this will. You’ll see. The internals continued and the new 52 Kai’s lows continue to expand in a positive direction. That’s just how bull markets operate. And now that we’re getting capitulation from the permafrost, you know, we’ll see what that means for the markets. The short term, medium, long term. I think I know what that means. Short term.

You never really know. All right. In our commodity watch today, again, gold overnight got some, got a real head of steam. Opened sharply high this morning. I believe that was opened at a new all time high, 24, 54. Yes, high of the day. It did close or trading right now at 24, 30. That’s up twelve to $13 an ounce on the day.

Silver, which has been a house on fire, well over 30 now. 3206, up another $0.80 an ounce of two and a half percent today. Again now, twelve year highs for silver, again, crazy though, the miners is still trading it at 41% below all time high. Gold is all time high. Silver, twelve year highs. What is going on? The miners of dirt cheap. That’s what I believe. And I’m going to keep, I’m going to keep singing that song because I think it’s a lot of money to be made there.

Copper also been a house on fire, up another 1% today at $5.10 a pound. All time high. And crude oil down thirty eight cents a barrel right now at 79.20. And finally today, bitcoin. Let’s see, last trade here now back below 69,000. So above 70. Now below 69. Last trade here, 69,956.

That’s up still 11% on the day over the last seven days. Up 6% in the last 24 hours. Bitcoin now is a market cap of $1.38 trillion. If that sounds big, you’re really going to be surprised by what this market cap is in the next five years because it would be a multiple, several times higher than it is now. As bitcoin is a one way freight train to much, much higher prices. These shakeouts will look like on a chart, looking back at a chart, say, the next three to five years, these shakeouts won’t even, they won’t even be a blip on the chart. It’ll just be a parabolic looking chart. Because there’s no better supply demand story out there.

We continue to recommend buying dips in bitcoin. It’s just a great, it’s a great portfolio where you can have gold, silver, bitcoin, and then investments in the hot sectors. Right. That’s, we always want to find what’s the next group that the big money is going to roll into and just try to beat them to the punch. That’s really what our Vera investing system does. And that works for us again. Everybody’s got to find their own approach. All right, folks, I 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 Groupthink harms investment firms, leads to underperformance.
04:22 Dow Jones trading overbought, rotational themes help.
09:22 Tech companies thrived in the IPO market.
10:28 Bull market opportunity for wealth creation.
14:45 Trump wins, laissez faire, strong economy, market optimism.
17:44 Tech stock bullish, stay locked in long-term.
19:43 Strong day for miners despite Dow Jones.
25:35 Bitcoin surges, market cap to increase.
26:16 Recommend buying bitcoin, gold, silver, hot sectors.

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