In today's episode, Kip dives deep into a whirlwind trading day following the long MLK holiday weekend. He unpacks the market’s nervous reaction to comments from Treasury Secretary Scott Bessant about the Japanese bond market, d ...
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 good day today. You know, thanks for going along just fine. We had a lower open this morning by the way. I hope you all had a good long weekend for those that celebrate to MLK Day. Of course we had the day off because the markets are closed.
But today’s a Monday so we don’t sell on Mondays. That’s a kind of a cardinal rule for us here. Talk to you about my mentor Ted Parsons. If you’ve been with us a while, you’ve, you know this story, you’ve heard it many, many times and today we’re going on fine. A lower open based on as we’re hearing about Greenland, about new tariffs that Trump’s going to propose unless the EU gets on board with us acquiring England. Excuse me, Greenland, England may be next. They probably vote. Much of England would vote for that if they could because of course that country is lost.
[00:00:53]:
UK’s lost, Canada’s lost. And so the topic now of course is Greenland. And so futures were lower, we opened lower and that was it. We stopped right there. We were rallying and then what happened. A guy that we think a lot of here, that’s a fantastic. Treasury Secretary Scott Bessant came out and said the following. Now this, he said this, went back and checked the timestamp on this.
When Scott Besant said I’m about to tell you about the Japanese government bonds, JGBs, right. When he said this, the markets had rallied. NASDAQ was down about 260. It had been down as much as close to 500 points. Okay, so we recovered, we recouped basically half of the losses and looked like we were going to have another classic Monday where we opened lower. It’s an opportunity to buy. And then here comes a rally. Well, Scott Besant said this about mid morning.
The markets are going down because Japan’s bond market just suffered a 6 standard deviation move in 10 year bonds over the past two days. I’ve been in touch with my counterparts in Japan and urged them to take the necessary action to stabilize their bond markets. This has nothing to do with Greenland. It’s all about the Japanese bond market. That’s Scott Bessant in his exact exact quote from Scott Besson. So all of a sudden here came the market started leaking. Lower. Right, because this is the big deal.
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If you know me at all. You know in every book I’ve written, we’ve talked about this so many times here at the vra. My biggest concern, my black swan concern is the Japanese bond market. I think, I think I speak for most people that say that is the big concern. Because as Tyler just reminded me, the Japanese really invented financial engineering. They were the first to use quantitative easing and now they’re trying to reverse that. Aren’t they trying, trying to normalize rates using this, the quantitative tightening? Because what they’re trying to do is they want rates to normalize again. They, they don’t want to manipulate and control their markets and they want a fair, they want an open market.
That’s never going to happen for Japan, by the way. That’s never going to happen. The, the, the bank of Japan, Japan Central Bank. The bank of Japan is the largest owner of both bonds and equities through the form of ETFs. Okay. And no one’s close to them because that’s how they supported their deflationary economy. And again, birth rates almost non existent. This is, this has been replaced, of course, as the second largest economy by China.
That happened many years ago. And so, but Japan had successfully used, and has successfully used financial engineering in the form of QE for a very long time, much longer than we have. Right. I think they started like 2000, 2001. So everyone’s concerned about Japanese yields rising. Well, this might surprise you because again, when everyone talks about, as Scott Besson said today, a six standard deviation move. Yeah, it’s a big move. It’s a big two day move, no doubt.
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But we’re talking about the 10 year yield for Japanese government bonds being only 2.18%. That’s less than half what our 10 year yield is. So you see the interesting quandary here. If they’re trying to normalize, then, dad, this move is normal. But, and I would not have been, and I wrote about this this afternoon, we put some stops in on our leveraged ETFs. Again because when you use leveraged ETFs, you have to have a whole different game plan in place because we like the two and three times. We actually prefer to use three time leverage because we want to be on the right side of the move. If you get the right side of the move and you know the NASDAQ 100 or you know, the semis, right, you get the, you get a, you get the right, you’re on the right side of these moves.
And so let’s say you get a 10% move higher in the semiconductors. Well, you’ve just turned that into a 30% gain. Right. And so we’ve used these successfully for a very long time. Not every trade is a winner. Right. That’s not reality. But I don’t know anyone that’s had more success in trading these than we do.
We’re not day traders with these. We take a position. We typically hold a position for. It varies, you know, it’s typically two, three months, something like that. Sometimes we get very fortunate. We get a three or four week trade and make 40, 50% and other times we hold longer. But the bottom line is you got to have a game plan with these. These are not meant to be buy and hold vehicles.
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That’s the primary takeaway. You got to have a game plan, you got to be on the right side and you want to catch big moves. Our goal is to catch about 80% of the move. So we’re not going to buy the exact bottom, we’re not going to sell the exact top. We’re going to capture that middle 80%. And, and this is a bit of a, again, been a very successful strategy for us for a long time. Well, with these leveraged ETFs, you, you just can’t sit and hold and hope for the best. Right.
So we put some stops in today because if Bessant is sending a message, and again, I, we, I think Scott Bessant is one of the guys, he’s very different than Trump. It’s not that you can’t take the President at his own word, but you just don’t know what he’s going to say any given day and then he’ll backtrack. You know, Scott Besant doesn’t backtrack. He’s not that guy. So when Scott Besant just flippantly puts us out there on a Real Americans Voice interview, I think he was on. Oh, what show is he on? Steve Bannon show War Room. Right. I think that’s the show.
He was on Real America’s Voice when he said this. You got to take him seriously. Well, the market certainly did and that’s when we started going lower. So we went from roughly a 230 point loss in NASDAQ to a 561 point loss in NASDAQ. That’s 2.4%. And that’s again, these are the kind of moves that you have to respect. Again, specifically with leveraged ETFs. Let me be very clear, folks.
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We’re talking about the difference between a counter trend move and a primary trend move. This is one of the most important topics for investors to understand Because I’m talking about short term risk here, near term risk. Do I think the Japanese, the JG, JGBs are blowing up? No, I do not. The Japanese stock market just had an all time high on Thursday. So no, I don’t think, I think, I think this is a, I think that Bessant put this out there to change the subject. But I also think he may not be wrong because a lot of people are talking about yields rising in Japan. We’ve just never thought it’s a big deal because their yields are still so low. Okay.
But again Bessant, we’re talking about all this today because of Scott Bessant. Right. So let’s keep going because Bessant I think would even tell you that if he, if he was asked the question as a follow up, do you think that’s happening? I think he would say no, no, no. I’ve talked to my, even said it in his, in his interview. Talk to my counterparts in Japan. They understand the significance of making sure this doesn’t become a problem. So you, you know, it’s just that, it’s that, it’s that, that, that in context, that clip that was taken that got the market’s attention because again, it is a massively huge black swan risk for not just the United States but for the global financial system. We’re talking about systemic risk of the highest order.
There’s no bigger risk. The only bigger risk than the JGB is blowing up that I, that I can that think of right now. And I, I’ve said this before and I think this is exactly right. By the way, the only biggest, bigger risk than JDBs blowing up are central bank, central banks blowing it up on purpose. Look, these are, these are, these are real concerns now where would they fall? I, I think I’d say 15% possibility of JGBs blowing up. I’d probably say higher. I’d say 20% because again, Trump is hitting these guys head on and he’s, he’s, he’s, he’s trying to cut the legs out from underneath them. Again, we’ve talked about this so often.
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Have we not? The most powerful cartel on the planet is the banking cartel who runs the bank cartel, central banks. So if they wanted to, they could sink the whole thing. Let’s come full circle now. Here’s why they’re not going to do that again. We, we’re just coming off stock markets at all time highs. Okay. This is, this is very premature to even have this conversation frankly. But again, it’s only because we Use options and we use leverage ETFs that we’re talking about today.
Right. Because again, you gotta be aware of this stuff. Right. But remember who the largest. Tyler tells me this all the time. Remember who the largest holders on the planet of equities, of real estate, of bitcoin. Who are the largest holders? They’re these exact elitist. Right.
The exact deep staters. The, the 1/10 of 1% that control the planet financially. The largest holders of everything. So if, if, if central banks were to tank the global economy, just crash everything, well, they’d be blowing up themselves because they’re, they’re the biggest investors. But that’s also why you have to be careful about these turns. You have to make sure it’s not just a counter trend turn that’s going to become a primary trend. And that’s why you got to stay on top of this. That’s what we do here.
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Of course. Right. But again, it was an ugly day, ugly close today. The market was heavy today. Again, this is why we put stops in on our leveraged ETFs today. The market traded heavy all day and not, not the typical kind of money we like to see. But again, it was happening. It was in process.
I think that NASDAQ would have finished high on the day, frankly. But then Bessing comes out and says this. So again, we like to keep everything in perspective. Again, I think it’s low probability. This is something we got to be concerned about. I actually think what will happen is I think tomorrow morning, by tomorrow morning, Scott Besant or other people, hopefully it is got Benson, kind of clarifies what he said. No, I don’t, I don’t think that’s happening. But you know, he wanted to change the conversation from tariffs in Greenland.
Right. Are causing all this brouhaha to something else. So anyway, that, that’s how we see it. We still remain, of course, aggressively long, very bullish. Our big three remaining place, of course they are the Trump economic miracle driven by the massive tack cuts, unbelievable levels of deregulation and of course the tariffs. You know which Supreme Court’s supposed to rule in that this week? Again, it’s the third week we said that they’ve yet to rule. Besant, by the way, just came out, said very confidently in an interview over the weekend, second time I’ve seen this in the last two days, three days from Besant where he said, I fully expect, he very confident. I fully expect the Supreme Court to rule in the President’s favor.
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So maybe he’s messaging and Maybe he’s trying to, you know, send a message to whoever these holdouts might be. It’s scotus. But he sounded very, very, very, very, very, very confident over the weekend and his weekend interviews that the tariffs hold up again. If they don’t, will we see some upheaval in the markets? Yes. Could that, could that be why the market’s down today? That word’s leaked? Yes. But I think, I do think with tariffs specifically that I think any sell off is going to be buying opportunity and it does again does not impact our, our, our macro primary trend move themes. Okay. Again, Trump economic miracle, the innovation revolution of course which is just getting started.
That’s this, this is the game changer. This, this is the, this is the short, medium, long term game changer for GDP growth. You know, people are now joining us and saying GDP growth is going to 8%. I think, I think Bessant just said he did in an interview, we could have 8 to 10% GDP growth this year. Well that’s, that’s what we’ve been saying. We actually said that by 2028, to be clear, 5% in the first quarter this year GDP growth was our call. So again I think, I think these other counter trend issues are going to prove to be very short lived. And so now, and of course it’s this ocean liquidity, you know, it’s absolute ocean liquidity is out there.
We talk about all the time, 22 trillion in M2 money supply, 95 trillion in global M2 money supply. Close to $40 trillion now in home equity. And rates are going higher though. Right. The 10 year today up 4 is to now 4.295%. Right. So the markets. But again that’s a counter trend move.
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Remember when Trump got elected the tenure yield was 4.88%. We’re now 4 point, almost 4.3%. So we’re still measurably lower from then. Rates are still going in the right direction and we believe they’re certainly going to continue to. We really need mortgage rates of course to do that. We think that’s absolutely going to happen as well. Again I think by year end I think you’ll see the 30 year mortgage down in the low fives. Right.
Maybe even sub 5 by year end. So again, you hate these days, these topsy turvy days. They can’t all be updates. You know, trees don’t grow the sky overnight. We’re going to have these kind of days. I think the important thing for everybody’s listening that I’ve learned over the years. Make sure you’re prepared. Make sure your portfolio is prepared for.
Because you can’t. You can’t prepare yourself for every outcome. Right? But, but look at the way we’re hedged today, just in the way we’re structured. Look, look at what happened with gold today. All right? As a lot of, you know, and of course, I love to repeat this because this is, this is, this is a good call, right? This, this was a good call. I’ve been fortunate to make some good calls over my career. This may be in the top three recommended gold at 4350, 350 announced in 2003. It’s now $4768 announced up a $172 bucks a share.
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Announced today. 3.7% silver today, up a big 6.7% at just, just almost it. Trade over 95 an ounce. Actually overnight right now, $94.61 an ounce. Again, we’re long there from $5 an ounce. And I put this out this morning. Let me pull this up. These are our returns from 2003 in gold.
We have 1,254 gains in gold and 18, 15% gains in silver from 2003. And of course, the thing I’m really more proud of is that we’ve been telling people to save in gold, don’t save in fiat currency, don’t save in bank accounts, have your money. I mean, I’m not saying all of it right, but I mean, this is. You practice what you preach. This is. This is what the Heritage family has done. We’ve saved in gold for a very long time. $100,000 invested in gold in 2003 is today worth $1.3 million.
If you kept that money instead in a fiat currency bank account earning 2, 3%, whatever after inflation, you’re looking at having less than the amount you invested, less than 100. So it’s 1.3 million versus less than 100,000. So it’s been a very successful strategy. We were laughed at. I was called irresponsible by a number of financial planners. They just kind of laughed at me. Look at, look at this guy, right? Well, who’s laughing now? Big guys, right? But again, here’s the key point. As Tyler just reminded me, everybody is upping their purchases.
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Central banks, governments of the world are buying even more now. They see what’s happening. And look, I’ll make it very simple analogy here. Bitcoin, which we recommended at $2,000, went up 5,000%. Why can’t. Why can’t gold do that? Why can’t gold have that run? And I think that’s part of what’s happening now. I think people, matter of fact, I know it to be true. People are now selling bitcoin and buying gold.
That again, that’s a reversal of a trend we haven’t seen in a very long time. Because everybody was laughing at, remember it was laughing at gold owners calling a stupid. You know, you held your gold. Now again, go, go. Bitcoin is still dramatically outperform gold. I want to make that very clear. And I’m not calling bitcoin owners stupid. We own bitcoin.
I’m not doing that at all. But it always. I hated when they said that because I was like, karma, man. You don’t understand how the investing gods work, do you? You’ll learn. You’ll learn. You know, it doesn’t matter. Betting gods, investing gods. If you’re bragging about something.
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There’s a difference between stating facts and bragging. I think we all can recognize that. But if you’re bragging about how well you’ve done in bitcoin and calling everybody else stupid for holding their, their gold investments, you are inviting disaster into your life. That’s just a lesson I’ve learned over the years. The, the, the betting gods, investing gods, the universe, whatever you want to call it, does not like that. I think the, the markets, I think the, the, the whatever gods, little G, by the way, little G, they do. They, they like, they like, they like at least Monaco of humility. I think that’s a, that’s a fair statement.
So again, being hedged, you know, again, we, we’ve got these hedges in place because our ownership of gold and silver and the miners, GDX again, these all three hit an all time high today. Of course, gdx today up 6%. When’s the last time GDX was up 6%? Been a long time. I’ll have to research that before tomorrow morning’s letter because again, all time high, 103 in GDX. And you know, junior miners, by the way, we had one that was up 6% today, one that was up 2%. Of course they’ve also been on a big run, but they do lag. They tend to lag. They’re large cap brethren.
But when they move, they really move. And we’ve seen that in the ones that we own. So I think that’s exactly what’s going to happen here. I do not think gold, look, gold has got a magnet to 5,000 silver’s got a magnet on it to 100. Right. When those happen, and I believe they will happen, just everyone’s aiming for that. Okay. It’s just the way the markets work.
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It’s the way investors think. There’ll probably be a shakeout at that point. But maybe not. I mean, maybe it just keeps going because now again, we’re now seeing true price discovery. These moves are still early, folks. 15,000 is our target for gold. I mean, could it go higher? Yeah. Will it? Yeah.
Over time? Sure. Silver, I think now is going to 300 again. Timing is, you know, again we think in this cycle move. So I would say between now and 2030, 2032, which means in these junior miners, again with at least 3 million ounces of gold on the ground, there’s no reason to speculate on, oh, they may have this. You want to know what they have at least in a preliminary mining report, Right? But if they have at least 3 million ounces of gold, we don’t own any silver miners. But you know, these stocks are going to. They’re going to be up. They’re going to be up insane levels from here.
We’re talking about 10 to 20 baggers from here within the next, you know, four or five years, I think. So again, having those kind of hedges in place really gives you a lot of protection and just don’t load the boat any one thing. I mean that’s. I know I don’t recommend over diversifying, but I think holding only a couple or three things unless you really know what they are, I think that’s a dangerous way to invest. Also think that if you own 30 things, you can’t keep track of all of it. We limit our holdings to 15 and I can barely keep up with that. I don’t know how people track in a portfolio with 30 or 40 or 50. I don’t know how you do it.
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You know, I don’t know how you do it, but I’m not as talented as other people. So there’s your answer right there. Okay, what else today? Truflation. You saw this truflation now, which is the honest cpi, okay, the bureau of labor statistics, the CPI from them. It’s just, it’s not trustworthy because it’s proven not to be trustworthy. It’s just not. It’s not honest reporting and it’s, it’s stale, it’s stagnant. By the time you see it, it’s lagging everything.
So you know, we know the CPI. What was the last report? 2.7 2.8. Well, Truflation has it at 1.48%. Folks, we’re witnessing disinflation that is going to become deflation. And if, if you understand the banking industry and what that means for them, it’s the, it’s the, it’s the, it’s the worst word in their vocabulary, deflation. Because that’s when debt starts losing its value. That’s when people stop using debt. That means banks are in trouble.
And I, for Jay Powell and his team Mary band of money printers at the Federal Reserve not to see what’s happening. Do they not have the ability to, I don’t get on Twitter and look at, look at truflation. I mean they have like 70 different real time indicators they use that tell them where inflation actually is. It’s so much more accurate, proven to be over time. But again, the Federal Reserve, they’re horrible at their job. They, they just, they’re just very happy to be paid all the money they’re being paid and to be in the cool kids club. This is what they, and they can’t give up that power. Again.
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They’re just, they do what they’re told, right? They, they do what they’re told by the cartel. We, we all know this, right? And again Trump is starting to eat away at that. And that’s, this is, this is what brings that dangerous time up. You know, would they crash, would they crash system on purpose? And again, I just don’t think so. They, they’re going to hurt themselves and their companies more than anybody else. They’d be the biggest losers. You know, that’s why the money guys, they told one thing they don’t do. They protect their own.
So again, I don’t see these worst case scenarios either with the JDVs collapsing or the central bank purposefully tanking the markets. I don’t see that happening at all. But by the way, if they did, what would gold do, what would silver do? What would the mining stocks do? All right, so again, if you’re positioned correctly and have good diversification and things that, you know that’s so important here, invest in what you know, right? Then you’re going to be fine either way and we’re always going to have these short term upheavals. But again, we’re talking about, you know, primary trend versus counter trends, right? But again, truflation, telling us the truth, rates should be somewhat slower than they are now. I don’t know why the 10 year went up today. Again we’re seeing a global kind of a Global move higher in rates. Maybe it does have something to do with JGBs but again I think this is counter trend and I think it will reverse lower again. Tyler just gave me some good great stuff today in our pre podcast meeting.
Gold is now the number one asset class of size. Number two is silver. How about that? Real money one and two, that’s. I can just, I can hear voices all over the planet saying told you about time. We always knew right? Because that is what’s happening again these moves just getting started. All right, let’s take a look on the hood today. Internals today were not good. Could have been worse.
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3 to 1 negative advanced decline for both NYSE and NASDAQ. Down volume of NYSE of 69.8%. Down volume NASDAQ of 61.8%. Again these aren’t over 70%. That’s what tends to get a little more attention. Close to it for New York NYSE but we also had by the way 20 more stocks hit a 52 week high and 52 week low. So we want to see this day as being a one off. The sector watch today was not good.
10 of 11 sectors finished lower again with the action today. That doesn’t really surprise you, does it? Led to the downside by technology again down 2.9% again semis today. Let me give you a last quote on semis because the semis had really been holding in there and then everything just kind of went to hell. Semis finished down 2% just barely outperforming NASDAQ today. But again Nasdaq and semis did lead lower today which is not what you want to see in a, in a big bull market like we’re in now in our commodity watch today. I just kind of covered it. Let’s go over it again. Gold up 173.
It’s up almost 4%. 3.8% to be exact at 4769. Silver up 6.7% as I speak. Last trade 94 45. Copper today flat on the day $5.82 a pound. Crude oil today up 32 cents a barrel at last trade 59 53. And finally the day Bitcoin back below, just back below 90,000 89,005 18. It’s a weird, it’s a weird environment right now in bitcoin because the charts we’ve been below the 200 day since early November.
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If you know us, you know we hate that. But we’ve got a good pattern here of lower of higher lows taking place right and I, I I think that bitcoin is still ready to go but you know it’s interesting is it not you know bitcoin is down 3% goes up 4% on the day what what is exactly going is it a store value right Is it a hedge against fiat currency or is it not I think bitcoin needs to prove itself right now what what we want to see hold is that let me pull it up to give you exact we want to see the recent lows hold which is just over 8000-0800-0068-0000 levels pretty important again last trade 89,000 537 we’re long Bitcoin and believe that that’s going to be a very good trade a very good investment this, this this this time we’re in it we we plan to be in it for a very long time okay folks that’s it for the day Hope you had a great day and you’ve a better night we’ll see back here again tomorrow after the close.
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In today's episode, Tyler breaks down a powerful move to all-time highs as semiconductors go parabolic to lead the charge. He walks through the latest earnings and what the major indexes are signaling about the strength of this bull market. PLUS, don't miss what history says about what comes next after similar “melt-up” moves. Tune in to hear how he’s thinking about positioning, risk, and opportunity as this semiconductor boom accelerates.
