VRA Weekly Update: VRA Investing System, 36 Years in Development. Why We Use the VRA System to Time the Markets. 1995–2000 Case Study.

Good Thursday morning all. As we welcome new VRA Members it’s important that we’re all on the same page. That means understanding the VRA Investing System, ensuring that we are positioned to crush Mr. Market. As we begin trading today, the VRA System sits at 9/12 Screens Bullish. Our two bearish screens are a) valuations and b) market internals (valuations look to flip to a bullish screen in the 4th quarter) with 1 screen neutral (VRA Momentum Oscillators). We also note that seasonality is not on our side during September to early/mid October. We are semi-patiently waiting to put funds back to work (after taking profits in 5 VRA Portfolio positions) on any market weakness.

VRA Investing System; 36 Years in Development

After my first few years on Wall Street, reality hit me right between the eyes. Fostered by a series of enlightening conversations with my first mentor (RIP Ted Parsons) I discovered that Wall Street’s primary objective was not to make my clients money. The primary objective of Wall Street was to make the firm money, as research worked hand in glove with investment banking, where the serious money was (and is) made for brokerage firms and their elite clients.

Once this reality set in I had two choices; quit and find another profession or find a way to actually make money for my clients. The VRA Investing System was born out of that decision.

The VRA System was built to uncover the best investments (at the best time) and to remove emotion from my investing. It was built to have us out of the markets in times of turmoil (or short) and in the market when the bull wants to run.

The VRA System combines fundamentals, technicals and investor sentiment…the 3 most important elements of investing (in any/all asset classes). We use broad market positions, employing leveraged ETF’s for maximum returns, combined with our ability to ferret out world class, small to mid-cap “growth stock, story stocks” for the opportunity of several hundred percent to more than 1000% in profits.

We rarely recommend more than 15 investments at any one time. If you want to own 30–40–50 stocks, buy an index fund. While technically it would appear that we are aggressive as they come, it is a “controlled aggression”; we know the companies that we recommend. We know their management teams and their business model and we know how to pick winners. Period. I also put my own money in the stocks that I recommend. Anything else would be Wall Street-like hypocrisy. Still, my investment style is not for everyone. I would never recommend placing all of your investment dollars into VRA Portfolio buy rec’s. However, for your “risk capital”…those funds that you put aside to make your retirement account everything that it could/should be, the VRA has been designed to get that job done.

We encourage you to resist the temptation to go “all in” on just 1–2 VRA Buy Rec’s. We only recommend approx. 15 stocks at a time for a reason. Diversification is a hallmark of successful investors and reduces the risk of becoming emotional about our positions. “Loading up” can also lead to large daily/weekly swings in your portfolio…the kinds of swings that can lead to oversized losses. Emotional investors tend to “buy high and sell low”, or just the inverse of what we’re looking to accomplish.

For our broad market positions in leveraged ETF’s, the VRA System employs “trend following” methodology. The game plan with trend following is to capture 80% of the move, in our investments of choice. It’s not about calling market tops and bottoms (although the VRA has caught NUMEROUS significant market turning points over our 15 years). Instead, we want to capture that middle 80% of the move…that’s our sweet spot…that’s where the most reliable and predictable profits reside. This makes the VRA System most important…its the major predictor as to whether a stock/sector/market is in a bull or bear market. It’s been my primary trend go-to for 30+ years.

The VRA System has 12 Proprietary Screens. Today (9/8/21), 9 screens remain in bullish mode, 2 screens are in bearish mode (valuations and market internals) and 1 screen is neutral (VRA Momentum Oscillators).

70% of the screens are fundamental and 30% of the screens are technical. Here’s the breakdown of our 12 screens:

This is how the VRA System works…in bull markets or bear. Sure, its MUCH more fun making money in a bull market; making money as we watch the US economy rock and roll and US stock prices soar. This, of course, is the market we are in today. Making money in a bear market means we’re forced to be “pessimists”. And who wants to be pessimistic? I’ve been a glass is half full guy my whole life…its highly likely that 90% reading this identity the same way…but it’s not our job to tell the market what to do, based on our emotions. Our job is to make money and to beat the markets sizably in doing so.

The VRA has outperformed the S&P 500 in 15/18 years. Since 2014 we have more than 2800% in net profits. We believe we are extremely well positioned positioned currently, with approx 60% of the VRA Portfolio in growth and 40% in value.

Investing Tenets and Observations of the Day

My mentors (Ted Parsons and Michael Metz, RIP) were smart, market savvy and most importantly, patient! Here are some of their top investing lessons…

1) “Don’t fight the tape, don’t fight the FED”. Not only do we have a Fed that could hardly be more accommodating, we have an entire planet of central banks that are forcing untold trillions into the economy and markets. Full on buy signals here from the Fed. And the “rising tape” demands that we remain bullish.

2) “The trend is your friend”. As trend followers, when the major averages are in confirmed bull market status (according to the VRA System), we want to be long. Conversely, in a confirmed bear market, we want to invest primarily from the short side. Today, if you’re not long, you’re wrong.

3) “There is no more bullish sign than an overbought market/stock that continues to rise”. This is exactly what we’re seeing today. Overbought markets that continue to rise, using sector rotations to work off exuberance, are highly bullish.

4) “It’s not a stock market….it’s a market of stocks”. One of the best investing lessons my mentors taught me. There’s always an opportunity to make money, by focusing on both VRA fundamental & technical research and good old fashioned stock picking. This rule is at the heart of the VRA System.

5) Major bull markets, especially those led by liquidity and corporate earnings, do not end until the public is wildly in love with stocks and aggressively buying every dip. Euphoric. Until the public believes that “the market cannot go lower”, the path of least resistance remains higher.

6) We are medium-long term investors that believe in position building (monthly dollar cost averaging) in our top growth stocks and VRA 10 Baggers and using the VRA Investing System to time buys/sells of our favorite ETF’s. We refer to it as the Peter Lynch school of investing. This is how we crush Mr Market and build long term capital gains.

We had a question yesterday that helps to shed some light on our approach to timing the markets/sectors/stocks, via the VRA System;

“Kip, Tyler and team. Not that I have a problem with taking profits but if your research says this is a melt up market like dot com was, aren’t we taking a big risk being out of your favorite ETF positions?

Thanks, Jeff from NC”

Thanks Jeff. Great question and one that Tyler and I talk about often. The best way to answer it is by looking at this chart of the Nasdaq from 1995–2000, as it soared 575%.

The 4 blue circles below represent corrections of 15% to 32% (bear market) that took place in the Nasdaq, right smack in the middle of the 5 year dot-com melt-up.

1) In mid-96 the nasdaq fell 19%

2) in early 97 the nasdaq fell 15%

3) in late 97 the nasdaq fell 16% (yes, two 10% + corrections inside of 9 months)

4) in mid 98, the nasdaq fell a huge 32% (a 4-month PAINFUL bear market that most everyone today has forgotten about) 

5) then the biggie; a 275% move higher from the late 99 lows to the final peak in March 2020.

This era, 1995–2000, played an important role in the development of the VRA Investing System. I knew several brokers that actually lost money during the best bull market ever. It drove several to quit. You can tell from these big swings exactly how that could happen. Most investors tend to wait until major moves higher have occurred before jumping in…the water feels safer then…only to panic sell as the rug is pulled by Mr Market (he’s a heartless sadist).

Our game plan is simple, as it applies to ETF’s and market timing. We buy low…using the VRA Investing System as our guide…then we take profits when our VRA readings hit extreme overbought. Rinse and repeat. 

BTW, those people you’ve heard say “no one can time the markets and make money doing it”. These are the people that lose money in the markets…because everyone times the market. As human beings we time every buy and sell that we make, of most everything. The key is having a system and the discipline to stick with it.

Until next time, thanks again for reading…

Kip

Join us for two free weeks at VRAInsider.com

Sign up to join us for our daily VRA Investing System podcast

Also, Find us on Twitter