VRA Update: Beating Mr. Market. Liquidity Continues to Flood In.

As the markets continue to ride the wall of worry higher, hitting fresh all time high after fresh all time high, the VRA Portfolio is not only participating, but once again, beating Mr. Market at its own game. Here are the numbers for 2017:

S&P 500: +12%

Nasdaq: +20%

Russell 2000: +6%

VRA Portfolio: +41%

The VRA Portfolio is aggressive...always has been and always will be...and it can be most closely compared to the Russell 2000 (small cap stock index). At 41% for the VRA (to 6% for the R2K), we are outperforming the small cap index by 6.8 times (or 680%).

About once a quarter I like to cover some VRA Core Principals and Portfolio Management concepts, especially important for our newer members but key reminders for us all. 

1) Again, the VRA is highly aggressive in our approach. I use the VRA System, a proprietary combination of fundamental and technical analysis, to help place us in the highest return investments possible. The VRA approach is not the right approach for everyone, but if you practice smart money management and portfolio diversification, the VRA can help you to crush Mr. Market (as we've done here for 13 of 14 years). 

2) Most use the VRA in addition to their conservative holdings (bank savings, bonds, retirement funds, insurance, etc). Only you know what the appropriate mix is, for your investment goals and your individual risk/reward personality. 

3) I never recommend more than 10 stocks. My goal is to crush Mr. Market and to do so with a diversified, but still concentrated approach. Over the years I've seen investors that hold 50-60 or more stocks in their personal portfolio. How they stay on top of all of them, I do not know. And, when they do have some big winners, the overall portfolio barely budges. If this is your approach, I would recommend instead the use of index funds, which give you both diversification and the ability to capture the returns of the major indexes. 

That's it really. Again, from my 32 years of doing this, day after day, the investment style that I recommend is the exact style that I use personally. I am a trend following investor that combines technical analysis (based primarily on price movement) with the fundamental analysis that was drilled into me on Wall Street, plus the wild card that only time can provide...a contrarian minded instinct, applying investor sentiment to keep us on the right side of market timing. 

Not all VRA recommendations will make us money. On those that go the wrong way (with a change in fundamentals or negative price action) we will take our losses and move on...removing emotion from the equation...while letting our winners run.

Important Point: Please remember to login to your VRA Members Site, at least once/week, to view the VRA Portfolio and make sure you are positioned properly. Also please remember that I am unable to provide individual investment advice....my Wall Street days are long behind me...but I will reply to your emails personally, and answer your questions the best way I am able to. 

VRA Market Update

Some big developments caught my eye over the weekend, as I ran my VRA scans and screens. Let's cover these...

1) EVERY major US equity index is now sitting at Extreme Overbought levels. While this does not mean that the markets are going to have a major correction, it does mean that we must tread a bit more carefully. Folks, it's from these types of extreme overbought readings that short term and painful sell-offs can occur. As you know, I watch the markets internals closely, and while I see no signs of an impending and sharp sell-off on the horizon, its the things that we cannot see that usually catch us by surprise.  

2) While I prefer the AAII Sentiment Survey, as you can see below, the USA Today Fear and Greed Index now sits at 77 (it was was 17 3 weeks ago). As a contrarian, we must be aware of these changes in investor sentiment.

3) Yes, P/E multiples are high...but they do not determine market direction. Instead, liquidity determines market direction. And man, do we have lots of liquidity in todays continued record low interest rate environment (which is fueling M&A activity and share buybacks). In addition, and for the first time in history, 3 central banks are adding to already massive debt holdings by also purchasing stocks. The PBOC, BOJ and SNB now own trillions in equities and buying more with each passing day. 

Its for all of these reasons...plus the fact that the world is returning to nationalism rather than globalism (a transformational event that few talk about) that I continue to be bullish on the markets. My 3-4 year DJ target remains 30,000+.

4) Inflation is returning...I write about it often...and this is another propellant for higher equity prices. The 1000+ PHD's at the FED seem to be missing the return of inflation, but we see it everywhere we look.

Check out the chart of gold below. Inverse head and shoulders patterns can be an indication that much higher prices are on the way. Once gold breaks $1400/oz, $1700 becomes my next target. Of course, the real leverage is in the miners...we'll make fortunes in this group over the next 1-3 years.

Until next time, thanks again for reading....

Kip