VRA Update: 360% Gains in Just 11 Days. Next Up.
/VRA Update: 360% Gains in Just 11 Days. Next Up.
Since the beginning of 2018 the VRA Portfolio ( stocks and options) has produced gains of 360%. I’ve been saying this will be my best year ever. This bull market is just getting started, and I fully intend to crush it again this year.
Market Update
Walmart announced that they would raise their starting wages, announced they are giving big cash bonuses to employees, plus something I have not seen before...a $5000 adoption benefit, for Walmart employees that adopt a child.
Wow.
Here's an AM tweet from Charles Payne...one of the rare MSM "gurus" that is actually a guru, in my book.
Since Trump's tax bill was passed into law, just 3 weeks ago, we've seen more than 80 fortune 500 companies making employee cash/benefits awards, similar to Walmarts.
Can anyone name a single fortune 500 company that offered company wide cash & benefits packages to ALL employees, during Barack Obama's entire 8 years in office? There must be at least a few...right?
And here's a reminder tweet of mine, once we knew the tax bill had the votes to pass:
I remember the Reagan years pretty well. I was young (18-26), but I remember the news of the day...great news that went on for years on end; tens of millions, new jobs created...higher wages, year after year...and a rip roaring stock market, that more than doubled over his 8 years in office.
Under Reagan, it took 12-18 months before his polices began to make a difference in the stock market, but jobs growth was a different story...job creation began to rise quickly after just 6 months in office, with interesting rates topping out near 20%. 8 years of economic boom.
Under Trump, we've seen near immediate improvement with major employer after major employer, paying it back to their best assets...the people that work for them. Who the president is matters a great deal.
I had people scoff at my year-end target for 25,000 for the Dow Jones, just as some are scoffing at my 30,000 target this year and my 40,000 target by 2020. But folks, this is what earnings growth of 10-15% per year works out to, assuming the P/E multiple stays around 20. It's really just math, at the end of the day.
Regardless, we'll continue to use the VRA System to ensure we are positioned correctly...whatever the future may hold.
Investing Tenets and Observations of the Day
A few of my mentors investing lessons...
1) "Don't fight the tape, don't fight the FED". Yes, the FED has started raising rates...at some point the markets will have to deal with this...but the rising "tape" says we must be bullish.
2) "The trend is your friend". When the major averages are in confirmed bull market status (above 200 dma), we must be long. Conversely, stocks trading beneath their 200 dma pose big risks.
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. 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 fundamental & technical research. This rule is at the heart of the VRA System.
I remain a bull...
...a big one...with the amount of money coming into the markets (a massively unreported story in my view), our next move should continue to be on the long side.
Remember, when inflation (and higher rates) first begin to return to the global economy, it is a highly, highly bullish event for stock prices. It's the confirmation of a strong economy and a much brighter global growth story. How could this be bearish?
It's only after a year (or even 2-3 years) of rising inflation and higher rates that we must start to become concerned. Please do not listen to the bears that tell you otherwise. It's not that they are wrong...they are just early (likely very).
Ideally, I'd like to see the market take a breather...maybe even have a 200 point down day, just to get some fear back into the market. But frankly, we may not get anything close to this kind of decline...this bull market has too much higher to run.
Oil Powering Higher. Commodities Must Be Owned.
Oil is breaking out to 4-year highs. Long-term readers will remember that I was bearish on oil at $100 and then turned bullish on oil at $32. Today, at $64.50/barrel, I could hardly be more bullish. ST overbought, yes... but we want to continue to own/buy.
Let me repeat; this is the beginning of the move higher...this is not the time to take profits...my $70/barrel target (WTI) for oil this year will likely be too low. Most continue to miss the power of the reflationary move in global economies. We're talking a 2-3-4 year cycle of MAJOR moves higher, in commodities across the board.
I've been saying that the pause in gold/silver/miners would be short lived. It's likely that we've already seen the ST lows in each. $2000/oz remains my target for gold this year. Price suppression schemes may have just reversed course...in favor of higher gold and silver prices. And what a reversal that would be. Still looking for one final sign of proof....we must see buy side volume in GDX (miner ETF). Once volume confirms, look out above.
Final point on PM's and miners. History tells us that PM's love higher interest rates. History also tells us that PM's and miners love higher inflation. Folks, we have both of these today.
VRA Market Update
Congress is back in session...this is when market accidents happen. Known as the Congressional Effect, going back some 60 years, more than 90% of all stock market gains have occurred when both houses of congress are out of session. Pretty powerful statistic. While we also know that more than 90% of all gains occur during the November to May time frames, I am not getting bearish on the markets...just pointing out that if a correction is going to occur, its more likely to take place when the House and Senate have an opportunity to screw things up.
Important New Years Market Pattern
Below is a link to an article from Zero Hedge that could foretell what we can expect for 2018, along with my tweet about the piece. Bottom line; we saw the Dow begin the new year with a gain of 2% or more. In years where the first 5 days of the year saw gains of 2% +, the market went on to rise in 15 of 15 years, with an average gain of 18.6%.
https://www.zerohedge.com/news/2018-01-06/stock-markets-bulls-monday-matters
Most interesting statistical research.
It matches well with my year-end target of DJ 30,000 (20% higher from the beginning of 2018). In April of 2017, I stated that my year-end target for the DJ was 25,000. We missed that by just two days. Frankly, I'm even more confident about my 30,000 target for this year. Range expansion meets momentum,...this is the market we appear to be in today...is highly, highly bullish. It makes sense when you think about it this way; when the markets (or individual stocks) hit all-time highs, there is no one that owns that particular investment that has a loss...meaning that there is little to no reason for that investor to sell. When there's little selling pressure, even small amounts of buying pressure can send an investment soaring.
Today, with the largest tax reform package in US history about to be unleashed...with corporate earnings already growing their best in a decade...and then add in the coming $2 trillion infrastructure bill and up to $4 trillion that could be repatriated back into the US, you can see why I remain so bullish about the future for stock prices.
Yes, we remain extended and overbought...but that's no reason to sell. In fact, statistical analysis also confirms for us that markets that reach overbought levels and remain overbought tend to be one of the best investment environments of the last 100 years.
In our next VRA Update we'll cover several charts that make up the VRA Portfolio. I continue to see major moves higher in energy, biotechs, China, precious metals & miners and small caps.
Until next time, thanks again for reading….have a great week.
Kip
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