VRA Investment Update: Fox Biz Interview. Don't Fight the Tape/Fed. Set-up into NVDA Earnings Next Week. Bitcoin and Vanguard.
/Good Thursday morning. It’s always great being on with Charles Payne. There aren’t many smart-money “talking heads”, but Charles is one of them. The reality is that the vast majority of media personalities know that “fear sells” so they pander to worst-case scenarios, regardless of what the data and markets are telling us. This is part of the “PSYOP of negativity” that we’ve been writing and warning about over the last 20 months.
Immediately after publishing “The Big Bribe”, which Tyler and I spent a year researching before publishing in Q3 2022, Charles had me on his show for the first time to talk about our forecasts of “The Roaring 2020’s” and “the most electric bull market since the 1995–2000 dot-com melt-up”. Truth is, outside of Bloomberg in the early AM I no longer watch financial TV, with the exception of Charles show “Making Money”. Thanks again Charles.
https://vraletter.com/podcast/kip-herriage-live-on-making-money-with-charles-payne-may-15-2024/
VRA Quick Hitters:
1)April CPI: Lowest Inflation Readings in More Than 3 Years
Against Tuesday’s positive PPI backdrop, yesterday we got the April CPI report which came in with a solid beat, showing .3% inflation versus the estimate of .4%, pushing year/year inflation down to 3.4%, the lowest readings in more than 3 years. The markets loved the news and continued their rally into today, while yields are plummeting lower.
Direct Evidence that the Markets Are Discounting the Inflation Story (with Fed rate cuts getting closer by the day)
2)This continues to be an excellent set-up for equites, led buy semis/tech, commodities/miners, small caps and Bitcoin. Now that it’s crystal clear that “disinflation” is in place, with rates collapsing and the Fed nearing their first rate cut, the markets have begun front-running “Don’t Fight the Tape, Don’t Fight the Fed”.
Tyler’s been talking about this chart on his podcasts, pretty much daily. In this chart of 10-year yields we see a clear peak at 5% in October of last year, followed by a lower high of 4.7% in late April.
Now that this channel has broken down, I’ll be surprised if we don’t head fairly quickly down to sub-4% yields. Rocket fuel for stocks…and precious metals/miners.
Now that the Bank of England and ECB have begun telegraphing rate cuts (likely beginning in June), we can expect the Fed to follow behind (shortly). This repeating pattern of coordinated interest rate policy, following the birth of QE, has remained rock solid. We fully expect this coordination to continue…and the equity markets will continue to discount pending rate cuts with higher prices.
3) Yesterday's surge higher brought with it closing ATH’s in the S&P 500, Dow Jones and Nasdaq. If you find someone saying this is “bearish”, you’ve identified someone that’s clueless about how the markets actually work.
4) Next up, NVDA Earnings: a couple weeks back we announced that we would be taking a more proactive approach to trading the markets, specifically in our leveraged ETF’s. I continue to see a great set-up for longs here, specifically into next Wednesday’s Nvidia earnings report. But know this; we are beginning to hit heavily overbought levels here, pretty much across the board. Depending on VRA Investing System screens we may look to take some profits into that NVDA report.
For example, should the semis hit extreme overbought on steroids (EOBOS), combined with readings on investor sentiment and our market internals, we may look to take profits. As always, we’ll set these trades up in advance to Members on VRAletter.com
Should we take profits, we likely won’t be out of these positions for long. But in a 3 x lev ETF, a 5% market pullback equates to a 15% move lower in the ETF. Again, we will be more proactive going forward.
5) Bitcoin is ready to go. If you’ve been following the situation at behemoth Vanguard, their CEO of 33 years just up and quit last month. IMO, he was clearly pushed out for continuing to miss the Bitcoin train. Vanguard missed out on the most successful ETF launch ever (x 100), as competition like Blackrock jumped in and launched one of the first 10 SEC approved Bitcoin ETF’s. Wonder what the price of Bitcoin is going to do when Vanguards new CEO announces that Vanguard is changing direction and entering the bitcoin ETF market. BTW, their new CEO led the way for bitcoin ETF’s at Blackrock.
My call; Vanguard will soon enter the Bitcoin ETF markets in a big way….and it’s good for a move of $10,000 (minimum) in Bitcoin.
Finally for today, the VRA Base Case of the last 20 months Remains Firmly Intact:
- We’ve entered a structural bull market, powered by our 5 “Big Bribe” megatrends, featuring an “Innovation Revolution” and accompanying surging corporate earnings into 2030 +
- This bull market will ultimately rival the 1995–2000 melt-up as the most electric bull market in US history.
- The largest US tech companies are reinvesting $100 billion in their own businesses. Never bet against a bull market (or US economy) when there’s a major upgrade cycle in tech.
- We remain unconcerned about a potential rise in interest rates. Instead, we continue to look for 2–3 rate cuts this year, our forecast from the start of 2024. “Gravity”, featuring global demand for higher US rates, will do the rest.
- A key ingredient of this new “Industrial Revolution” is that innovation/disruption will bring powerful disinflationary forces with it.
- Our wild card, a very friendly Fed into the November elections, will likely result in the economy and markets being “goosed” higher.
Until next time, thanks again for reading…
Kip
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