VRA Investment Update: Bull Market "Tells" Are Piling Up. Trading Notes & the Trump Economic Miracle.

Good Thursday morning all. Another day, another "lower open” that was met with buying pressure throughout the day, leading to another strong smart money hour and resulting in (another) troubling pattern for the bears. And it’s not just that its happened every day so far this week, it’s been the repeating pattern of 2023. Add that market internals were right at 2:1 positive…again, another repeating pattern this year…combined with another day where we had more 52 week highs than lows, an event that has taken place every day so far this year. 

2023 (so far) is nothing like 2022. And it looks like our markets will get another chance to rally off of opening lows again today, as the Dow JOnes is -240 (just afterlearning that PPI rose .7% in January, higher than expected). 

Trading note: the second half of February is not great for US markets, historically. 

Another important point; bull markets love climbing a wall of worry and we certainly have plenty to worry about. Plenty of bricks are piling up in this wall of worry. Investors that we speak with and hear from are as bearish as I can remember. With Biden as President and the world seemingly ready to implode, its hard to fault anyone for being concerned. We certainly share in those concerns. But, this too is becoming a legitimate pattern change, as the markets keep rising in the face of fear. We think it’s another tell-tale sign that we've entered a new bull market, as we’ve said from the (classic) market capitulation on 10/13. 

Also, as we’ve written about extensively, including in our new book The Big Bribe, the Trump Economic Miracle is continuing to drive the US economy. It’s a fact that we hear essentially no one talking about, but Trumps lower taxes, America-First polices, anti-China policies (including tariffs) and broad/massive deregulation remain widely intact. 

Another big tell keep coming from the semis, which managed to finish at their highs of the day yesterday. The semis lead in both directions…there is not a better tell IMO. 

Here it is in visual form. Chart of relative strength between the semis and S&P 500. The semis have been leading the market higher from the October capitulation lows. Again, “textbook” bull market action.

Again, it’s a leading indicator telling us “the trading patterns from 2022 to so far in 2023 are night and day difference”. Add that lower opens are constantly being met with buying pressure throughout the day, another troubling sign for bears. 

More classic signs that point to this being more of a market bottom than market top. Very few IPO’s while cash levels for both corp America and the public sit at all-time highs. 

I’ve written and warned about the permabears and fear-mongers for much of the last 20 years. This is their business model (selling fear). 
IMO, there should be rules in place where they must disclose that they aren’t actually investors or fund managers, but instead they are list builders. 
When you think of sites like Zero Hedge and other fear merchants, just keep this in mind. 

In the face of widespread permabears and with the vast majority of investors in the “extreme bearish” camp over the last many months, our view has remained that the US consumer has been remarkably healthy and that corporate America has rarely been in better shape, with debt/equity levels at all-time lows. And when it comes to the housing market…our #1 leading economic indicator…it became clear that home prices could not continue to grow by 20-30%/year, nor could rents continue to increase at astronomical levels. The Fed’s rate hikes have served to cool both markets, a healthy development. 

At the end of the day, when the unemployment rate sits at 53 year lows and as homeowners net equity and credit scores remain right at all-time highs, with mortgage defaults near all-time lows, we never bought into the “here comes a hard recession” mindset (although we wouldn’t be surprised to see a mild recession in 2024). 

VRA Bottom Line: we have entered a new bull market, following 3 bear markets in 4 years (unprecedented) that saw the average stock lose >50% of its value in each bear market. Again, unprecedented. The end result is one of the most pessimistic periods in history for investors (a contrarians dream). 

While we entirely understand this pessimism, we also believe that it’s served to give us one of the best bull market set-ups of my career; “bull markets love climbing a wall of worry”. We will continue to use “overbought pauses” to add to our VRA Portfolio ETF’s and we will continue to use monthly dollar cost averaging to buy our VRA 10-Bagger Growth Stocks.   

Until next time, thanks again for reading.

Kip

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