VRA Investment Letter: Early Innings of Innovation Revolution. MidEast Attacks Sending PM's/Miners & Oil Higher. Q4 Earnings Begin. BTC Approved.
/Good Friday morning. The yo-yo trading of 2024 continued yesterday, however one constant proved up again; the semis (SMH) and tech (nasdaq) once again reversed sharp opening losses to finish higher on the day. Tell.
Our VRA Megatrend forecast remains; the “innovation revolution” will continue to propel markets higher, led by semis and tech. We are in the early stages of the next dot-com stock market boom.
We’re also in just the second year of a powerful new bull market. It will continue to catch investors by surprise but the key point to remember is that this bull market is structural in nature, driven by a convergence of once in a lifetime megatrends;
1) Financial engineering is occurring at all levels (powered in part by AI); institutional/govt, corp America and yes, even consumers.
2) Corporate earnings expansion, driven by the “Innovation/AI Revolution”, which will eventually surpass the euphoria of the dotcom/tech boom cycle.
3) Long term housing boom, powered by consumers in their best financial shape in decades (regardless of the PSYOP of negativity in place designed to make us think otherwise). Housing drives “everything”.
4) The millennial generation. 72 million strong (now the largest segment of the population), in the process of inheriting >$70 trillion. Millennials love housing, stocks, cryptos with an understanding of technology that’s in their DNA…and they are born entrepreneurs.
5) The red-pilling of America and the return of animal spirits. We’re waking up to the dangers of communism and what we want, instead. Hugely bullish for our long term prosperity, even our survival as the last great democracy/republic standing.
We’re in the Roaring 2020’s.
(From our 10/2022 book “The Big Bribe”).
MidEast Attacks Sending PM’s/Miners & Oil Higher.
US/UK forces have launched a series of strikes against (Iran-aligned) Houthi group in Yemen in response to their attacks on ships in the Red Sea. The attacks may signal a widening in the Israel-Hamas war (seen as a key factor of recent Houthi aggression in the Red Sea).
On the news, gold is +$40/oz (2%) to $2060, silver is +$.76/oz (3.3%) to $23.46 and WTIC is +$2.35/bl (+3.2%) to $74.30. The miners (GDX) are trading +2.9% to $29.74.
Also on the news, VRA 10-bagger Tesla (TSLA) is off by 2.8% to $221 as they announce they are shutting down production in Germany (largest European facility) for two weeks due to the strikes and related supply chain issues in the Red Sea. We are buyers of TSLA on this pullback.
Q4 Earnings Kick Off with Major Money Center Banks Reporting
First to report this AM was Bank of America, which disappointed, sending shares down by as much as 5% (down just 2% now). JPM and Citi followed and while their shares initially fell on earnings news they’ve quickly reversed higher with gains in the 2% area. Wells Fargo also disappointed, with shares -2% as I write.
We have avoided bank stocks for essentially a decade. We will continue to avoid bank stocks, as little more than value traps.
While Monday is a holiday (MLK Day), Q4 earnings pick up speed next week with the real deluge of reports beginning on 1/22.
Final note on banking. Mortgage delinquencies are making up just 3.6% of total bank loans, just off of the lowest readings on record. But just watch, the extraordinary strength and health of housing markets/mortgages won’t stop fearmongers from proclaiming “this is the next 2008”. Nothing could be further from the truth. Housing leads “everything” and today represents another significant VRA Megatrend that continues to power the Roaring 2020’s.
VRA Market Update
Dow futures fell as much as 200 points this AM on mid-east news and bank earnings but are coming back, with small caps and nasdaq leading the way higher. We continue to expect 2024 to be a banner year for semis/tech and small caps as our new bull market continues to broaden out.
Yesterday's trading was another testament to the strength of this bull market, as the Dow fell 230 points by midday only to finish higher on the day. Once again, the semis led the way higher with gains of .57%. The semis lead in both directions and from the 10/13/22 bear market lows the semis have charged higher. There is no better tell.
The smart money hour continues to flash significant buy signals.
Gold Mining Stocks, A Clear and Compelling Investment Case:
Excellent report from Sprott asset mgt on this sector, with the miners trading near 30-year low valuations to gold.
Some key takeaways; chronic underinvestment and Fed rate cuts should make this sector red hot over the coming years.
Fed Pivots Precede Outsized Performance in Gold Miners: Every Fed pivot has been followed by outsized gains in gold mining equities.
GDX gains:
• Period 5/00–1/08: +400%
• Period 1/16–8/16: +238%
• Period 3/20–7/20: +208%
Bitcoin Spot ETF’s Approved by SEC
It took a crazy 24 hours of hacked SEC news releases but, as of yesterday, BTC ETF’s are now officially trading, with all 11 BTC ETF applicants gaining approval from the SEC.
Two remarkable stories out on Cathie Wood this AM as well. We’re long term fans of Wood, a trailblazer and early adapter in the AI/innovation and crypto arena. First, Wood says she has 25% of her net worth in BTC (ok, wow). Second, Wood believes BTC is headed to $600,000 (low end) to $1.5 million (high end) by 2030. Betting against Wood has been a long term, losing proposition.
Until next time, thanks again for reading…
Kip
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