VRA Investment Letter: Excellent Setup Unfolding Into Tech Earnings. Massive Tech Disruption & Growth. Bull Market in Early Innings.
/Good Thursday morning. We’ve dedicated much of the last week's VRA Letters to the “war risks” and corresponding action in the broad markets. We’re now just a few days away from Q1 tech earnings kicking off in style, with high profile names Tesla (next Tuesday), META (Wednesday) and Alphabet, Amazon, Intel and Microsoft set to report next Thursday. We see a great setup unfolding. Geopolitical tensions combined with renewed inflationary concerns and rising rates have produced a classic oversold setup into tech earnings. Just as “fear” has returned to investor sentiment. There’s always a good reason to keep some powder dry.
As Tyler covered on his podcast yesterday, several US major indexes have already hit extreme oversold levels on the VRA Investing System, led by the Dow Jones which just hit our most oversold designation “extreme oversold on steroids” (EOSOS).
In addition, yesterday’s closing put-call ratio was a 1.28…excessive fear, led by high levels of put purchases. These typically mark near term lows. Tyler also covered the latest from Bank of Americas Global Fund Manager Survey which shows that fund Managers are selling bonds at the fastest pace in more than 2 decades. This is a “Chefs Kiss”for contrarians.
I’ll take this opportunity to repeat our forecasts from the beginning of 2024. We expect that inflation will continue to fall (year/year, AKA “disinflation”), that rates will continue to decline…led by the innovation revolution, where massive disruptive tech will continue to force prices lower (US/globally) and that the Fed will cut rates 2–3 times in 2024.
The following is from one of our (new) favorite market watchers Bryan Rich. He sees this as we do; a technical correction that will soon run its course. A powerful new bull market is underway; a new “Industrial Revolution”.
VRA Bottom Line; This selloff is very close to running its course. We’re a week away from the beginning of Q1 tech earnings, which should once again blow away estimates. The innovation revolution is only in its infancy, along with one of the best buying opportunities from the birth of this bull market.
“Buy the dip” will remain the smartest of smart money strategies.
- That’s been our message from the 10/13/22 bear market lows when we called the bottom and forecast that we were in the Roaring 2020’s.
- This is a generational bull market, driven by consumers & companies in their strongest financial shape in decades.
- Rising earnings & GDP growth will power the markets higher for years to come. Pullbacks should be treated as gifts.
- Here, we recommend semis/tech, bitcoin, gold, miners (although ST overbought) & small caps (excellent buy here). Housing stocks are nearing another strong buy as well.
The Bull Market of Bull Markets in Precious Metals and Miners.
I have written about (and recommended) gold and silver since 2003, when in my second issue of the VRA I recommended gold at less than $375/oz and silver at $5/oz. What followed was a record setting, 12-year bull market run that took gold to over $1900/oz (533% return) and silver to nearly $50/oz (900% return). The 12-year bull market in gold and silver qualified as the longest bull market ever recorded for a specific asset class. In addition, over the last 20 years, the VRA has booked net profits of more than 3500% in the miners.
When the bull market ended, lower precious metals prices led many to sell their positions. These sellers are what we refer to as “weak hands”….many that should probably have never purchased gold and silver in the first place. The strong hands belong to global central banks, the US, China, Russia and the Middle East, along with the smart money shadow institutions that love it when you and I are panicked into selling our precious metals holdings. These groups sat back and quietly purchased every ounce (and ton) of gold and silver that they can get their hands on.
Over the last two years, central banks have purchased record amounts of gold. 2024 will almost certainly mark three straight years of record gold buying from the actual “smart money”.
For gold to be priced anywhere near close to appropriately (based on inflation), it would have to trade well north of $5000/oz, or 108% higher than we find it today ($2400). Many believe that silver’s fundamentals are even stronger than gold’s, with a massive (and continuing) shortage from under-production that will result in the most dramatic move higher ever for the “poor man’s gold”.
The macro picture on precious metals simply could not be more bullish. I encourage all investors to ignore these day-to-day gyrations…the powers that be have long manipulated gold and silver lower (research G.A.T.A.’s decade plus most excellent work on this subject for the cold hard evidence @ GATA.ORG)…and instead, focus on the long term fundamentals. In the not too distant future, I fully expect to see gold north of $5000/oz and silver north of $50/oz, if nothing else than to correct the excesses of fiat currency madness. Along with Bitcoin, I find no asset class more fundamentally positive than precious metals/miners today.
While our minimum target of $2400/oz for 2024 has been met, I expect gold to challenge $3000 this year. We’re big believers in “saving” in gold/silver, versus an ever-depreciating fiat currency. We recommend a 70/30 split (gold to silver holdings) and physical gold/silver only, where we recommend developing a relationship with a local metals dealer. These are great people to know, certainly if the sh*t ever hits the fan…they know everyone thats important in your local community.
Until next time, thanks again for reading…
Kip
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