For Thursday January 17, 2013, We Recommend Investing in US Markets

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Technical Comment:

The S&P 500 was virtually unchanged on Wednesday when the index closed up 0.3 points (+0.02%) on volume above Tuesday but just below the 30 day moving average.  The absence of strong-volume down-days continues to demonstrate market data patterns consistent with growth.  Should the S&P 500 decline about 7 points on Thursday (-0.5%) our automated forecast could change to an uncertain trend.

Subjective Comment:

We remain steadfastly behind our opinion that US market and the economy are beginning the boom phase of the business cycle.  The money printing from the Federal Reserve combined with accelerated lending by US banks is growing the US money supply much faster over the last 3 months than at any time in the prior year.  Austrian Business Cycle Theory explains why this will create a bubble boom.  We encourage you to read yesterday’s post for our thoughts on the political drama and our general investment suggestions.

We have spoken often about price inflation and our opinion it will accelerate.  Money printing almost always leads to increasing prices, but sometimes this is not the case.  The Consumer Price Index (CPI) is likely to not reflect the true increase in prices for many reasons.  Changes in worker productivity puts downward pressure on prices, and if enough productivity gains are enabled via process and technology improvements, the downward pressure on prices can offset money printing.  It all depends on the rate of money printing, the amount of worker productivity changes, and the desire of people to accumulate and hold cash balances.  We are guessing the accelerating money printing will eventually overwhelm the other factors attempting to bring prices lower, and that’s why we’ve suggested price inflation hedges as a possible investment option.

Today at the Ludwig von Mises institute’s website was a fantastic article by Mark Thornton titled Where Is the Inflation?  We recommend reading this article and learning more about Austrian Business Cycle Theory.  In this article Mr. Thornton explains in more detail how the CPI might not show price inflation.  He also briefly discusses how money printing causes booms (and eventually busts) even if other factors combine to mask price inflation.  You can learn more about Austrian Economics by reading the daily articles at the LvMI website, and for a subscription you can learn Austrian Economics and much more at Liberty Classroom.  We highly encourage you learn more now that you have your investment portfolio positioned to take advantage of the coming growth in US markets.

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