For Tuesday April 2, 2013, We Recommend Against Investing


Investment Recommendations:

We do not know if US markets will resume their recent growth trend or if they will turn down.  We are seeing data that could be pointing to continued growth.  We’re not yet recommending investing in US markets, but our recommendation could change in the coming week or two depending on what develops.  Price inflation hedges remain viable investment options.  Continue to avoid all bonds as they will fall in price when price inflation accelerates in the near future.  Avoid TIPS bonds and municipal bonds as well.

Technical Comments:

The S&P 500 declined 0.45% on Monday with volume below last Thursday and below the 30 day moving average volume.  Monday was thus a light-volume down-day which is a change in the daily patterns over the past 3 to 4 weeks.  Down-days recently have been on stronger volume.  The light-volume on Monday means the decline in the market is less significant.  If the S&P 500 declines about 12 points on Tuesday (-0.8%) our stop loss algorithm could trigger and change our forecast to an uncertain trend.

Subjective Comments:

We recently posted about the US money supply growth rate changes.  We encourage you to read that post if you haven’t done so.  We had seen a slowdown in the money supply growth rate, but the growth rate is accelerating again.  If acceleration continues the money supply drop that occurred about 3 months ago will become a non-event and the bubble-boom will continue.  Time will tell if growth will accelerate or not.  Economic data released Monday suggests March growth was strong, and the historic money printing combined with factional reserve lending is the cause of the recent uptick in the economy.  More economic data will be released this week.

There was a municipal bankruptcy in California.  Stockton has been officially declared bankrupt.  We continue to recommend against all bonds, including Municipal bonds.  Anyone owning muni-bonds from Stockton will not be repaid.  We continue to see the US economy at a turning point.  This turning point will either have been a pause in a bubble-boom, or the bubble will pop and the downturn will commence.  Eventually every bubble will pop, but the timing of the current pop is very difficult to predict.  For 3 months the money supply growth decelerated and the risk of a pop was increasing.  Now money supply growth is again accelerating, which is reducing the risk of a crash in the near term.  The change in the daily market data in the past 2 to 3 trading sessions is interesting but not yet significant enough to change our recommendation.  We remain likely to change our recommendation in the near future if daily data sees market advances on strong volume days, and if the money supply growth continues to accelerate.

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