For Thursday June 13, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US stock markets right now.  Price inflation hedges remain good long-term investments.  Continue to avoid all bond investments.

 Technical Comments:

The S&P 500 declined 0.84% on Wednesday with volume below Tuesday and lighter than the 30 day moving average.  Tuesday was a light-volume down-day, but the index declined enough to trigger our stop loss algorithm and change our automated forecast to an uncertain trend.  If the S&P 500 were to advance about 9 points (+0.6%) on Thursday our forecast could return to a growth trend.

Subjective Comments:

With the US market decline on Wednesday the Dow Jones index had its first three-day losing streak since 2012.  Our automated forecast is susceptible to frequent changes between a growth forecast and an uncertain forecast when markets are declining or moving sideways.  This is the second week in a row our forecast has changed to an uncertain trend.  The accumulation of strong-volume down-days has not created a pattern that forecasts a decline, but our technical analysis is giving off stop-loss warnings that indicate cause for concern.  This is consistent with what we have seen from the growth rate changes in the US money supply and the fact Austrian Business Cycle Theory describes why the slowing money growth means a crash is coming.  We think the US money supply will not grow fast enough to avoid a serious market decline.  While US banks could accelerate lending and grow the money supply, we haven’t seen this happen and know of no reason for banks to change their lending policies.  Do not listen to politicians or bureaucrats who suggest things like “The Sequester” or other such nonsense are to blame for economic woes.  The problem is money printing by the Federal Reserve combined with fractional reserve lending by banks.  This is what causes the boom-bust business cycle, and we are nearing the end of the boom.  All of the money printing since the crash in 2008 has prevented necessary bankruptcies from occurring and has created the situation for price inflation to get much worse.  Hold and accumulate cash.  Avoid all bonds.  Even professional bond investors are reducing their exposure to bonds.  Avoid US stock markets for now, but be prepared for potential opportunities to invest in leveraged index funds that grow when US stock markets decline.  Consider putting part of your portfolio into price inflation hedges, but only that portion which you can leave invested for a very long time.

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