For Tuesday August 13, 2013, We Recommend Against Investing


Investment Recommendations:

Ignore our automated market forecast and avoid US stock markets right now.  Continue to avoid all bond investments. Price inflation hedges remain good long-term investments, but only invest in price inflation hedges amounts that you can leave invested for a very long time.

 Technical Comments:

The S&P 500 declined 0.12% on Monday with volume below Friday and lighter than the 30 day moving average.  Last Friday’s volume was light as is typical on the last day of the week, but Monday’s volume being below Friday is a bit atypical.  Monday was thus a light-volume down-day.  Should the S&P 500 drop about 6 points on Tuesday (-0.3%) our market forecast could change to an uncertain trend.

Subjective Comments:

When the US economy and stock markets crash in the near future, the root cause is explained by Austrian Business Cycle Theory (ABCT).  The US money supply grew by 9.2% in 2012, and since the beginning of the year it has barely grown at all.  Under these conditions ABCT explains why a boom will occur, followed by a crash. The S&P 500 is near record highs and the boom in US stocks appears to be over.  Historically the stock market tends to decline gradually after the peak of the boom, and then a harsh and sudden crash occurs.  Typically the crash is triggered by some event and history records the random proximity of the event as the cause of the crash.  The typical political response is to pass more regulations to prevent whatever it was from happening again.  It would seem the Federal Reserve is preparing this propaganda now having published a report that warns leveraged exchange traded funds could cause a crash similar to the one in October, 1987.  This is pure bunk.  Don’t believe it.  The boom-bust cycle comes from money growth.  The Federal Reserve prints money and commercial banks engage in fractional reserve lending.  These are the two factors that cause the money supply to grow.  The consequences are inevitable and unavoidable, and so too will be the propaganda since most people are unaware of the true cause and effect described by ABCT.

Participants in US markets appear to be increasingly nervous that the Fed will “taper” (slow or stop) money printing in September.  This is consistent with our guess that the coming crash will happen before the end of this October.  Please note the only thing that is a guess on our part is the timing of October or sooner.  The fact a crash will happen is not a guess but the conclusion from ABCT and the current status of the US money supply.  Lots of things could be the trigger event.  The Chinese economy is slowing and Japan GDP had its biggest miss in a year.  The Chinese real estate bubble will probably be seen as the biggest bubble in world history when it finally pops.  Japan and China find themselves in the current economic situations from massive money printing in their respective currencies.  ABCT works regardless of the culture, politics or geographic location involved.

Protect yourself, your family and your friends.  Tell those you care about to sell all bonds and stocks and stay out of the market until after the pending crash.  When US markets crash the Fed will likely accelerate the printing of money.  Price inflation is already bad, and the continued money printing will only make it worse.  For these reasons we suggest investing part of your portfolio in price inflation hedges.  We also suggest holding part of your wealth in cash at your broker so you’re able to short US markets as the crash draws closer.  This will be a very big opportunity to achieve very high returns.

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