For Wednesday August 14, 2013, We Recommend Against Investing

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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 advanced 0.3% on Tuesday with volume above Monday but below the 30 day moving average volume.  Tuesday was classified a strong-volume up-day by our pattern recognition software.  If the S&P 500 were to decline about 11 points on Wednesday (-0.6%) our market forecast would likely change to an uncertain trend.

Subjective Comments:

If you have been following our daily updates, then you know we have been predicting a crash in US markets for quite some time now.  Our opinion has not changed.  We still see US markets crashing because of the change in the money supply and the resulting economic consequences explained by Austrian Business Cycle Theory (ABCT).  The timing of the coming crash is not explained by ABCT, but we’re guessing before the end of this October.

For the 5th time in the last 7 days the Hindenburg Omen has appeared in the NYSE.  This is the most concentrated cluster of the omen according to ZeroHedge.com.  As this occurrence of this technical indicator increases, so do the odds that the NYSE could be headed for a crash.  According to Wikipedia, the Hindenburg Omen is based on the assumption that when the stock market is trending up or down, many stocks will be setting either new annual highs or new annual lows, but not both at the same time.  When many stocks are setting new annual highs at the same time many other stocks are setting new annual lows, this is assumed to be abnormal.  When this condition occurs frequently it has historically preceded market crashes by 30 to 40 days.  A very good explanation of the Hindenburg Omen is available from EconomicPolicyJournal.com.

The current market trends are very similar to 2008, 1987 and 1929.  In all these cases the change in the money supply growth is what caused the market crash.  Austrian Business Cycle Theory is the only correct economic explanation of the business cycle and why booms and busts keep happening.  It might seem odd that the US money supply growth has slowed since the beginning of the year when the Fed’s constant money printing of $85 Billion per month has been going on all year.  All of the QE money printing is just growing the excess reserves sitting in banks.  Banks are letting old loans mature faster than they are creating new loans, and this is completely offsetting the Fed’s money printing.  This is why US M2 money supply is virtually unchanged since the start of the year, and why US markets are headed for a crash.

3 Responses to For Wednesday August 14, 2013, We Recommend Against Investing

  1. Sachin says:

    You recommend we do not invest in US stock market at all for the rest of 2013? Please clarify. Also could you please tell which markets are safe to invest looking at the current scenario?

    • We are recommending against investments designed to grow with US markets, and this recommendation will likely last the rest of the year. It is likely we will recommend investments that grow when US markets decline before the end of the year. If circumstances change we will update our recommendations accordingly, and that could happen anytime.

      We do not provide analysis of other markets, although we do express opinions from time to time since Austrian Business Cycle Theory applies to all markets.

    • You asked if we recommend against investing for the rest of 2013. Our forecasting process does not look that far ahead. If conditions change we will change our forecast. We might have a forecast in the near future of a market decline, which would be a “short” investment opportunity. We think it is unlikely we will recommend investing for growth for the rest of 2013, but we can’t commit to that. We follow the data.

      You also asked about which markets are safe for investments. Our market forecast only looks at the US market, but our opinion is that no market is currently a safe investment. Price inflation hedges are probably the best investments right now.