For Wednesday September 4, 2013, We Recommend Against Investing

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Investment Recommendations:

No Change: 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 0.4% on Tuesday with volume above Friday and above the 30 day moving average.  Tuesday was a strong-volume up-day.  In the past 4 weeks there has been equal number of strong-volume up-days and strong-volume down-days.  This does not form a predictive pattern, but it is something that is common at market turning points.  If the S&P 500 declines about 14 points on Wednesday (-0.9%) our forecast could change to an uncertain trend.

Subjective Comments:

With the US money supply growth remaining very small compared to 2012’s annual growth of 9.2%, the economy and stock markets are heading into the down phase of the business cycle.  Austrian Business Cycle Theory (ABCT) explains how this happens.  Murray Rothbard has written extensively on ABCT, including this wonderful explanation of How the Business Cycle Happens.  This article is an excerpt from his book America’s Great Depression.  We hope you’ll take the time to read the article.

ABCT explains how the business cycle happens and why the slowing growth of the US money supply must lead to a crash.  The timing of the crash is not predicted by ABCT.  We are still putting our best guess for a crash as sometime before the end of October (next month).  Having just begun, September could be a very interesting month for US markets.  The weak money supply growth has setup the markets for a crash.  A triggering event could happen anytime.

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