For Thursday October 03, 2013, We Recommend Against Investing


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 declined 0.07% Wednesday on volume below Tuesday but above the 30 day moving average.  Our pattern detection software classified Wednesday as a light-volume down-day and does not contribute nor distract from the developing pattern.  The in-progress pattern that is developing might predict a market decline because there has been a frequent occurrence of strong-volume down-days in the past two weeks.  More such days could complete this pattern in the near future.  If the S&P 500 declines another 14 points on Thursday (-0.8%) our market forecast could change to an uncertain trend.

Subjective Comments:

When US markets crash in the near future remember to ignore the politicians and clueless commentators on television.  The boom-bust cycle is not part of free market capitalism; it is caused by changes in the money supply growth rate.  There are two factors causing the money supply to grow:

  1. Federal Reserve Monetary Policy (AKA Money Printing)
  2. Fractional Reserve Bank Lending

You can count on lots of explanations being offered when the market crashes, especially from politicians seeking votes by blaming the other party.  Blame the Fed, and blame fractional reserve banking.  Austrian Business Cycle Theory explains the economic fundamentals of cause (money printing, fractional reserve lending) and effect (boom-bust business cycle).  With 2012 US M2 money supply having grown 9.2% followed by about 3% annualized growth year-to-date in 2013, we are heading for a market (and economic) crash.  The accelerated growth last year followed by the slower growth now is the cause.  It is unfortunate the US government “shutdown” and looming debt ceiling “crisis” are occurring at the same time the bubble is about to pop.

Here are the highlights of the political circus from Washington D.C.

If we had to guess, here was the sequence of events that occurred today (in this order):

  1. Bankers told Obama not to let the nonsense cause a default (which is coming in about 2 weeks if the debt ceiling is not increased).
  2. Obama summoned Congressional leaders, reiterated he would not negotiate on the government shutdown but relayed the Banker’s warning to avoid a default.
  3. Otherwise clueless Republicans, having been warned by Obama about what the Bankers said, got the idea to use the debt ceiling to try and get their way.

The faux-drama from D.C. will continue until the Republicans think they’ve made enough noise to improve their election odds next November.  At that point they will fold and fund the government, and increase the debt ceiling.  Until then there will be enough noise to frighten some market participants and news from D.C. will have some impact on the markets.  The impact will occur because of the current market weakness caused by the 9-month slowdown in US M2 money supply growth.

We are still guessing the coming market crash happens before this month is over.  ABCT tells us a market crash is inevitable.  The timing estimate is a guess on our part.  We think our pattern detection software will identify an opportunity to short US markets in the near future.  If that happens, we will update our market forecast and make a very big deal in our daily posts here on our website.  Continue to avoid US markets.  Have some cash ready for the short investment opportunity we see coming.  Price inflation hedges remain good long-term investments.  Please share this information with your family and friends.  Encourage them to protect their wealth from the coming crash.  If you’re feeling generous, consider recommending they read our website.

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