For Tuesday January 07, 2014, We Recommend Investing in US Markets


Investment Recommendations:

It is time to invest in US stock markets.  Price inflation hedges should be held for the long term and remain a good idea as we expect price inflation to accelerate in 2014.  Avoid all bonds.

Technical Comments:

The S&P 500 declined 0.25% on Monday with volume above last Friday and higher than the 30-day moving average, resulting in a strong-volume down-day.  There have been a few such days in the past several trading sessions, but this was the first with above average volume.  There are no predictive patterns right now but several more strong-volume down-days could produce a pattern.  If the S&P 500 were to decline about 15 points on Tuesday (-0.8%) our stop loss algorithm could trigger and change our automated forecast to an uncertain trend.

Subjective Comments:

We have warned about accelerating price inflation as a consequence of the mad money printing by the Federal Reserve.  Unsurprisingly today the US Senate confirmed Janet Yellen as the next Fed Head, so it is highly likely money printing will continue after Bernanke steps down.  Price inflation will eventually accelerate as measured by “official” government statistics.  Price inflation is higher than officially reported.  Over the long term price inflation hedges will be good investments.  Money printing will not do anything claimed by proponents of “accommodative monetary policy”.  Instead it will distort the economy causing malinvestments that will eventually fail to produce output with willing buyers.  As long as the growth of the money supply accelerates this bubble-boom process can continue, but it eventually must end.  We thing the US M2 money supply has accelerated and now is a good time to invest.  We don’t know how long the current bubble-boom will continue, but as long as it is doing so investing for growth is recommended.  We also recommend leveraged index funds so your nominal gains will stay ahead of price inflation.

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