For Tuesday February 25, 2014, We Recommend Against Equity Investing

Hold_Recommendation

Investment Recommendations:

Sell US equity positions and hold cash.  Price inflation hedges should be held or accumulated for the long term as price inflation is starting to accelerate.  Avoid all bonds, including the new MyRA bond scheme from the Feds.  Ignore the propaganda.

Technical Comments:

The S&P 500 advanced 0.62% Monday with volume above last Friday and above the 30 day moving average, making Monday a strong-volume up-day.  Last week each day’s volume was below average, but there was one strong-volume up-day and one strong-volume down-day.  There are no predictive patterns developing presently.  However, there were quite a few strong-volume down-days a few weeks ago, and this continues to suppress the formation of any pattern that would predict market growth.  The S&P 500 would have to decline about 32 points (-1.9%) on Tuesday to change our automated market forecast to an uncertain trend.

Subjective Comments:

We apologize for the lack of daily posts last week.

Thank you to everyone who sent us questions and suggestions about the future discontinuation of our daily blog.  The most common question we received was about a continued fee-based subscription service for readers interested in continued updates.  We are considering a continued update of our daily signals using TimerTrac.com.  If you bookmark this link (http://www.timertrac.com/private/medallion.asp?mlid=8CD77AB2-6894-4A39-9142-B832D8293125) you can continue to receive our daily signals for free.  However, via TimerTrac there is a 1-day lag, and you will only see updates when signals change.  You will have to access the link every day to see if anything has changed.  TimerTrac offers fee-based subscriptions that might offer additional features, but at least in this manner you can continue to receive our daily forecast.

What you will not receive at TimerTrac is any commentary.  Since there was considerable interest in a subscription service by many of our readers, we are considering a weekly newsletter published on the weekends.  The primary content of the weekly newsletter would be updates on the money supply trends.  We would be comfortable selling this content as it would be the publication of information as opposed to investment advice.  We are philosophically opposed to selling investment advice since that changes the incentives for the publisher.  By accepting tips (donations) from satisfied readers, our incentive as the publisher is to provide valuable advice.  Our incentives change to acquiring many subscribers, regardless of the effectiveness of our advice, when we sell subscriptions.  We would surly lose subscribers if we publish bad advice, but the incentive changes and many newsletter publishers simply attempt to replace lost subscribers with new subscribers when they should be focused on providing the best investment recommendations possible.  If we sell information about the money supply trends and commentary about the implications, this would be different than an investment recommendation.

Speaking of the US M2 money supply, last week it bounced upward in what appears to be a recovery of the 4-week sub-cycle.  There remains a collapse in the growth rate of the money supply.  From last October through early January M2 growth had been at or above 10% per annum depending on the method of measurement.  For the past 5 weeks M2 growth has been 0%.  The recent upward movement in banking required reserves appears to have reversed and was likely something that happens every January.  These things taken together indicate the continued growth rate of the money supply could be mild to near zero.  If this indeed happens for an extended period then the boom-phase of the business cycle will draw to a close and the bust phase will occur.  There is no avoiding a crash after all the massive money printing over the past several years.  If the new Fed Head Janet Yellen allows M2 growth to slow, then the current bubble-boom will end.

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