For Friday March 27, 2014, We Recommend Against Equity Investing


Investment Recommendations:

We have changed our subjective investment recommendation to risk-off. 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 declined 0.2% Thursday with volume above Wednesday and higher than the 30-day moving average, resulting in yet another strong-volume down-day. A predictive pattern has not formed yet, but a pattern that predicts market weakness is clearly developing. Additional strong-volume down-days in the near future could complete this pattern. Our stop-loss algorithm remains in a triggered state, resulting in an uncertain trend for our automated forecast. If the S&P 500 were to advance about 5 points on Friday our automated forecast could return to a growth trend.

Subjective Comments:

The forming pattern that predicts market weakness has absolutely caught our attention and we will be watching very, very carefully to see if additional strong-volume down-days complete the pattern. When our stop-loss algorithm triggers it sometimes reverses within 3 days. A reversal tomorrow would make the current uncertain trend a false trigger of the stop-loss algorithm. Regardless of the possible false trigger, we are changing our subjective recommendation to risk-off. We suggest you sell any investments that grow with US markets.

US M2 (not seasonally adjusted) is growing near an annualized 14% rate. This rate continues to accelerate, although it is likely to slow next week because the 4-week sub-cycle dip is due. The 14% growth is only over the past 7 weeks, but the longer term growth rates show a slight acceleration as well. We believe it will require several more weeks of sustained M2 accelerated growth to keep the current bubble-boom going, and there are concerns the M2 growth could slow. The Fed is tapering again and the yield curve is flattening. Both of these things could slow the growth rate. US M2 data published every Thursday is also delayed by 10 days, so it is possible the 14% growth in the most current data has already slowed. The next 2 to 3 weeks of M2 data will reflect any immediate changes to the most recent Fed taper and any bank lending changes from the flattening yield curve. Conditions appear present for money growth to slow. The weakness in M2 growth during the first quarter of 2014 quickly showed up in the stock market, and this strongly suggests the US economy and market are much closer to crash conditions than most people suspect. Austrian Business Cycle Theory explains that continued acceleration in the money supply growth rate is necessary for a bubble-boom to continue. If growth continues but does not accelerate, the unavoidable crash that follows money printing will absolutely occur. If the growth rate slows the crash comes that much sooner.

Price inflation is accelerating, although it will not show up in the government’s official CPI numbers. Official CPI is designed to under-report the true rate of inflation, and the government has been caught falsifying the data to further suppress the reported CPI (hat tip Price inflation is showing up if you know where to look. There are reports of inflation as well as MIT’s online billion price index. Other sources of inflation are products being sold in smaller sizes or with reduced quality. This report from the Wall Street Journal a few days ago identified that “peanut butter prices accelerated faster than any other food item”. While it is true poor crops contributed to a constrained supply, the money printing is having an impact. Jif peanut butter has come up with a clever idea to mask this price inflation. They have decided to dilute the peanut butter with air and market it as “Whipped Peanut Butter Spreads.” This is an example of a smaller serving size and a lower quality product being promoted when in fact it simply hides the underlying price inflation. Continue to hold and accumulate price inflation hedges as they will perform well over the long term. The massive money printing since 2008 will continue to drive prices up for quite some time into the future, and we seriously doubt the bimbo Fed Head Janet Yellen will have the courage to raise interest rates high enough to stop the price inflation when it gets really bad. She’s been setup to take the fall when the economy crashes. That’s why we think Bernanke got out when he did, and also why Stanly Fischer has been nominated to be the Fed’s new vice chairman. Janet is too clueless to see she’s been setup as a patsy and will take the blame for the next crash, and Mr. Fischer will be in place to “come to the rescue”, which means more money printing in the future.

Wind Down of Daily Blog Posts:

We will continue to post about US markets through the end of March. We are planning on suspending daily posts in early April. We will continue to update our market signals at for our readers interested in tracking our automated and subjective market recommendations. For interested readers, we have the following recommendations for finding excellent commentary:

Best Economic Blog:

The editor of is Robert Wenzel, and he offers a daily email subscription that is absolutely fantastic! You can subscribe at this link. We highly recommend this subscription. You will continue to get great commentary and analysis on the US money supply growth rate using Austrian Business Cycle Theory.

We also suggest, although the blog posts there tend to be a bit snarky and often use terminology that can be difficult for the average reader to follow. is intended for professional traders. There is a larger staff at, so you will find it updated more frequently than, but that’s not always a good thing.

These recommendations will serve you well as we continue to wind down our daily commentary.

Comments are closed.