For Thursday April 03, 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 dipped down 0.11% on volume below Wednesday and below the 30-day moving average, resulting in a small-volume down-day. With the recent light-volume days combined with a few strong-volume up-days, the developing negative pattern has fallen apart. If the S&P 500 declines about 35 points on Friday (-1.9%) our automated forecast is likely to change to an uncertain trend.

Subjective Comments:

The US M2 (not seasonally adjusted) money supply showed the expected 4-week sub-cycle dip with the most current data published on Thursday. The current growth rate of the money supply, if sustained, will spark a continued bubble-boom of the US economy and stock market consistent with Austrian Business Cycle Theory. However, we think it appears unlikely the money supply will continue to grow at its current annualized growth rate of over 12%, which is the rate seen over the past 2 months. US banking reserves declined, both required and excess reserves. This indicates that new loan origination is slower than the rate of old loan maturation. The Fed has tapered again so the rate of new money printing by the Fed has slowed, and this slowdown of bank lending is happening at the same time. This means the money supply growth will slow. It is very possible the Fed will accelerate printing again, but they are unlikely to do so unless the economic and market data start to deteriorate much more than at present. In other words, the Fed will be slow to react. Bank lending can accelerate, but banks appear to have little incentive to do so. As long as the current situation persists the money growth will slow, and this will increase the odds of a market crash. We think the US economy is much more fragile now than at any time last year. We don’t know how long the bubble’s momentum can sustain itself without accelerated growth of the money supply, but we doubt it is very long. At present the market is booming from the accelerated money growth over the past 2 months. US markets are likely to continue growing or at least move sideways for a few weeks from here. It is beyond a few weeks that has us worried. Now is a good time to get out of US markets and protect your wealth from a crash. Of some interest was the resignation of a member of the Fed who had 4 years left on his term. It could be Mr. Stein is clever enough to get out before the next crash and hopefully avoid the potential scorn and condemnation he deserves as a member of the banking politburo.

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.

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