This is our final blog post

Hold_Recommendation

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 again Friday by 0.95% on volume below Thursday but above the 30-day moving average. The overall daily data from the market continues to be consistent with a market that will continue to decline, but a predictive pattern has not formed. Our stop-loss algorithm remains triggered so our automated market forecast is currently an “uncertain trend”. The S&P 500 would have to advance about 21 points on Monday to reverse the trigger and change our forecast back to a growth trend.

Subjective Comments:

Even if our automated forecast were to return to a growth trend after Monday’s trading session, we would not recommend investing in US markets right now. The daily data shows too many strong-volume down-days and we think a negative pattern is becoming more likely. The US money supply growth is not strong enough to continue the bubble-boom that has been in progress. If the money growth were to accelerate, the bubble-boom could resume. However, all indications are that US banks have slowed lending and have little incentive to change path. The Fed has tapered. The sources of accelerated money growth do not appear present, so we expect money growth to slow even more in the near future. We are not yet at the point of recommending a short position, so stay out of US markets for now.

End of Daily Blog Posts:

We will continue to update our market signals at TimerTrac.com for our readers interested in tracking our automated and subjective market recommendations:

Automatic Forecast Here:

This is our automated forecast. We don’t always recommend investing per the output of this forecast, but whatever our forecast does will be published at TimerTrac.com and available from this link.

 

Subjective Forecast Here:

We evaluate the growth of the money supply using Austrian Business Cycle Theory and consider the status of our automatic forecast when making our subjective investment recommendation. We will update our subjective forecast at TimerTrac.com from this alternative link.

 

Our Recommendations for Excellent Commentary:

Best Economic Blog: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

For Tuesday April 08, 2014, We Recommend Against Equity Investing

Hold_Recommendation

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 dropped Friday and again on Monday, both as strong-volume down-days. This has restarted the formation of a pattern that predicts additional market declines, although the pattern is not yet fully formed. The market decline last Friday was almost enough to trigger our stop-loss algorithm, but not quite. However, Monday’s decline did trigger the algorithm and our automated forecast no signals an uncertain trend. The S&P 500 would have to advance about 9 points (+0.5%) on Tuesday to reverse the trigger and change the forecast back to a growth trend.

Subjective Comments:

The slow-down in the money supply growth rate appears to be quickly having an effect on US markets. This is what we’ve been concerned about. Most of last year we were concerned about the slow-down in the growth rate through the first 9 months of the year, but there was enough new money in the economy to keep the boom going. We wrote about weakness developing in early October last year, and then the money supply growth rate accelerated through the end of the year. Since the start of this year a similar slow-down has occurred in the growth of the money supply, but this year appears to be different than 2013. This year the US market and economy appears closer to a crash and the current slow-down in the money growth could trigger the down phase of the business cycle. This will include a market drop. Exact timing and magnitude are difficult to predict, but our opinion is that a crash could be getting closer.

The Fed has stated they intend to further taper, meaning they will slow the printing press. Never believe anything the Fed says, but instead verify by watching the data and what they actually do. In this case, they have slowed the presses. They should stop them altogether, but slowing means the growth rate of the money supply will slow unless banks accelerate lending. Watching the banking reserves shows banks are not lending faster. In fact they appear to barely be lending fast enough to keep their loan portfolios from shrinking. We’ve noticed this in the trend of US banking required reserves. News articles now inform that mortgage originations have plunged to the lowest on record and that most of consumer credit last year was student and car loans. The two sources of money creation are Fed printing and bank fractional-reserve lending, and both sources appear to be slowing down.

The slow-down in money growth increases the risk of a market and economic crash (adjustment) which is necessary and the unavoidable outcome of the prior money printing, as explained by Austrian Business Cycle Theory. However, all of the past money printing still is putting upward pressure on price inflation, something Keynesian economists do not understand. Continue to avoid the stock market right now. It’s not clear if we have an opportunity to short the market yet, but the uncertainty implies the best thing is avoiding stocks all together. Avoid all bonds because they will decline in value as interest rates go up, and up they will go in response to accelerating price inflation. We recommend price inflation hedges for your portfolio.

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Thursday April 03, 2014, We Recommend Against Equity Investing

Hold_Recommendation

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Wednesday April 02, 2014, We Recommend Against Equity Investing

Hold_Recommendation

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 advanced 0.7% on volume above Monday but still below the 30-day moving average. Tuesday was a strong-volume up-day and the S&P 500 set another record high. Over the past 4 months the S&P 500 formed a cup-and-handle chart pattern, and Tuesday’s breakout to a new record high can be interpreted as a technical pattern predictive of growth. The large cluster of strong-volume down-days last week still has the basis of a negative pattern, but that negative pattern is not fully formed. If the S&P 500 were to decline about 35 points on Wednesday (-1.8%) our automated market forecast could change to an uncertain trend.

Subjective Comments:

We don’t put a lot of weight on the current cup-and-handle pattern because the handle was higher than the start of the cup. The pattern is considered stronger when the handle is lower than the beginning of the cup. Additionally the theory behind chart patterns is based on past behavior repeating itself. This is not a bad theory because human beings are repetitive in their investment decisions. However, the theory is not 100% sound because human being act and make choices that can and do differ. Austrian Business Cycle Theory is 100% sound and explains, not predicts but explains why a boom occurs when money printing accelerates. It goes on to explain how a crash must happen when the money printing slows. A record-high stock market does not mean it will continue to go up. We remain very concerned the money supply growth will not sustain the current bubble-boom. If we see the money supply growth rate accelerate, we will change our subjective opinion. For now, we continue to recommend avoiding US markets.

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Tuesday April 01, 2014, We Recommend Against Equity Investing

Hold_Recommendation

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 advanced 0.8% on Monday with volume above last Friday but below the 30-day moving average, making Monday a strong-volume up-day. There are no predictive patterns fully formed in the daily market data, but a market decline pattern is forming after all the strong-volume down-days last week. If the S&P 500 were to decline about 21 points on Tuesday (-1.1%) our automated market forecast would likely change to an uncertain trend.

Subjective Comments:

The new Fed Head gave remarks this morning that were interpreted by market participants to mean additional money printing will occur. This is the most likely cause for Monday’s advance in US markets. Do not listen to what these liars say! Watch what the money supply actually does. That’s what matters. With a proper understanding of Austrian Business Cycle Theory you will understand how changes in the money supply growth rate will affect the economy and stock markets. It is not clear if the US money supply will keep growing or not, but there are little incentives for banks to lend and the Fed is tapering. It is more likely the money supply growth will slow and increase the risk of a market crash in the near future. Avoid long positions in US markets. We recommend risk-off as it is too soon to suggest shorting US markets.

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

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

Hold_Recommendation

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 ZeroHedge.com). 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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Thursday March 27, 2014, We Recommend Investing in US Markets

Investment Recommendations:

Hold investments that grow with US markets, but pause in accumulating more. 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 dropped 0.7% on Wednesday with volume above Tuesday but below the 30-day moving average, resulting in another strong-volume down-day. There is no predictive pattern yet, but a negative pattern is forming in the daily market data. Wednesday’s decline was sufficient to trigger our stop-loss algorithm and change our automated market forecast to an uncertain trend. If the S&P 500 advances about 2 to 3 points on Thursday our automated forecast could return to a growth trend.

Subjective Comments:

We are leaving our subjective recommendation as is, but we do not recommend further accumulation. The daily market data is showing signs of weakness. If the money supply growth rate appears to be slowing we are likely to change our subjective recommendation tomorrow, but we don’t want to react too quickly. Price inflation hedges will be good investments as the effects of the last several years of money printing are starting to take effect. Official CPI numbers might be relatively “tame”, but that’s not a true reflection of what consumers are feeling. US Food Prices, which are excluded from the headline CPI, are up 19% since the start of the year.

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Wednesday March 26, 2014, We Recommend Investing in US Markets

Investment Recommendations:

Begin accumulating investments that grow with US markets. 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 0.44% on Tuesday with volume below Monday and lighter than the 30-day moving average, resulting in a light-volume up-day. The most recent market trends have been strong-volume down-days interspersed with light-volume up-days. This type of pattern is usually indicative of a market in decline, or about to decline. Presently there are patterns developing, but nothing fully developed to the point of having any predictive value. Should the S&P 500 decline about 10 points on Wednesday (-0.5%) our stop-loss algorithm could trigger and change our automated market forecast to an uncertain trend.

Subjective Comments:

We will be watching the US money supply growth rate very closely this Thursday and next Thursday. With the yield curve becoming flatter and the Fed tapering back the printing press, we are concerned the growth rate of the money supply will slow. If this happens, we will change our subjective investment recommendation to a risk off position. We remain cautious in our subjective recommendation. Accumulate long positions slowly and don’t go all-in. Let’s see what develops with the US money supply.

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 TimerTrac.com 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: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

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

For Tuesday March 25, 2014, We Recommend Investing in US Markets

Investment Recommendations:

Begin accumulating investments that grow with US markets. 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 0.49% Monday with volume below last Friday and lighter than the 30-day moving average, making Monday a light-volume down-day. Monday’s decline was almost enough to trigger our stop-loss algorithm. There are currently no predictive patterns present in the daily market data, but negative patterns are forming. Should the S&P 500 decline again on Tuesday our automated market forecast will likely change to an uncertain trend.

Subjective Comments:

Be cautious adding positions to investments that grow with US markets. We have changed our subjective investment to “Invest for Growth” recently, but with the caveat that positions should be accumulated slowly and not to go all-in. We continue to recommend this as it is not clear what direction the US money supply will go. If growth continues to accelerate, then we are poised for another bubble-boom. The Yield Curve is at its shallowest point since 2009, and this provides a disincentive for US banks to lend. With the Fed tapering further and Banks less likely to lend, our call to invest for growth could be wrong.

World geopolitical tensions are high, but we seriously doubt a conflict will break out over Russia’s annexation of Crimea. Poland is calling up Army reservists, while Russia is cutting back on the energy supply to Europe. Tit-for-tat travel bans are being implemented, but it just doesn’t seem like there is support for a conflict. For example, 54% of Germans believe the US and EU should accept the annexation. Still, logic can often go out the window where state actions are involved. When economic conditions deteriorate because of state action, the state usually looks for scapegoats or starts a conflict to distract the population. Geopolitical tensions would likely have unpredictable impacts on markets. Let’s pray for peace and prosperity, and an expansion of trade among nations.

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 TimerTrac.com for our readers interested in tracking our automated and subjective market recommendations. The commentary is what we are going to suspend. For interested readers, we have the following recommendations for finding excellent commentary:

Best Economic Blog: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com 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 ZeroHedge.com, 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. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

We hope these recommendations will serve you well as we continue to wind down our daily commentary.

For Friday March 21, 2014, We Recommend Investing in US Markets

Investment Recommendations:

Begin accumulating investments that grow with US markets.  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 0.6% on Thursday with volume not yet published at the time of posting this blog.  If the S&P 500 were to decline about 14 points on Friday (-0.7%) our stop-loss algorithm could trigger and change our automated market forecast to an uncertain trend.

Subjective Comments:

We are cautiously changing our subjective investment recommendation.  We explain why and offer specific investment advice in the following paragraphs.

The US M2 money supply and banking reserves data was published Thursday.  Money supply growth continues to accelerate over the past 7 weeks following a 3-week decline at the beginning of the year.  At the present growth rate of 13% annualized (over the past 7 weeks), or a rate of 7.6% annualized (over the past 23 weeks), M2 is experiencing accelerated growth over the prior periods.  According to Austrian Business Cycle Theory (ABCT), this will cause a bubble-boom in US markets and the economy.  If Austrian True Money Supply is used instead and the past 2 years are considered, the past 6 months has a slightly accelerated rate compared to the prior 18 months.  All of this points to a continued bubble-boom.  There are three reasons for some caution, however.  First is that the accelerated growth rates are not yet exceptionally stronger than the prior growth.  ABCT requires accelerated growth.  That is what is happening, but the acceleration is not yet much faster than prior periods.  The second reason for caution comes from the Fed’s announcement of another taper, meaning the rate of money printing by the Fed will slow.  The third reason for caution comes from the US banking required reserves which are unchanged over the past 6 weeks.  There was accelerated lending for the three months of November, December and January, but since the end of January net lending has leveled off as indicated by the unchanged required reserves.  There are three ways the US money supply can grow:

  1. Money printing by the Fed (AKA Quantitative Easing & Open Market Operations)
  2. Bank Lending (Fractional Reserve Money Multiplier)
  3. Off shore Dollars coming back from over seas

The Fed is still printing, but they are “tapering”.  For the past 6 weeks the Fed has stopped lending.  Russia recently threatened to dump US dollars, which would have caused them to come back to the US, but so far they have not followed through on that threat.  So, right now, the three sources that can accelerate the money supply growth rate are not doing what is necessary to sustain the current accelerated growth rate.

Here is what we suggest given the state of the US money supply.  There has now been sufficient growth that any market crash has now been pushed at least several weeks into the future.  Should the US money supply growth slow or even go negative (deflation), there will be time to react to such a change and exit the market.  Investing some money to grow with US markets has much less risk now.  If banks resume aggressive lending then the money supply will continue to grow and a bubble-boom could continue.  How long and how high the bubble will grow is unknown.  If you choose to invest in US markets now, but sure to keep close track of the weekly updates of the US money supply for any changes in the growth rate.

Additionally, continue to avoid all bonds.  Price inflation is going to accelerate and this will drive bond prices down.  It appears less and less likely the US will resort to violence over the Crimean annexation, but the stupidity of US foreign policy could still antagonize the Russians and cause them to dump dollar holdings.  This would flood the bond market with a huge supply and push bond prices down further.  For all these reasons continue to avoid all bonds.  Price inflation hedges remain a good long-term investment.

We are changing our subjective investment recommendation to “Invest for Growth”, but we don’t suggest going all-in all at once.  Instead begin to accumulate positions in investments that grow with US markets.  If the US money supply continues to accelerate, continue to accumulate positions.  It will be two weeks before the next banking reserve data is available and about three to four weeks before the Fed taper starts to take effect.  It will be another 6 weeks before it is clear if banks will accelerate lending and keep the bubble-boom going.  Slow accumulation over the next 6 weeks will limit downside exposure and position for continued growth that could occur.