TimingCube - Inflation - inflation,inflation calculator,commodity inflation,currency inflation, m3 money supply

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Announcing TradeGuru!

We are pleased to announce TradeGuru, a new stock trading system from the inventors of TimingCube. Unlike TimingCube, which is long-term oriented with infrequent trading and centered on following broad market trends, the TradeGuru System is designed to benefit from short-term explosive advances of select individual stocks. A short comparison of the two services is provided in the FAQ of the Week below.

For the time being we are announcing the TradeGuru service exclusively to you, our TimingCube subscribers and, as an incentive and sign of gratitude, we offer 20%-off introductory subscriptions through February 19, 2006.

Please visit www.TradeGuru.com and find out how it generated a 113% return in 2005.

Signal Update

Current Signal Performance as of

Signal Type	Trade Date	Index	Return since issued
		Nasdaq 100
		Russell 2000
		S&P 500
		QQQQ

Cumulative Returns since First TimingCube Live Signal ( ) as of

Index	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
Nasdaq 100
Russell 2000
S&P 500
QQQQ

Note: QQQQ returns are included for continuity sake.

Market Update

What a difference a week can make! On returning from the prolonged weekend, traders began in a bearish mood with news of the Japanese stock market plunge followed by crude oil jumping on heightening tensions in the Iran nuclear situation and Nigerian attacks on oil installations. Selling worsened on Wednesday following missed fourth quarter estimates by technology giants Intel and Yahoo. More bad news was to come as E-bay and Apple added to the disappointments. Apple in fact beat analyst estimates with earnings up 86% over the year ago quarter, but got punished for forecasting lower sales and earning growth for the current quarter. On the economic front, further yield curve inversions did not help the general investor disposition.

Thursday's rally on slightly increasing volume seemed to put a healthy stop to the bleeding, but on Friday it all came undone. Poor earnings reports spread from technology to other sectors with General Electric and Citigroup reporting shy of Wall Street expectations which was further compounded by soaring energy prices. Crude oil surged to top $68, a four months high and within striking distance of the all-time-high. As a result markets tanked and ended up closing near the session lows with above-average and increasing volume, never a good sign. The Nasdaq Composite index, after falling throughout the session, has come to rest close to the up trend line it has drawn since early October 2005. We will see next week if the 2200 to 2250 area continues serving as resistance as it has before or not.

For the week the large cap indices suffered the most with the Nasdaq 100 and S&P 500 leading the way down with 4.03% and 2.03% losses respectively, followed by the Russell 2000, relatively unscathed with a 0.54% decline. A brutal week, but not nearly as bad as it could have been when comparing it with the Nikkei's 6.67% drop. Despite this week's pullback our Model remains with its Buy signal.

Trend Timing School

Inflation

We have reported on the appearance of inflation fears since early 2004, but with recent surges in energy prices, and many analysts predicting them to go much higher in the foreseeable future, we thought it would be a good time to examine the topic of inflation and what it means to us Trend Timers.

Inflation is generally defined as the rate at which price levels rise. Past the simple definition there are many different ways to measure it. We occasionally mention the Labor Department's Producer Price Index (PPI) which measures wholesale prices, and is an indicator of future price inflation at the consumer level. The Consumer Price Index (CPI) is the Government's key measure of inflation and it has been increasing at a much faster pace in recent months, something the stock market never likes to see.

Why should we care about inflation you might ask? On the personal level, while we may not be aware of the longer term effects, our purchasing power is sapped substantially. Perhaps the best illustration of this can be found at the following link, courtesy of the Federal Reserve Bank of Minneapolis, which you might want to bookmark for future reference.

http://www.minneapolisfed.org/Research/data/us/calc/index.cfm

The Fed Dollar Inflation calculator works with actual CPI historic data and is rather simple to use. It helps us find the inflation adjusted Dollar value between any two years from 1913 to 2005.

As an example, we filled the blank fields on the calculator as follows:

If in 1980 (year)

I bought goods or services for $1000,

then in 2005 (year)

the same goods or services would cost $2361.65

So, we can look at this either as price inflation, with the calculator indicating how much more goods or services cost us today (2.36 times more), or we could see it as currency devaluation because had we kept that $1,000 in our wallet, it would be worth less than half of its original value. That's how inflation affects us and our savings directly.

So what are the causes of inflation? There are two distinct types of inflation: commodity inflation and currency inflation. While everyone is aware of oil prices few realize that is the least of it. Most commodities from copper, gold, natural gas, to uranium have been exploding with several doubling in price over the last year. Commodity inflation is primarily fueled by demand and supply, and can at least be partly attributed to the gigantic growing demand from countries like China and India. When demand growth outpaces supply, prices have nowhere to go but up. The prices of raw materials and energy ultimately ripple through the food chain and into the costs of manufacturers and ultimately into the prices consumers pay for every day goods.

Currency inflation is also expected by many economists to heat up in the foreseeable future, and they argue that one of the primary causes is excessive money supply growth. Graph 1 below shows the recent increase in money supply (M3). Economists also hold the view that politicians will invariably inflate their way out of insurmountable debt. By increasing the money supply, i.e. printing money, a Government devalues its currency, thus lowering the effective debt. If they are right, incoming Fed Chairman Ben Bernanke will have no choice but to turn the money supply spigots wide open.

Source: Federal Reserve Board, January 19, 2006

No one knows for sure if and when inflation will start affecting the stock market negatively, but we can count on our Model to signal a major change in the general trend.

FAQ of the Week

Question: How does TradeGuru compare with TimingCube?

First we need to emphasize that the two services are different and their recommendations are completely unrelated. Unlike TimingCube, the TradeGuru System uses a two part approach 1) top down company selection based on their leadership fundamentals such as earnings growth, and stock price appreciation and, 2) a 100% mechanical issuance of buy and sell signals based entirely on technical analysis. The differences are detailed in the table below.

Comparison of TimingCube and TradeGuru

	TimingCube	TradeGuru
Style	Index investing	Stock picking
Strategy	Trend following	Special stock opportunities
Market side	Long/Short	Long only
Investment vehicles	ETFs, mutual funds, options	Individual stocks, options
Investor profile Character Risk tolerance Time horizon	Moderate Low Long-term	Aggressive High Short-term
Average trade frequency	4 trades per year	2 trades per week, and up
Average trade duration	3 months	31 days