Inflation Potential

The view here since last autumn is that faster liquidity growth would lead to somewhat faster
global economic growth and that such would produce some acceleration of inflation. I have
been looking favorably on oil, natural gas, gold, silver and commodities in general. Measured
yr/yr, the CPI has moved up from a depressed 1.0% for Oct. '13 to 2.1% currently. My
forward looking inflation gauges are continuing to advance as well. Consider the yr/yr rate
of change in the CRB commodities composite (top panel) CRB Weekly

However, the world is after all still trying to shake off the effects of steep global recession, so
you need to exercise some discretion here. There is still slack in global productive capacity
and in key large developed economies such as the US, wage gains have barely kept up with
inflation as slack continues in the labor markets as well. To sustain accelerating inflation in
a normal cyclical fashion, there eventually has to be follow through to wage rates or else real
incomes can be punished enough to weaken growth of demand.

Materials and commodities prices have been rising and there have been some positive cyclical
moves for traders to capture. But it is still too early in the game to pronounce the return of
substantial inflation on a more durable basis.

The CRB has recovered up to the 310 - 315 area. The model I run on commodities suggests
fair value is at 335. At that level, there would be a better balance between supply and demand.
So, there is some value in the commodities sectors but realize that economic demand has to
remain firm for an extended period to take up the slack.

Monetary Policy & System Liquidity

Short Term Rates
The cyclical case for raising short term interest rates is in place, although it is not a table
pounder as cyclical pressures although present are not that powerful. So, the US is finally
in an era of rate suppression. Because of the technical difficulties in raising rates during
a period of substantial QE, the issue probably remains tabled until the QE program ends later
this year. The 2yr Treas. note shows signs that investors are putting biases on an end to
ZIRP and some upward pressure on the inflation rate. US2Yr.

Liquidity Cycle
Banks are expanding the scope of lending. There have even been upticks in home mortgage
and home equity balances. The broad measure of credit driven funding (excluding QE) is
up 6.5% yr/yr through May which is strong enough given inflation of only 2%. The monthly
growth of private sector liquidity funding now exceeds that of QE as the cycle edges into a
more mature phase. With the dollar value of industrial output rising at 6.5%, the Fed is likely
reasonably satisfied with progress in 2014 to date. Still, the responsiveness has been a long
time in coming, and the balanced growth and funding will have to continue after QE is retired
for the tapering program to be a success and for the Fed to have leeway to begin a return to
more nearly normal operation of monetary policy.

Economic & Profits Indicators

Coincident Economic Indicator
The US economy continues to strengthen over the stall speed levels seen from late 2012
through early 2014. The economy has picked up from one / third speed to two / thirds
with my CEI through May at + 2.0% yr/yr. There is a continuing drag on the economy from
low employment growth plus flat real incomes reflecting modestly higher inflation and
low wage and entitlements growth. Household confidence has improved and consumers are
willing to borrow more and this has helped sustain faster business sales and production growth.
Moreover, economic recovery / expansion is broadening out. Overall, still far from pretty but
better than it was.

Business Profits Indicators
My proxy for business sales -- the value of industrial output measured yr/yr -- was up 6.5% in
May. This is the strongest reading since mid - 2012, and hits my projection for what sales should
be doing for the remainder of the year. Profit margins should be expanding now on the
stronger volume growth and an improving selling price / cost ratio as a little extra pricing
power has developed. The one negative here was a faster build in inventories relative to sales
earlier this spring. This may be part of a bounce back from the nasty winter, but keep an eye
on it.

Production capacity shrunk from 2009 - 2011, but is recovering modestly, rising to + 2.4% yr/yr
in May. The addition of real capital for business is a healthy long term development, although
further strength in the growth of production and delivery capacity may eventually slow share
buybacks with a pivot in budgets.

Stronger business sales this year is crimping the growth of financial liquidity that may be
available to flow into the capital markets. The partial offset for equities investors is faster
earnings growth.

SPX -- Daily Chart

The market hit an overbought situation early in the week, and with no momentum follow -
through, traders are taking some money off the table. SPX Daily Chart Note the RSI and
MACD readings for early in the week. The SPX was not strongly overbought against its 25
day m/a. The market remains in an uptrend off the Apr. 2014 and will remain so if it can
hold above 1920 in the next couple of trading days. You should probably take note of a
prospective reversal in the downtrend of the VIX. If such occurs, this signal would imply
that the developing complacency among players could be evaporating and that a degree of
further price attrition may lie ahead.

Traders did not care for the data on retail sales released today. Sales were positive but less
than hoped for. There was also a strong move up in the oil price which is seen as threatening
the growth of discretionary income. With QE tapering proceeding, players are less forgiving
of economic data shortfalls.

Oil traders have their first little bit of excitement in a while and aim to make the most of it
as the news tape from Iraq unfolds. How much further down the road to Iraq's dissolution
this all goes is still a tough issue. The Kurds may well have opted out of the union today
by taking Kirkuk, a northern city / oil center they have long considered their own. Whether
the new jihadis can make into Baghdad remains to be seen. If the US is prepared to initiate
air strikes, the militants will need to disperse quickly as proud columns of troops in trucks
can be eliminated fast by US attack aircraft. And, if the US is prepared to use air strikes,
the militants will be hard pressed to carry their fight to the big oil fields and terminals in
the far south of Iraq. The other key swing factor in the early going will be Shia troops or
militias and whether and where they might be prepared to join the battle.

Appointment In Samarra

Samarra lies about 70 miles due north of Baghdad. That's where the Sunni Islamist militants
are nibbling at the outskirts of this ancient city. They have already overrun Iraq's northern oil
fields, refineries and pipelines. With  a small, combat seasoned, heavily armed force, they may
capture the northern half of Iraq. Native Sunni tribal chiefs, the military and the police have
largely quit their posts. No refugee flow has has grown so large in so quick a time in history.
The militants have naturally hit all the banks on the road to Baghdad and have scooped up tons
of abandoned weaponry. They hold a huge territorial area area with a small force but lots of local assistance.

The Iraqi government is imperiled, the Kurds rush to defend their border, and Turkey is busy
warning the Islamist militants off. It has the makings of a very big story, and how it plays out
from here will fascinate. But for the markets in the near time there will be the question of what happens to the production, refinement and transport of crude and downstream products from
this major producer. WTIC Crude Daily

Oil is in an uptrend and is challenging resistance again. Reaction to this explosive situation in
Iraq has been muted so far, but things are happening at lightening speed on the ground.

Google Shows The Story

Growth company Google resumed market leadership after the last substantial market
correction way back in 2011. A stock with a decent beta, it corrected sharply earlier this year
along with about 60% of the total market. GOOGL Daily Note the test of the 200 day m/a in
early May. Lots of technicians watched that action with baited breath. Note as well the action
of the intermediate term MACD. About 60% of the total market fell into a similar MACD
pattern including the fact that probably less than 50% of the market has experienced sufficient
price momentum to cross the zero line on the way up. You will note that Google like most stocks
has yet to cross over into positive territory on MACD. That tells you that despite the rally in the
SPX, there is still above average risk in the market.

Stock Market -- Weekly

Technical
As indicated in the 5/30 SPX weekly (scroll down) the market has broken out of a congestion
zone to new highs. The breakout extended this week with the SPX closing in on the channel
top in place since autumn 2011. SPX Weekly The MACD, though historically in an upper
register, has turned positive to confirm the breakout. You have to go back to the late 1990s
bubble years to find a weekly MACD reading which has remained so continuously highly
elevated. The market is also 7.5% above the 40 wk m/a and is inching up to another strong
overbought reading. Historically, buying into these sorts of elevated momentum and MACD
markets works out profitably only about 25% of the time, but investors have made it pay
nicely since the spring of last year when the market was propelled up to high levels on these
important measures. (In the interim, more conservative traders like me have been left out in
the cold.) The RSI is overbought, but the chart shows how an overbought reading can last
several weeks especially when price momentum hums along.

The VIX index shows new levels of confidence and complacency were reached this week,
and may be its time to take note of this even granting that a low VIX reading can continue for
a good several weeks running.

Price momentum is o.k. and market breadth is solid. Volume remains awful and this may well
bother players considerably more if prices continue to trend higher on light volume.

Fundamentals
Purchasing manager combined data for new orders have been positive throughout the recovery
but showed a trend of deteriorating momentum from late 2010 through mid - 2013. Save for
the recent winter (Jan. / Feb.), combined new order data has been relatively strong since mid -
2013 and weekly leading economic indicator data remain in an 18 month uptrend. Moreover,
banks have been lending in support of higher working capital needs. Investor focus has
meanwhile shifted from the Fed's QE program which is now winding down to the better
business fundamentals. Earnings estimates are inching up after months when estimates were
consistently cut and this has helped stocks recently.

With QE tapering substantial and ongoing and business data at the forefront again, investors
should be become increasingly sensitive to how well the economy is doing. This is a big
change from last year when mounting monetary liquidity was the dominant theme, and players
were very much more tolerant of slips in economic momentum.

Eurozone Quickly Revisited

With industrial output only marginally above 2010 and price deflation a couple of clicks away,
The ECB countered today by cutting rates, suspending sterilization of basic monetary liquidity
and via targeting more asset purchases and steps to make more credit available to smaller,
growing firms. All to the good because the steps increase liquidity that was on its way down
from modest positive levels. These moves are also designed to undercut support for the
Euro. Maybe these steps will postpone the development of dangerous deflationary pressures
by leading to an improvement in economic demand levels, but unless we see production growth
re-accelerate markedly, destabilizing social and political measures will intensify further.

The Eurozone stock market is getting overbought in the near term, as players have been
anticipating ECB easing action. But there could be more follow through in the near term
especially if business confidence responds just ahead because the ECB comes to be seen
as providing substantive cumulative support.

China -- Big Red Dragon Getting Cranked Again

Well, there was a spell or two in recent years when the the central bank (PBOC) tried to
tamp down the monetary press. Cumulatively, it hit the overheated real estate sector recently.
Now the PBOC has the long term growth of its money M-2 back up near 20%. The economy --
real GDP plus inflation -- needs only about 10% growth to function decently, so the rest of
the money finds its way into the property market and all the credit specialties that are in one
way or anther collateralized by real estate. In the early part of the past decade when China was
still in its super growth phase, I figured the authorities could balance growth against debt well
enough that a big and terrible blowout would not arrive until well after 2020. I did not change
my thinking much even after the collapse of the stock market bubble, but the gov. under Hu
and Wen panicked during the deep global recession  of 2008 - 09. Money and debt have
exploded up even as real economic progress has decelerated. So, in just five years time, China
has created a potential economic catastrophe for itself and those who are dependent on China prospering.

The authorities have far reaching reform plans and perhaps with periodic relatively short term
bouts of tight money that shake out the property and credit markets, China can re-balance its
economy and achieve sounder but very much more modest growth. Since patriotism is the last
resort of scoundrels, nationalism and militarism may play a more prominent role in China's
future as the authorities nudge the economy toward a lower growth path. The US sees that
China is in deep shit with its economy now, and will need to focus far more on China's offensive
military capabilities as time goes on.

Here is a chart of the Shanghai exchange. SSEC Daily I watch it because it is a post - bubble
depressed market and once in a while there is a good trade as occurred in late 2012 when the
Fed's QE program kicked in. I think if investors believed China had a good shot at sustaining
real GDP growth at 7.5% as is so often discussed as an objective, the SSEC would trade
more in a range of 2400 - 2500. Given the trend of the SSEC and the number of trips down
to the 2000 area, players have a lower target in mind for China growth. In any event, since
the PBOC is again adding liquidity, upticks in the economy could provide a nice rally for
a few months.

Eurozone: Kings Of The Phillips Curve

According to the Phillips Curve, inflation varies inversely to unemployment. The Eurozone
has persistent unemployment at a double digit rate and is veering toward deflation with a
recent CPI of 0.7% yr/yr. The ECB, which has struggled to keep the Euro economy afloat after Mr.
Trichet trashed recovery chances with an anti - inflation program in 2010 before he retired, is
set this week to ease policy further ostensibly with a cut to short rates and a program to make
more credit available to cash strapped smaller businesses. Euro M-1 money which had responded
nicely to easing polices under the Draghi regime has pitched down in growth to 5% yr/yr and
appears  on a recessionary and deflationary course unless the ECB engineers further liquidity
growth for the system. With private sector credit demand still falling and fiscal and regulatory restraint still the order of the day, the ECB is the only game in town. Moreover, social pressures
are building in the EZ and are fostering populist political movements. Further stagnation or
outright deflationary recession can only lead to more  social and political destabilization.

The Euro stock market could be interesting if The ECB can get away from minor tinkering and
fine tuning. Waiting much longer for further proof of economic deterioration before stepping
hard on the monetary accelerator could prove very risky in a deeply fundamental way.

IEV Euro 350 iShares  Note: the IEV is about 20% below the highs of 2007.

Stock Market -- Weekly

The cyclical bull market continues with a lift in recent weeks out of congestion to a new high.
The market is moderately overbought relative to its 40 wk. m/a at a 6.5% premium. RSI has
reversed positive but without a pull back of consequence this year, The SPX RSI is again
approaching an overbought reading. The MACD has reversed a downtrend in place for most
of the year, but remains high by long term standards. Even so, a 12 wk. MACD does not
whipsaw that often. SPX Weekly

The bottom panel of the chart shows the VIX or volatility index. The current very low reading
of 11.40 suggests a high degree of complacency among traders and investors. Unfortunately,
the VIX may not give much warning of impending trouble by rising with the market. In
recent years, it has tended to lurch up when sentiment changes, and now, it may need to speed
up to 20 before the caution light goes on for many players.

The red horizontal line at SPX 1800 signifies when the SPX is hyper-extended on a very long
term basis. The SPX is now nearly 7% above that line and suggests that price risk is very
high and rising. I have never been long the market unhedged during the very few intervals in
history when the SPX is so extended. The green horizontal line at SPX 1485 gives its value
16.5X long term trend earnings which is currently $90 per SPX share. Investors are thus
paying a nearly 30% premium for cyclically elevated earnings. It is an expensive and risky
market.

My weekly cyclical fundamental indicator (WCFI) is up about 5.5% this year to date compared
to a 4.1% advance for the SPX. The stock market trounced the performance of the WCFI from
its deep interim low in 2011, but so far this year performed more in line with this forward
looking indicator. this may be happenstance, but so far in 2014, the market has payed much
closer attention to fundamentals on the ground than in recent years when SPX momentum
more naly matched the power of the Fed's QE program.

Gold Price

My view since the last couple of months of 2013 has been that global economic performance
should improve in 2014 and that, even if gold is in a long term bear market following the
bursting of the price bubble starting in latter 2011, the gold price was entitled to a counter -
trend cyclical rally in 2014. I did not assign a price objective, but I have been thinking it
could rise to around $1450 oz. by year's end off that low base of 1200 set late in the year.
And there was a good rally to kick of this year which carried the metal to 1380 before it tailed
off. Gold Price Daily Chart

Gold can be very volatile, so I did not think too much about the action in recent weeks. I have
been watching gold against the oil price and I think in March gold probably got a little
overpriced relative to oil as well as on its own RSI. The downdraft in the gold price now
has it approaching an oversold level and maybe also moving back in line with the oil price.
Well I have not changed my mind on prospects for gold this year, and I like the supportive
trends in oil and sensitive materials prices ($DJAIN on the chart). Even my inflation thrust
indicator is moving a little bit higher.

The amusing surprise with gold so far this year is that geopolitical tensions and uncertainties
are on the rise around the world, but there has been little discernible portfolio hedging in
favor of adding to gold ownership. the gold bugz used to feast on this stuff.

Stock Market

The short term uptrend in the SPX broke late last week, but the market has hung modestly
above a rising 25 day m/a, so despite the trend line warning, it is still technically rising. The
SPX is trading steadily in the bottom half of the band set in Jun. 13 but it has not broken
down. Price momentum has been barely positive in recent months and there has been more
whipsaw action. The SPX has been bending but not breaking, and to celebrate, the VIX, or
volatility  index, has been trending down to very low levels signifying rising confidence.
SPX Daily (VIX index in bottom panel).

The Fed's QE program is subject to steady tapering and it appears it will zero out before
the end of 2014. Clearly, momentum players have lightened positions in their favorite
momentum stocks and that could drag on intermittently as QE winds down. On the plus
side, the private banking sector is providing more credit which it must do if the economy is
to grow once QE is over. The focus on QE has been strong enough that it is tough to tell
how mindful investors are of a positive transition from monetary stimulus to credit.

Monetary liquidity growth, although starting to fade, is still strong enough to drive faster
economic performance this year, but realistically, we have yet to see that. This means that
the stronger earnings projected for 2014 are under a little cloud. Investor patience does
remain buttressed by continuing very low short term interest rates and an inflation rate that
is not threatening to the p/e multiple.

The QE taper experience has the US in an experimental situation and as far I am concerned,
the market is holding up remarkably well given that there are risks in the environment that it
is very difficult to quantify as we move to a flat Fed balance sheet.

Long Treasury Yield % -- Caution Flag

The long T yield % rose up to levels in 2013 that made little fundamental sense. There has
been a substantial and warranted retracement this year until just recently in my view. $TYX

The chart shows a clear and inviting downtrend in the long T % since the outset of the year.
But, some reservations are in order. The yield has gone from a large premium to the 200 day
m/a to a growing discount. This signals a move from a bond which was strongly oversold in
2013 to one which is increasingly overbought. The yield on the bond is now below 3.50%
and long term bond players should not be carrying net long positions at this level. Because
I still hold to the view that the US economy should do quite a bit better over the course of
2014, a cyclical uptrend in the yield dating back to the summer of 2012 when The Fed put
QE 3 into play is appropriate and is being tested now following a period when  the yield
was badly overextended to the upside. Lastly, as the bottom panel of the chart shows, sensitive
materials prices have turned up and this usually adds some upside pressure to the long bond
yield.

I may change my mind out ahead about whether the powerful liquidity cycle still underway
will fail to boost the economy, but for now I think a good range for the long T should be
about 3.40 - 3.90 %.

Economic & Profits Indicators

Coincident Economic Indicator (CEI)
When my CEI hits 3% yr/yr, it usually shows moderate growth with a reasonable balance
between output and income. For all of 2013, the CEI averaged a paltry +1.3%. the average so
far for this year through April is +1.6% for a modest improvement. The most distressing factor
last year was the poor performance in the real wage. This year's tough winter weather
notwithstanding, I think the cumulative effect of a depressed real wage last year has led to a
deceleration of real retail sales this year which has been a drag on the performance of the CEI
for 2014 to date. As well, the momentum in the growth of civilian employment was low in
2013 and this also contributed to a lack of progress in aggregate spending power.

This year the real wage has done better as has employment growth, so the potential to see the
CEI pick up in growth somewhat is there. However, businesses are still not doing the hiring
and paying well enough to get the economy on a more substantial and sustainable footing.

Business Profits
S&P 500 net per share rose about  2-3% yr / yr in Q1 '14. With unseasonably cold weather in play,
utilities led the way. My US sales proxy increased by 4.5% for the quarter, and experience shows
with that kind of modest growth, it is tough to maintain profit margins before the beneficial
effects of share buybacks. Pricing power was again subdued and the price / cost ratio likely
retreated. On the plus side, April may have been the best month so far in 2014 on a yr/yr basis.

Looking back at late 2013, analysts were expecting SP 500 earnings per share to rise by at
least 10%. We are going to have to see much better operating performance from here to
reach 10% or better profit growth.

Stock Market --Daily Chart

With a move to new high this week, the SPX has developed a short term uptrend with
a rising 25 day m/a underneath it. the low that anchors the trend is the 1816 level set
in April. The market is slightly overbought and the trajectory of the advance is modest.
The SPX sits about mid - range of the rising channel dating back to late Jun. last year
and has been struggling to stay above the mid - mark. SPX Daily

The market is still in a powerful uptrend range that dates back to late 2012 when the Fed's
big QE program of $85 bn. securities purchases was initiated. The Fed's balance sheet
expanded by near 37% in 2013, strong liquidity support for a last year's 30% rise in the
SPX. Fed Bank Credit has expanded at a 20% annual rate so far in 2014, but players know
it is being wound down steadily but rapidly. It may be mere happenstance, but the slow
rise in the SPX since the end of 2013, appears to reflect the modest progress in net per share
rather than a still powerful but dwindling tail wind from the Fed. If this is indeed the case, then
the powerful uptrend for the SPX in place since late '12 is likely to break down as the year
wears on.

The web has its share of continuing bull cycle stories and a growing number of correction
ahead and full bear stories. It is still a bull market with defining new highs and ascending
lows, and its still a mild economic expansion with an experimental monetary policy
regarding liquidity management. And, you have to pay up to play it long. Right now, the
critical supports are in the SPX 1845 - 1860 area.

Financial System Liquidity

The growth of total financial system liquidity continued to moderate in Apr. but remaians
a hefty 10% yr/yr. Transactional liquidity, which excludes the large volume of excess or free
reserves, grew at 6.3% over the period. Because growth has been mild and inflation low,
transactional liquidity growth has left a modest excess above the needs of the real economy
which has been a small positive for the capital markets. Banking system balance sheet liquidity
(excluding excess reserves) has moved lower as lending has picked up but is still ample by historic
standards.

The Fed is slowly easing into a period of short term interest rate suppression as shorter range
credit demand has swung more vigorously positive. Even so, with idle resources in the
economic system and a short term credit supply / demand pressure gauge at only +2.5 in
favor of demand, the Fed is meeting its ZIRP commitment without real strain in the
financial markets yet.  

Breadth of loan categories seeing expansion is improving save for residential real estate
where lending standards have yet to be loosened appreciably. Banks are doing cash flow
test lending now rather than collateral value only lending, but young home buyers face stern
reviews.

SPX-- Daily Chart

the SP 500 is up about 1.5% for the YTD. Resistance in this slow moving market has moved
from SPX 1850 up to 1880. Realistically, for the short term the market is essentially trendless
and adrift. There is a wide-band uptrend in place since the end of Jun. 13, and in the past few
weeks,the SPX has been operating in the lower portion of that band as momentum has faded.
The 25 day m/a is flattening out and MACD and RSI trends are drifting lower. Even breadth
has begun to flatten out. SPX Daily Chart

But, despite this weak internal showing, the market remains in an upwave dating back first
to late 2012 and before that to the latter part of 2011. It is the third leg - up to a cyclical bull
which started in Mar. 2009.

With the Fed's QE tapering program well underway, the QE momentum players are cashing in  
and have been hitting the momentum stocks like the dot.coms very hard. Many investors are
now hedging on a positive fundamental environment by rotating into more defensive areas.
One popular move is to "hide cash" by moving into utility stocks as a defensive tactic at
a time when bond yields have been falling and power output has been seasonally strong.
(The bottom panel of the chart shows the strength of the SP 500 relative to the utilities.)
Some of this defensive behavior no doubt is due to the severe winter experienced in the US
but likely also reflects degrees of investor concern over how well the economy will do as
the QE program is wound down to zero.  Keep in mind that this unique experiment is being conducted with a p/e multiple on the SPX of over 17x. Remarkable confidence is being
shown when you consider we are working with theory and not tried and true rote.

Gold Relative To Oil

The old rule of thumb is that 13 barrels of oil buys you an ounce of gold. It is an important
relationship because periods of accelerating inflation over the past 130 years frequently get
rolling because of booms in the oil price and the remainder of the petro sector. the relationship
between the oil price and the price of gold was shelved as the first decade of the new century
wore on because of  high volatilty of each of the price series. Interestingly, however there
has been a return to the 13x ratio recently $GOLD / $WTIC

The oil price has made a cyclical recovery since a bubble collapse over the second half of
2006 and the gold price is much lower in the wake of a bubble bust starting over Half 2 of
2011. Given the importance of oil and petrol to inflation, perhaps it should lead the price
of gold by at least a little bit.

Since the old rule of thumb has recently been restored, I am willing to say that most of the
financial / monetary / economic crisis premium built into the price of gold over the past five
years has been wrung out. There has an important reset, one worth keeping in mind if you
are a gold aficionado.

Stocks vs. Treas. Bonds & "Sell In May"

Stocks have traditionally been vulnerable as springtime wears on because that is normally
when the Fed is completing the unwinding of liquidity it has provided seasonally for the
prior holiday season. Sometimes the drought is made worse by larger than seasonally expected
tax payments. Even with the QE programs, M-1 money supply has had flat spots in the spring.
Now as it turns out, the weekly leading economic indicators have been weak or flat during the
spring months since 2010. Seasoned traders will sometimes take money off the equties table
and plunk it down in longer dated Treasuries during these periods. SPY Spyder vs. $USB

I point this out because M-1 has been flat since late Feb. this year and also because the
weekly leading economic indicators are showing a little weakness here owing primarily to
a jump in initial jobless claims. So the bond market has firmed not only because basic
liquidity is tighter but also because the QE taper is very well underway, with the latter
reflecting concern among some players that economic growth may slow down the road as
a result.

I do not want to make big deal out of this seasonal liquidity and economic indicator weakness
but you should be aware of it. The longer term issue -- whether the taper of QE down to zero
will adversely affect economic growth down the road -- needs a few more months of
evidence from incoming data before it becomes interesting.