Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Investing - The November Syndrome

Stock-Markets / US Stock Markets Nov 20, 2007 - 10:42 AM GMT

By: Steve_Selengut

Stock-Markets Sweet November... well, not really: The war lingers on for purposes unknown to most and oil prices continue to rise. Credit woes dominate the financial headlines, and value stocks seem intent on extending their correction into a seventh month. Investors want a stronger dollar while lower interest rates (and lower taxes) are clearly more beneficial. Neither political party has a candidate that supports real tax reform for both investors and corporate job creators, nor has the counter productive United States Regulation Industry stopped growing faster than most world economies.

In terms of issue breadth alone, November is becoming the worst month (or the best buying opportunity) since July of 2002, and possibly since October of 1987. Just who makes this good/bad determination anyway, the Wall Street institutions, the media, investment letter writers? Why are rallies considered good and corrections bad?   Will we remember 2007 as the year of the Grinch or will the leaves and the market stop falling in favor of a Santa Clause rally? Only the phantom knows for sure.

Every fall, good year in the market or not, I remind my clients that the final calendar quarter is a very special time. November is particularly exciting because it hosts the convergence of four Katrina-level forces, all of which are part of Wall Street's conventional wisdom while none of them lead to intelligent investment decision making. And this year we have a special treat in the form of a Category Three market correction in the Value Stock sector. (October '87 was a Short Five; June '98 through January '00 was a long Four.)  A five-force November Syndrome can be particularly destructive; no wonder the media is giving it so much attention... carnage at last!

Force One is the mad rush of the lemmings to realize losses on equity and/or income securities for absolutely no investment reason at all... just because they have fallen in price from the time that they were purchased. Assuming (as I always do) that we are dealing with "Investment Grade Securities", lower prices should more logically be seen as an opportunity to add to positions cheaply than as an opportunity to reduce the 2005 tax liability on our other investment earnings. Losing (your) money is only a good idea in the eyes of accountants, particularly if the reasoning for buying the security was sound in the first place, and assuming that the issuing company is still profitable. This "tax-loss" lunacy is comparable to barging into your boss' office and demanding a cut in pay, and it could be eliminated entirely by some intelligent tax reform. Have hope investors, I've heard a rumor that candidate Romney is talking about eliminating taxes on investment earnings.

Similarly, letting your profits run, as instructed by Force Two, in order to push the awful things into 2008 is just foolishness. Talk to those geniuses who didn't take profits in 1999 (or in August, '87) and who are still waiting for their stocks or Mutual Funds to bounce back! The objective of the equity investment exercise is to take profits... the more quickly and more frequently, the better. There are no guarantees that the profits will wait for you to pull the trigger at your personal tax convenience. And patting yourself on the back when you have unrealized gains within your income portfolio is equally absurd. What's better, a 10% profit in your hand today, or 6% over the course of the next twelve months? Profits need to be taken when they appear... the investment gods are watching.

Force Three takes the form of a trade, and is innocently called a Bond Swap... one of two reasons why your broker sold you those short-duration, odd lot positions in the first place. Now he has the opportunity to pick your pocket by exchanging them at a "nice tax loss" for another bond with "about the same yield". He gets a double dip commission (yeah, I know it's not on the confirmation notice, but a mark-up is applied to each side of the trade), and you get a bond either of longer duration or lower quality. Somehow it's OK now to buy the longer duration bond. Really, this is how they finance their Christmas Shopping! If you don't fall for the swap con, he won't be too upset... the rapid turnover of your portfolio nets him a cool 3% on each maturing issue anyway.

As if all of this isn't enough, Wall Street gangs up on you some more with a self-serving strategy that is blithely referred to by the Media as Institutional Year End Window Dressing...a euphemism for consumer fraud. In this annual Shell Game, Mutual Fund and other Institutional Money Managers unload stocks that have been weak and load up on those that are at their highest prices of the year. Always keep in mind: (a) that Wall Street has no respect for your intelligence and (b) that the media talking heads are entertainers, not investors. Institutions must show how smart they are by having quarterly and annual reports that reflect their unfailing brilliance, so they boldly sell low and buy high with your retirement nest egg.

It would be an understatement to say that the sum of these year-end strategies typically adds to the weakness of the weak and "proves" the intelligence of buying the strong. The November Syndrome is a short-lived annual investment opportunity that most people are too confused to notice, much less appreciate. Simply put, get out there and buy the November lows and wait for the periodic and mysterious January Effect to happen. The media will talk about this phenomenon with wide-eyed amazement as they watch many of the horrid become torrid for, seemingly, no reason at all. What's happening, you might ask? Well, those professional window dressers are now selling their high priced honeys and replacing them with the solid companies they just sold for losses. Interesting place, Wall Street... tough but manageable. Take the profits and pay the dreaded taxes. Buy the November lows, even add to existing holdings. More often than not, this proves to be a winning strategy if you stick with investment grade securities.

Note: The 2nd Edition of "Brainwashing" is here!

By Steve Selengut
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

Steve Selengut Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in