Happy December everyone! I’ve just awaken from a turkey coma and have found the market has apparently stabilized, at least in the short term. Nah, I’m just kidding. The market only shed about .5% since the close a week ago. I was expecting the holiday rally to start, but the market is pretty flat. This is not necessarily a bad thing, since a rally would spark silly purchasing by the individual investor. Avoid the herd mentality and keep stock piling cash. The market is going to rally a little and will then retreat back to levels not seen since 1997.
A flat market during this time of year tells us one thing; the big boys are not sure what to do. They are in a holding pattern mainly due to the sales numbers from the holiday weekend. Yes, the numbers were better than expected, but there is a catch. Most of the people that were polled about their shopping expectations this holiday season stated they were about 75% done with their holiday shopping. Historically, the Thanksgiving holiday sales account for roughly 10% of the holiday revenues. Even if the survey exaggerates the claim of most people being 75% done with their holiday shopping, it definitely gives us an indication of the poor numbers to come after the holiday season ends in three weeks.
Stay liquid. You should have at least 25% of your portfolio in cash at this time. Sell your long term losers or take some profits, if you have any short term winners. Don’t be sentimental about your losers. Do your homework and if you have a stock that is beaten up, which you most certainly have, then investigate whether this is a long term loser or simply a stock that is the victim of the current crisis. Purge the dead weight and keep an eye on the market. My next installment will be concerning the new idiots; “The Big 3”.
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