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Ending Hurricane Season

07/08/2013

There is an old expression on Wall Street that it is always “climbing a Wall of Worry.”  We saw that last month when the stock market had a temper tantrum following Ben Bernanke’s press conference.  Most such emotional outbursts are more annoying than instructive.

But, there is something bothering me that I don’t think the market has focused on . . . yet.  And, that is the calendar.   In late September, the Fed is expected to announce some tapering in quantitative easing.  That is also the election in Germany where Merkel is expected to win but only after a national discussion on bailing out the rest of Europe.

In October, it is expected that Greece, Portugal, and Cyprus will need another bailout of about $256 billion, which is an astronomical sum.  More write-down of existing bonds is inevitable, but the IMF has already said they will not agree to this.

Also, in October, it is expected that the U.S. debt ceiling will come to a vote in Congress, and we know what a circus that can be.

Did I mention that the stock market hates uncertainty and usually goes down when uncertainty goes up.

Also, did I mention that October is historically the worst month of the year for stocks?

Does that mean we should sell all our stocks and go to cash now?  Absolutely not!  But, it does suggest a little extra cash on hand would ease the market volatility and provide the dry powder for bargain-hunting later.  As always, be vigilant about a derivatives blow-up in Europe and keep your finger near the SELL button.

Now, enjoy your summer!

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