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Waiting To Hear The Cannons Fire


I don’t know if it is true but have always heard that the expression “sell on the rumors of war and buy when you hear the cannons,” originated after one of the Napoleonic Wars, when several investors made a huge fortune buying stock at the low point.

The point of this old adage is that the stock market anticipates news.  If the news is expected to hurt the market, the market is already down before the news is actually announced.

That’s exactly what the stock market has been doing the last few weeks — slowly leaking value as it waits for the onslaught of bad news this Fall.  Next month holds the German elections and the latest chapter in the Greek debt tragedy.  October holds another debt ceiling debacle in Congress.  Despite our generally improving economy, pointed reminders of our vulnerability to another financial crisis are in the near future.

Overlaying this slow leaking of value, Egypt blows up, increasing the leakage.  The “Arab Spring” suddenly becomes the “Arab Fall.”  The stock market becomes headline-dependent again.  Gold rises, along with interest rates.   This geopolitical overlay has turned the slow leak into an annoying hiss.

As long as uncertainty rises, the stock market will leak, and I expect that will continue another two months or so.  So, take another summer vacation, walk your kid to school this year, and plan your Holiday Season, when the stock market should be putting a present under the tree for you . . .

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