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WILL WE HAVE A YEAR END OR SANTA CLAUS RALLY? 

Updated October 31, 2013  The Dow Jones Industrial Average managed to get through both September and October without big sell-offs.  We escaped a "September Slaughter" and we escaped an "October Massacre" -- the names given to big sell-offs in September and October in previous years.  September and October have the reputation for being the worst months for owning stocks, but we dodged the bullet... again.

Now we have to look forward to November and December -- traditionally good months for owning stocks.  We will be looking for a year end or a Santa Claus rally.  It could be starting now because the first five days of the month are traditionally strong days for the market because this is when new money enters the market through contributions to pension and investment plans.  Stocks also tend to rally around the holidays because "good cheer on Main Street" tends to boost expectations on Wall Street.

But with that said I must remain cautious.  This stock market has had a very strong run and I have been telling you that at any time profit taking can come with a sharp cut to prices.  Stocks can't go up in a straight line forever.

So again, caution is the key word.  In the stock market greed kills rallies and destroys investments and ruins portfolios.  Markets don't keep going up without interruption and there will be more bouts of profit taking to come.  This is why measured investments while steering clear of speculative stocks is the best way to carefully put money into the stock market.

What I would like to see in the short term is for the Dow to stay above 15,000.

Analysts have noted that a rise in U.S. stock prices on Wall Street means a better economy on U.S. main streets about six months later.  I am hoping that the gains on Wall Street so far this year will mean better times on Main Street America soon.

Just remember what I wrote here several months ago after the market had a strong rally:  When everyone is so happy and so cheery and so optimistic -- and when things really look like the ball is rolling -- things can and do go wrong.  So, watch out.  When things get to be too good, the fake out or suckers rallies end with a thud. 

There could easily be more whip-saw action ahead for the markets.  If you are holding stocks you have to roll with the punches -- and the likelihood is that there will be more punches coming.

I still think we are in a bull market that started four and a half years ago, but it is a weak bull market that will frustrate many optimistic investors.  You can't expect the market to climb week after week without profit taking or a pause to refresh, because like rockets -- a market that keeps going higher and higher eventually burns up all of its fuel and comes crashing back to earth.

This is not a market for speculation but it is a market for careful long term investing -- but do not throw good money after bad.  If you are going to invest, then price average up and do not price average down.

We could say a new bull market started four and a half years ago when the Dow and many stocks hit their low on March 9, 2009.  So what's next?

Frankly, my opinion on investing in the stock market has not changed for several months now.  I still urge caution. 

However, I don't know what the future will hold.  I'm the kind of investor who wants to buy high and sell even higher-- and that's a piece of advice from stock market guru Stan Weinstein that I've followed for more than a quarter century, ever since I met him in Florida in the early 1980s.  I don't want to bottom fish because I don't know when the bottom will fall out and a new lower bottom will form.  However, with that said, perhaps it is time to return to and continue limited stock market buying.

Every rally we have now could be a sucker rally or a fake-out rally.  That is why limited, paced buying might be the way to go now.

If you have extra money, it should be going into insured bank accounts where there is no risk of loss.  Bank accounts are "golden" now because inflation is low and the small interest paid by banks will not be whittled down by rising prices.  It's that simple-- put the money, or keep the money in the bank.  But if you have a regular, long term stock market investment plan, you might want to start or keep making regular, long term investments in it.   But remember-- I urge caution.

Also see our "Vegas and Casino Stocks" page.

THE STOCK MARKET IS NOT RIGHT FOR EVERYBODY

Update February 24, 2012  Recently, I met with Certified Financial Planner Brian Gilder and we discussed stock market investing -- and who it is right for and alternatives for those who don't want to invest in stocks.  Gilder made several solid suggestions about alternatives not only for investing for also for money management.  He suggests that paying down debt and paying off your home mortgage could be better alternatives than stocks.  He says workers should make the best use of their 401(k) Plans so that they get the matching funds if available and he suggests ways to minimize your risk after getting those matching funds.  Watch my interview with Gilder below.

THE DANGER OF HIGHER INTEREST RATES, AND HIGHER PRICES 

If we do get higher interest rates now, and if prices go up because of those higher interest rates, we could call it slumpflation.  Slumpflation is a rare event, and the last time we had slumpflation it lasted a short time.   You are probably more familiar with the term stagflation which happens when there is inflation in a stagnant economy. 

Stagflation is a more common event in an economy, but not slumpflation which is rare.  There are widespread fears among some investors about slumpflation because the governments of the world are pouring billions of dollars into economies at the same time that their economies are in a recession. 

The fear is that the new money will raise prices at the same time that recession is taking its toll.  However, there are also comments that the "money supply" is under control and that would indicate inflation will be under control.

There is a lot of criticism about "the bailout."  But I am aftraid one fact is being overlooked: the failure for the banks was caused by you and your neighbors who bought more house than they could afford and lied about their ability to repay the mortgage loans.  Frankly, this bailout of taxpayer money is going to pay for other taxpayers who cheated the system.

The banks didn't commit mortgage fraud-- the consumers did.

Thanks for watching and good shopping and investing, Alan Mendelson

Here on our new media website "Moneyman" Alan Mendelson who is the original Best Deals TV Show reporter on KCAL9 and consumer advocate, shows you the best deals on TV, and the best buys, bargains and where savvy shoppers go to save, and how to get the most for "your money" with the best of Los Angeles, Orange County, Ventura County, Riverside County and San Bernardino County. Some content on www.alanbestbuys.com is paid advertising. The Best Buys TV Show is a paid infomercial program which may also include news and information which is not sponsored or paid for by advertisers.

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