AMAT sold 1000 @24.50 that I bot at 25.
Margin call too close for comfort. Does anyone subscribe to the theory that the market will be dead in the water until November?
Reuters Business
FEATURE-If it's May, it must be time to sell stocks
By Nick Olivari
NEW YORK, April 30 (Reuters) - If the calendar says it's May, then it must be reason enough for investors who know their history to dump stocks.
Most of the year's stock market gains typically come in the six months, November to April, and other asset classes, including cash, offer better returns in the six months, May to October. In fact, the blue-chip Dow Jones industrial average (^DJI - news) has generated 88 percent of its gains in the November-April period in the last 51 years.
"Sell in May, and go away," said Rick Hutcheon, a portfolio manager with Toronto-based RKH Financial which caters to high net worth individuals. "It's one of those things that historically has worked and will again this year as we have already had the rally."
Why stock rallies peter out in the summer and early fall, nobody really knows. One theory is that money managers typically do most of their buying in the early part of the year and start selling losing stocks for tax purposes before they close their books in late October.
Whatever the reason, money managers are confident this year will again follow the trend. The outlook for stocks is bleak, anyway, they note.
"Expectations for higher rates, surging oil prices, a poor profit picture, and ongoing accounting concerns mean that even if the Fed keeps its foot off the brakes, few are willing to bet the market will move higher quickly," said Edward Hemmelgarn, a money manager with Cleveland, Ohio-based Shaker Investments, which oversees $2.3 billion in assets.
Plus, the Standard & Poor's 500 index (^SPX - news) -- a broad market gauge -- already gained 11 percent from November through early January and, after a dip, was up by the same amount in March before tapering off. The benchmark index is now almost flat for the November-through-April period, and investors see little to change the situation.
HISTORICAL TRENDS
History is clearly not on the side of stock investors for the next six months.
The Dow Jones has gained a combined 9236 points for the months November through April since 1950, according to the Stock Trader's Almanac, but only 1300 points for the May through October period. In other words, almost 88 percent of the Dow's gains occurred in the November-April period.
That makes all the difference. A $10,000 sum invested in 1950 to a fund indexed to the average for the November-April months grew to $415,890 through to 2000. That compares with a gain of just $1,743 for $10,000 invested for May through October, according the Stock Trader's Almanac.
"It is still a mystery why stocks' performance can vary so consistently," Tom McManus, chief U.S. strategist for Bank of America told clients in a research note. "Over the past 75 years, the total return for the index from May through October is lower than that for November through April by more than 500 basis points on an annual basis."
Just 17 percent of the Nasdaq Composite index (^IXIC - news), annualized return since 1971 was generated between May and October, according to Brian Chait, a money manager with Ohio-based Clarion Partners, which oversees $160 million in equity assets.
That means the other 83 percent of the index's return on the year was gained between November and April. Similarly, the S&P has seen just 20 percent of its annual return generated between May and October, with the other 80 percent coming in the months beginning with November through April, Chait said.
This recurring pattern is not influencing Chait's trading decisions, he says. But he firmly believes stocks won't go anywhere in a hurry.
"Corporate debt, liquidity, the weakening dollar, expectations for inflation, and investigations into analyst ratings from the major brokerages" are all reasons to limit holding stocks, Chait said, adding that these factors make a case for "waiting until later in the summer" to buy equities.
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