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Strategies & Market Trends : Analysis Class for Beginners

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To: Arthur Tang who wrote (657)	11/14/1997 9:24:00 AM
From: Arthur Tang	Read Replies (2) of 1471

Tax loss season is upon us; what should we do? Some investors sell for tax loss then, even have the gall, to buy back for hopeful appreciations after new year. This concept created the January effect of great appreciation from January to March 15. In reality, the January effect has to be helped by the tax refunds, continued 401k investments, and bonuses received during X'mas. etc. The extra input to Wall Street creates extra demand. When demand exceeded supply of stock, the market goes up. Interesting to note that the October mini-crash came because of extra IPO's (Chinese ADP at that) draining liquidity at the time that liquidity was tight. Feds' extra surcharge of 25 basis points (interest rate increase of 5%) on $4 trillion (half of GDP) overnight discount loans, removed about $10 billion liquidity from the banks since March this year. It will take 401k money for some months to balance out the liquidity problem. So, if January effect is late this year, we know why. Market will be dull, for some time. Liquidity is an extremely important factor in investment. So far luckly, all the business overcame the two weeks of vacation non-productivity with a small decline in earnings. Planning of accelerated marketing during the last quarter will make up some of the sins of non-productivity. Boing ran out of parts for production after October. This indicates that all capacity needs to be 10% more next year to supply the demand which can not be satisfied during our vacation period. January will be a good time to accomodated the capacity increase. Next year if liquidity is controlled to have an increase of 5-10% just keepin pace; we shall enjoy another good year of productivity and prosperity. Investor will be wise to anticipate and invest properly.

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