written by reader Get out altogether?

By Anonymous Questions, April 5, 2014

With so many investment emails warning a stock market collapse and the FLASH BOYS book adding to the disillusionment, how do you see the (itself scary) idea of getting out of the stock market altogether?

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alephnull
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alephnull
April 6, 2014 2:27 pm

Speaking in general, the month of april is in terms of seasonality, the strongest month of the year. Even stronger than the january effect. Especially this years january was only so so. Last fridays price action was not really encouraging. But considering the april strong seasonality, maybe you could hold on a couple of weeks. And apply a mental stop loss at around SP 500 1740. On a different note, In my humble opinion watching the recent biotech craze here, this is a sign to take the profits . The Stansberry people recently pointed at that Mr. Market is rotating out of high beta shares to value shares. But Mr. Market still has some legs. Maybe you could take a look at the agriculture sector.

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Ian S
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Ian S
April 8, 2014 6:59 pm

There are structural reasons why April is a strong month in many countries where companies have their financial year aligned with the calendar year. It often represents the first month Insiders can buy, because the annual results and board projections are made public by end March. There is no structural reason why savvy investors should add to holdings in May, and indeed many see May as the month to cash out gains. Sell in May and Go Away isn’t just a rhyme it has a reason.

The US stock-markets have higher P/Es now than most others, so they are vulnerable, though there is no safe alternative providing US investors with a higher yield for the mountain of cash that would be interested in moving. As Ruud says a number of tech stocks biotechs especially have a P/E of infinity (or negative P/E) because they are not profitable. They are only kept up by the general updraft. When that falters they will drop far faster than dividend payers.

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