Thursday, September 1, 2011

September is the worst month for stocks

                                          Credit to Cyanide and Happiness    

     Historically, September is the worst month for stocks with prices dropping an average of 1.4% on the S&P 500.  The reasons for this vary.   Sam Stovall of S&P speculates that people spend more time looking at their investments after a summer of "focusing more on their tans than their portfolios."

     "Psychologically, when the leaves turn in the fall, vacations end and the days are getting shorter, there is this kind of negative vibe out there that tends to accentuate any negative events," said Dan Seiver, a finance professor at San Diego State University.

     Also, many mutual funds fiscal year ends in September and mutual fund managers tend to sell their losers for tax purposes during this time period. 

     Whatever the reasons for this sorrowful September phenomenon, it is worth noting as we go into the beginning of the month with many worries in the markets.  Odds are this will be another woeful September so plan accordingly.

      Initial jobless claims came in a little worse than expected at 409,000 but still dropped 12,000 from last week.  Economists were expecting 407,000.  Initial jobless claims measures new people who have filed for unemployment in the last week.  Continuing claims for unemployment dropped to 3,735,000.

     Worker productivity dropped .7% in the last quarter in a sign that existing employees maybe getting overworked with no new hiring going on.  On the plus side, unit labor costs rose 3.3% which means employees are getting paid more.

    Manufacturing also grew for the 25th straight month an Institutue for Supply Management survey said.  The metric came in at 50.6 which was better than economists had forecast.  Any number over 50 indicates expansion.  Economist had expected a number below 50 due to the turmoil in the financial markets in August.  Stocks rose sharply after this data was released going from 40 points down on the DOW to 80 points up.

     Stocks I am watching today include NLY.  NLY has dropped 3.5% on heavy volume in early trading on word that the SEC is taking comments on possibly changing some rules regarding MREITs that would threaten their business model.

     "Through an advance notice of proposed rulemaking, the SEC is seeking public input on possible amendments the agency might consider proposing to Rule 3a-7, which excludes certain issuers of asset-backed securities from having to comply with the requirements of the Investment Company Act," said the SEC statement.

     Annaly makes money like a bank by borrowing money at a low rate and investing in securities with a higher rate.  They only invest in mortgage securities with an implicit guarantee of the US Government. 

     Edit:  11:28 PST  The market has sold off this afternoon with the SPY down almost 1% and small cap stocks are underperforming again today down almost 2.5%.  It might be too early to call the end of the rally but this action is concerning.  I am might add some RWM which is a bet small caps will go down and maybe some EFZ which is a bet that European stocks will go down.  Won't do it until I see how we close today.

     Market action today was very bearish.  We had a strong reversal and finished on the lows of the day.  I would say that is bearish for tomorrow but we have a wild card tomorrow and that is the all important government August non farm payrolls jobs report.  A good jobs report will send the markets soaring and a bad one will tank the markets.  I suspect that is why we sold off today.  Traders were preparing for the possibility of a bad jobs report tomorrow.  I did not make any moves today and will wait to see the report says.  I am hoping for an upside surprise but don't think that is very likely.  Economists expect a gain of 60,000 jobs for the month of August.

     I have a question  for my blog followers.  How do you get it so your blog posts show only a preview on the front page?  Right now my home page has the whole blog on it but I want to show just a preview.  How do I do this?  I looked through all the settings and cannot figure out how to do this.


  1. This is really interesting, the way stocks move. Looks like i'm not investing on september

  2. might invest when prices get a little lower this month, thanks for the heads up

  3. interesting, learned something new today. the pic made me lol

  4. I absolutely love Cyanide and Happiness!! Best comic strip ever.

  5. Being hasidic, you could guess that business run through my veins. This is an econ blog i will really enjoy reading, which is quite rare considering the amount of shitty econ/finance blogs ive seen around.
    Also Cyanid and Happiness is sooooooo good, i never get tired of it.

  6. wow, thanks for the compliment, hasidic plumber! I just started this blog as a hobby but now I'm really getting into it. Hopefully, I can keep up the high standards.

  7. wow you've been right so far! so far the market is down almost 400 pts this month!