Tag Archives: Greg Oliver

Has WWIII has already started …

Has “Sell in May” Gone Away?
Investors aren’t yet backing out of stocks this spring.

BY GREG OLIVER ofs@one.net

Healthy skepticism hasn’t motivated much selling. An old belief has lingered on Wall Street for years – the belief that investors should get out of stocks in May and get back into stocks in October. But here we are in May – and while analysts are wondering how much more upward progress stocks can make, gains are still occurring. On May 9, the S&P 500 closed at 1,626.67 – up 1.82% so far for the month after going +1.81% for April.1

A May retreat is hardly a given. You can readily find articles questioning the current rally, insisting a pullback is ahead. After all, didn’t stocks swoon in spring 2010 and spring 2011? Wasn’t last spring just an aberration?

The selloffs of spring 2010 and spring 2011 weren’t really prompted by seasonal behavior. You had the EU debt crisis, the twin calamities hitting Japan, and the debt ceiling fight (and the resulting U.S. credit rating downgrade) occurring. By contrast, across May-September 2012 the S&P 500 rose more than 4%.2

Going back decades, the case for selling in May appears just as inconclusive. During 1965-1984, the S&P lost ground 15 times in May – but that 20-year stretch included a 16-year secular bear market. From 1985-1997, the S&P 500 never had a down May.2,3

Conditions could support further gains. Earnings are sometimes called the mother’s milk of stocks, and we’ve seen about 5% Q1 earnings growth. The Fed is still purchasing $85 billion of Treasuries and mortgage-backed securities per month. Hiring has picked up. Consumer prices are barely rising. Money is regularly flowing into stock-based mutual funds this year for the first time since the market downturn of 2008.4,5

Beyond these factors, there is still enough optimism on Wall Street to counter skepticism. If the current bull market is getting long in the tooth, few see a bear market quickly emerging.

As CNBC.com recently noted, Morgan Stanley chief investment strategist David Darst maintains an informal 6-point bear market “checklist” – and Darst sees none of the six bearish signals currently flashing (Fed tightening, recession looming, bond spreads widening, evident investor euphoria, stretched stock price valuations, retreat in small caps + transportation + bank stocks). While the Fed’s easing may be fueling the rally more than anything else, QE3 is still continuing undiminished.5

The “sell in May” idea actually emerged in Great Britain, not America. Years ago, London brokers would go on holiday in May and head back to their desks in September, resulting in thin trading and subdued returns in the interim. Supposedly, this was how the “sell in May” pattern originated, and it may not even apply in Great Britain anymore: investors selling the Dow Jones STOXX 600 in May and buying back in for September would have lost money in three of the five years from 2008-12.6

GREG OLIVER -9345t=-93456=-9\=4-6924=-954690254

1 – money.cnn.com/data/markets/sandp/ [5/9/13]
2 – dailyfinance.com/on/sell-may-investing-stock-market/ [5/3/13]
3 – forbes.com/sites/greatspeculations/2010/03/11/secular-bear-market-reaches-10th-anniversary/ [3/11/10]
4 – cnbc.com/id/100723658 [5/9/13]
5 – cnbc.com/id/100720862 [5/8/13]
6 – reuters.com/article/2013/05/07/us-markets-stocks-seasonals-idUSBRE9460IT20130507 [5/7/13]



Important dates for your IRA are coming in April.

Many of us associate April with taxes. We should also associate it with IRAs, for April is the month with the deadlines for IRA contributions and mandatory IRA withdrawals.

The deadline for your 2012 IRA contribution is April 15, 2013. For tax year 2012, you can contribute up to $5,000 to your Roth or traditional IRA. One exception: If you turned 50 in 2012, your Roth or traditional IRA contribution limit for 2012 is $6,000. You get 15½ months to make your IRA contribution for a given tax year. You can make your 2013 IRA contribution at any time until Monday, April 15, 2014.1

Have you already made your IRA contributions? Hopefully, you contribute the maximum annually and make your contribution soon; the earlier that money is invested, the longer it can work for you.

Be sure to indicate the year of the IRA contribution on the check. This seems pretty basic, yet is too often overlooked. Write “2012 IRA contribution” or “2013 IRA contribution” or something equally simple and clear on your check (and include your account number on the check to help your IRA custodian). If you’re making your contribution electronically, be sure this gets communicated. If you don’t tell your IRA custodian what year the contribution is for, it will be accepted as an IRA contribution for the current year per IRS guidelines.2

Avoid racing against the clock. If you wait until the last minute, you may feel safe mailing your 2012 IRA contribution check to your IRA custodian with an April 15, 2013 postmark. That feeling might be unwarranted. Postmark deadlines for prior-year contributions vary among IRA custodians, and sometimes checks that arrive after the deadline count as current-year contributions regardless of postmark. Why not save yourself the risk and mail your 2012 contribution in with plenty of time to spare? 2

The recharacterization deadline for 2012 Roth IRA conversions is October 15. If you converted a traditional IRA to a Roth IRA last year and need to undo it for tax purposes, October 15 is the absolute deadline to “recharacterize” the Roth account. If you need to do this, please request a recharacterization with your IRA custodian well before October 15.3

The RMD deadline is April 1. If you turned 70½ in 2012, you have until April 1 of this year to take your first Required Minimum Distribution from your traditional IRA; that is, your first mandatory income withdrawal. Your IRA custodian should have notified you of this deadline at the end of January, and many IRA custodians will typically calculate your annual RMD for you and offer to send you a check for the amount. (If not, many of them have online calculators or similar tools that will help you figure out your RMD amount.) If you have a Roth IRA, you are never required to take an RMD (during your lifetime) and you can still keep contributing to it after age 70½. Keep the deadlines in mind; April will be here before you know it.4

Citations. GREG OLIVER 082783`278932`893`
1 – us.etrade.com/e/t/plan/retirement/static?gxml=ira_amt_deadlines.html&skinname=none [1/2/13]
2 – boston.com/business/personalfinance/managingyourmoney/archives/2011/03/its_crunch_seas.html [3/10/11]
3 – turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Reversing-a-Roth-IRA-Conversion/INF12129.html [1/2/13]
4 – www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions [1/2/13]


How To Cash In On Monster Rallies!

How To Cash In On Monster Rallies!



While the S&P 500 had its first negative fourth quarter in four years, it didn’t stop the index from having a great 2012. The NASDAQ and Dow also lost ground for the quarter, but the losses could have been worse – Europe was for once relatively free of alarm, Wall Street seemed to take fiscal cliff fears in stride, and key indicators held up even after a massive storm delivered a punch to the economy on the east coast. The Fed let investors know exactly where it stood when it came to raising rates. Our real estate sector showed real improvement. Congress added a whole bunch of drama – a deal was struck right at the edge of the fiscal cliff, one which provided a partial solution to the dilemma (as well as higher taxes).1

Congress technically missed the year-end deadline for addressing the fiscal cliff issue, but it managed a fix on New Year’s Day – and the resulting tax law changes were major. A repeal of the 2% payroll tax cut meant higher taxes for working Americans across the board in 2013. The top marginal tax rate was reset to 39.6%, and the top estate tax rate was hiked to 40% while the individual exemption fell slightly to $5 million. The bill had a considerable upside: the Bush-era tax cuts were made permanent for 98% of Americans, unemployment insurance was extended for another year, and the idea of taxing dividends as ordinary income was jettisoned (the legislation capped both dividend and capital gains taxes at 20%).2

The Federal Reserve told the country exactly when it would make a move on interest rates. It said it would do so when the unemployment rate hit 6.5% or inflation reached 2.5%. Operation Twist expired at the end of the quarter, but the central bank said it would buy $45 billion in longer-term Treasuries come January. Reports out of Washington hinted that Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke were considering leaving their jobs by 2014 or earlier; in fact, it looked as if Geithner would resign in January.3,4,5,6

By December, the jobless rate had declined to 7.8%, down 0.5% in five months; the long-term unemployed comprised 39.1% of jobless Americans, down from 44.3% two years before. Good news, yet the looming fiscal cliff stressed households. The Conference Board’s consumer confidence poll and the University of Michigan’s consumer sentiment survey saw big drops in December after reaching multiyear highs in November, respectively falling 6.4% and 9.8%.6,7,8,9

As for consumer spending, it was up 0.4% in November after a 0.1% October retreat. Consumer incomes rose 0.6% in November, the best advance in 11 months. In related news, the Bureau of Economic Analysis put the final estimate of Q3 GDP at 3.1%, a sea change from the initial 2.0% assessment. Retail sales decreased 0.3% in October, then rebounded 0.3% in November even with the effects from Superstorm Sandy (gasoline sales plunged 4% while automakers reported the best month of new car sales they had seen in four years).9,10,11


Consumer inflation was not yet a factor, even as QE3 progressed. In fact, the CPI declined 0.3% in November and only rose 0.1% in October. By November, yearly consumer inflation was just 1.8% (the annualized core CPI increase was 1.9%). Producer prices fell 0.2% in October and 0.8% in November after rising 1.1% in September.3,12

The Institute for Supply Management’s manufacturing PMI again flirted with contraction territory – it was at 51.7 in October, 49.5 in November and 50.7 in December. ISM’s service sector PMI was stronger: 54.2 for October, 54.7 in November and 56.1 for December.13,14

The outlook grew brighter for China in late 2012. HSBC’s China PMI topped 50 in November (the first time that had happened in 13 months), and the International Monetary Fund forecast 8.2% growth for the PRC in 2013 (2012 was shaping up to be the poorest year for China’s economy since 1999, with Q3 GDP at just 7.4%).  The IMF projected overall 2013 Asia-Pacific growth at 6.0% for 2013, which was also its projection for India. While Australia’s benchmark PMI came in at 44.3 in December, manufacturing gauges in China, South Korea and Taiwan all surpassed the 50 level.15,16,17

Europe’s four-year-old debt crisis was hardly settling down. Bank lending to companies declined in the eurozone by 1.8% in both October and November; the European Commission approved a collective €37 billion rescue package for four key Spanish banks during the quarter. On the upside, S&P upgraded Greece’s credit rating to B-. Germany’s unemployment rate hit 6.7% in December. The Markit PMI for overall EU manufacturing sank below 47 in November and December, a strong hint that the eurozone recession would extend for a third quarter.18,19

Foreign stock markets saw big gains in Q4 2012. Key Asia Pacific indices did very well, and the Nikkei 225 led them all with a 17.2% advance. Australia’s All Ordinaries rose 5.9%, the Hang Seng climbed 8.8%, the Sensex rose 3.6% and the Shanghai Composite gained 8.9%. The MSCI World Index rose 2.1% for the quarter; the MSCI Emerging Markets index advanced 5.2%. Momentum also gathered in Europe. Here are some Q4 gains from that region: CAC 40, 8.5%; IBEX, 6.0%; FTSE 100, 2.7%; STOXX 600, 4.2%. Greece’s ATHEX Composite rose 23% last quarter.17,20,21

Generally speaking, the fourth quarter was rough on the commodities sector. In New York, silver and gold both dropped 12.6%; platinum fell 7.6%, yet palladium gained 9.8%. (Gold and silver did respectively advance 7.0% and 8.3% on the year.) The quarter was not good for some key crops: corn futures lost 7.3%, wheat 13.8%, and soybeans 11.4%. (However, wheat futures rose 19.2% across 2012 while soybeans gained 18.4%.) Natural gas futures soared in the quarter en route to a 12.1% yearly gain; oil’s red Q4 contributed to its 7.1% 2012 descent. The U.S. Dollar Index ticked down 0.2% in Q4 2012.22,23,24,25

Reporting a 5.9% gain in existing home sales in November, the National Association of Realtors also said residential resales had increased 14.5% in the past 12 months. October’s Case-Shiller Home Price Index showed a 4.3% annual gain in home values across 20 cities – the best yearly advance it had seen in 29 months. Building permits for single-family construction were up 25.3% annually by November, with single-family housing starts up 22.8% in the past year. By November, median new home prices were 3.7% higher year-over-year; new home sales were down 3.5% in October but up 4.4% a month later. Pending home sales were up for a third straight month in November, rising 1.7%.26,27,28


Home loan rates descended in Q4 2012, with a helping hand from QE3. Back on September 27, interest rates on mortgages averaged as follows, according to Freddie Mac’s Primary Mortgage Market Survey: 30-year FRMs, 3.40%; 15-year FRMs, 2.73%; 5/1-year ARMs, 2.71%; 1-year ARMs, 2.60%. In the December 27 PMMS, the averages were: 30-year FRMs, 3.35%; 15-year FRMs, 2.65%; 5/1-year ARMs, 2.70%; 1-year ARMs, 2.56%.29


In the following chart, note the 6.15% difference in the annual performance of the Dow and S&P for 2012. The gap hasn’t been that broad since 2002. As a footnote, the Russell 2000 finished 2012 just 1.8% under its all-time closing high of 865.29 from April 2011; it rose 14.63% for the year. Another thing about the Russell 2000: it didn’t lose any ground last quarter. The Dow, S&P and NASDAQ all beat notable retreats over the past three months. The Dow ended the year at 13,104.14, the S&P at 1,426.19 and the Nasdaq at 3,019.51.1,30,31
















S&P 500






12/31 RATE










Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 12/31/1231,32,33,34,35

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

Is the worst behind us? Is the wind in our favor? Economists have talked for months about how the market could have a great 2013, if only a solution could be found for the fiscal cliff … and Europe’s debt crisis … and the threat of higher taxes … and so forth. Well, the market spent most of 2012 worrying about these things and had a good year anyway. Wall Street’s optimism is pretty entrenched at the moment, and it may be bolstered in Q1 2013 if fundamental indicators continue to improve and earnings surprise to the upside. The faith in this bull market has yet to fade.



email  ofs@one.net



Citations. GREG OLIVER 90230923740`934`902384=23-084`

1 – blogs.barrons.com/stockstowatchtoday/2012/12/31/stocks-finish-up-for-day-month-year/ [12/31/12]

2 – blogs.wsj.com/totalreturn/2013/01/02/what-the-new-law-means-for-taxpayers/ [1/2/13]

3 – www.bloomberg.com/news/2012-12-14/consumer-prices-in-u-s-decline-more-than-forecast-in-november.html [12/14/12]

4 – www.reuters.com/article/2012/12/31/usa-fed-schedule-idUSL1E8NV3N920121231 [12/31/12]

5 – seattletimes.com/html/businesstechnology/2019631568_treasurysecretaryxml.html [11/14/12]

6 – www.ncsl.org/issues-research/labor/national-employment-monthly-update.aspx [1/4/13]

7 – www.nytimes.com/2012/12/28/business/economy/weekly-jobless-claims-fall.html [12/28/12]

8 – www.reuters.com/article/2012/12/21/us-usa-economy-sentiment-idUSBRE8BK0OO20121221 [12/21/12]

9 – www.nytimes.com/2012/12/22/business/economy/consumer-spending-spurs-forecasts-for-faster-growth.html [9/14/12]

10 – www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm [12/20/12]

11 – money.cnn.com/2012/12/13/news/economy/retail-sales/index.html [12/13/12]

12 – www.bls.gov/news.release/ppi.nr0.htm [12/13/12]

13 – www.ism.ws/ISMReport/MfgROB.cfm [1/2/13]

14 – www.ism.ws/ISMReport/NonMfgROB.cfm [1/4/13]

15 – thediplomat.com/pacific-money/2013/01/03/a-better-year-2013-forecast-for-asian-economies/ [1/3/13]

16 – online.wsj.com/article/SB10001424127887323320404578216343041227644.html [1/2/13]

17 – news.morningstar.com/articlenet/article.aspx?id=579465 [12/31/12]

18 – online.wsj.com/article/SB10001424127887323374504578216950737679348.html [10/1/12]

19 – www.nytimes.com/interactive/business/global/european-debt-crisis-tracker.html [10/1/12]

20 – mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [12/31/12]

21 – articles.marketwatch.com/2012-12-31/markets/36067724_1_fiscal-cliff-deadline-fiscal-cliff-pan-european-index [12/31/12]

22 – bullionpricestoday.com/bullion-prices-rise-in-2012-gold-logs-12th-annual-gain/ [12/31/12]

23 – www.thenews.com.pk/Todays-News-3-151984-Wheat-posts-largest-gain-among-commodities-in-2012 [1/2/13]

24 – online.wsj.com/article/SB10001424127887323277504578193752344298468.html [1/1/13]

25 – online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [1/4/13]

26 – www.housingviews.com/2012/12/20/economic-reports-good-for-housing/ [12/20/12]

27 – www.nytimes.com/2012/12/28/business/economy/weekly-jobless-claims-fall.html [12/28/12]

28 – www.bloomberg.com/news/2012-12-28/pending-sales-of-existing-u-s-homes-climb-for-third-month-1-.html [12/28/12]

29 – www.freddiemac.com/pmms/index.html?year=2012 [1/4/13]

30 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [1/3/13]

31 – www.cnbc.com/id/100346272 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F28%2F12&x=0&y=0 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F28%2F12&x=0&y=0 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F28%2F12&x=0&y=0 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F31%2F02&x=0&y=0 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F31%2F02&x=0&y=0 [12/31/12]

32 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F31%2F02&x=0&y=0 [12/31/12]

33 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/2/13]

34 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm71002.pdf [7/10/02]

35 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F12&x=0&y=0 [6/29/12]

35 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F12&x=0&y=0 [6/29/12]

35 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F12&x=0&y=0 [6/29/12]