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May Deja Vu - Third Year in Row!

May deja vu - third time in a row. If you go back in 2010 and 2011, one could have almost predicted what would happen in 2012 and could have saved tons of money by moving to cash at end of Apr. While I almost knew what was coming in May, I did not act on moving my investments to cash (luckily I told few folks who may be smarter in acting on it). Well now that May has again proved true to old saying of "Sell in May and Walk Away" and month is over, what's in store for rest of summer?
Given Facebook IPO fiasco (which was supposed to be savior for markets) and continued political and policy mess in Europe, things don't look very promising. Dismal labor market conditions in USA and sudden slowing down of economies in China and India are adding fuel to the fire which Europe's lack of action has created. Here is my prediction on how it would play out:

  • Markets would be very volatile till elections on Greece on Jun 17. Most likely Greece results would be slightly positive with pro-bailout parties with ND coming first
  • ECB and Fed would show some determination of action and may intervene in providing support in later half of Jun. Here comes QE III or Operation Twist II
  • Summer would be tough for President Obama with continued dis-appointments in Jun and July unemployment reports
  • Markets would start turning around after DOW briefly goes below 12000. S&P may touch 1250 and then turn around
  • As summer progresses, there would be calm returning to markets preparing for Nov elections in USA
As investors, one may want to wait for 2-3 weeks and when S&P touches 1250, one may want to consider putting money in markets slowly and steadily.
I cannot possibly end my blog without writing about Facebook IPO fiasco. The main blame for this goes to Facebook (for being too greedy), Nasdaq (for blowing out opening) and Morgan Stanley (for creating pre-IPO bubble about what investors are willing to pay). If Facebook had priced at $30 or $32, it would have created quite a bit of positive momentum and stock could have been trading around $40. Now it would take few quarters before its stock would see $40. I was (un)lucky enough to get 50 shares allocated  in IPO. Given the losses, I should consider ordering physical copy of shares to frame it and put it in my study room as an example of Internet Bubble 2.0!
Have a great week!
/Shyam

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