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Get Ready for "Fall" Season

We were at Berkeley campus yesterday for a course I am auditing and I noticed beautiful fall colors started appearing on trees.  Fall also brings interesting memories from markets in months of September and October. Historically September is worst performance month for markets. It is also filled with many events to remember (or not) from great recession of 2008/2009 which started with Lehman Brother's bankruptcy (anniversary of which is on Monday 9/15). So what it all means to remaining two weeks of September and upcoming October (which is normally most scary for markets) of this year.
Let's look at some of the major market moving events which is coming up next week and what could be outcome of those events.
  • FOMC 2-day meeting wrapping up on Wed 9/17 - most likely Fed would give some indication of timeline for interest rate increase by removing "considerable" word from their statement. This means interest rate increases would start in 6-9 months (1HCY2015). Markets love today's booster shot of low interest rates. This change would definitely move markets downwards in short-term
  • Then comes Scottish vote for independence on Thursday 9/18. Right now polls show that it is 50:50 chance. If Scottish vote for independence they would be ending more than 300 years of union with UK. This could be major unsettling event for markets - especially for currency markets and UK stock markets. My prediction is that "NO" will win with thin margin similar to what happened in Quebec/Canada (The referendum took place in Quebec on October 30, 1995, with 49.42% voting "Yes" and 50.58% voting "No"). if "YES" vote wins, consider this as small black swan event since markets were not pricing this till very recently. Sterling pound could crater below $1.50
  • Then comes Alibaba IPO on Friday 9/19. This is biggest IPO world has ever seen and by the time all said and done, Alibaba would have raised close to $25Billion. If "BABA" (stock symbol for Alibaba) does well on first day, it could be boost for markets. However this could be temporary as markets may consider this as short-term top and start worrying about end of Q3 and corporate results
  • And of course arrival of iPhone 6 and iPhone 6plus in Apple stores. I am personally eagerly waiting for this. Apple could sell over 10 million units of these new phones in Q3 and could sell over 60-70 million units in Q4. That would be blockbuster launch for any product in history of high-tech or any product for that matter.
So what should normal investor do. If you are in for long-term, don't do anything since markets would recover during holiday season. If you want to book some profits, that would also be good idea. One could sell in-money covered call options and enjoy the ride. Whatever you do, do your due-diligence and make informed decisions.
Enjoy the fall colors and fall season
/Shyam



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