SELL IN MAY AND GO AWAY.

Is The Old Cliche Correct? Obviously, not always, but like most cliches there is a grain of truth. In fact, on a statistical basis, it is more often right than not. I have been predicting a correction in the market for 6 or more months. Finally, I am right which reminds me of another cliche that says, "Even a stopped clock is right twice a day." I guess the bottom line is that, if you expect you or your investment advisor to get you in and out of the market at the right time, prepare to be disappointed.



There is Often No Rhyme or Reason To Market Behavior. While this statement may not be totally true, oil prices are a prime example of how difficult it can be to anticipate the results of a given event. On April 23, 2010, oil was at $85 per barrel. Three days later a major explosion on an off shore drilling platform resulted in the death of 11 men and a major discharge of petroleum into the Gulf of Mexico. The President called for a suspension of new off shore drilling and environmentalists, never favorable to fossil fuel production, called for a permanent ban. As of today, attempts to eliminate the flow of oil into the gulf have met with little success. What would you have predicted for oil prices after the explosion, up 10%, possibly 20%? As of today, prices are barely above $70 per barrel, a drop of almost 18%. I'm sure I could look around the internet and find an explanation for this behavior but I wouldn't believe it if I did.

Another Reason To Emphasize Current Cash Flow. I have always promoted an emphasis on developing cash flow from your investment portfolio. Whether you are buying real estate or stocks. a portfolio that emphasizes cash flow over growth is best for most investors, particularly those at, or nearing, retirement. Right now this strategy is more important than ever. My reasoning is as follows: 1. It appears that we may be headed for a "range bound" market. This will make it increasingly difficult to withdraw cash for living expenses based on growth in the portfolio value. 2. Fixed income investments, especially those emphasizing safety, are offering very low yields. With one year bank CDs paying less than 1%, it may be tempting to extend the maturity date ( the 10 year treasury is paying 3.88%) but there is risk in deterioration of purchasing power if the predictions of higher rates in the future are correct.
3. Baby boomers will be more likely to favor high dividends as demand for income they can spend increases.

Quit Worrying About Market Prices By Investing In High Dividend Companies. A diversified portfolio of companies like AT&T, Verizon, Pitney Bowes And Kinder Morgan Partners can give you a yield of more than 5%. While these are not without risk, they should give you a better total return than you can get with fixed income investments.

Small Blessings. After three or four months of back problems, it is a real blessing to be able to walk across the room without pain. Hopefully, this improvement will continue and I can take a trip to Colorado later this summer.