October’s Always Rough on Investors
Thursday, October 20th, 2005
By George Leong, B.Comm. for Profit Confidential
I still remember October 19, 1987, Black Monday, as if it were yesterday. I had just graduated from business school and was training at my first real job in the credit department of a large financial institution. The world of finance was exciting, and I was raring to go.
October 19, 1987 started like any other Monday, as I downed my third cup of coffee before the market opening. As I looked at the screens and tuned into the wires prior to the opening bell, I noticed the futures markets were way down, pointing to a disaster of an opening. The order books showed an imbalance of sell orders, and at that time there was no structure to prevent the kind of day we would soon see.
In fact, it soon became apparent that the fateful day would not be an ordinary one, as sell orders accelerated throughout the day, driving the DOW down 22.6% by the close. And, by the end of October 1987, the selling had sliced as much as 50% off some global markets.
My saving grace at the time was the absence of any invest-able capital on my part, as I had student loans on the books to pay back. It was probably the only time in my life that I was glad I was broke! While colleagues of mine were in despair for months following the crash, I was actually relieved that I hadn’t had the capital to invest as of yet.
Today, on the18h anniversary of this infamous market crash, my memories of 1987 are still fresh. The difference is, these days I do have money to invest and a stake in stocks, so what happens in the markets is important to my bottom line. The student loans have long been paid off, but the stakes are a lot higher.
Since 1987, October has always been a period of increased volatility, and we’ve become accustomed to it. Today, in October 2005, stocks are again under pressure. Technical strength has weakened and market sentiment has turned extremely bearish — it seems as though investors just want to get October over with.
Now is also the time of the year when mutual fund companies review their performance and begin to formulate their investment strategies for 2006. After two straight up years, the markets may end up lower this year, unless we see a turnaround in sentiment and buying.
This is also the time of year when you should review your portfolio and begin to formulate a plan of action for 2006. Sell some of the losers and take some profits on the winners.
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Tags: dow jones, global economy, investing in stocks, market view
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
