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12.27.2017 - Free Investment Newsletter Bookmark

At the bottom of every letter, there’s a “donate” button. I put it there about a year ago, because we had folks over the years that tell us “we don’t do any investing, but I like reading your letters, is there any way I can toss you a few bucks?”   

Well this week I got notice of a donation, and figured it had to be a mistake. I’m not talking thousands, but it was quite large, and I contacted the donor. I said thank you for the donation, but surely you made a mistake. He said there was no mistake, and that he has enjoyed our letters and wanted to help keep them coming.  But what got me all emotional was when he said he forwards my letters to his daughters, because he thinks some of them are important enough that he wants them to read it.  

Wow. Humbled I was and humbled I am. We’re only on this ball for a very short time and all I ever wanted to do with InvestYourself, was help people. If one of my letters strikes a chord with you, helps you, provokes new ideas, etc, then I’ve done my job. I certainly don’t know everything, and I’m no genius. But there’s some things I am pretty good at, and if I can share that with you we all win.  Thank you.
Interesting Side Note:
On the Very same day that Gentleman made his donation, I got an Email from a lady named Louise.  I won’t copy and past it, but it went like this: “ I have a question. I’ve been getting your letters for about six months. Thank you they’re very informative and interesting. But why do you do it? In all this time I haven’t seen a popup, or an advertisement or anything. How do you make money off of this? “
I laughed a little when I read it. Self promotion is not my main goal in this game, and no there’s no ads, no products etc. So I replied to her by telling her that the Free letter is for everyone to use as they can. But, if someone wanted to follow stocks along with us, then we have a paid for subscription area for members. It’s 199 bucks for a year, and it’s virtually a five day a week running commentary on what I’m looking at, buying, thinking of, options I’m interested in, etc. 
She wrote back to yell at me a bit. Again, to paraphrase “Well don’t you think you ought to push a bit more that you have a service like that? When I read the market commentary, you never mention anything about joining your group. Don’t you think you’d get more sign ups if you told people you do that?????? 
LOL, Yes Louise, I imagine I would, and you’re quite right, I have a habit of forgetting to mention to folks, that every day the market is open, I send 3 emails a day to our members, with my take on the markets, direction, investments I’ve made, new ideas, etc.  So now you know! Oh, and thanks for signing up!
Okay, Back to Business:
After a blistering run from late August to about a week ago, the market has settled down.  For the last 6 sessions, the DOW has been running in place. Even today, it only gained 28 points, which is like 0.1%. Several days past, it was actually red for a few days in a row.
Which begs the ultimate question, is the run over, or are they just coasting us into the year end? But wait, the question looms larger. Is there going to be a “January effect” or are we going to greet the new year with profit taking and a falling market?
First off, what’s a “January effect?”  Let’s take a definition from Investopedia”

What is the 'January Effect'
The January effect is a seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month.
I’ve seen some mighty powerful January’s. I’ve also seen people get burned badly on January’s that  rolled right over and sold down hard. This one has the ability to do either, and no I’m not talking out of both sides of my mouth.
The market has just had an incredible 20% run. That on top of rising for the most part for over 8 years. No matter how bullish you are, you know from history that trees don’t grow to the moon, and market’s don’t rise for ever. So a correction is coming. But when? 
There “could” be a ton of investors that are just hoping the market holds up into January, and they sell a significant portion of their holdings and take the profits. Why wait instead of selling now? If you take profits tomorrow ( Thursday) You’ll pay taxes on those gains in April. If you wait until January 2, 3, 4, 5, to sell, you don’t face the tax man until 2019. 
So I can make a case that there will be people thinking “enough is enough, I’m taking some off the table” in January. But there’s the other side of the coin. The January “up” effect. A lot of large institutional investing is done on an annual basis. If you’re a large pension fund and you close out 2017, you very well might want to inject a ton of your new year cash right into stocks. More buyers than sellers pushes them higher.
We also still have the “hope” that the new tax plan is going to pave businesses with more profits, and as much as stocks have “stupid high” P/E’s now, if they can add a bit more “E”, they’ll let the “P go even higher.
My guess is that this market finally runs into trouble sometime in the first quarter. It could be January, but probably not. Mid February? Maybe. One thing we have to keep on our minds is North Korea. While the media has moved on to such important things as how much soda Trump drinks, if you look at what the generals are being allowed to say, there’s a ton of verbiage about “war” coming. 
I would NOT be surprised if shortly after the Olympics in South Korea, some form of military event takes place. That could rattle the market “bigly”.
So the jury’s out folks. We are still trading “long” and reaping profits when they look good. But I do have to think that 2018 is the year that a lot of “interesting” things happen. Stay tuned for thoughts about that.
Have a great week and I’ll see you all Sunday in the letter. 

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