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dpdoor (36.58)

Every Other Month Theory

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August 01, 2009 – Comments (4)

Virtual every business, contractor, sales person that I deal with say that every other month is slow. It is very frustrating to have a fairly good month (compared to the end of last year and the month of February) then have a bad month. It’s up then down, not just up and down but, up enough to think things are really good and just as you thinking things are good, the rug gets pulled out and it’s the end of the world all over again. I can not express how hard it is to plan for the future when the direction changes 180 degrees every 30 days.

I have a theory on why the oscillation is the way it is.

First I’ll state the obvious, there is a great deal of uncertainty over the economy. There is a great deal of fear that more people will loose their jobs, loose medical benefits, loose retainment investments and things will be even more difficulty in the months to come. But at the same time "when the economy recovers" is head every day, so obviously there is the presumption that things will improve.

People are looking at the stock market as an indicator of how the economy is doing and at the same time the stock market is looking at the consumers and business to see if we are improving.

So if the consumer spends more when the market goes up, and the market goes up when the consumer spends more why does it change every other month?

When people get their investment (401k) statement at the beginning of the month it has an effect on how they feel. If it is good they might spend just a little more. You may deny it but you know your going to buy an extra Strabucks Coffee or give your kids an extra 20 bucks. If the 401k statement is bad you might just hold off on a purchase.

My theory is that the statement that is mailed the 1st of the month effects that month. And the stock market is not effected until that month is tallied up.

The stock market gets the reports on how businesses did not on how they are doing. These reports come out on the 7th through 21st of the following month. In May the market was up, this lead to June being good for the retailers, contractors, and sales people. June the market ended down, the retailers, contractors and sales people all had a bad July but the market was up because of the June the sales were good from the Market moving up in May. So when Wall Street finds out the July was bad for retailers (after the 7th) then the market would move down. But the consumers will get an investment statement that shows a nice increase in their 401k and will spend more. So the Market goes down for August even though I expect a good sales month for August.

So if the market goes down after the 7th next month and your local coffee shop has a good month, (even if the market is moving lower) you’ll know why.

The good thing is if this cycle continues then October would be down, This is important and I will tell you why some other time but for now just make sure you have money to invest around that time.

4 Comments – Post Your Own

#1) On August 02, 2009 at 1:19 AM, cthomas1017 (98.52) wrote:

Wow!  This is a market timing principle that I've never heard before.  Can it really be this easy?  I mean, up one month, down the next.  Who woulda ever thunk?

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#2) On August 02, 2009 at 3:28 AM, dpdoor (36.58) wrote:

Thanks for the comment, I am very good at predicting the spending habits of consumers and the overall economy but trying to figure out the rationalization of investors is much more difficult. My business is a reflection of understanding consumers I just can't believe how long it takes investors to see what is happening. In March of 07 I pulled out of stocks and it took several months for investors to see a problem with the economy. If Washington D.C. and economist new as much as us construction guys we wouldn't be in this mess. My portfolio and the people that invest with me are up 65% from 07 , that is better then the guys we elected to run the mess.

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#3) On August 02, 2009 at 10:35 AM, cthomas1017 (98.52) wrote:

The difference between you and "investors" is that you are on the front line directly involved with the consumer - a whole different perspective than a guy with specticals glancing a the ticket and "studying" overall trends.  I doubt that you are as good at "Predicting... the overall econony" because consumer spending habits have traditionally reflected only 70% of the economy.  Corporations may see the monthly ups and downs as you've described, but they also are looking out at longer trends and asjusting inventories, debt, partnerships, etc.

 So yes, perhaps you can see month to month flux, but if you try to map that directly onto market pricing or even market timing, you'll get obliterated.  (Unless of course, you've stumbled upon something so incedibly simple that evey scholar and every investment banker in the world over the course of history has missed.  If you find it though, I doubt you'd really want to post it here.  It would be the "holy grail".  (Except that once the secret was out, everyone would know and try to speculate on futures and all things would gravitate back toward where they are now.  So good luck.) :p

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#4) On August 03, 2009 at 12:57 AM, dpdoor (36.58) wrote:

True, I regretted posting my last committed and should have given it more thought before talking about my luck with tracking and predicting trends. I broke at least one of the 7 deadly sins. So hows that stock market going to do this month?

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