THE JANUARY EFFECT

I have a particular affectation for the January Effect. It is a good time to be alive. Let me share a few ideas of why human spirits soar and this phenomenon is often followed by a soaring of economic activity, including but not limited to the Stock Market. Here goes:

1)  The old year is gone. If you had a bad year, you look forward to a better year. If you had a good year, for optimists it can only get better. Many people right now are looking forward to the new year. Hope and Change spring eternal.

2)  Many big funds and pensions start to rebalance their portfolios at the end of the year. They go to cash (which started just before Oct. 31st) and start purchasing better stocks.

3)  Here's a comical irony. The big guys want to get in the market in advance of the little guys---you and me. Don't we usually think it is the other way around? We, the little guys, are trying to figure out where the big money is going. Point: at the end of December and in January there is a lot of positioning and re-balancing.

4)  There is a flood of new money, well . . . flooding the market in January. Some of this is from the aforementioned move from cash to equity positions. Most is from an event which happens every year. It is the new cash that goes into IRAs, 401Ks, pension plans, etc. Think of this. Most corporate plans max out in the previous summer. Now, people have new freed-up donations to their plans and they want to put it to work as soon as they can. This is huge. Consider your own situation. Do you wait for April 14th of 2013 to make your 2012 contribution to your IRA or do you make it on January 2nd of 2012? Get it in early. Why not pick up another year of tax-free growth?

5)  January is the month of the ultimate "Earnings Season." It's the year end. If the year has been profitable and the companies are doing well, it should be good. Well, my opinion is that companies have become lean and mean. They have billions of dollars, and in spite of our current government's bias against profits, growth and businsss, many businesses and investments have excelled anyway. One man cannot hold back our free-enterprise system for long.

"IF THERE'S A WAY, TAKE IT; IF NOT, MAKE IT."

6)  This year is also different. Companies have investment capital for acquisitions, expansion and organic growth. And their multiples are incredible. Some say, and I agree, this is one of the best times for picking up great companies' stocks that we've seen in over 80 years.

7)  And the best January Effect of all is me. I'm here, ready to analyze, figure-out and plan a great month. I hope to hear from you as you "GROW OUT OF YOUR PROBLEMS!"
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