Monday, December 1, 2008

Don't be lulled into getting back into market, or staying in; December will be disastrous month

In a year in which most investors refused to open their 401k statements every month, the stock market begins its final month of the year after a week of impressive gains.

And just like a poker game setup in which the novice is allowed to win the early hands, the market is setting up a lot of investors into believing it has hit its bottom and is heading up and out of a Bear territory.

Don't be fooled.

The economic data coming out this week is going to show an economy worsening beyond earlier projections. Job losses are going to be staggering. They're why reports are coming in from around the country that children are asking Santa for their parents not to lose their homes and to get new jobs.

Christmas buying numbers will falter by mid-month. Retailers will retrench. We'll actually see deflation on big ticket items. Gas prices will begin to rise again as the nation experiences a colder than usual winter and more oil goes into heating oil.

All these factors mean that the market will fall below 7,000 by year's end or in the first quarter. You'll be wishing you would have sold out of your mutual funds now, near 9,000, instead of losing another 20 percent.

Don't continue to be greedy. Take your losses -- if you're not in a 401k -- off your tax return for 2008. And then get in cash and buy at the market's low next year.

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