What Santa Clause Rally?

Everyone must have been bad this year, because we didn’t get much of a Santa Claus rally.

The Dow, S&P 500, NASDAQ and Russell 2000 were all off significantly from their October highs.  These indexes were up for the year, but the results were mixed.  The S&P was up significantly, while the Dow and S&P were up reasonably and the Russell 2000 was up barely.  This was a good year to stick with the large cap stocks and other investments of perceived quality and stability. 

 It was a bad year to take a long shot at a speculative sector, which is what I did.  Well, that is why I have risk capital and the rest of my portfolio did fine.  If my long shot had of paid off, then it would have been a splendid year.  For a while there, I was riding high with my Uranium mining stocks and then the bottom fell out.  I have always said, “Everyone’s a genius as long as the market keeps going up”.

All things considered, it was a decent year in the stock market, despite the lackluster ending.  I predict that by the end of next year, we will all be wishing for another year like this.  I believe that we are heading into a recession and the stock market will take a hit.

All of the economic indicators seem to foretell of a recession and many of the economists predict it.  Even Alan Greenspan is giving it a 50/50 chance.  I’m no economist, but I have to think the high energy costs, heavy debt loads, high foreclosure rates and subsequent tightening of credit will have an effect.  Add to that, sluggishness in the auto, mortgage, real estate and home building industries and you have a lot of negative momentum.

Recessions are a normal part of the economic cycle and we are overdue.  It’s probably a good time to reduce your debt-load and put some money away.  Then, maybe you can catch the rebound that is sure to come after the down-turn.

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