ALWAYS SELL IN MAY (or when people are too clever for their own good)

This May has been the worst May for stocks since 1940 (down 8%) and one of the worst months period for the stock market on record.

Not that anyone should have been able to predict that, but I’ll be goddamned if I don’t bring up the fact that the financial blogosphere and the Chief Strategist cottage industry both blew this call big time.

From mid-April through the first week of May, we were literally barraged with way-too-clever bullshit about how “Sell in May doesn’t work in an election year all the time.”

For example:

1. http://www.huffingtonpost.com/2012/04/30/sell-in-may-doesnt-work_n_1463980.html

2. http://www.ritholtz.com/blog/2012/05/sell-in-may-and-go-awayexcept-in-election-years/

3. http://seekingalpha.com/article/560341-chart-the-s-p-and-sell-in-may-in-an-election-year

4. http://www.themoneygoround.com/2012/05/does-sell-in-may-work-in-election-year.html

5. http://articles.businessinsider.com/2012-05-07/markets/31605146_1_market-returns-bank-new-report

6. http://www.financialsense.com/contributors/brian-pretti/sell-in-may-election-year

7. http://afewdollarsmore.com/2012/05/03/sell-in-may-and-go-away/

8. http://voices.yahoo.com/chart-sp-sell-may-election-year-11317648.html

9. http://www.bespokeinvest.com/thinkbig/2012/4/28/sell-in-may-go-away-during-election-years.html

10. http://blog.stocktradersalmanac.com/post/Election-Year-DJIA-Stats-for-Sell-In-May–Big-Jan-Feb-Gains

11. http://www.fabianwealth.com/blog/2012/05/01/sell-in-may-and-go-away/

12. http://www.brightscope.com/financial-planning/advice/question/3387/any-truth-to-the-adage-sell-in-may-stay-away

13. http://www.brightscope.com/financial-planning/advice/question/3387/any-truth-to-the-adage-sell-in-may-stay-away

14. http://www.topstockanalysts.com/index.php/2012/05/10/why-selling-in-may-and-going-away-could-be-a-huge-mistake-this-year/

15. http://theguruinvestor.com/2012/05/18/sonders-on-sell-in-may-positive-signs-and-the-fiscal-cliff/

16. http://muckdog.posterous.com/169-sell-in-may-in-election-year-att-verzion

17. http://finance.yahoo.com/blogs/breakout/sell-may-away-again-113124053.html

18. http://www.markmartiak.com/2012/05/08/sell-in-may-and-go-away/

19. http://www.accidentalcapitalist.com/2012/05/02/sell-in-may-except-in-election-years/

20. http://ibankcoin.com/hattery/2012/05/03/may-trend-report/

21. http://statebankofcrossplains.wordpress.com/2012/04/27/sell-in-may-and-go-away/

22. http://www.thereformedbroker.com/2012/05/15/heres-the-good-news/ (Me! Oops!)

23. http://247wallst.com/2012/04/26/sell-in-may-and-go-away-a-2012-primer-bac-jpm-ge-aa-cat-msft-intc-aapl-xom-cvx-dd/

24. http://articles.businessinsider.com/2012-04-30/markets/31490145_1_median-return-negative-returns-s-p

25. http://www.guggenheimfunds.com/resources/intelligence/article/12-04-30/Will_Investors_Sell_In_May_and_Go_Away.aspx

Look, I understand the fact that this stuff can be interesting and I didn’t spare my own blog (or Barry’s) from this, even though I was merely reprinting the Don;t Sell In May comments from Liz Ann Sonders.  I get that people are writing around the clock and they don’t always have something provocative or interesting to say – so they resort to this kind of cherry-picking, data-torturing nonsense.

But still, Sell in May is one of the most obvious advantages that individual investors and traders have over the long-only mutual fund managers.  We can actually do this stuff.

There is a reason why it usually works – when we were an agrarian society, the banks were flush with cash as a result of the harvest in late fall.  Then they had dispensed much of it to their farmer-borrowers and were low on cash headed into Spring.  When financial institutions are cash-rich, money is put to work in investments.  When they are cash poor, well, do the mental math.  Sell in May has nothing to do with “traders headed off to the Hamptons for the summer” – it is a societal pattern that is deeply ingrained in our economy and it stretches back centuries.

By the way – Sell In May doesn’t mean Sell Everything in May (I certainly didn’t) – it means use your head and lighten the fuck up.  Who are you trying to impress?

Let me show something else as my last word on the topic:

The Secret Sauce Trade is Back (TRB)