INTERVIEW
Sell In May And Go Away?
Sy Harding publishes the financial website Street Smart Report Online and a morning blog three times a week at www.StreetSmartPost.com. In 1999 he published the book Riding The Bear: How To Prosper In The Coming Bear Market, in which he correctly predicted the worst bear market since the 1930s was right around the corner. The 2000–02 bear market, in which the Standard & Poor’s 500 lost 50% of its value and the NASDAQ lost 78%, began just a few months later. His latest book is Beat The Market The Easy Way: Surprising Seasonal Strategies That Double The Market’s Performance.
Stocks & Commodities Jayanthi Gopalakrishnan and Staff Writer Bruce Faber posed a series of questions to Harding, which he answered via email on March 8, 2012.
Sy, when did you get interested in the markets?
That would have been in the 1980s. Up to that point my career had been as an entrepreneur, launching and building a couple of successful high-tech manufacturing companies. During that period when the businesses required my attention, my investments were handled by stockbrokers and money managers. Their performance was disappointing. When my last manufacturing company was acquired by an NYSE firm in 1985, I began managing my investments myself.
With my engineering background it was probably inevitable my approach would involve technical charting and analysis. In August 1987, against the advice of the experts, I moved half of my portfolio to cash. In early October, with the Dow Jones Industrial Average (DJIA) down 12% since August and my charts deteriorating even more quickly, I moved 100% to cash, just a few days before the brutal 1987 crash.
When I read that virtually no one had called the crash, I knew something was missing in available information. So in 1988 I founded Asset Management Research Corp. and began publishing my research and market recommendations. I was almost immediately in Timer Digest’s top 10 timers rankings; I was the no. 2 stock market timer in 1990, the no. 2 long-term timer in 1991, and the no. 1 gold timer in 1991. I have been in the top 10 for rankings almost every year for the last 25 years.
Your work is mostly based on seasonal strategies. How did you discover these patterns in the markets?
In 1998 I was again very concerned about my charts and what appeared to be a bubble forming in the stock market. So I wrote a book, Riding The Bear: How To Prosper In The Coming Bear Market, predicting that the most severe bear market since the 1929 crash was right around the corner. The book only sold 20,000 copies. Understandably, no one wanted to believe anything negative at that point. In contrast, the best-selling investment book in 1999 was James Glassman’s Dow 36,000. The severe 2000–02 bear market began a few months later.
My current prediction for 2012 is that 2012 will be a better year than 2011, with a smaller correction.In my research for a simple strategy that would allow investors to participate in the 1990s bull market but also prosper in the coming bear market, the market’s seasonality seemed to have significant potential. Further work confirmed that and resulted in the development of my seasonal timing strategy (STS).
I introduced the strategy in my book and as a second strategy and portfolio in my newsletter, while also continuing my original strategy of market timing via technical charting and analysis.
Why do markets move in these seasonal cycles?
Over the long term, the market makes most of its gains each year in the winter, and when there is a serious correction, it most often takes place in the summer.