Stock indices may be hinting at days of redemption

Is there a redemption problem hitting the major indices?

All the major indices saw sharp declines on the open of Nov. 15th, which is the deadline for most hedge funds investors to put in orders to pull out some cash.This could be a harbinger of year-end profit taking by investors hoping to get a retroactive tax cut on capital gains taxes.

Sure it’s time to pull some profits out of the market. The baby boomers have already gone through two horrendous stock crashes and can hardly afford another.

The large number of Americans working into their 70’s — as most labor demographics show — is not done for love of the job. These people are suiting up and showing up at work because the retirement fund is too low to support them.

Another dynamic over the last few weeks of the year is mutual funds and other fund managers booking profits to “window dress” their portfolios. Showing higher profits by selling some better performing securities to dress up their returns for the year-end letter to investors.

So between these two forces, the end of December could have a much higher volatility than we have witnessed over the last 10 months.

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