Sell in May and Go Away

... personally, I waited until July before I went away, hence the recent absence of activity on the blog, but I wonder how many people today rue the fact they ignored the old investors tale to "sell in May" - coined in the UK sometime in the 17th Century. And note the date of the snippet, in 2005. Were we worried then?
Despite its prophetic nature, the adage has consistently demonstrated its soundness, but whatever reasons our ancestors had for discovering such wisdom, it seems there are some fundamental reasons for the "difficult" stock market conditions that exist right now.
The impact on the financial markets of the sub prime business in the USA has been undeniable. But then, I also think the headlong frenzy towards the listing of "A" and "H" shares on the Shanghai and Hong Kong exchanges has also had a part to play.
From a former "vantage point", I was supportive of the acquisition by HSBC of Household Finance in the USA - a major player in the sub-prime market. The customer profile in existence at the time of the purchase was reasonably solid "Middle-America"; a category type with which the Bank, steeped in a long history of successfully lending to small businesses and individuals in Asia - with all the attendant riskes, had a degree of familiarity. However, if those riskier borrowers are not subject to enforceable controls and if the lenders are not alert, things will go wrong. Hindsight? I don't think so. The dangers of relaxing the lending criteria were there for all to see - and the bundling up of those lower quality mortgages into saleable packages - so eagerly taken up by the investor community, just serves as a reminder of caveat emptor. So, are we having fun blaming the US sub-prime market? - well, it seems a whole lot better than accepting any blame ourselves for being greedy!
And I mentioned China stocks - are they realy anything to do with the problem? In my opinion, yes. I have long warned against the China-stock frenzy - to the point of being extremely boring. My concerns? - an investing public that was unsophisticated and that would be the last to get out of the market - with substantial (at least for them) losses. I couldn't fault the public for wanting a "piece of the action", but I did think it was going to end in tears. The market, in my opinion, has been looking for an excuse to cool down - and it found it, without having to point the finger at itself. How good is that?
There are some very nervous people in the Asia markets right now, markets that have probably over-reacted as is often the case. But I think that once the sick feeling in the bottom of the stomach dissipates over the weekend, with the FTSE and the NYSE showing signs of recovery this Friday, next week will bring some relief. As long as you can afford to hang on, do so. As we have witnessed so many times before, over decades, it is only a matter of time before the cycle moves on and round. In fact I think I shall be looking for some bargain buys first thing on Monday.