Sell in May and go away? The Great Singapore Sale is here early.

Years ago, an industry veteran said to me, he was going on holiday to Europe. I asked him how he could take the time to go off and not even bother about the market. His answer was "Sell in May and go away". Wise words indeed, as May tends to be a bad month for equities and over the years that has been the case. It would be easy for me to just brush everything that is happening aside and just take it on the face value of May being a bad month every year. But I am not the sort of person that takes things on the face value, maybe that is why I tend to think too much over lots of things.

I think all of you may be feeling the heat over the past week as global markets tumbled, bringing back "not so fond" memories of the 2008 crash. As the media spend time arguing over the true cause of the current sell down, no one can be sure of what is the real reason behind it. The Dow has fallen more than 7 percent over the past week. Some European markets actually fell more than 10%, while Asia fared no better.

Is it getting worrying for all of you? I have to apologise before hand that I really cannot be sure what is the reason. But remember, I have said before that we may be suffering from complacency and there seemed to be no stopping the market from its advance. This is a long overdue correction although the steepness of the fall is quite concerning.

There are many possible reasons to why the the global markets are falling like a brick.

1) China raising reserve requirements. But this is the 3rd time this year, so it is highly unlikely.

2) Greece...Unlikely as the plan has been inked out and passed. But of course the media as usual tries to sell this story which is just ridiculous. Spain's recent bond auction did quite well, so it does not seem like they have any problems refinancing its bonds.

3) Volcker rule: The resurgence of the rule over the past week could be making the market a little jittery. If it passes through, the banks are not going to look good in the short run.

4) Uncertainty over the German and UK elections. Well its not going to be a problem as everything seems to be going according to the poll forecasts.

5) The British Petroleum catastrophe: That oil spill will not only bring about environmental problems, there could be politics involved too. Oil prices are still falling as the USD continues to enjoy some limelight from the flight to quality. Some say 100000 barrels are being leaked out per day. That is a lot of wasted oil. I guess I am going to be laying off seafood for some time.

6) Mining tax in Australia: This is going to hurt the miners and since they are practically an oligopoly, they will try to transfer this liability to their clients.

7) Falling China property prices: Latest statistics show that property sales in China has fallen drastically month on month. This is a worry for me. To be honest, I think if the property market goes down drastically, that could lead to a real contagion. Banks to get hit with loan losses, that would lead to massive call backs on loans across the country. How much have they lent out? 1.6 trillion yuan? Do the maths.

8) Poor turnout for the 2010 World Expo in China. This was a real disappointment. Sentiment will definitely be hurt by this. Its way below even the most conservative estimates. The chinese government will definitely be worried about how the world will deem this asa failure.

So many reasons but really none of them will lead to us going to another crash like 2008.

I read a passage earlier and I thought it made a lot of sense and I would like to share it with all of you. It said "many investors illogically become euphoric when stock prices rise and unhappy when they fall. They show no such confusion in their reaction to food prices: Knowing they are forever going to be buyers of food, they welcome falling prices and deplore prices increases.".

This passage hit the nail right on its head. All of us are investing for the longer term and shouldn't falling prices be good for us? We should only worry about falling prices during times when we are looking to sell out. I understand there are many investors who look for short term profits, but my question to them is....do you have a way to tell when and to what levels would the prices rise to? If you don't then why do you try to time the market?

Sell in May and go away? I have never really put that as a consideration in my investment thought process. All I know is the "Great Singapore Sale" or should I say "Great Equities Sale" has started in May instead of June this year. Most probably, they are trying to avoid clashing with the World Cup in June. Enjoy the sale because its going to be one that will be throwing up lots of bargains.

Do not worry, just buy quality and everything will be fine.

Best,

SVI