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Watch Out For October 1, 2009

That would be the sixtieth anniversary of the success of the Communist Revolution in China. (The Communists officially took over the country October 1, 1949.) There will be a massive celebration on that day this year (and every year ending in "9.") China will pump up the economy and stock market until then. After that, watch out, because they'll have to let up.

October has historically been a dangerous month in the U.S. Now, a lot of mutual funds do their tax selling, and close their books for tax purposes in that month. It is also the first month of the fourth quarter, which means that people begin doing their preliminary tallies for the whole year. If they don't like the "look" of it, one might not get to November or December.

Because of theirĀ  growing interdependence, America is now much more vulnerable to what happens in China than in say, 1999. Same for the other side. The two countries are almost "joined at the hip," meaning what's bad for one will likely be bad for the other.

Mark Twain observed that October was a dangerous month in the (U.S.) markets. So were September and the other months (although I forget which order he named them in). It was certainly true for October in 1929. More to the point, it could well be true in October of this year, because of some other country's "birthday" celebration.