Beware September! Historically, September has been the worst month of the year. The average gain is a -1%. Typically this was the time when mutual funds cleaned house. It has also been the tail end of summer. For whatever reason, and we can make up a lot of reasons, September is a month for caution.

For those who are following our market timing strategies, you will want to be very neutral this month until we have more clear direction. We currently are about 22% net long but many of our long positions are in high dividend producing stocks and closed end funds. We still have short positions in the S&P 500, the Dow Jones and the Nasdaq. In addition, we have shorts on the emerging markets, Asia and China.

We are striving for absolute returns. We want to end the year on a positive note. After an abysmal year, we are settling back with 30% in closed end funds like NLY, ZTR, IGR, CHY, and EOS.

Active portfolio management is tough right now so be very careful as we go into September. If today is any indication, we could be in for a few rough days!