Welcome to September

Barron's wrote up XTO Energy (ticker XTO) and interviewed Andrew Pilara who likes related energy investments in Key Energy Services (KEGS), Spectra Energy (SE), and Taliman Energy (TLM). The most interesting this to me, though, was page 48 of the Market Week section.

It happens almost every year, but it's still noteworthy when Equity flows into mutual funds reverse, as they do about this time every year. Outflows hit municipal and taxable funds, and last week AMG reported that stock flows out of stock funds reached $2.7 billion.

When new money is flowing into the market, it's easy for the bid side to carried away investing its' money, forcing the price of stocks up higher than fair value. When the party is over and the money starts flowing the other direction, the trading desks are left with a need to raise funds and forced to ask the question, "sell to whom?" At these times, values fall to a level where new money can come into the market and stabilize the buy/sell equilibrium. No longer will buyers tolerate overvalued merchendise. Stocks are likely to keep falling until either equilibrium is restored or, courtesy of the calendar, money flows reverse direction and buyers once again need to hustle to get money put to work.

It's a supply and demand world out there, and it's time for the annual calling to account.

Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.

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