Karl Denninger says that it’s time to get out of stocks
One our our favorite contrarian analysts has suggested that it may be time to exit the markets. For those looking to make a little profit on the way down, now may be a good entry point for shorting the markets as discussed in his latest piece Watch That Thesis! (FOMC Announcement).
Mr. Denninger assesses a recent statement from the Federal Open Market Committee and indicated that what the FOMC is essentially saying is “The flood of monetization that powered the market from 666 to 1070 is ending.” The Fed stated last month that they will wind down the monetization of debt, which has been the fuel for the most recent stock market rally.
More from Denninger:
We all hold hands now as we head for the cliff…. Wheeeeeee!
The only important sentence in the entire announcement is in bold.
Ignore it at your peril.
Nice shelf to get short at; take it down if we break materially over 1080.Â Either economic fundamentals assert themselves as deserving of these valuations or we’re a solid 2,000 DOW points (and 200 SPX points) or more above where we should be.Â Â As a trade the risk:reward looks better than it has in months; you’re risking ~10-20 handles on the SPX to potentially capture 200!
We have been waiting for all of the stars to align on the down-market call from our favorite contrarians. And, we now seem to be at that point, with recent correction/crash calls coming from Marc Faber, Harry Dent, Gerald Celente and Bob Hoye (click their names to get their specific calls).This is the first time in nearly a year that Denninger has made a specific market call like this. And the last time he did, the equities markets began their collapse into the November lows within a few days.
Whether you short this market or not, the key thing to focus on right now is preserving capital.
While this is probably not the systemic meltdown that will lead to a total SHTF scenario, many people will lose a lot of their wealth, so we urge our readers to take the necessary steps to avoid this if at all possible.
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Date: September 24th, 2009
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