Denninger On Stocks: It’s Time to Sell

It’s time folks.

Back in late 2007 and early 2008, to the guffaws of basically everyone in response, I noted that contrary to Cramer’s “Horsemen” (Remember them?) the emergence of a “fabulous four” stocks that were responsible for a huge percentage of the market’s advance meant it was time to sell, not buy, and if you were aggressive it was time to short.

That turned out to be exactly right — the market subsequently crashed.

We’re there again, except this time it’s one stock that is responsible for a monstrous percentage of the index gains: Apple.

It isn’t going to work this time any better than it did last time.

This sort of “coiled spring” effect, where rotation piles the gains into an increasingly-narrow piece of the market, essentially always ends up with a calamity.

It is precisely because the premise of such a shift in the market is that one leads all; in other words, one firm’s market gains on the belief that the business is advancing will inexorably lead to the general economy expanding and improving, is and always has been false.

It doesn’t work that way.

It never has, and it never will.

Inevitably 499 (or 99) opinions are right and the one (or four) are wrong.  Inevitably the market succumbs to this blatant imbalance and collapses.  2000 and 2008 are the most-ridiculous examples in recent memory, but not the only ones.

In 2006 you had some time left, as many stocks took big “dips” in the summer only to roar back.  But there the leadership was broad-based and solid.  Earnings were being ratcheted up as were expectations.

Now we’ve got the opposite — earnings expectations published by companies themselves are not being ratcheted up.  Instead, we have touts on the bought and paid-for media issuing ever-more-ridiculous price targets simply predicated on the fact that their last one got run over.

It’s time to sell folks.  The money is not yours until it is reduced to cash.

Yeah, this might be a bit early.

But it’s not wrong.

Via The Market Ticker