Watching the Global Meltdown

What is happening now, in my opinion, will make 2008 look like a hiccup by comparison. It won’t happen today, or tomorrow, or this weekend, but it will happen.

In 2008, we started to rollover and after each sell off people basically breathed a sigh of relief and said “that was it”. Until the next unwind and the next chunk of deleveraging. We would get a shot to the bow, then a rally that would invariably induce complacency, the long only crowd caught knives and were dragged to the wood chipper. It wasn’t the end, and the market went into a massive meltdown. After all, how do you cure years of government recklessness with just a few market corrections? I’m talking the Greenspan induced freak fest. You know, a chicken in every pot and house key in everyone’s pocket.

So how does Europe cure decades of recklessness? The cradle to grave approach is sending Europe to an early grave.  It doesn’t get fixed in a few months or with the swipe of a pen.. Extreme pain will be needed first and yes it will probably throw us into a double dip. I know this has become an old story and we’re all sick of it by now. My point is that Europe, from a market perspective, is probably in just the third inning. Maybe there will be some massive monetary howitzer that will emerge, but for now it is a rudderless boat that is leaking uncontrollably.

I’ve told subscribers to get in cash, hedged and short. I am also aware that perhaps we are getting oversold and that a face ripper of a rally may be around the corner precipitated by any small headline that is perceived as “bullish”. I don’t buy it, but I will trade it.

Eventually we will disconnect from Europe, but not yet, and I don’t think much is safe.

I’m short the euro $FXE and the banks $XLF and will stay that way.

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