Here’s the case for dumping stocks and not touching them for at least two years.
The case for “buying and holding” stocks boils down to four words: don’t fight the Fed. Forget moral hazard and all the fancy stuff; the reason to load the truck with stocks is that the Fed is invincible, and its mighty machinery of manipulation can drive stocks higher no matter what else is happening.
Put another way: when the Fed succeeds in driving the dollar to near-zero, the value of stocks will be near-infinite.
The case to dump stocks now and not even look at the market for two years is based not on worship of the Federal Reserve’s infinite wisdom and power but on the charts. The abject, pathetic, remarkably complete failure of QE2 has driven a stake through the heart of the Fed’s political power and its reputation for wisdom; it has been revealed as a clueless cabal, basing policy on textbook models of what “should happen when we do this.” Alas, real life doesn’t follow moldy old PhD theses, and it doesn’t worship the Fed or listen to the cargo-cult incantations of the Keynesians.
Financialization anf globalization have run their course, along with cheap abundant energy. As the giant 17-year bubble in stocks deflates, those entrusting their money with Wall Street face stupendous risk and potentially massive losses.