The only people who really should be buying are those that think we are in the midst of a dramatic v-shaped recovery. Of course, I don’t think that is true, but the Fed and government has clouded the issue by being willing to do virtually anything to prop things up. In the process, they’ve moved the housing/debt bubble onto their balance sheets and created a much bigger bubble of government debt. To make the payments on that debt manageable, they’ve continued to push the maturity to shorter and shorter periods. Currently, 40+% of our debt rolls over within a year. That makes the US very vulnerable to interest rate increases and limits some of the Fed’s options. My biggest fear was that they would try to inflate their way out of the debt, but that now seems unlikely. If the Fed does continue their MBS purchases after this quarter, I think the time would be right to get out of the dollar entirely.

 

The only way this whole mess can be fixed is to remove the moral hazard that has been created by the massive (and generally undeserved) bailouts of virtually every industry. That begins by allowing one of the big banks to fail. I don’t know that they have the balls to do it, but (the ironic thing) is that it wouldn’t even be noticed by 98% of the population. Deposits would be safe, stock holders would take a hit, and bond holders would get dinged, but the bad debts would get washed away and the pieces could be sold off separately to start fixing the ‘too big to fail’ problem.