CautiousInvestor's  Instablog

Dan Sullivan, editor of two investment advisory services -- The Chartist and the Chartist Mutual Fund Letter -- emailed clients last night that he was changing his recommendation from being 100% invested in equities to being completely in cash.

This move should give bulls pause, given Sullivan's track record: He has done an outstanding job of timing the stock market over the past three years. He got out of stocks early in the 2007-2009 bear market for example -- in January 2008, in fact.

And he got back into stocks soon after the bull market began (in April 2009), and -- except for one brief retreat to cash in the summer of 2009 -- has remained steadfastly bullish ever since.

Until today.

In going to cash, Sullivan joins Richard Russell, editor of Dow Theory Letters, who also is firmly in the bearish camp. This past weekend, Russell sent to his clients an unusually apocalyptic message:

"Do your friends a favor. Tell them to 'batten down the hatches' because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country."

Contrarians may be the only ones to find a silver lining in this very gray cloud, since it means that there is now an even more formidable wall of worry that a bull market could climb

• Geithner was directly responsible for the most appalling corporate bailout in U.S. history, in which tens of billions of taxpayer dollars were secretly funneled to some of the richest corporations in the world. The terms of this bailout, and the associated cloak of secrecy under which it was conducted (the details of which continue to leak out) have hurt the public's confidence in the government.
   
• Geithner's ongoing decision to save banks at any cost was predicated on the theory that this would keep the banks lending. This policy has failed: The banks have not continued to lend. What the banks HAVE done is coin billions of dollars of profits risk-free at taxpayer expense, fueling even more public outrage.
   
• Geithner's policy of "too big to fail" has created a banking system whose bets are guaranteed by the US taxpayer, and it has distorted lending and market forces across the entire economy. This policy, which has now been all but written into the Constitution, is grossly unfair. Big banks can do whatever they want with no concern about the consequences; small banks have to hunker down or they'll get taken over and shut down.
   
• Geithner's role in the AIG bailout, which the current administration bears no responsibility for, continues to destroy confidence in his current boss, President Barack Obama. If AIG stays in the headlines, and Geithner does not accept responsibility for what happened. Obama's agenda and influence will continue to suffer.
   
• Geithner's consistent decision to put Wall Street first has helped fuel a populist rage that will make it very difficult for the government to do anything more to help the financial system. If the recovery continues, such help might never become necessary. If it falters, however, Geithner's policies will have severely curtailed the government's ability to do anything about it.