And on into 2014

If all this wasn't enough, there will be new wrinkles to consider as 2014 approaches. Washington still hasn't passed a budget plan, which when combined with the upcoming debt-ceiling battle paves the way for more fiscal firefights between Republicans and Democrats. The argument has quieted as the deficit has fallen in recent months, but this should shake anyone looking for the White House or Congress to step into the vacuum the Fed will leave.

Plus, Ben Bernanke's term as Fed chairman expires early next year, and he appears unlikely to return.

If we're going to see a sustainable increase in the currently tepid gross domestic product and job growth rates, we'll need to see action on some very big impediments.

We need a boost in corporate investment as CEOs stop hoarding cash and instead invest in new factories and new workers. As I wrote recently in "We need CEOs to get to work," this has been the big missing piece of the recovery so far.

We need government to boost small-business confidence by addressing concerns on taxation and regulation. We have to ensure that Obamacare is implemented properly and smoothly, or chaos in the health care market will damage business confidence.

Credit Suisse economist Neal Soss worries about another aspect of Obamacare: the coverage requirement for small- and midsize businesses. He fears that many will load up on part-time workers to avoid regulatory headaches -- further skewing job gains toward low-wage, no-benefit positions and forcing families to turn to credit or savings to make ends meet.

The most recent report on personal income suggests that this dynamic has already begun playing out, and it could limit consumer spending (a rare bright spot recently) in the months to come as savings are depleted, credit balances used up and people are forced to cut back.

So as much as I hope the economy is ready to go it alone, as an investor I have to say: Stay cautious.

How to play it

With markets liquidating, and commodities, bonds, precious metals and stocks all falling in unison, cash is probably the most desirable option for conservative investors right now. Certainly, hold only positions you are committed to long term; everything else is trade bait right now.

If the Fed is right, a turn for the better in the economic data would bolster industrial metals, steelmakers and emerging market stocks first. Watch for that, but it's not a safe bet right now. In fact, the opposite is happening, with basic material stocks like Cemex (CX) melting lower. Since I recommended it as a short play on June 12, Cemex is down nearly 7%.

If the Fed is wrong, the economic data are going to get so bad that the central bank will be forced to revise forecasts and possibly talk up the ability to increase the pace of bond-buying stimulus. That will boost inflation expectations, help stocks and perhaps lift silver and gold out of the doldrums. Sentiment toward the shiny stuff has become so negative that metals are prone to a relief rebound if this scenario plays out.

All the other issues I mentioned will also play a role. But these are the two main scenarios right now. What I expect to see is a middle course, with the Fed walking back its tapering talk to quell market fright, China easing up on its banks a little, Europe moving toward more stimulus and Japan redoubling its revitalization efforts in August.

That might end the current pullback, though it won't settle the big question: Can the economy stand on its own without the Fed's cheap money? Early indications suggest it can't.

So for now, I continue to recommend that nimble investors look for opportunities to profit from the chaos with short ideas against homebuilders like DR Horton (DHI) and short exchange-traded fund plays such as the ProShares UltraShort Europe (EPV). Both DHI and EPV are in my sample portfolio.

For the more defensively minded, consider stashing cash in the bank or under the mattress until the smoke clears.

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At the time of publication Anthony Mirhaydari did not own or control shares of any equity mentioned in this column in his personal portfolio. He has recommended AA short, CX short and DHI short to his clients. He has also recommended EPV long.

Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.