Kipp,
Good point about government possibly declaring all the CDS as null and void. That, in my opinion, could begin a cleansing process in the system that is very well overdue. Agreed- that would cause many weak banks, hedge funds and financial institutions to go under and deflate the asset prices further; but as you mentioned that could very well be the final bottoming out process. I would say the government should be doing that now instead of dragging on the inevitable capitulation.
Anyways, I would wait until that happens and remain hedged in my precious metal stock and energy positions with some market/financial shorts, Yen Call and Euro put options.
Good Luck with your strategy.
-crk
