US consumers and businesses have become used to cheap credit; it's what helped get us into this current mess. The government response has been geared towards making credit even cheaper. They've done that by bailing out the banks, buying residential mortgages, buying consumer debt and buying long term treasuries. Current 30 year mortgage rates are below 5% and may fall to almost 4% by year end.

Regardless of whether the measures the government has taken will stem the economic collapse, the end result will be inflation. Unfortunately, their options to contain inflation will be limited as raising interest rates is always politically unpopular and would put an added strain on any housing market recovery. Additionally, the Fed will have incentive to keep rates low to finance the monstrous debt that is being built up.

It's unfortunate that the current economic crisis hasn't been used as an opportunity to modif ...

"Should I buy gold?"

It’s probably not a bad idea. I’m working on the right way to play all this. Right now, it’s ‘put everything in t-bills’ as it’s only a matter of time before Citi and B of A fail and there still is a lot of uncertainty as to exactly how that will play out.

Looking 1-3 years out, the end result of all these bail outs is going to be high (possibly hyper) inflation. At that point, government bond yields will go up so they might not be a bad place to park longer term [safe] money. That should also be a good time to be back in stocks, property and commodities. As to the exact timing of all this, it’s hard to say, but essentially we have a slow motion train wreck happening. The first thing I’m looking for is any sign of a recovery in housing. Currently, prices are slumping at over 2% a month. With the 1.5 trillion in option arms and alt-a loan ...

I couldn't take it any longer... Did I get out at the bottom? ($4.76) Only time will tell. I'd been planning on dumping it the end of this year as I figured eventually everyone would start to realize that the financial crisis is more serious than expected and it won't be long before municipalities and state governments start defaulting on their payments. Generally, budget problems lag a recession by a few years, but as it was just announced that we've offically been in recession all year, that could hasten the process. Still, I probably would have been OK if Lehman hadn't been allowed to fail. The liquidity crunch that ensued flooded the market with munis.

The 'tradable' bear rally is underway. I can't see how it really lasts too long as I'm expecting horrible holiday shopping numbers and a slew of retailer failures being announced early next year. The DOW closed today just under 9K but the ascent is counter to all common s ...

The market has been rallying and is now up around 9,500. I expect it to climb to 10,500-11,000 before resuming it's decent. By early next year, I expect to be below 7,000.

The recent sell-off was overdone and was sparked primarily from one event (the failure of Lehman), but there is no reason to expect that things are going to be looking better anytime soon.

On the political front, Obama will win easily, but a bigger question is how many seats the Democrats will pick up in Congress. I'm going to guess 58 seats in the Senate, but 60 is the magic number to prevent a Republican filibuster.

The bond fund has kind of settled in around $5.07. I'm hoping for a rally so I can get out once and for all. An Obama presidency should be good for tax-frees! Likewise, I'm hoping for the current market rally to continue so I can get out of the ...

The DOW is crashing again today. It will probably end up at around 8300. In the past week, my muni bond fund bounced back from a low of 4.83 and is now at 5.09.

Everything points to deflation over the next 6 months, but then??? The government is printing money as fast as it can to borrow us out of this mess. The likely (and intended) result will be inflation. The easiest way to buy yourself out of debt is to make the debt [relatively] less. The challenge is going to be figuring the best time to go from cash - and long term bonds - into hedges against inflation. (property, stocks, commodities) As they are the very things that are crashing right now,  the timing is going to be difficult.

My first step is to get out of the long term bonds. I'm thinking definitely within the next 3 months.

The DOW is below 10K for the first time since 2004. While I think it ultimately might settle in around 7K, that could take a year or so. In the near term, the panic phase will probably subside and we'll see some sort of rebound.

Houses in OC hit a high of around $630K in late 2007. They're currently at about $450K, and I expect them to go to $300K before we see a turnaround.

My MCFTX hit a low of $5.23/share last Thursday. The flood of high quality assets seeking cash is playing havoc with otherwise conservative investments. The recent crash was initiated by the bankruptcy of Lehman. Things seems to have turned a corner and I'm hoping for a bounce back up to around $5.60.

On a positive note, yields in tax free muni money markets are though the roof as nobody is interested in tying up short term money. The tax free yield is up to almost 5% fro ...

Well, it happened sooner than I thought. Stocks around the world shot up Monday as fears of mortgage defaults on US held securities diminished. The US markets have been more cautious, but (with the exception of FNM and FRE) financials and home builders are up sharply.

It's all kind of ridiculous short-term trading as unquestionably this is bad news for economy as a whole and the housing market specifically. Are people really excited about the government running the mortgage industry? As Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday, the U.S. is "more communist than China right now".

I'm re-reading John Talbott's 2003 book "The Coming Crash in the Housing Market". Since his predictions were spot on, I'm particularly interested in his assessment of mortgage giants Fannie and Freddie. My fear is that they ultimately will have to be nationalized and the ensuing debt taken on by the government will ultimately lower the government's credit rating... lowering the value of outstanding bills and bonds and hastening the United States descent into the number 2 spot in global power.

On Monday I moved most of my remaining money from WAMU into Wells Fargo so I can begin the long, painful process of setting up and transferring all the bill pay, auto debit, etc.  
IndyMac bank (founded by Mozilo) failed on Friday. It will prove the costliest bank failure in US history, approach ...