Are we really in a recession or has the dream bubble burst? Did we really expect the housing market to always go up with no top on the horizon? Come on now… When I was working at the bank and I was supposed to sell home equity lines and loans to clients that had about 30% debt to income ratio, I knew something was going to happen. Our software actually promoted the idea to sell loans to people that were in the 30-40% debt to income range. I was a simple “banker” (really just a fancy word for salesman of financial products) and I could see what was going to happen four years ago. It just amazes me that financial institutions were so leveraged to the mortgage business even though a high school student with one semester of forecasting could predict it blowing up.

This situation does not have to get you down though. This market had a self-destruct button and it was hit a long time ago. Companies did this to themselves and the ones that can’t take the heat are going to be burnt. Badly burnt. But as you know, there are plenty of companies that are just getting brought down by the huge sell off that’s been going on for a while now. Some companies that seemed too expensive just a few months ago are now extremely cheap. It’s going to me hard making a positive return in this market, but you can certainly build a nice position while the market is low. Dividends are a huge key to be successful in this market, but there are plenty of other ways to get a pay off. Diversification could be a winner here if you choose the right fund. Fidelity reopened the Magellan fund; which brought some nice returns even in a pretty crappy market in the 80’s and 90’s. Fidelity is opening up the flood gates for new investors and maybe you should be part of the rush.

I know it seems depressing when you turn on the TV and all you see is the Dow sinking even further. I wouldn’t recommend putting all your money in one stock or purchasing a ton of stocks at one time. You need to purchase slowly and keep buying even if the market keeps sinking. The best idea is just let an index fund do everything for you. Just keep on dumping $300 dollars a month (if you can) in an index fund that is spread over the S&P 500, raw materials, minerals, and petroleum. The stock market will go up and you just need to buy it as the market goes down. There will be a U-turn at some point and investors will be happy that they bought when everyone was selling.

I also think that boom markets will be produced from this mortgage disaster. There’s still a lot of older people out there that are about to retire. This situation alone will send up certain sectors to new highs. Medical and anything influenced by an aging population will send stocks soaring. And because the whole market is hitting new two year lows, this offers the opportunity to own lots of stocks for real cheap. Happy investing and I would love to hear some new investing ideas you might have.