The Stock & Bond Markets -
With oil approaching $100 per barrel, the dollar reaching record lows against almost all foreign currencies, foreclosures doubling from last year in an accelerating trend, consumer confidence and spending down and the Federal Reserve signaling a reluctance to further reduce interest rates, it's hard to see how the stock market can continue to move continually upward. And yet, up it continues to go. Whether stocks can continue to defy gravity for the foreseeable future remains to be seen. We are recommending (as always) broad diversification and "keeping some powder dry" (cash) should prices decline and provide buying opportunities.

Bond continue to offer diversification to either low yielding money market funds or volatile stock markets but the rally in bonds is unlikely to continue should the Federal Reserve make good on its threat to stop lowering rates. One hybrid to traditional bonds are "inflation-protected" ones which pay a slightly lower yield but supplement that yield by increasing values in direct proportion to inflation (consumer price index). Government-backed versions of these are known as Treasury Inflation Protected Securities (TIPS). Feel free to inquire if you'd like more details.

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Real Estate Bubble? -
Homes across 20 major U.S. metropolitan areas fell 4.4% for the prior 12 months ending in August according to the recent Case-Shiller survey. With foreclosures doubling over the same period and many adjustable rate loans due to reset in mid-2008, that trend is likely to remain or accelerate, keeping the supply of homes high and prices under pressure. While mortgage activity rebounded a bit, it was not due to increased interest among prospective buyers but multiple applications being filed by the same borrowers in light of the tightening credit standards of lenders. Home builders are more bearish than ever so we recommend waiting before trying to pick a bottom in real estate at this time.