The Stock & Bond Markets -
There is a sell-off in the global markets approaching panic levels as I write the January 2008 newsletter. While the pundits are often wrong, markets tend to be right and the writing is on the wall (street) for all to see in bright red. Even the Federal Reserve, before making the first inter-meeting rate cut since 2001 (remember the dot com crash?) stated "APPRECIABLE [capitalized for emphasis] downside risks to growth remain." Rather than waiting for 2 quarters of declining GNP to name what is occurring now as a recession, it's better to acknowledge we're currently in one and position investments accordingly. The first rule is to avoid panic and make sober assessments of specific portfolio goals and objectives like short-term vs. long- term time horizons, tolerance of risk or not and so on. Once this process occurs, investors should make the changes necessary to position portfolios to new realities following the adage that investments are never too cheap to sell or too expensive to buy depending on the trend. The general advice, for those of you making New Year's investment resolutions, is to balance portfolios in U.S. and international equities markets, short-mid term on U.S. Treasury (not some derivative version) and a larger percentage than normal of cash available for buying at lower prices in the future.

Bonds have been a mixed bag. Treasuries have been going up in value based on the expectation of lower rates and demand for the kind of quality only Treasuries can provide (the government is the only debtor than can print money to cover the debt). Many other types of bonds have been declining in reaction to their quality ratings declining or expected decline. Bond investors should stick with the highest quality bonds only and stay with short-mid term maturities.

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Real Estate -
The housing market continues to accelerate on the downside with conditions worsening around the globe (England had the worst year-over-year) property decline since 1992) and tightening credit making it harder to see a way out of the current decline. Homebuilders are more pessimistic than at any time in history and they're usually the last to throw in the towel. Consumers are taking less money out of homes for purchases creating a further drag on the economy. In short, it's a buyer's market and better buys are still to come.