Fact or Fiction

Freddie Mac and Fannie Mae were off roughly 45% this week.

- FACT: These are Government Sponsored Entities (GSE) that engage in mortgage purchasing and providing funds to mortgage lenders, respectively. Their stocks prices have tanked this week from fear of going bankruptcy. However pay close attention because many on Wall Street believe that some type of government bailout will be necessary to save these firms.

Inflation on the rise.

- FACT: Inflation or at least the fears that your dollar is stretching thinner and thinner continues to rise. Normally during times of inflationary concern, investors would flock towards a Fannie Mae, Freddie Mac or government bonds but that is not happening. Should you be concerned, YES, because you must follow the money and Wall Street is telling you to be concerned because the price of GOLD is rising, OIL has pushed through record prices, and ohhh I forgot the housing and auto industries are collapsing. Don't believe me, see the lastest story about Indymac, which became the largest US bank in history to be seized by the government.

You should feel good about the market, and keep holding on to your stocks.

- FICTION: Sorry folks for the first time ever my outlook is very dismal from here. If you are a gunslinger, then please at least hedge your portfolio against further downside risk. For the rest of us, continue to sell most of your winners, cut your ties with losers, and get defensive!!!

Your defensive plays are:

OIL : Problems in Iraq and Israel & Iran, disruptions in Nigeria and Russia ALL mean oil will continue to rise. I don't believe speculators play a big role in the price and I don't think the potential of domestic drilling will impact the short term price.
GOLD: Gold is on the rise and so are future prices, which means that investor faith in the dollar continues to decline.
CASH: Cash is always KING and have cash in your portfolio ain't always a bad thing. Wait out this storm, because it could be awhile.