My Take on the Credit Crunch and Housing Woes.

There has been a lot of doom and gloom in the news lately about the problems with the credit markets and the increase in foreclosures due to some poor lending practices in the housing markets. While this has caused a lot of uncertainty in the U.S. economy, it's my opinion that we really have very little to worry about. In fact, unless you're one of the unfortunate people who took out one of these mortgages or, like myself, waited a little too long to unload shares in REITs, this could actually turn out to be a good thing.

I've been around long enough to remember a very similiar situation in our economy. Back in my 20's, when I was more interested in partying than in investing, our country was faced with a Savings and Loan crisis. It seems the Savings and Loans had played fast and loose with some adjustable rate mortgages and they had gotten themselves into a bind when the foreclosures started to reach epic proportions. Peoples interest rates adjusted and therefore their monthly payments went through the roof and many of them simply turned in their keys and walked away because they simply could not afford to make the payments. Sound familiar? The situation now is so similar it is almost spooky. The American dollar is down against foreign currencies, the price of gasoline has syrocketed, the government has had to step in to help stabilize the economy (although the Feds interventions are a lot less drastic than were required during the Savings and Loan crisis). So why do I say this could be a good thing?

In the years following the S&L crisis you couldn't throw a rock without hitting a great opportunity for increasing personal wealth. That is, as long as you were one of the sane ones who ignored all the people preaching doom and gloom and actually assessed the situation for what it was. When the American dollar dropped so low back then, it made our goods less expensive and more attractive to foreign countries. Our exports began to boom, just as they have now. The price of oil and gasoline were outrageously high, so everywhere you looked there were large gas guzzling cars and trucks for sale and nobody wanted them, because they were all switching to more fuel efficient vehicles. Which is exactly what is happening now. When the country en-masse switched to driving mostly smaller vehicles our gasoline consumption dropped dramatically and the price of oil and gasoline followed suit. Basic economics, the law of supply and demand. As for real estate, after the dust from the S&L disaster began to settle, people began to realize that expensive properties were going extremely cheap. Those who had the good sense to buy some of those investment properties at or near rock bottom made out like bandits in the ensuing years as the real estate markets began to recover and prices shot back up to or above their previous levels. I believe 2008-2009 will be the big buying opportunity again in investment real estate and I have no intention of missing out on this one.

As for the stock market, I believe it is a victim of sorts of the information age. With all the business news channels, the internet business websites, every little obscure bit of news from around the globe is analyzed to death. I believe a lot of the fluctuations in the market are irrational and you just have to pick stocks in well run companies who have a solid financials and you have to stick with them and ignore all the hoopla and sensationalism from most of the business news. If you invest in solid companies who reward their shareholders with regular and increasing dividends, the effects of market fluctuations are most likely to be temporary ones. Remember, your supposed to buy low and sell high, which almost no one ever does. So when everyone else is fleeing the market, that's the time to be doing your homework and finding the bargains. I can tell you from personal experience, there will be plenty!

So, in summation, while things might seem pretty bleak right now, in my view we are faced with a great window of opportunity within the next couple of years. I've already put my plans in motion to take advantage of what I see as another great shift in wealth in the U.S. economy.