If you have been following the stock and bond markets recently, you have seen that the markets have been volatile of late, as the bulls and bears debate with their money how extensive the sub-prime mortgage crisis will be to the world economy.  In just the past week, the CEO's of both Citigroup and Merrill Lynch have resigned due to huge writedowns to account for credit losses at their firms.

In addition, some analysts are now starting to worry that our nation's credit card debt will be the next cause for concern.  Some banks are starting to increase their loan loss reserves for credit card receivables, as signs of distress are starting to appear.

When credit problems start to emerge, it has the potential to permeate through the economy, as Wall Street has been packaging risky securities/receivables and selling them off to pension funds, insurance companies and banks for years.   This in turn can lead to increasing borrowing costs and an economic slowdown.

If you are interested in finding out more, I recommend this article.

From an investment perspective, this might be a good time to ensure that your portfolio is sufficiently diversified to weather any investment storm that may appear down the road. 

Also, is your asset allocation consistent with your time horizon?  Funds that you are counting upon in the next few years should not be used to speculate on short-term movements in the markets.

I pray that these warning clouds are false alarms that do not lead to bigger problems down the road.  However, let's make sure that we don't get wiped out by taking undue risk.

Powered by ScribeFire.