Fed Moves May Not Hold

Many Wall Street thinkers continue to be troubled by financial conditions,in spite of recent attempts by the Federal Reserve to calm the markets.The credit problems are so complex and widespread,that recession seems more likely.Investors should contemplate the possibility of an extended bear market.As Brian Wesburg of First Trust Advisors sees it,the Federal Reserve actions do not resolve the long term policy issues of housing,housing finance,and the debt tied to it.Housing is 10% of the economy,yet with the leverage attached to it,it is 50-60% more significant.The credit issue will not go away overnight.We have seen early week rallies followed by sell-offs.Lyle Gramley of the Stanford Washington Research Group notes that the mortgage and mortgage securities markets have seized up,increasing the odds of a recession to 50-50.Richard Bove of Punk Ziegel sees serious systemic problems that will not go away.The bad loans are still out there and must be repaid.The deal market won't soar again,and loans won't be paid off.To Liz Ann Sonders of Charles Schwab,the credit market's seizing up calls economic growth into question.The economy is sound right now,but recessions usually start while rosy numbers are posted,as these figures are lagging indicators.The iShares Lehman Brothers treasury funds,such as SHY,TIP and TLT,are attractive to many of those who are seeking higher ground.