A year ago the good times were rolling. The Dow Jones Industrial (DJIA) was at 14,000 points and everyone was making money. The unemployment rate was at 4.6% and new housing starts were at 1.47 million units. However; dark clouds began to loom on the horizon with the financial sector or our economy showing signs of trouble. The stock market began to become unstable as major institutions such as American International Group (AIG), Fannie Mae (FIN), Freddie Mac (FRE), Lehman Brothers (LBC) and Merrill Lynch (MER) struggled to stay solvent. The Federal government has passed a $700 Billion buyout to save these companies and the economy in the process. Many questions which now arise are how will this affect my retirement? Will my investments be safe? What should I do to protect myself? The purpose of this article is not to give specific investment advice, but rather to explain how this problem occurred and how the current actions of the government will affect the value of investment income in the days ahead.

The meltdown and financial crisis in wall street was caused largely by mortgage crisis in the US. The sublime mortgage crisis came about as a result of a squeeze in the global credit market resulting from a contracted squeeze in the banking institutions and global credit market as well as failure of investment companies, mortgage companies and government sponsored enterprises. The collapse of such companies like Lehman brothers, AIG, Freddie Mac, and Fannie Mae was triggered by high default rates in the US housing markets in sub-prime and adjustable rate mortgages.