Economic Problems Persist

Stocks are still trending higher as the economy shows signs of at least stabilizing at current levers. Layoffs at least at larger companies have slowed and productions seems to be picking up. In the longer term economic growth will be challenged by several factors

1.Loss of value in real estate that is most likely not going to return in the next ten years

2. Continued erosion of 401k values from the peak

3.Loss of income from investment due to low interest rates

4. Lower income per capita due to low employment levels and lower paying jobs

5. High fixed costs of living due to higher taxes

6. Higher cost of medical insurance and medical costs

7. Lack of credit availability to less than perfect borrowers

8. Lack of credit availability to small business

9. Continued cost of fighting wars in Iraq and Afghanistan

10. Funding issues relating to social security

These issues will weigh on the Bond market for many years. People who expect that we are going to quickly emerge from this are way too optimistic. Mortgage rates will need to remain low for the foreseeable future if we are to weather this crisis