Stock market problems have not ended yet

When the early settlers in North America built the first communities, they surrounded their homes and most important possessions with tall wooden fences to keep out intruders, whether four-footed or two-footed.
Their forts were a historical link with the past when cities were stone walled to keep out bandits and unfriendly armies.
Religious orders and barons in eastern Europe and the Mediterranean used to build home quarters on inaccessible cliffs and mountains.
Stock market investors should take heed of how pioneers through the ages have fortified themselves for protection.
The last 11 months have been a wild ride for investors. The general averages and many stocks show the same trend -a heavy wind driving up stocks until spring when up and down volatility began.
Then in July came a sudden steep decline as the first problems appeared with the loose American mortgage lending practices of the last few years.
It all seemed over so soon as stock climbed back to or close to pre-July levels in weeks.
This column warned that the mortgage and credit crisis was far from over. Unfortunately this column was right.
Investors have witnessed bank after bank in the last two weeks take massive write-offs related to the packages of high risk U.S. mortgages in their investment portfolio.
And the situation is far from over.
Last week, U.S. data revealed mortgage defaults in the U.S. have hit a multi-year high.
Borrowing for mortgages and business in the U.S. has been getting harder to get as lenders tighten the screws to prevent more losses.
Central banks around the world have poured more cash into their economies on a weekly basis to try and stall any recession caused by the now global credit crunch.
In the face of a historic high inventory of U.S. houses for sale, central bankers have a Superman task. Not since the 20 per cent interest rate era of the early 1980s have so many homes been for sale south of the border.
U.S. demand for basic materials - copper, iron, zinc - will fall. Demand won't stop Asian growth, but the perception among stock market traders will cause prices of these commodities to slip and the underlying stocks will decline.
The U.S. debt crisis may be worked out by 2009 and the largest economy on the globe should resume chugging along unless the credit crunch causes a recession.
In the meantime, investors would be wise to look at reducing ownership of risky stocks, buy strong companies that pay hefty and sustainable dividends and keep lots of cash in the kitty to buy the bargains next year as stocks may resume an upward trend.
Remember the No. 1 rule in the stock market: Protect your capital, and don't lose money.
Bizword columns do not solicit buying or trading of securities. Investors need to do their own homework or consult advisers.

Ron Walter can be reached at 691-1264.