Cramer predicts meltdown- What's next?!

Back in August 2007, when the market began to show signs of its collapse, Mad Money's Jim Cramer predicted the eminent economic meltdown. http://www.youtube.com/watch?v=GKZgfrsItmw

A fellow Keller Williams agent out of Celebration, FL, Steve Glose, writes, "With the world's financial markets in turmoil the question on everyone's mind is 'Are things going to get worse and when will we see this mess level off?' No one knows this answer for sure but a good bet is that things are still going to get worse before we see things turn around. The finger pointing at the problem is pretty easy. The housing melt down has caused huge losses to Banks and Financial institutions. These losses are forcing many banks to restructure their bad debt or risk failure all together. Several large banking institutions have sought out buyers to prevent bankruptcy while the government looks to see what can be done to prevent further meltdown. This uncertainty has sent shock waves throughout the global financial system and caused huge down turns in stock markets around the globe" (http://activerain.com/blogsview/692367/Financial-Markets-In-A).

For some, the current outlook of the market is quite scary, but not for investors. Those who know how to invest, know that this is quite possibly one of the best markets to be in. When markets crash, people panic and withdraw to save what's left of their investment. People become irrational and lose sight of basic market fundamentals, often selling at big losses just to get out. It is at this point when the savvy investors jump in and take advantage of a changing market.

"In today's economy, residential real estate offers investors a fresh place to put their money, rather than turning to typical stocks, some say. Jason DeMink, CEO of the Benchmark Cos. in Grand Rapids, said that with foreclosed homes selling as low as half their worth, investors who can't participate in the commercial real estate market can get into residential" (http://www.mlive.com/businessreview/western/index.ssf/2008/09/investing_in_todays_real_estat.html).

Right now we are going through a much needed correction. Banks that made poor business decisions are getting reprimanded. That's Schumpeter's creative destruction at work. If you bail them out, you're rewarding the businesses that created the problem in the first place.

I liken the situation we are in to weight lose attempts. One cannot expect to lose weight after working out a day or even in a week. It's taken years for your body to put on the weight and it's going to take some time and hard work to get back into the lean shape you want to be in. Similarly, we've been putting on some bad weight during this housing and financial fiasco and now it's going to take some tough "workout sessions" to get us back into shape again.