The investment world is in a buzz with a loss of confidence and a lot of fear. Citibank was recently rescued by Middle East investors who put a lot of money in to keep the bank afloat. HSBC is also in a similar bind. The problem is that over the last few years, people started to get really cute with Wall Street investments. That's the heart of the housing/mortgage meltdown. Lenders just wanted to package mortgages and resell them for a profit -- they didn't care if the loans were ever paid. The drop in lending standards also really took a toll on the market. Home values in California are now down 15 percent from their peak and they're expected to go lower.

Economists now are talking about the possibility of recession. The foreclosure epidemic is a personal tragedy for families and neighborhoods alike, but the big test for the economy is if the stock market hollows out too. Beware of a bear market, where the value of stocks falls 20 percent from peak prices. The combo of a bear market with a housing slump could definitely lead to recession. It's been about 25 years since we as a nation have had really tough economic times. If you came of age during the last 20 years, you don't know the level of discomfort that could be yet to come. So what should you being doing right now? In a word, have your act together. The recent "in" thing to do was to take out a home equity line of credit and make your house a piggy bank. But now that piggy is tapped out. So you must pay off the debts you may have developed. Ask yourself how much you have in savings and how much debt you've accumulated. Have a plan in place in the event of a job loss. If you're looking ahead to retirement soon, move your retirement savings into safe havens. If retirement is many years away, then stay the course and keep putting money into your 401(k) plan. Doing that during lean times is like buying merchandise at a deep discount.