One of my favorite parts of the movie "Perfect Storm" was the nerdy weatherman assessing the incoming weather data and doing a "What if."  What if these 3 things happen...perfect storm!

Perfect Storms don't happen very often, rarely in fact.  But, every once in a while, we get to experience "epic" proportion events...

Consider the conditions...

1) a worthless dollar created by current Fed and Treasury policy.

2) commodity prices going through the roof.

3) the supply of oil in jeopardy; 70% likelihood of Israel unilaterally taking military action on Iran.

4) Fannie and Freddie are virtually insolvent.

5) A host of big banks on the verge of liquidity issues which will create insolvency issues: WAMU, Wachovia, Lehman, and virtually every Regional bank.

6) A huge oversupply of houses.

7) Businesses cutting jobs left and right to soften their losses.  People without jobs don't buy houses, and those with houses and no jobs eventually lose their houses.

We all might have some great seats to the greatest global financial meltdown of all time.  Something to tell our grandchildren about.

Storms are natural, unfortunately, this financial storm on the horizon is not natural.  It has been born out of irresponsibility, greed, and short-term thinking. 

I am not a "gold bug" and up until now I believed that the "gold standard" was completely impractical because it limits scales of growth and economic expansion.  Well, how much will we wish that there had been some brakes on our speed of growth if we experience the "Perfect Financial Storm?"

Even if the other pieces of the puzzle don't come together...consider the Fannie/Freddie piece.  What if...

...we lose the ability to securitize mortgages?  What bank do you know that has the capitalization that can stand to portfolio the loans that they get on their books over the course of a year?   What do you think will happen to mortgage rates and our current housing crisis? 

...the government nationalizes Fannie/Freddie?  Where does the money come from?  There are two choices...1) me and you in the form of higher taxes or 2) the printing press.  Neither of which are good options.

I was with an agent this morning who was drinking the "Positive Koolaid" and I couldn't help but conjure up the mental image that he was paddling out on a surf board to catch a Tsunami.  Maybe he's a good surfer...one can only hope.

Am I being negative?  No way.  I am being realistic.  I am extremely optimistic that our cyclical economy will correct as well as our housing market.  It took us 5 years go get us into this mess, there are no quick exits.