The regulatory spotlight returned to the world’s largest mortgage buyer, Fannie Mae (FNM), this past week. What they see is not pretty. And neither is what the worst case scenario would mean for your mutual fund investments, to say nothing of your home and your future tax bill.

The economy and the stock market are much bigger than any one elected official, even the President. That said, the executive branch’s economic policy can move markets, particularly certain types of securities.

As the market moved higher over the last year we made changes, selling some of our hotter stock and bond funds and then moving the proceeds to more conservative funds. Longer-term subscribers will remember that in late 2002, while the market was falling, we moved out of cash and into more aggressive funds. 

When a transition is complete the last great industry continues to exist in the economy, but grows at a slower pace and becomes a smaller percentage of our national product. Today’s outsourcing (or offshoring) of technology jobs is a sign that America’s current leading industry is about to be replaced by another.  What will replace it? Financing.