I would think that those that found fast gains in stocks, then fast losses, turned to another investment type when that housing market heated up and looked like “the next big thing”. Once addicted to chasing return, they simply looked for a different game. Fixed income investors are probably more risk adverse than to start trying to flip properties and buying with the adjustable, no money down, mortgages that fueled the real estate boom.

Today there were reports that the housing bubble isn’t a systemic problem. Basically, they are saying that the fall out won’t effect the rest of the economic system. The housing bubble not being systemic doesn’t mean it will be a good economic event and the fall out will still hurt a lot of people. Plus…they could be wrong.

There are plenty of people that think Freddie Mac and Fannie Mae are both in trouble. They seem to be continually hiding something and just today one of them is once again looking for a new CEO.

The catalyst for their failure is interest rates. If they move up to fast, they could be in deep trouble as they have to cover their duration gap which will send interest rates up even further. This could lead to a spike in interest rates. This will cause the housing bubble to burst and create a huge problem for the economy.