As the US Dow Jones index continues to power ahead to all time highs, there are signs that the stock market performance of late may be masking what is happening behind the scenes.  The US Federal Reserve have been holding a conference with Congress over the last few days, with many experts asked to give their opinions on the state of the economy, the future, etc.  Its seems that all may not be well!

It was Federal Reserve chairman Ben Bernanke who actually brought up the ongoing situation with sub-prime lenders (sub-prime lenders deal with customers who have tarnished credit ratings) and the increasing dangers for the sector. Bernanke claims that far from the worst being over, when a number of high profile companies recently collapsed, there is still a lot more to come.  In fact he reckons that the sector could well soon lose out to the tune of $50 billion to $100 billion, as more and more struggle to pay their mortgages.

It is not just the repayment situation, it is also the fact that many homes may well come onto the market to enable the sub-prime lenders to recoup as much money as possible - thereby having a potentially massive knock on effect to the buoyant housing market.  A lot of Americans have recently ploughed their savings into the stock market and property, two areas which may suffer serious problems. So what can the authorities do?

Unfortunately, much of the damage has already been done with sub standard business written at the height of the market.  In order to return the sector to some kind of stability it appears inevitable, and essential, that there is some kind of shake out.  Quite how much of a shake out remains to be seen, but it will surely test the ever optimistic attitude of the US investor - and the Fed.