Stocks are spiraling downward, surprisingly since it was only a few days ago that they were improving. The biggest part of the problem is that the issue over defaulted mortgage loans is still fresh and now investors are looking at bonds rather than stocks.

Recently many homes have been foreclosed upon because the free lending methods of the past backfired and all those bad credit home loans banks thought they would cash in on went belly up causing a big stir in the financial world. When things seemed to be settling down somewhat the problem arose again when American Home Mortgage Investment disclosed that it had hired advisors to help guide them. The end result may be that they must sell some of their assets, although this will not happen if the mortgage company is able to access its credit.

Towards the end of last week the Dow Jones tumbled hundreds of points and really scared investors. However, when the new week began it looked as if things might be working out in the world of stocks as the Dow gained almost 100 points. However, Tuesday rolls around and sees a loss of more than 100 points. This left investors a little anxious because it was difficult to tell exactly where the market was going.

Other aspects that are not helping the Dow Jones any include that oil prices reached a price of $78 for the first time ever. Gold had a higher price as well. With the market jumping up and down investors should be prepared for more of the same. Of course, better than expected earnings for any of the big businesses could turn things around for the Dow Jones but while the market is worried over lending and whether or not companies will be able to receive loans the market will be finicky.

It seems strange that the Dow Jones reached a record of 14,000.41 in July and then just a few days later managed to fall an astonishing 5%. Believe it or not but some investors believe the worst has yet to be seen and that it is possible for another 5% drop. That remains to be seen but investors should prepare themselves for a volatile market that may be high one day and tumbling the next.

Of course, long-term investors likely have little to be concerned over because they may sit tight and wait for the storm to pass. It is hard to do however when it appears the market is going straight for the toilet. Nevertheless, long term predictions for the Dow Jones look good so investors may prefer to ride out the bad wave and then be in position when the Dow starts rising again.

This is especially true now that many lending institutions are changing their standards for home loans and subprime lenders are more than likely going to be required to have higher credit to be approved than the borrowers that have recently defaulted on so many loans.