Batten down the hatches.  A major recession is coming.

The bailout was finally approved at the end of last week and there were no joyous celebrations or pats on the back for a job well done.  Instead was the blunt reality of an economy that is essentially experiencing a lobotomy of extraordinary size and scope. (See also: "Bailout Approved. What's Next?")

Entire sections of our economy are being removed at breakneck pace.  Printing money as the government and central bank are now doing in a coordinated effort may restore confidence, but only in the way a doctors scramble to treat a patient in a triage unit.

Stop one problem only to face another.  Where it ends is anyone's guess, but there is one thing that we can be sure of and that is the collateral damage to the economy will be severe.

Is anyone else frightened by the ineptitude of our leaders during this crisis?  It hardly seems that anyone really knows what is transpiring, and the fact is they don't.  The statements from the halls of Congress last week were hardly comforting.

One of the most common justifications for the passing the bailout bill from both sides off the aisle was a fear that failure to do so would result in a significant collapse in stock values.

With trillions of retirement dollars at stake, legislators figured spending a cool $700 billion would be the lesser of two evils.

The question I have is when did Congress become so prescient at predicting market direction?  How would they know if stocks would fall if they failed to pass a bill?  They have no clue, and to pretend they do is ignorant.

It would be one thing if there was discussion about valuations and the impact of the bailout on credit markets and future earnings, but there was none of that for obvious reasons.  They simply don't know the full impact. (See also: "How to Keep Your Money Out of Harm's Way.")

The conclusion regarding the stock market then was that in some unknown way the bailout would allow stocks to form a base of value that would then gain in value once a bailout was announced.

Retirement portfolios would be saved, but it is not that simple. Investing in stocks involves risk, substantial risk.  There is no such thing as a guarantee that stocks will go up in value or that principle is guaranteed even with a government bailout of this magnitude. (See also: "3 Tips to Protect Your Retirement.")

It was not that long ago that people believed housing prices would never go down.  Home values always go up, and you could depend on your equity to augment income or provide for retirement never having to worry about lower prices.

Even I conservatively assume 5% appreciation per year on my home I make out like a bandit. I'm not taking risk, I'm being conservative.  Yeah, right!

That works fine and dandy until home prices start to drop.  The funny thing is that most people feel like it is a right to have home prices that only go up in value.  We know now that such a belief was merely fantasy.

Home values can, and do, go down and down hard in some cases.

Now we hear the same thing with stocks.