Yesterday I began the New Year by looking at possible tipping points that may lead to an economic slowdown. First, we looked at the Peak Oil problem and how it is not going away. The economic impact of Peak Oil and what that means to our way of life could be extreme. Now, it doesn't mean that it will happen overnight. No, it is far more likely that it will be a slow process. In fact, I would say that it has already started, and most people just don't see it. Everyone sees the record oil company profits and lays all of the blame for high fuel costs at the oil companys feet.

Rather, I believe that this is the first phase of Peak Oil and it will only get worse. Why do you think our country is fighting a war that is not winnable in the Middle East? It is not about weapons of mass destruction or the slaughter of innocent citizens, it is about oil. That is why I believe the war effort in the Middle East will only expand as we seek to control the region. Next on the agenda, Syria and Iran.

But enough talk about Peak Oil. Today, the next possible tipping point is the US interest rate yield curve and what that could mean to us.

The yield curve did not wait until March to invert. It briefly inverted last week and it looks like it is only going to get worse. Why should you care about the yield curve? Because in six of the last eight inversions, we have suffered a recession within 12-18 months. The most recent yield curve inversion occurred in 2000. When it occurred, the Wall Street wizards claimed this time it is different. As we now know, it wasnt any different than any other time in history. The markets tanked and the country slipped into recession.

This time we have a severely overpriced real estate market that is as fragile as any market Ive seen. The consequences of a recession could be devastating to the real estate market.

Conventional wisdom is once again saying that the yield curve is nothing to worry about. We have a unique situation due to foreign buyers, purchasing the long bonds and driving the interest rates on the long end down. I hope that you have all learned not to trust "conventional" wisdom. History has shown time and time again, that it is not wisdom at all but foolishness and the individual investor tends to suffer the most by following their advice.

Think that foreign banks will continue to bail us out? Just this last Sunday, Yu Yongding, chief adviser to the People's Bank of China warned for the second time in a month, that Beijing should scale down its purchases of US dollars and bonds. His big concern is that at the first sign of recession our new Fed chairman Bernanke might start lowering rates again resulting in a sell-off in the dollar and staggering losses for China and all of the other countries that hold dollars and U.S. bonds.

As if that is not enough, we already have signs of a weakening real estate market. New US home sales fell 11.3% in November, the largest monthly drop since 1996, and applications for home mortgages fell to a 3-½ year low. Existing homesales fell 1.7%, for a second month in November, while home prices fell $3,000 to an average $215,000, and the number of homes for sale rose to an annual 2.9 million, the highest in 20-years.

So, if foreign banks scale back purchases of U.S. dollars and bonds, the yield curve may correct, but interest rates will go up, triggering interest rate increase for millions of homebuyers who have adjustable rate mortgages. The continued softening of the real estate market will make it increasingly difficult for strapped homeowners to unload their houses, which will have dropped in value below the outstanding mortgage balances. This will only accelerate the imploding of the real estate bubble.

This possible tipping point, I believe, is more likely to occur first. The Peak Oil problem may take years to develop. The real estate bubble could pop as early as this year.

Are you ready for what could become an event filled year? If you have not already done so, I strongly encourage you to send for my free report, "Five Things You Must Do Now to Protect Your Investments."

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