Credit Crisis also called the Credit Crunch occurring in an economy wipes away investor wealth in a real hurry. In the US, there has been enough warning because many experts have been saying that the Federal government’s credit expansion undertaken in 2002 will hit back at the economy. Now in August 2008, we are seeing the phenomenon. This credit crisis hitting the stock markets now has wiped away a net of USD 2 trillion.

On the book but hitting where it counts, today brokers across the globe are seeing the US credit crisis phenomenon and have nowhere to turn to apart from being optimistic and expecting the best to happen – markets to turn around. The question is will they? If yes, then when? What is the best stock advice one can get in a credit crisis? In this article, let us examine a few tips as stock advice in a credit crisis.

If you are an investor, you will be feeling the jeepers as to when to liquidate your existing portfolio and if buying new stock could be any use. If you are a stock broker, you must be inundated with calls from your investors and do not what advice to give them. Although the credit crisis is a short term phenomenon, can you really predict when the markets will show a positive trend and come back to the past glory? With all these questions and with answers nowhere to be found, is it really possible to go theoretic and keep your client’s investments safe from erosion?

However, this credit crisis mentioned above will be here to stay for some time to come. In the words of Ludwig von Mises - "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." And Ludwig von Mises is a veteran in these matters and he had the experience of watching the economic rise and downfall of Nazi-Germany. Although the equations are slightly different today, the underlying principles are more or less the same.

The solution is not yet in sight with many a large mortgage companies folding up and adding fuel to the fire. The road to recovery is getting treacherous by the day. This is a chain reaction, with the mortgage market falling due to doubtful credit customers, the home loan market of banks is falling couples with the credit crisis where the banks are again taking the fall due tot heir exposure to mutual finds and direct stock markets. This is leading the economy into a liquidity crises where the banks and the government in trying to stall by pumping money into the economy.

With the investor belief falling to new ground zero, pumping in more money into the economy will not fetch the required results since unless it is used to invest, no economic recession can be arrested. If the money pumped in stays put in the bank vaults, it does not help anyone. So, it is the investor’s belief that needs to be reinforced rather than pumping in money and making the economy pump up the jam.

Investors today should pick up the treads and the government money pumped in and invest in gold which will help tide over the worst economic crisis over the next few months. Investing in stock as of now could be investing in toilet paper. Unless the stock market shows signs of revving up and shows an upward trend, economy would not be best option to invest in.

While gold may also be subject to trends in pricing and may go up and down, the upside and downside would not be at such extremes as the stock market. Until stock markets show a trend of going up, gold would be the best bet for investors. Once the storm blows and the economic mischief calms down, the investor can liquidate parts of gold and putting it back in the stock market in a phase wise and timely manner.

Now, many of us still licking our words and contemplating, why the credit crisis occurred in the fist place. A lot of conditions have come together to make it happen and frankly, all the problems that the economy is facing at the moment will not blow over together. So, expecting the stock market to recover on a particular day or after a particular economic problem is taken care of would be foolish. Stock advice as of now in the blowing credit crisis would be stop buying or selling and using fresh funds to buy commodities like gold.

Hope this article makes the situation crystal clear, and unless you have a information angel that is whispering into your ear, the above advice is the only way to tide over the credit crisis.