Editor’s Note: How do you protect yourself against a bear market? Should you put your money in stocks and bonds? What about real estate? Or commodities? Bill Bonner looks at the pros and cons.

More bad news from the US housing market: in the worst housing slump since the Great Depression, 67,967 homeowners with mortgage insurance fell at least 60 days behind on their loans, compared with 40,687 who got back on track.

Meanwhile, US financials continued their three-day slump on fears banks and bond insurers are running out of cash.

Editor’s note: Oil is rapidly heading towards $150 a barrel, and Fed boss Ben Bernanke won’t raise rates… yet. Who do Americans blame? Gee Dubya, says Bill Bonner in The Daily Reckoning. The president’s approval ratings have gone through the floor. And Warren Buffett says he’s voting for Obama…

Oil hit $143.67 this morning as fears of Israel attacking Iran spooked the market. On Saturday, Major general Mohammad Ali Jafar, the Iranian military chief, ratcheted up the tension by warning of shipping controls in the Gulf – through which 40% of the world’s oil travels – if Israel launched an attack.

Editor’s note: The Dow is having its worst June since the Great Depression.

The index is on the brink of a bear market, says Bloomberg. More subprime-related writedowns and stubbornly high crude oil prices are giving Mr Market a serious case of the jitters.

The US economic model is in decline, says Dan Denning. US companies are lumbering giants who just can’t compete as the world changes. They can’t make money making things. They can’t make money lending money. This is a big problem…

Editor’s note: The Federal Reserve is living in dreamland if it thinks US inflation’s going to come down this year, says Charles Delvalle in Investor’s Daily Edge. The price of imports will see to that. Bernanke should follow Europe’s lead and think about raising interest rates.

Editor’s Note: Bill Bonner wore a brown polyester shirt in the ’70s. The polyester shirt is gone, but ’70s-style inflation is back. So is ‘30-style deflation, says Bill. The Fed is doing it’s best to combat deflation by juicing up the markets with more easy money. But in doing so they’re pushing the price of commodities through the roof…

Citing the risk of high inflation, the U.S. Federal Reserve voted to hold the Federal Funds rate steady at 2.0% yesterday (Wednesday).

“Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,” the accompanying Federal Open Market Committee (FOMC) statement read.

Jason Simpkins at Money Week provides some more detail on yesterday’s gloomy data releases…

Home prices as measured by the S&P/Case Shiller composite index of 20 metro areas fell 1.4% in April from March and slumped by a record 15.3% over the year. The group’s composite index of 10 metro areas dropped 1.6% in April, making for a record 16.3% annual drop.

According to the S&P, 13 of the top 20 metro areas are still posting record annual declines with price losses in the double digits for half of the areas.

“The potential is a vicious cycle which we may already be experiencing. Falling home prices are leading to more foreclosures, which cause a further decline in prices,” Richard DeKaser, chief economist at National…

Economists and investors wait with bated breath for the U.S. Federal Reserve to release the statement from the Federal Open Market Committee this afternoon (Wednesday) at 2:15 p.m. EDT.

While it is almost universally expected that the FOMC will vote to hold the Federal Funds rate steady at its current 2.0%, the language in the accompanying statement will be scrutinized for clues about the upcoming August and September meetings.

Bill Bonner in The Daily Reckoning takes on the Fed’s big dilemma. How can it simultaneously fight inflation and deflation of asset prices?

The Fed’s two-day policy meeting tomorrow means there’s of speculation about its next interest rate move. But will rising inflation keep it from further juicing up the economy?