Q4 2008 Economic Update
The current financial crisis reminds me of a movie from the 50’s, “The Day the Earth Stood Still”. With a frozen and fearful credit market, lending for virtually everything has stopped. A true panic has caused runs on money market funds and banks (WAMU saw $16.5 billion withdrawn from its bank in the week before it was seized by the FDIC). These are supposed to be the “safe” places to put your money. Goldman Sachs, the most revered of all investment banks, recently had to borrow money from Warren Buffet at 10% interest. If Goldman Sachs has to pay 10%, everyone else down the food chain has to pay more. This also means that the yield on corporate and muni bonds have sky rocketed, driving their prices down. The value of our well diversified Optivest portfolios, including Commercial Property, Trust Deeds and Hedge Funds really shines in times like these.