By Bill Baker, J.D.
Editor and Publisher, The San Bruno Beacon
As an investor, I have to see things coming long before they happen. The equity markets are forward looking instruments and to be successful you need to act on information long before a crowd gathers around a targeted equity and destroys the potential profit in any position you may want to build. When it comes to taking advice, you learn who the winners and losers are.
That being said, I have a very high degree of confidence in the economic research team at the Royal Bank of Scotland. Simply stated, when it comes to economic matters, these are the folks you want to listen to.
In a 06/18/2008 Telegraph story, it was reported that Bob Janjuah, the chief credit strategist for the Royal Bank of Scotland warned clients that:
"A very nasty period is soon to be upon us - be prepared"
Mr. Janjuah believes that a serious crash in the global stock and credit markets is looming just over the horizon.
Mr. Janjuah went on to say,
"Cash is the key safe haven. This is about not losing your money, and not losing your job"
While I agree with Mr. Janjuah that cash is the key "safe haven" I would also point out that the anticipated volatility in credit and equity markets creates a need to hedge risk with derivatives and find other stores of value. In a word; diversify.
However, the point of this article is not to discuss investment strategies but to heed the warning of these three paragraphs included in this Telegraph article:
"US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.
The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation.
The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets."
From a local perspective, I would strongly urge both the City of San Bruno and the San Bruno Park School District to immediately put their financial houses in order, create budget surpluses, and build strong cash positions.
We may be heading into an economic depression. Pay close attention to coming economic developments as they unfold. This is not about politics, this is about survival. 