Is Cash Becoming Trash?

Cash has quickly converted from the best asset class to the worst in 10 short weeks. Is it trash?

As global markets boom, commodities take off and stock markets roar, it all the sudden seems like the one sure place to lose value is in cash.  Virtually everything is returning 2 to 3% a day, and cash isn't even going to provide those kind of returns in a year.   Even those who have exercised sound judgment and managed to sidestep most of the stock market turmoil by being in the stock market suddenly need to ask whether continuing this strategy is the proper move going forward.

I am going to go out on a limb and suggest that it is.  Consumer sentiment may be strengthing, industrial production improving and commodity prices increasing, but we still have not fully come to terms with a banking system that has not written down assets and is providing less liquidity.  Or, with the fact that our economy is contracting.  Or, with the fact that our economy is now a socialist experiment with the government playing much too central a role in ownership of the major banks and industrial production.

I am not going to predict a stock market crash from here, nor a commodity crash nor anything else.  I don't know if the S&P will ever revisit 670.  But, I do know that cash looks awefully attractive with it at 940.

No, cash is not trash.

Jason Rodgers
Jason Rodgers: Jason Rodgers was an experienced research analyst for a major bank prior to retiring to run his own investment consultancy in beautiful Lihue, Hawaii. Jason contributed articles to BestCashCow from 2008 to 2014.

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Comments

  • rachel

    June 03, 2009

    ever heard the expression cash is king? liquid money is the most powerful thing in the world. just ask buffett.

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