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Despite what those financial "gurus" say, Cash is King!!!!

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Old 01-05-2018, 10:55 PM   #1
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Despite what those financial "gurus" say, Cash is King!!!!

They like to sell inflation story to scare people who have cash. But cash gives you an interest yield plus options to buy things when people are losing money.
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Old 02-05-2018, 06:19 AM   #2
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This belongs to EDMW
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Old 02-05-2018, 07:01 AM   #3
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They like to sell inflation story to scare people who have cash. But cash gives you an interest yield plus options to buy things when people are losing money.
It's true

No trade no lose
No invest no lose
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Old 02-05-2018, 07:52 AM   #4
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Who’s “they”?

Literal cash and cash equivalents are subject to inflation risk. That’s a simple fact. The Monetary Authority of Singapore, among others, will tell you all about Singapore dollar inflation. If you want something even safer than cash at a bank that is also inflation protected, then one choice is to hold inflation indexed, high quality government bonds. Sadly, they don’t seem to be available in Singapore since the government seems almost pathologically allergic to anything (including tax rules and wages) that are automatically adjusted for inflation. Other governments are more enlightened in that sense. You can buy a bond fund that invests in inflation indexed government bonds, with the bonds denominated in multiple currencies. And that’d work pretty well over the medium to long term, since it’s effectively a basket of currencies. As one example, Fidelity has a global inflation linked bond fund available for sale in Singapore. If you can avoid the initial sales charge (FSM?), it looks pretty good, at least by Singapore standards.

If you want to defend against a specific currency’s inflation, then you can often do that the same basic way, except with direct purchase of that country’s inflation linked government bonds. The U.S. Treasury, for example, makes this really easy for retail investors. Its I-Bonds and Treasury Inflation Protected Securities (TIPS) are available directly to retail investors through TreasuryDirect.gov. You need to have a SSN or ITIN (ID number) and a U.S. bank or U.S. credit union account — a Walmart/American Express Bluebird account is probably good enough for these purposes — and then you’re in business. For a while, years ago, the U.S. Treasury was selling 30 year I-Bonds yielding 2 or more percentage points plus the CPI inflation rate, and that’s just amazing with hindsight. I hold a few of those, and they’re lovely. The highest ever was the May, 2000, I-Bond (available for the 6 month period starting on May 1, 2000) that is paying 3.60 percentage points plus the U.S. CPI rate. Wow, wow, wow, that’s spectacular, and congratulations to those who signed up for that record holding issue. I wasn’t quite so lucky, but I’ve got a couple in the 3++CPI zone, and I certainly cannot complaint about those. Currently issued I-Bonds (6 month period from May 1, 2018) will pay 0.30 percentage points plus the U.S. CPI rate.

Last edited by BBCWatcher; 02-05-2018 at 07:59 AM..
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Old 02-05-2018, 02:05 PM   #5
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It's true

No trade no lose
No invest no lose
quote for the truth.

have the habit of keeping 40% cash in savings.
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Old 02-05-2018, 03:26 PM   #6
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They like to sell inflation story to scare people who have cash. But cash gives you an interest yield plus options to buy things when people are losing money.
Cash is just cash, like Gold is just Gold. Cash don't give interest yield, like Gold don't give interest yield.

The interest yield you get is from your deposit into a bank account or FD. Your bank account and FD give interest yield. This is not the same as Cash giving Yield.

If Cash give interest yield, then you should get interest even when you put your cash under your pillow, but you don't.

Inflation is real because if you put your cash under your pillow, 10 years from now, you'll buy less with the same amount you have today. This is why you want to convert your cash into something that can beat inflation. This can be FD, bond, stocks, properties, etc.

This Cash is King thing is only real when you know there is a crisis coming and converting to Cash, will help you to protect your wealth. However, in a booming economy, this is not true.
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Old 02-05-2018, 04:44 PM   #7
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This Cash is King thing is only real when you know there is a crisis coming and converting to Cash, will help you to protect your wealth. However, in a booming economy, this is not true.
In a non-crisis economy, this is also not true. It's only in a crisis that cash (the paper and coin kind) might get interesting. Moreover, the value and usefulness of cash depends on the nature/type of the crisis. Germany experienced crises (plural) in the first half of the 20th century, but German cash was a perfectly awful tool to cope with those particular crises.

The Papiermark (1914-1924) experienced hyperinflation. If you stuffed those notes under your bed, you (quickly) ended up with notes worth less than the (used) mattress. Later, the Reichsmark (1924-1948) suffered greatly along with the rest of Germany during that country's World War II defeat.

As a fascinating aspect of the Reichsmark story, the United States started printing "occupation" Reichsmark notes in early 1944, in anticipation of Allied victory. The Soviet Union (an Allied power) demanded, and got, the same printing equipment and supplies from the United States. Occupation Reichsmark notes were convertible to U.S. dollars at 10:1, and (naturally!) the Soviets printed vast quantities of occupation Reichsmark notes while they had the chance...about US$380 million more than U.S. authorities wanted. Thus the Soviets, and the Reichsmark, contributed somewhat to the spike in U.S. dollar inflation just after World War II. And/or, if you prefer, the United States extended its excellent paper currency to help finance the Soviet Union's needs in the immediate post-War period. There would have been some inflation regardless, given the transition from a war economy, but the extra $380 million did its part.

Like I said, if you fear inflation, there are excellent, modern ways to combat inflation, most especially inflation linked government bonds.

Last edited by BBCWatcher; 02-05-2018 at 04:48 PM..
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Old 02-05-2018, 05:10 PM   #8
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How about the example of Japan? After Nikkei crashed, not only was there no inflation, there was deflation and Yen strengthened.

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Old 02-05-2018, 05:55 PM   #9
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How about the example of Japan? After Nikkei crashed, not only was there no inflation, there was deflation and Yen strengthened.
Yes, when Japan's bubble burst, yen cash did OK. But you were much better off if you had Japanese government bonds. Oh boy were those fantastic.
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