Will Cash Always Be Trash, Or Will It One Day Be King?
When the phantom wealth evaporates and risk assets go bidless, cash will once again be king, for the simple reason there will be so little of it.
Occasionally it’s a good idea to step away from the daily grind to consider the larger issues we all face–for example, the future of the money we earn and the bits we invest in something we hope holds or increases its value.
At present, cash is trash: cash earns almost no yield, and in some countries it now earns a negative interest rate, meaning it costs you to park your cash in a bank.
Even cash equivalents such as one-year Treasury bonds pay almost nothing.
Those who avoided debt and risky assets since 2009 have seen their cash lose value when adjusted for inflation, while those who borrowed to the hilt and bought risk-on assets such as stocks, junk bonds and high-end housing have skimmed monumental gains for doing what the central banks incentivized: borrowing money and buying speculative risk-on assets.
Correspondent Kevin K. recently sent me a link to a home in the San Francisco Bay Area that was purchased around the crash era (2008-09) for $1.4 million, and sold last year for $2.1 million.
Assuming a conventional 20% down payment of $280,000, the savvy buyer borrowed $1.12 million at historically low rates and offloaded the house 6 years later for a cool $560,000 profit (assuming a 6% sales commission and closing costs).
…click on the above link to read the rest of the article…
