{"id":21230,"date":"2016-06-24T05:54:47","date_gmt":"2016-06-24T10:54:47","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21230"},"modified":"2016-06-24T05:54:47","modified_gmt":"2016-06-24T10:54:47","slug":"3-things-value-of-cash-3rd-mandate-yellen-channels-bernanke","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21230","title":{"rendered":"3 Things: Value Of Cash, 3rd Mandate, Yellen Channels Bernanke"},"content":{"rendered":"<h3><a href=\"https:\/\/realinvestmentadvice.com\/3-things-value-of-cash-3rd-mandate-yellen-channels-bernanke\/\">3 Things: Value Of Cash, 3rd Mandate, Yellen Channels Bernanke<\/a><\/h3>\n<p>&nbsp;<\/p>\n<div class=\"pf-content\">\n<hr \/>\n<h2>El-Erian \u2013 The Value Of Cash<\/h2>\n<p>My friend, Anora Mahmudova,\u00a0<a href=\"http:\/\/www.marketwatch.com\/story\/el-erian-cash-is-more-valuable-than-ever-2016-06-20?siteid=yhoof2&amp;yptr=yahoo\" target=\"_blank\">recently wrote for MarketWatch<\/a>\u00a0about Mohamed El-Erian\u2019s discussion on the importance of \u201ccash\u201d for investors.<\/p>\n<blockquote><p>\u201cAt a breakfast meeting with reporters on Monday, the former Pacific Investment Management Company chief executive\u00a0<strong>said central bank asset purchases have successfully decoupled asset prices from fundamentals and distorted traditional correlations.<\/strong><\/p>\n<p>\u2018Investors cannot rely on correlations as a risk mitigator, making cash a very valuable thing to have.<\/p>\n<p><strong>It can give your portfolio resilience during stressful times, optionality\u2014whether you use it for tactical or strategic purposes and flexibility to deploy it when necessary.\u2019\u00a0<\/strong><\/p>\n<p>Central banks are finding it harder and harder to repress volatility in financial markets, and any jolts, such as currency devaluation in China or political events, such as Brexit, result in wild swings in the markets.\u2019<\/p>\n<p>El-Erian also said<strong>\u00a0years of unconventional monetary policy, including asset purchases, and a lack of fiscal stimulus are making developed economies less stable.\u201d<\/strong><\/p><\/blockquote>\n<p>Whenever El-Erian makes comments about the value of holding cash, there is generally a good bit of media lash-back about relating to the impacts of inflation and the inability to successfully navigate market cycles.<\/p>\n<p>El-Erian\u2019s comments are a valuation call, driven to excess by monetary interventions, on the financial markets suggesting that having capital invested will likely yield substantially lower or negative returns in the future. This is an extremely important concept in understanding the\u00a0<em>\u201creal value of cash.\u201d<\/em><\/p>\n<p>The chart below shows the inflation-adjusted return of $100 invested in the S&amp;P 500\u00a0<em>(using data provided by Dr. Robert Shiller).<\/em>\u00a0The chart also shows Dr. Shiller\u2019s CAPE ratio.\u00a0<strong>However, I have capped the CAPE ratio at 23x earnings which has historically been the peak of secular bull markets in the past. Lastly, I calculated a simple cash\/stock switching model which buys stocks at a CAPE ratio of 6x or less and moves to cash at a ratio of 23x.<\/strong><\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>3 Things: Value Of Cash, 3rd Mandate, Yellen Channels Bernanke &nbsp; El-Erian \u2013 The Value Of Cash My friend, Anora Mahmudova,\u00a0recently wrote for MarketWatch\u00a0about Mohamed El-Erian\u2019s discussion on the importance of \u201ccash\u201d for investors. \u201cAt a breakfast meeting with reporters on Monday, the former Pacific Investment Management Company chief executive\u00a0said central bank asset purchases have [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1035,14090,303,451,8511,5220,3650],"class_list":["post-21230","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cash","tag-el-erian","tag-fed","tag-janet-yellen","tag-lance-roberts","tag-marketwatch","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21230","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21230"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21230\/revisions"}],"predecessor-version":[{"id":21231,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21230\/revisions\/21231"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21230"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21230"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21230"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}