CASH is King

[MR.]

Is Cash still king?

Have any cash? If it’s in a term deposit what term is it on? 3mths or maybe 6?
Either people want to keep their funds not far from reach (to re-enter markets) or (they just haven’t thought that far ahead) I wonder what rates the banks will offer in just 3 months time!

If you are just waiting “short term” to re-enter the markets just be aware there appears to be many of you.... That spells Volatility!

Have you held cash for several years waiting for this moment? Several years ago didn’t you decide not to invest in shares and hold cash “await a crash perhaps” now tempted back in because of the massive drop? Are shares that much lower than when you decided not to buy them “several years ago?” Don’t miss out!

Cash is not King anymore! Don’t miss out! .... Did you think of that yourself? Is a Financial Planner behind it? Financial Planners could have never made everyone rich? What is the use of cash if you don’t use it when the time is right, like NOW!

It’s appears to be most often the most simplistic of thoughts that make the most sense but we seem to resemble sheep at times. For example: For China to de-couple from America is it likely to have happened during a boom or bust? Hint, does China appear to follow the S&P or Dow, they were during the boom? To me it must be a bust then,.... but not just yet I feel. If the “West” is in recession surely China would be effected, exports, incoming foreign funds, sentiment in general. What? China’s effected????

So the ones who saved some cash or were lucky enough to bail back in September all flood back into the share market sooner rather than later. Maybe finally buy some property as well as its down a little and when interest rates go down property goes up! I'm told! The share market is at the lowest for years. Shares are half price and dividends outweigh bank interest. The charts are looking so attractive, just need a change in direction perhaps!

Another simplistic question which we will all ignore:
Is everyone now anywhere near being out of debt?
The government has not written off a part of everyone’s debt just yet! And I don’t think people have worked it off yet.

So far I have locked 40% in term deposit for 3 years. I am one of very few! This will not be over anytime soon. But we all know this!
Cash remains King while the mass’s carry heavy debts.
Don’t believe.... Wait and see.........

 

[Trevor_S]

Cash remains King while the mass’s carry heavy debts.
Don’t believe.... Wait and see.........

So, we have two school of thought, MR vs Warren Buffett

http://www.nytimes.com/2008/10/17/opinion/17buffett.html

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.

In particular...

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I guess "time" will tell who was a better "investor", MR or Buffett ?

Don't shoot me, I am just the messenger, I don't have enough alacrity to pick the future...

Declaration: My portfolio is about 60% cash, 30% shares and 10% investment property (PPOR ignored) and own a small business with no debt. I have a small loan over the shares, about 1/5 the size of my cash reserves so debt is very serviceable), what the hell would I know.

 

[MR.]

http://www.nytimes.com/2008/10/17/opinion/17buffett.html

I guess "time" will tell who was a better "investor", MR or Buffett ?

Good, anothers point of view. Even if it is Buffett's!

So we are all going to buy up like s..... I mean Buffett???.
Ofcoarse we are, just my point.

You are an investor but you are not going to try and pick the future?

I will wait and see........ 3 years.

Thanks for your input.

 

[beerwm]

Locking your money away for 3 years doesnt seem very prudent.

While you can 'try' and predict the future, unless you respond to changes it wont do you any good.

Cash maybe the flavour of the moment but 3 years is along time, is 5% pa. going to make you happy?

My interests lie in trading, btw.

I cant seen any upside to investing, that cant be improved by intelligently trading the same stock.

Investors to me seem lazy and more hopeful than wise.

 

[nunthewiser]

hahahahah WOULD like to point out to all the buffet worshippers THAT cash has OUTPERFORMED mr buffets publicised entrys of late and i pointed this out in another thread but it was not recieved well ......

personally happy to be in cash rather than sitting on wozzas current losses and anyone that disagrees with that FACT is obviously deluded and too one eyed to notice that even wozza gets his timing wrong at times


anyways im sure this may upset the more fanatical worshippers of buffets quotes but hey one cant deny the fact of the matter that CASH has outperformed his entrys of late



bless yas all

 

[nunthewiser]

Geeeeez ...........i killed yet another convo .......... this always happens when i point out something simple.


sorry guys will just bat my eyelashes and agree with everyone instead

 

[Julia]

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

I am utterly tired of seeing this Buffet quote repeated ad nauseam.

It assumes that people presently holding cash intend to do this for the long term (....."a terrible long term asset").
If a lot more people had gone to cash a year or so ago, then there would a hell of a lot less misery and griping now.

But hey, let's not expect anyone to take responsibility for looking after themselves here. I was talking with some people today who shared a common moan that "Super is just a big con". One person said "Remember Peter Costello telling us to put more into Super? Well, we did that, and look what has happened". etc etc.

My mutterings that Super was simply a vehicle in which to hold assets in a favourable tax environment were ignored. As was the suggestion that they could - on appreciating that the world was coming down around our ears - have instructed their Funds to move to the cash option at that time.

There will undoubtedly be another substantial interest rate drop next week, at which stage new term deposits are going to be less than a viable proposition.

I will nonetheless keep at least 70% in cash and continue with some short term trades in the meantime to generate some income.

Wouldn't be happy to lock it away for 3 years, or even one year, but good luck to anyone who is comfortable with that.

 

[Trevor_S]

Geeeeez ...........i killed yet another convo .......... this always happens when i point out something simple.

Seems a nonsense, more so then simple, so not much to respond to from me.

As "Wozza" points out, he doesn't bother with market timing per se, only if he sees fair value in what he purchases... and often pays (on paper) for it, short term. I am not sure why you try and deride that, he is quite open about it ? His "skill" is being able to value and identify a great business and waiting for it to get to about that value before purchasing.. and then holding, seems to have worked for him so far.

Let's re-vist this in 10 years and see where it's at ie. whether you're ahead or he is. I guess... my "money" is on Wozza being WAY ahead, and possibly you owning shares that you purchased after the market has risen significantly and you feel "comfortable".

I am not particularly a WB "fan" but I do listen to what he has to say.

and he "ain't" the only one, (and I don't me me and my purchases in December) this back late last year

http://www.iht.com/articles/2008/11/16/business/16fund.php?page=1

If that's the case, why did GMO begin to buy stocks in this market? Because Grantham doesn't believe in trying to time short-term market moves.

Grantham says that although he doesn't know how well he timed his purchases, "we do know that seven years out, these will be good purchases for us."

 

[Wysiwyg]

Let's re-vist this in 10 years and see where it's at ie. whether you're ahead or he is. I guess... my "money" is on Wozza being WAY ahead, and possibly you owning shares that you purchased after the market has risen significantly and you feel "comfortable".

I think nunny`s trying to convey that he is better at picking market bums and will wait until the perfect moment for a dart at it.

 

[CanOz]

I am utterly tired of seeing this Buffet quote repeated ad nauseam.

It assumes that people presently holding cash intend to do this for the long term (....."a terrible long term asset").
If a lot more people had gone to cash a year or so ago, then there would a hell of a lot less misery and griping now.

But hey, let's not expect anyone to take responsibility for looking after themselves here. I was talking with some people today who shared a common moan that "Super is just a big con". One person said "Remember Peter Costello telling us to put more into Super? Well, we did that, and look what has happened". etc etc.

My mutterings that Super was simply a vehicle in which to hold assets in a favourable tax environment were ignored. As was the suggestion that they could - on appreciating that the world was coming down around our ears - have instructed their Funds to move to the cash option at that time.

There will undoubtedly be another substantial interest rate drop next week, at which stage new term deposits are going to be less than a viable proposition.

I will nonetheless keep at least 70% in cash and continue with some short term trades in the meantime to generate some income.

Wouldn't be happy to lock it away for 3 years, or even one year, but good luck to anyone who is comfortable with that.

Julia, at times your logic falls in the domain of those that also may hold physical gold, but yet i suspect that may not yet be the case. Why?

Cheers,


CanOz

 

[MR.]

My mutterings that Super was simply a vehicle in which to hold assets in a favourable tax environment were ignored. As was the suggestion that they could - on appreciating that the world was coming down around our ears - have instructed their Funds to move to the cash option at that time.

Without my permission my super provider “T----“ change my super’s position. It changed just over one year ago from “mostly cash” to an “aggressive fund”. From their response “to why did they change it”, they claimed that I seemed to fall into an age group which should be taking on higher risk so they took the liberty of changing my portfolio without my request. It had come to my attention last February when I received their annual statement.

I did not request that they changed the fund back as the market had already taken a tumble. Classic.... I’m looking forward to the next one anytime now. If it was the majority of my assets I would be obtaining legal advice. (But they know what they’re doing) I’m going to find out any day now and I can’t imagine how on earth they have managed to protect my funds in a “a top heavy market” by choosing an “aggressive fund.”
Classic.......... (at my expense)


Perhaps I should also look towards some gold! Thought I'd do some trading and explains in part term deposit on 3mths but I believe it's going to be hard to turn profits with "everyone else"

 

[wayneL]

I am utterly tired of seeing this Buffet quote repeated ad nauseam.

It assumes that people presently holding cash intend to do this for the long term (....."a terrible long term asset").
If a lot more people had gone to cash a year or so ago, then there would a hell of a lot less misery and griping now.

But hey, let's not expect anyone to take responsibility for looking after themselves here. I was talking with some people today who shared a common moan that "Super is just a big con". One person said "Remember Peter Costello telling us to put more into Super? Well, we did that, and look what has happened". etc etc.

My mutterings that Super was simply a vehicle in which to hold assets in a favourable tax environment were ignored. As was the suggestion that they could - on appreciating that the world was coming down around our ears - have instructed their Funds to move to the cash option at that time.

There will undoubtedly be another substantial interest rate drop next week, at which stage new term deposits are going to be less than a viable proposition.

I will nonetheless keep at least 70% in cash and continue with some short term trades in the meantime to generate some income.

Wouldn't be happy to lock it away for 3 years, or even one year, but good luck to anyone who is comfortable with that.

A very good post Julia.

I'm also sick of the Buffet thing being trotted out. The parallels between Buffett and the individual investor do not exist; or are very slim at best.

IF folks want to do a Buffet, just buy BRKA, otherwise ignore Buffett, he's in a different category.

___________

I like to look at the cash is king maxim a little differently, ie "liquidity" is king.

Cash is good because it's liquid... unless you go and lock it up in a term deposit. I'm prepared to suffer a lower return on cash in exchange for liquidity, so when something I like turns up... bang, I'm in.





I like to look at

 

[noirua]

Cash appears the King when you've lost just about everything. Later new investors will arrive and so the cycle starts all over again.

 

[wayneL]

Cash appears the King when you've lost just about everything. Later new investors will arrive and so the cycle starts all over again.

Eh?

So the person who went to cash, anticipating this collapse, has lost just about everything?

Do explain your logic.

 

[MrBurns]

Cash is good because it's liquid... unless you go and lock it up in a term deposit.

Cash is never "locked" away in a term deposit, you can draw it down any time you like , you just lose some interest in the adjustment if you take it early.

 

[wayneL]

Cash is never "locked" away in a term deposit, you can draw it down any time you like , you just lose some interest in the adjustment if you take it early.

Jesus, is metaphor dieing in Australia since I left?

 

[nunthewiser]

Seems a nonsense, more so then simple, so not much to respond to from me.

As "Wozza" points out, he doesn't bother with market timing per se, only if he sees fair value in what he purchases... and often pays (on paper) for it, short term. I am not sure why you try and deride that, he is quite open about it ? His "skill" is being able to value and identify a great business and waiting for it to get to about that value before purchasing.. and then holding, seems to have worked for him so far.

Let's re-vist this in 10 years and see where it's at ie. whether you're ahead or he is. I guess... my "money" is on Wozza being WAY ahead, and possibly you owning shares that you purchased after the market has risen significantly and you feel "comfortable".

I am not particularly a WB "fan" but I do listen to what he has to say.

and he "ain't" the only one, (and I don't me me and my purchases in December) this back late last year

http://www.iht.com/articles/2008/11/16/business/16fund.php?page=1

YAWN................... same boring reply you gave before.........um i didnt mention holding cash for 10 years , merely stated how cash has out performed wozzas latest entrys .

i too listen to warren buffet and as with all stock market oracles , i listen to the parts that make sense not the parts that suit them because of the hand that they have played.

my argument re cash .IS that , that whole paragraph you keep posting is only worth a pinch of poo IF HIS alternative investments were outperforming cash and frankly HIS investments of late havent..


i couldnt care less what his name is , how many books he has , how big his wang is..the fact is .......... IF one had followed his call to escape cash and follow him into where he invested . one would be sitting on some sertious losses currently ........ LOL as far as come back in 10 years and see as you stated ....good luck

have a niceday

 

[nunthewiser]

I think nunny`s trying to convey that he is better at picking market bums and will wait until the perfect moment for a dart at it.

No i think nunny conveying that what wozza did by PUBLICALLY saying NOW is the time for investing in quality when he did was irresponsible and a totallly amatureish move on his behalf ...... lol catching falling knives ....because THAT is exactly what he done ..

why not pick up a paper , read his entrys , pull out a chart and have a squiz actually .


my argument has nothing to do with HIS personal investment strategy ..if it works for him GREAT ..........

my argument is regarding the fact cash HAS ..NOT will ...........outperformed his investment strategies of late

most here seem to overlook what i just said .......... wozza seems to be a bit of a no go zone when one points out that maybe he actually got it wrong re cash AT THE TIME

 

[MrBurns]

Jesus, is metaphor dieing in Australia since I left?

Most people who say that actually believe you cant get the money til the end of the term.

 

[noirua]

Eh?
So the person who went to cash, anticipating this collapse, has lost just about everything?
Do explain your logic.

First sentence explains what cash is seen as when nearly everything is lost. Not when you still have lots of it.

The cycle returns when new investors arrive, not having experienced what has happened before. Eventually many fall into the same trap again.