With the stock market pushing through to new all - time highs the
idea of holding cash is coming under a great deal of scrutiny.
In this issue, I'm going to talk about something you never hear about on financial TV: the
wisdom of holding cash.
When investors
think of holding cash in a period of sharply rising asset inflation, they often think of opportunity cost.
The yield on the German 10 - year Bund recently fell below zero, and the Swiss 30 - year government bond yield turned negative, in effect charging investors for the
privilege of holding their cash.
TheStreet's Jim Cramer says he's a big
fan of holding cash right now and waiting for further declines before buying shares.
In this article published in The Australian, Roger discusses the recent volatility and the advantage
of holding cash as if provides flexibility to take advantage of lower prices.
Given the
alternative of holding cash, and thus earning 0 %, rather than lending it out, profit - seeking lenders will not lend below 0 %, as that will guarantee a loss, and a bank offering a negative deposit rate will find few takers, as savers will instead hold cash.
While the financial media focused on the FANGs and record stock prices last Friday, I enjoyed a pair of articles discussing the
benefits of holding cash.
In this segment of the «Look Back» series, we consider inflation and the subsequent real rates of
return of holding cash (defined as holding Treasury bills or T - bills) over the past century.
With interest rates so low and the market doing well, many people have a problem with the
idea of holding cash, but an emergency fund can provide a much - needed cushion in hard times.
The opportunity
cost of holding cash is a lot lower in this environment than it would be in a cyclic bull market.