Over the last three months, most of us will have been glad of any uninvested cash in our portfolios. That’s partly for reassurance: since we don’t know how long the coronavirus crisis will drag on and quite how terrible the economic consequences will be, it’s psychologically easier to feel we have a bit of a buffer to cover any unexpected expenses or losses to our income.
We don’t want to have to sell investments at depressed prices or rely on dividends when they are being slashed. But more optimistically, having excess cash lets us take advantage of any opportunities that the market plunge throws up.
While cash normally seems like the dullest part of a portfolio, crises are a sharp reminder of why many notable investors see it as something valuable. For example, Warren Buffett thinks of cash differently to conventional investors. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.
That’s a technical way of putting it, but it captures an interesting idea. It’s natural to feel that holding cash is silly if we can’t earn much of a return on it. At best, we may get a long-term return slightly above inflation; more likely in today’s world of ultra-low interest rates, we will see its value eroded.
That’s frustrating, but thinking of cash as an option tells us why it’s not necessarily wrong to accept that small ongoing loss.
We can justify it as the premium we pay to have this option and be able to exercise it on those rare occasions – perhaps just once or twice a decade – when there are compelling opportunities (as is arguably the case today – not across the entire market, but in certain areas such as emerging Asia).
Motivational Quote Of The Day
“In the business world,everyone is paid in two coins; cash and experience. Take the experience first, the cash will come later.”
Harold S Geneen
Alternative Quote Of The Day
“Live every day as if it were your last and then some day you will be right.”
HH Morant
Of course, that only makes sense if the price we are paying for the option is reasonable. In deflation, the value of our cash will increase, so we’re even being paid to keep our options open.
In hyperinflation, holding cash will be disastrous – its value will be destroyed – but you might hold a more stable foreign currency instead. At times like now, the loss is small (inflation is 1.5% and falling, you can earn 1% on deposit) and quite tolerable.
But what of a high-but-not-hyper inflation scenario – like the one that might follow this vast expansion in government spending? In the inflationary 1970s, cash didn’t do too badly – while interest rates and bond yields lagged inflation, they followed it up.
That might not be the case next time – in which case, we might need to reassess the cost of consistently having, say, 10% in cash. But for now, with a bit of value emerging, cash is showing why it pays to have something in reserve for when boom turns to bust!
Today’s National Day
NATIONAL MAKING LIFE BEAUTIFUL DAY!
PUBLISHERS NOTICE
Dear Streetwise Customer
I hope that you and your family are well.
I don’t have to tell you that the Coronavirus outbreak has changed everything, and nowhere more so than in the world of sports betting. With almost all our regular ‘go to’ profit makers like European football, horse racing and golf on hold, you might be excused for thinking that the opportunity to make a lucrative extra income from sports betting was gone – at least for now.
That’s what we thought until we heard from a guy called Craig Russell and how
he was…
Making an extra £150-£250 a week exploiting the ‘invisible’ betting opportunities exposed by the Coronavirus mayhem.
You see Craig isn’t your typical sports bettor. Long before anyone had heard of coronavirus, he was shunning the sort of events most of us bet on in favour of little-known sports, events and fixtures taking place in obscure locations.
Why did he concentrate on those?
Because he figured that the less ‘pro’s’ there were looking at these obscure markets, and the more time he spent studying them, the greater edge he’d have over the competition.
Obvious when you think about it.
So why this message?
Because it seems like now is the perfect time to bring this to a wider audience…but not much wider!
You see, in conjunction with Craig we’ve put together a totally unique service which is tailor-made for the times we find ourselves in. But there will only be 100 places available. Ever.
For full details on what’s involved and why the limit, take a LOOK NOW.If an extra couple of hundred pounds tax-free income would be worthwhile to you right now, I’d urge you to get in touch without delay. These places are really going to go fast.
For full details CLICK HERE
Very Best Wishes,
John Harrison
Streetwise Publications
P.S Almost forgot…you can get started with this for just £9.95. I’m pretty sure that makes it our cheapest service ever. Why? Well take a look now and all will be revealed.