SP500 5 and 20 year charts. Just looking at it seems so stratospheric. Think about it, an entire generation has never really known a downturn. Pandemic just seemed like a buying opportunity. Pandemic lows didn't even go below 2016 highs!
Oh dear. This is a terrible decision. Inflation is going to eat at your cash. No, no, no. If you want to live in a corner, fine.
Sweet Bobby, back from the dead. So what is your advice? Inflation is going to eat cash, so cash is bad. Where should we put our cash to lose it?
Back in the 70s/early 80s (prior occurrence of inflation) bank rates were in the 5% to 10% range with a foray into the teens. So back then, being in cash was an alpha adding 'strategy'. Now its neither alpha adding nor a hedge, as hedges are supposed to gain in value as your main holding loses value. We're in uncharted territory here with zero and, in some countries, negative rates in the face of ramping up inflation worldwide. I personally feel a strong urge to keep as little money in the bank as possible - currently my net worth is the most invested it has ever been and has the least % cash ever. I have strict rules to exit my investments and go short or to cash during downturns so I don't lose sleep over it. To me, keeping cash in the bank is not the way to go as you are functionally losing about 6% to 10% of your balance every year due to inflation, depending on which inflation numbers you are looking at.
Not necessarily. If that were the case, one should invest 100% in the hedge vehicle. Hedging is to "offset losses" somewhere else... not necessarily 100%. Besides, a cash hedge is more of a temporary position.
It's going to be tough to see a sustained market de-rating with the Fed printing $100bn a month and rates at zero. Feels like we can go much, much higher.