What To Do With Your Cash?

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by Adam Taggart, Peak Prosperity:
Have you moved a material percentage of your financial portfolio to cash? Have you become so concerned about the meteoric ramp upwards in asset prices that you find it wiser instead to move to the sidelines, build “dry powder”, and wait to re-enter the markets at saner valuations?

If so, you have my sympathies.

The past 5+ years have been brutal for savers pursuing this strategy. I know this well, as I’m one of those folks, too.

The Mother Of All Financial Bubbles
As we’ve chronicled for years here at PeakProsperity.com, the global central banking cartel started flooding the world with liquidity (aka, money printed from thin air) in response to the arrival of the Great Financial Crisis in late 2008. And they never stopped.

The chart below shows how the combined balance sheets of the major world central banks (Fed, ECB & BOJ) are 3.5x higher today than their pre-crisis levels less than a decade ago. (And if we included the PBOC in this chart, the cumulative total would be 18.8 Trillion!):

All that liquidity has to go somewhere. And, as hoped by the central banking cartel, it has found its way into the financial markets, pushing the price of nearly every asset class to record extremes. And then higher still.

Equities have shot the moon, and are now nearly twice as high as they were at the apex of the past two stock market bubbles, as this below chart of the S&P 500 shows (in fact, the S&P price/revenue ratio just hit the highest level in history, aside from the week of the March 2000 bubble peak):

Similarly, bond prices have continued their 30-year march higher, powered by record-low interest rates around the world:

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1 COMMENT

  1. “Similarly, bond prices have continued their 30-year march higher, powered by record-low interest rates around the world”
    Yes, they have but it is well known that everything eventually reverts to the median value of that thing over an extended period of time… and mean reversion can be a real bi+ch at times. Bond owners will be creamed as interest rates rise and the longer the term of their holdings, the worse this effect gets. IMO, bond owners are not being compensated nearly enough for the interest rate and default risk they are taking. Bonds are sold as “risk free” investments or the risks inherent in them is minimized. Problem with this is that many investors now believe that bonds in general and UST paper in particular is absolutely risk free… and it ISN’T!

    There is no doubt that there is a tremendous bubble in both stocks and bonds at this time. All the signs are there but people are working very hard to ignore them. But then, this is typical behavior in a bubble. People see the large gains they have but none of the risk going forward. A lot of money can be made in a bubble by those who do not get greedy and stay in it too long. Those who make a good percentage gain and then sell their holdings do very well. Those who hang on for that last percent or two of additional gain often end up getting their heads handed to them.

    I sold the bonds I owned several years ago when I realized that it was a Ponzi scheme and the US Gov and the Fed were the ones running it. They’re still at it. I could have made more money by keeping my bonds but I simply do not want to be part of that slimy operation.

    Holding PMs and cash works for me. I do have some core positions in a few good mutual funds and ETFs but they are only about 1/3 of my invested wealth. I’m at that stage of life where I can handle not making 30{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} on my investments a lot better than I can handle a 30{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} or more loss.
    This is not about making money but about not losing the money I have already made. Tread carefully, folks… there be vipers in this grass.

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