June 10, 2009

"The Real Suckers Are In Cash"


Are you a sucker?

Cash was king.

And then it wasn't.


The Real Suckers Are In Cash - It's time for bears to eat some crow as the recession that could've been a depression is about to end.


Let's get a grip on reality. The bear market ended March 9, and the end of the worst recession since the 1930s--or is it the mid 1970s--is plainly in sight.

About $120 billion has been pulled out of global money market funds since mid-March; yet money market assets are still equal to 50% of the S&P 500 market cap. That is huge potential buying power. Since 1990, money market assets have averaged about 20% of the S&P 500 market cap.

There must be a horde of perplexed investors, like Croesus, who have been hoarding cash at no yield because risk aversion compelled them to adopt a conservative approach. Alas, they missed a rally in the S&P 500 that just polished off the best performance in more than 60 years, a 90-day steamroller worth 40% in recouped value. Up already 35% from its nadir in March, it looks like the Dow Jones industrial average will blow right through 9,000. Who knows, maybe 10,000 by summer's end.

37 comments:

Afterthought said...

Yes, put all your money in this play.

Anonymous said...

nobody ever went bankrupt by having too much cash.

Anonymous said...

Ridiculous.

Need a hard money loan?

Bwa ha ha ha .

Deression of '09 just BEGINNING

les said...

Yup.

Inflation and dollar devaluation is the one sure way to get people to spend the cash that they're hoarding.

Once much of the cash has been thrown into the market, the dollar will be destroyed.

long beach,ca said...

i like my real estate, stock, and cash positions just fine. i can sleep like a baby every night.

Anonymous said...

I agree with anon 5:00am.

I'm waiting for the 10% interest rate hikes. Believe me its coming.

WizardofIB said...

Speaking of suckers, Casey Serin is back on the net. BloggerCasey.com... Check it out!!!

keith said...

Remember, Schiff is saying cash is trash too folks...

Saul said...

Let's just see what happens when the long end of the treasury auctions fail.

Anonymous said...

Best rally in the S&P in more than 60 years...and of course everyone got in at 666. How's that 365 day rally treating ya?

Anonymous said...

So what are you bartering with Keith?

I still pay cash for my food and the price of groceries is on the decline in L.A.

I'll buy some more gold I'm sure.

Own a couple stocks. X and CTIC.

Gallon jugs of change (50c,25c,10c,5c) (did you read the article in the recent New Yorker about change shortages in Argentina?)

Cash in the bank.

I'll sleep ok.

Anonymous said...

So we are all to take our cash and go all-in now? Late in the poker game don't ya think?

I recognize I missed a buying opp earlier this year. But it won't be the last buying opportunity meaning another swing down....

I hold dollars so I am concerned. I can see the govt. devaluing in a slow very public way so as to encourage or force the savers to spend and spend it now.

Voted for Obama but his financial policies are making things worse.
Stop fucking up our shit!

Still think the US dollar is the lesser evil.

Anonymous said...

all bets are officially off...the plot has been lost...we are not in Kansas anymore. Markets will be up through end of June, then new data comes out in July. I don't see how those numbers can be fudged anymore than it already is, but, if so, it will be so blatantly obvious, that markets will drop again. If not, we have truly entered la la land.

Bukko_in_Australia said...

Not all of us are gamblers. That's why I don't care what I'm missing.

I used to tell people that I didn't feel the need to go to the horse track or buy lottery tickets because I had money in the stock market. That satisfied my gambling urge. And during the go-go years of the .com bubble, I remember feeling like I was a chump, because the tech stocks I invested in weren't doing as fabbo as the hot picks. My broker, to his credit, admitted he didn't understand what it was that many of those companies actually DID, other than increase their market cap, so he steered me away from them. I didn't make out on the way up, but I didn't crash on the way down.

You're right about there being a pop at the moment, and those of us who didn't play don't get the pay. But I regard everything finance-related now as a fake. There's no such thing as "value investing" any more. Us little people, who aren't in on the machinations of the fakery, might make some paper profits if we're lucky enough to latch on to what the maggots at the top are doing. But we're more likely to get crushed, just like at Vegas. The house, and the inside grifters, always win.

So enjoy the ride, Keith. I wish you luck and profits. You seem to have the time, and the desire for thrills, to play the game. I'm just going to try to hang onto what I've got, lead a decent life, and do things in such a way that I can stay warm and well-fed until I die.

keith said...

Bukko - if you have US dollars then you're the gambler

Good for you that I assume you're paid in Aussie dollars? Only problem for you is that you'll see some mad inflation over there soon too

Gambling is staying in your currency as the currency is debased or inflated away

Pretty much the only paper currency that I'd trust today would be the renminbi

keith said...

Oh, oil prices are now 100% off their lows

Any questions?

100%

Andrew from Russia said...


Are you a sucker?
Cash was king.
And then it wasn't.


Can a sucker miss a sucker's rally?

But maybe I want to be a sucker in another sense of the word. I mean, to suck in as much dollar cash as possible while the green paper keeps flowing in and the reflation miracle looks convincing. Effective immediately, I'm resuming the "Greening Up" campaign!

yoski said...

The Chinese say they're still buying US Treasuries. What else could they say? "The USD is screwed! Everybody abandon ship!"
Of course they can't say that. They are trying to prop up the dollar as long as possible to avoid a panic. In the meantime they are busy buying commodities. How do their actions measure up? According to the 2nd graph in:
http://www.cotohousingblog.com/?p=501&ref=patrick.net

they've significantly scaled back on financing our debt. Sooner or later the world will run out of suckers which will force some very unpleasant consequences upon the big spenders in DC. For now there're 3 ways to deal with the situation. Print up the difference, scale back spending or offer higher interest rates. Neither option is too appetizing but I bet that they will offer higher interest rates for now. That of course is poison for the housing market and all the problems related to it. Higher interest rates also won't really stimulate the rest of the economy. So by the time interest rates hit 8-10% this recovery will have slammed into reverse. Inflation will likely be higher but not outrageous, 5-10% range. My guess is that this will happen before the 2012 election cycle but sometimes I've been known to underestimate the amount of suckers out there. Especially Japan and the Saudis have sucker written all over them. Eventually rasing interest rates won't be an option any longer. It will come down to printing money or cutting spending in the midst of a recession brought on by high interest rates. So of course we will go with printing money and sharply higher inflation.
Personally I got real estate, gold, commodity stocks. Also look at foreign markets, Brazil, Canada, China. Real Estate is somewhat risky, not so because of the downturn which is nearing its end, but because of the taxing authority of local governments. They'll try to stick it to the homeowner.
These are treacherous times, good luck to all.

keith said...

I wouldn't call the dollar falling from 1.37 to 1.64 against the pound a suckers rally

I call that flight from the dollar

Anonymous said...

sure that a fall in the dollar of 27 cents never happened before...and cash is still king...

This idiocy completely abandoms to important pillars of reality:

1. The ENTIRE WORLD is in heavy debt. This can ONLY be DEflationary.

2. We all know the FED will dramatically raise interest rates if the chinese stop buying...in the short term, there will be a lot of money to make in cash.

There may well be a time when cash is for suckers...this is not it. The only suckers right now are the green shoots crowd and the "the dollar" is going to blowup tomorrow crowd.

Learn math, it's mathematically impossible.

Dr. Huxtable said...

Nuff said:

Russia to Sell US Treasurys, Buy IMF Bonds

http://www.cnbc.com/id/31202790

wallstreetvet said...

Hardly a sucker. Cash remains king as real-estate which is the largest levered purchase of a lifetime continues to drop. Most equities have zero performance over the last 10years.

I understand your point of $usd weakness and inflation and I agree. But the real suckers are the 401k dopes that never open the mail and are still down over the years.

Anonymous said...

B.S. Keith....hold cash and your dead w/i the next 3-5 years...If your time horizon is shorter than that go for it...we need others to feed the beast....have at it.

casey said...

I have all my cash buried in the forest.This rally is due to the govt buying stocks with borrowed money.Never invest with other peoples money.didn't a bunch of suckers lose their ass buying on margin in 1999?

Dr. Huxtable said...

Uh oh, hold your horses Keith, silence the trumpets on your recovery:

Goldman Sachs CEO Sees Long Recession

http://www.cnbc.com/id/31204205

yoski said...

"1. The ENTIRE WORLD is in heavy debt. This can ONLY be DEflationary."

This depends if the debtor owns a printing press or not. A debtor with a printing press will never default on his own currency since he has the option to print up the amount owed.
This is the case for our government/FED. It is not the case for the homedebtor or Clownifornia. In the short and medium term higher interest rates will work its way through the system, kind of like GM when they were trying to attract more suckers to buy their debt. However, if someone offers high interest rates he usually has to 'cos he's in trouble. In that regard our government and GM are very similar.
Once the high interest loans can't be paid back GM defaults (= deflation) but I doubt that the US will simply default on their obligations. In the end they will print up the difference. When will "the end" arrive? Not sure, probably after 2012.
Sort term treasuries are fine, but stay away from anything 3 years or over. Just my $0.02

Anonymous said...

I'd like to see that DOW $10k; maybe even the $14k that I started with...

Then I could cash out and buy some Chrysler debt. I'm almost certain I can trust the rule of law in this cuntry.

"...My broker, to his credit, admitted he didn't understand what it was that many of those companies actually DID...

...You're right about there being a pop at the moment...Us little people...might make some paper profits if we're lucky enough to latch on to what the maggots at the top are doing..."


Considering that nearly the entire pop was financials(who coincidentally were given a big sack of taxpayer cash), a more cynical person might think twice about it's longevity.

Bukko_in_Australia said...

Bukko - if you have US dollars then you're the gambler. Good for you that I assume you're paid in Aussie dollars? Only problem for you is that you'll see some mad inflation over there soon too.


I get paid in AU $, more than 70,000 of them this year, but that's just living money, not investment money. This currency is too flukey -- in the past year, it's ranged from one Aussie dollar being worth 94 U.S. cents to being worth less than 60 cents American. I keep a few thousand Aussie dollars in my savings account to pay the bills, and a few thousand in cash in a secure location just in case TSHTF. But it's play money to me.

My investment money, the big sums, is in euros and Swiss francs. I've got American dollars, but only five figures worth. I'm long in everything -- no leverage, no debt. To me, the most important thing is to be able to switch money from one currency to another, to take advantage of the value gyrations.

But bank maggots and governments make it hard to do. Before we emigrated, we jumped through a lot of hoops to set up wire transfer capability with our American bank. Then when we got here, the U.S. bank said there was a problem, and could we stop in to a local branch to work it out? While we're on the other side of the Pacific...

We didn't care at the time, because our Swiss gnomes could do whatever we wanted. Now that Obama is cracking down on Americans with Swiss accounts (if you're a human, Obama will mess with you, but if you're a crooked, insolvent bank, no worries!) things are getting frosty in Zurich. It seems like the only way for small fish like me to play the currency game is through a ForEx investment firm. To me, that's on the same level as trusting a stockbroker or doing day trading. Not my thing.

I was a big believer in U.S. dollar hyperinflation, but I've read a number of people I respect who discount the "hyper" part. Have you heard of Ravi Batra? He's a Greenscam-hating economist, kinda Roubini-like. Batra expects high inflation, but not Zimbabwe/Weimar level, because of deflationary counter-pressures and how the rest of the world has an interest in propping up the U.S. dollar's value to prevent their export economies and U.S. debt from collapsing.

As for Aussie hyperinflation, I don't see that happening either, because this country's finances are still run intelligently, the way America's were before Reagan. It's a pipsqueak economy here, like New York State having its own currency, so they can't get too far out of line with printing.

Then again, this country did away with pennies in the 90s -- all cash transactions are rounded to the nearest 5 cents. I read a newspaper article last month saying there are plans to eliminate the 5-cent piece soon. Everything would be rounded to the closest 10. To my paranoid mind, that says TPTB are getting ready for inflation that is going to move things over one decimal place, to make a dime worth a penny.

Snidely Whiplash said...

I dont need cash, i have credit!

Mark in San Diego said...

Here is how is goes - inflation in oil, food, manufactured goods (as the dollar sinks), and deflation continuing in housing. . .why? Because household formation is still shrinking in the recession, no pressure on wages with 9% unemployment (going to 11), and a glut of homes for the next 3 years. Here in SD, you can't even rent a place anymore without reducing rent by 10 to 20%!! One complex near me has 50% vacancy and is offering two months free rent. Why - all the kids moved back home, and mom and dad have moved back in with Grandma. No demand for housing period.

So - buy commodities - oil, food, etc. Stocks that can pass along increases - maybe Procter and Gamble, and shun cash. . .my two cents.

Anonymous said...

Um, Keith, the stock market is priced in US dollars. So what are the true gains relative to the value of the dollar?

On top of that, this rally could collapse at any time because it is ethereal based on nothing but Hope(tm) and Fraud.

Yes, if you are confident enough and lucky enough to play the market you could have made big off this rally provided you sell out of the rally before it's over. But the same thing could be said of the housing bubble and how many house flippers got burned by that?

gutless and lazy said...

And just who the hell is Robert Lenzner, the writer???
http://www.forbes.com/fdc/bios/new/robertlenzner.html

He worded for GS and Oppenheimer in the 60s on Wall St. He's been a newspaper columnist ever since. Current Forbes editor.

In other words, he's a loser.
Always evaluate WHO'S giving you the advice first.

Anyone listening to Robert Lenzner is the REAL sucker.

gutless and lazy said...

Suckers are not in Cash. Suckers are in U.S. dollars.

GET THE DIFFERENCE????

Ribbons, Eagles and NASCAR said...

Go back to sleep sheeple. Gimme cheeze doodles. Scratch, belch, fart.

Let's all roll in the GMC Yukon down the off-ramp to Wally-World and ride the motorized cart while we shop. Hit the fry-hut greasepit drive-thru on the way back home. BMI 35+ anyone?

SeattleMoose said...

You are joking...right?

The Banksters are trying the "same old BS" to try and get things going but this time truly is different. Interest rates are at zero, the printing press is on 24/7, and still:

The 2nd and 3rd waves of mortgage default have not yet hit.

Unemployment rate is still rising.

It is a propoganda game of "if we wish just believe it, all our problems will be gone".

Well....gee whiz!!!

And the dollar is falling against which SOLID currency? The pound? (U.K. is as F^cked as we are), The Euro (yea right).

No, this is the eye of the hurricane....bright sunny skies...for a few more months.

Anonymous said...

Stock and financial markets are not dependent of the real world. Thy feed themselves on expectations, not facts or reallity. Thats why I think that whatever happens on main street is irrelevant for the financial world.

Anonymous said...

I am not a big fan of the USD. Other than GLD, where else would you put your cash Keith??

EUR
JPY
RMB
GBP

What currency?

If the USD sucks, the others are far worst. Most people talking down the dollar are fools who do not understand that the Europeans are printing, China is printing, UK is printing, Japan has been printing for a while, we are all printing.

Again, if I had to choose a currency by choice, I would choose the JPY and USD over any other currency, period.

Those predicting a total USD meltdown are due for a big shock. I would bet that the EUR would collapse before the USD anytime. Suckers...

Dny