As I spoke to collogue today, I understood we both agreed that soon the US will work off cash and not credit. In other countries credit means you’re poor. The US is one of the only countries that thinks “credit” resembles wealth.
In other countries to use credit means you don’t have cash to afford certain things. Hell, the US is one of the last countries still NOT on the metric system for crying out loud. The truth is: that unless your bank is a multinational bank your credit score means nothing in other countries - not a bloody thing.
The irony is you usually don't realize how good something is until it's gone. For most investors, the red-headed stepchild in their portfolios is cash. When markets are advancing, it's easy to see cash as a weak, underperforming asset that needs to be put to better use. After all, who wants sit on an asset earning low-single-digit returns when the markets are serving up double-digit gains? As a result, investments are made with less regard to the underlying fundamentals of the business.
Believe it or not, it can be quite difficult to justify why you're holding cash. If someone asks you to name your favorite investment ideas and you say you're in cash, that's usually the end of the conversation...lol
As an investor, the general assumption is that you always have to be invested; holding cash suggests that you're not investing but rather sitting idle. Yet this assumption couldn't be more misguided. Cash is actually the investor's most valuable asset. Most don't see its true value, however, until there's a cash crunch in the economy.
Go figure…
Interesting trend, of late, with respect to topics surrounding money. Focusing on the knowledge and developing the wisdom tends to navigate the path forward in maintaining sufficient balance.
ReplyDeleteYea, if the US reversed the system and became a ash based financial base instead of a credit financial base, things wouldn’t be this way.
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