Role of cash in the absence of tight money

General Discussion on the Permanent Portfolio Strategy

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I Shrugged
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Role of cash in the absence of tight money

Post by I Shrugged » Wed Sep 16, 2015 7:56 pm

While everyone else seems to fret about one of the other three pieces of the PP, I hate the cash portion.  In the current world, there is not going to be any such thing as a tight money recession.  And even if there is, so what?  By definition it's a short period. But there won't be one unless and until the central banks allow one.  Which they will not, no way no how, not in any forseeable circumstance.

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AdamA
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Re: Role of cash in the absence of tight money

Post by AdamA » Wed Sep 16, 2015 8:33 pm

I love holding cash.  It dampens the PP's volatility and also gives me a sense of security.

I like knowing that if I need cash I have it readily available. 
"All men's miseries derive from not being able to sit in a quiet room alone."

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ozzy
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Re: Role of cash in the absence of tight money

Post by ozzy » Wed Sep 16, 2015 8:58 pm

I Shrugged – I'm in your camp too.  Aside from my emergency fund, I don't hold any cash in my portfolio.  That said, I'm in the accumulation phase with steady employment.
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mortalpawn
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Re: Role of cash in the absence of tight money

Post by mortalpawn » Wed Sep 16, 2015 10:04 pm

Cash hedges against deflation, which is what we are seeing (in part) with the rising dollar.  As the dollar increases in value, other assets become cheaper and it is actually better to hold cash than stocks, bonds, or gold. 

Also if the stock or bond bubbles do pop, there will likely be a fire sale as the big derivative holders rush to sell assets to cover their bad bets.  In such a scenario, cash would be king - at least for a while.  This event would also be deflationary, as it was after the 1929 crash and during much of the great depression.
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Re: Role of cash in the absence of tight money

Post by koekebakker » Thu Sep 17, 2015 12:01 am

I don't view the PP as just an investment potfolio. The roles of gold and cash are broader than that. Gold and cash give you extra protection. Gold against extreme economic/political events and cash againt the more common individual setbacks.

Holding a substantial cash portion also prevents me from getting greedy and invest too much of my money.
fi50@fi2023
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Re: Role of cash in the absence of tight money

Post by fi50@fi2023 » Thu Sep 17, 2015 8:32 pm

Before the PP, I tended to stay too heavily invested in the market and had limited liquidity.  The cash portion forces me to keep dry powder on the sidelines.
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mathjak107
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Re: Role of cash in the absence of tight money

Post by mathjak107 » Fri Sep 18, 2015 5:29 am

why couldn't you keep a cash position with any portfolio ?  just make it part of the portfolio allocation .

we are retired and keep 2 years withdrawals and a 50k emergency fund on the side  (10% cash ) .  no reason any portfolio can't keep powder dry
Last edited by mathjak107 on Fri Sep 18, 2015 5:32 am, edited 1 time in total.
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Tyler
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Re: Role of cash in the absence of tight money

Post by Tyler » Fri Sep 18, 2015 10:29 am

koekebakker wrote: I don't view the PP as just an investment potfolio. The roles of gold and cash are broader than that.
+1.  Sometimes people get so caught up in future returns that they neglect the money management side of asset allocation.  Investments are great for the future, but the stability and liquidity of cash are way more helpful for the here and now.  IMHO, cash is a great addition to any portfolio. 
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
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