Cash Isn’t Always King – It Can Also Be a Killer
If you’re holding cash, you’re losing money.
There … I’ve said it.
That’s a tough truth to accept.
But it’s a truth nevertheless.
Look, we all know the Personal Finance 101 basics – that we all should hold some cash – for emergencies … for liquidity … for opportunities.
But as an investment asset? Well, cash is a loser … an eroding asset … like a melting ice cube with a dollar sign on it.
That old mantra tells us that “cash is king.”
But, especially right now, that mantra is wrong.
Cash isn’t king.
It’s a killer.
The High “Cost” of Cash
There’s a record $5.3 trillion sitting in cash – out on the market sidelines right now.
And it’s one of those jarring ironies that the reason so many folks ran to cash is the very same reason cash is such an exceptionally lousy “investment” right now.
Yup … you guessed it – inflation.
Soaring prices – and the Federal Reserve’s aggressive assault on it through higher interest rates – have impacted investors more than anything since early 2022. And in many cases, that impact has been to run for cover.
There’s no sugarcoating it. The first nine months of 2022 were brutal for most folks as inflation soared and the Fed began raising rates. The S&P 500 collapsed 25% with plenty of volatility, head fakes and confusion… everything that made folks want to stuff their money in a mattress… or crawl under a rock and take their money with them.
Unfortunately, all those trillions now in cash – the highest amount ever – have lost value.
Just by sitting there.
Prices for needed everyday items – food for your table, gas for your car, rent for your house or apartment – have gone up many times more than the microscopic return you’ll get on that cash.
At its core, the math is quite simple.
The latest Consumer Price Index (CPI) from this week showed prices increased at an annual rate of 4.95% in April. That’s actually good news because it was down from March’s rate of 5% and below expectations also for 5%. That’s way higher than the long-term average of 3.28%.
And it also continues the undeniable trend of inflation cooling since it peaked in June 2022.
But the average interest rate on savings accounts right now is still 0.24%, according to Bankrate.
But… if you’re earning 0.24% on your savings while inflation is running at 4.95%, you’re losing 4.7% on your cash.
And that $5.3 trillion in cash on the sidelines eroding at 4.7% is about $250 billion in lost purchasing power per year!
Other rates aren’t much better. The average return on a money market account is 0.32%, also according to Bankrate.
You can find higher rates. High-yield savings accounts and some money markets will get you up to maybe 4.7%, but that’s still below the inflation rate.
The one-year U.S. Treasury Rate is 4.7% today, up from 2.01% last year.
So that’s a loser, too.
And that’s only if you look at “official” inflation rates.
Lots of experts believe that Washington games the system when it comes to inflation numbers (among other things) — which would make real inflation even higher, perhaps around 8%..
If that’s the case, our “simple math” equation (8% inflation – 4.7% interest rates = you are falling further and further behind) shows an even-bigger loss from cash
(And, by the way, you may have to pay taxes on some of the interest you “earned”).
Those are real losses.
And (sorry to say) the “cash is king” myth is an even-bigger bit of blarney than that.
You also need to look at “opportunity costs” – or what that money could have made for you if it had been deployed elsewhere.
In stocks, for example, the S&P 500 has rallied 15% from its October lows, so it’s not (to use one of Wall Street’s more-descriptive terms) just a “dead-cat bounce.”
That’s real money.
And, in many cases – for instance, with a stock picking system like Quantum Edge – you could’ve done even better. A lot better in many cases.
There have been strong opportunities to recoup some of those 2022 losses and get your wealth growing again.
I get the hesitancy. We all hate to lose money, and it makes us tentative about going back into stock. But there’s no other investment class that come close to stocks for building wealth.
And here’s my main message for you today: It’s not too late.
You can set yourself up now for substantial profits in the coming months but investing in superior stocks with a high probability of making you money.
The kind of stocks my Quantum Edge system identifies.
Inflation is falling. The outlook is brightening. And some of the highest-quality stocks in the market are already on the move. Now’s the time to get on board.
Identifying High-Probability Profits
Don’t get me wrong. Rebuilding mode isn’t the same as a snorting, charging bull market.
Not quite yet.
Expect more volatility and choppiness as investors get comfortable with a less-hawkish Fed, rates finally leveling off, and an understanding that a slowing economy is inevitable but a recession is not.
I see the potential for a fantastic fourth quarter for stocks. But, until then, we’ll likely experience more ups and downs.
That’s not great for people sitting in cash, who will probably stay cautious and miss even more chances to make money.
It’s also not great for index investors – who will ride stocks up and then down – and on the other side will end up breakeven.
But it will be great for “stock pickers” – the folks who bet on the handful of stocks that go higher.
But for that to work, you need to know which stocks will move higher… before they do.
Impossible… right?
Not at all.
It’s impossible to do it 100% of the time. But it’s not impossible to do it 70% of the time.
I think about all those folks who are currently holding those melting dollar cubes – and how they’d feel if they were making money on seven out of every 10 trades.
That’s what 32 years of Quantum Edge system data shows me. And a recent audit by TradeSmith determined that the system outperform the market by 7-to-1.
The secret to that success is my Quantum Score, which combines proprietary analysis of a company’s fundamentals and the technicals of its shares. From there, we add our proprietary Big Money indicators, which sniff out unusual buying and selling in stocks that the powerful pros would like to keep quiet.
Those are the three legs that support my system – that help me identify which stocks will rise … and which ones will fall.
Every day, my computers run more than 6,000 stocks through our algorithms and assign each one a Quantum Score. Stocks that score between 70 and 85 are the ones with the highest probability of moving higher.
Data analysis gives us a good idea of what’s to come because patterns repeat themselves. I think that’s probably true in most areas of life, but it’s definitely true when it comes to making money in stocks.
And right now, the data is clear: You’ve got a better shot at making money in stocks – using my proprietary Quantum Scores – than you ever will in cash.
Cash can kill you.
Stocks can make you rich.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. My Quantum Edge system is a great example of how investors today have an incredible chance to use technology to change their life for the better… to make more money than they ever thought possible.
It allows the level of research and analysis that wasn’t humanly possible, and it leads to phenomenal results.
I use the system for all my investing decisions, including the first six stocks I’ve recommended in Quantum Edge Trader. All rate high in my system and have Big Money flowing in.
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