Cash to rise from compost heap
>>To be fair, America does believe in cash, as long as it's someone else's. Household and corporate debt in this country is almost $30 trillion. That's more than twice America's annual gross domestic product.<<
By Thom Calandra, CBS.MarketWatch.com
Last Update: 11:57 AM ET Aug. 21, 2002
SAN FRANCISCO (CBS.MW) -- Cash is supposed to be king, queen and duke during tough stock market times like these. Surprise: It's played more like the jester.
Cash is so far down on the list of acceptable investments, it's practically trash. Far from being widely held and respected, money-market accounts, because of 2 percent and lower returns, are regularly shunned in favor of stocks.
The swath of the American population ages 36 to 56, some 29 percent of the country, may see the stock market as their only hope for a comfortable retirement. A new survey of 1,400 people, from Allstate Financial, says retirement savings for the baby boomers fell to $93,000 this year from $120,000 in 2001.
Much of that evaporated wealth came from Americans' exposure to losing stocks. Try this test: Ask any ordinary American what they could have done differently to avoid getting their knuckles wrapped by the $7 trillion erosion of stock-market wealth these past 30 months.
Most will answer that they could have switched sectors: out of tech and into "something else." Few, if any folks these days will answer that they could have socked their money into a money market. Even slightly higher yielding certificates of deposit - a one-year CD yields an average of 2.5 percent nationwide -- make up a sliver of Americans' retirement holdings.
Americans watched their next-door neighbors get wealthy off the stock market through much of the '90s. So most of us just don't believe in cash. Interest rates are so low, it would take more than 50 years to double your money in a typical money market account.
But the alternatives this year are much worse than a meager, positive return. Ask any stock market investor how their retirement portfolio is doing, and get ready for a sob story, complete with real tears and hand wringing.
If Americans are to begin repairing their broken investments, they first must believe in cash. A 2 percent money-market return -- before taxes and inflation -- sounds awful. But it's a heck of a lot better than a 40 percent loss. Or more. See money-market deposit account rates at BankRate.com
To be fair, America does believe in cash, as long as it's someone else's. Household and corporate debt in this country is almost $30 trillion. That's more than twice America's annual gross domestic product.
"One of the best investments you can make now will be to hold cash," Elliott Wave theorist Robert Prechter Jr. says in an interview about his new book, "Conquer the Crash." Prechter predicts a "massive deflation" of assets in coming years. The subtitle to his book is "How to Survive and Prosper in a Deflationary Depression."
The sad fact about cash is that when most Americans take cash off their trash lists, an ordinary greenback will be very, very hard to come by.
cbs.marketwatch.com |
