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Monday, 8 September 2014

Cash Is Rotting???

Pretty obvious!

Can't really pretend it is not!


  1. I agree with B. I'm happily comfortable with my cash stash right now.

    The worst thing that can happen is to spend it on something wasteful.

  2. Either you believe in this or you don't. Is there a compromise? Take the middle path?

    Holding cash has an opportunity cost.

    Let us keep calculations as simple as possible for grasping the principle of cash as an option without time limit, O. K.

    Currently FD for one year is 1% compare to SGX Equity's dividend yield about 5 %. So for 5 years you will lose16% (4*4% p/a)
    The sixth year, a black swan appears. You plonk your cash into the severe Bear market snapping up many market's gems at a very good MOS prices. Do you think you can offset the 16 % lost for holding cash as option for the last 5 years?
    If you don't think so, then try other strategy lol.
    And yes what happens if black swan comes later? May be in the tenth year?
    So pray you tell me Lady Luck or God Blessings or your Intelligence/Temperament plays a part? Which one plays the greatest part of your strategy?
    GOD BLESSINGS, of course. (i am a CHRISTIAN).
    No offence intended.

  3. Amendment.
    Sorry, it should be 4%*5=20% opportunity cost. See how poor my basic arithmatics is.

    1. T, I will term it as 20% opportunity profit forgone.

    2. Ha! Ha!
      A rose by any other name will smell as sweet, isn't it?

      And don't forget the side of the coin?
      Imagine you are fully invested all the time (starting from 2007) and how much do you think you would have lost during the last GFC until now?
      Do you think you can or have recovered some of your capital invested on paper by now? Or by how many more years to wait into the future?

      If WB believes in CASH as an option without time limit, who is to argue with him?
      The only problem is do we have the resources (cash) to emulate him?

    3. WB holds 20-40B cash. However, Berkshire net worth is 250B.

      Hence, he holds about 8-16% cash.

      So to WB, his opportunity "profit foregone" is small compare to his worth.


    4. Yes agreed.
      Talking in terms of % has no absolute meaning. 1% of a $1 million is a vast difference from 1% of a $1 Billion.
      On the other hand, if WB has been fully invested in the market from 2007 till now, Will he be better off.
      i know if i was fully invested, i will not be better off.

    5. And also my post about this strategy's extremity that needs some sort of compensations.

  4. i think this is a very "extreme strategy". So we should have asset allocations to compensate this extremity. Or else the time factor will kill us. Or better still you are very high on the HC ladder. Then no worry or problem. Who say the RICH easily can not get richer?


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