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The Bull Market in Cash Is On

By Brian Hunt and Ben Morris, editors, DailyWealth Trader
Monday, September 14, 2015

In late March, we called it "one of the best assets to hold in uncertain markets" in our DailyWealth Trader service...
The title has since proven its merit.
The asset's value has climbed 6% relative to U.S. stocks... and 10% relative to European stocks. Its value has risen 8% relative to gold... and 14% relative to silver. Its value even climbed close to 1% compared with 10-year U.S. government bonds, which are considered some of the safest assets in the world.
How has this asset performed in U.S. dollars?
Well... it is the U.S. dollar. The asset is cash.
Stocks have fallen hard over the last month. If you had most of your assets in stocks, it was probably hard to stomach. Gold and silver have declined, too, but more gradually. At the same time, the value of your cash has climbed...
Think about it this way... When an asset falls, it isn't just a bear market in that asset... It's also a bull market in cash. It's an increase in the amount of assets you can afford.
If stocks drop 10%, maybe you can buy 100 extra shares of one of the world's best companies... And you can buy those shares at a better price. If silver drops 20%, maybe you can buy 100 extra one-ounce coins.
This is an important idea to keep in mind today...
Global financial markets have broken their primary trends... and are now struggling. And we're likely in for more volatility in the weeks and months ahead. So holding more cash might let you sleep better at night.
It allows you to weather shocks to financial markets... and to pick up good deals when they appear.
In our March 26 DailyWealth Trader issue, we explained that lots of folks object to this idea:
Many people don't like to keep large portions of their wealth in cash because they feel like they always have to be "doing something." They hate sitting still. They see a large cash balance in their account and start looking for a stock to buy... a commodity to buy... anything to buy. It burns a hole in their pocket.
But sophisticated investors have a more useful way of viewing cash. We see cash as "returns in waiting."

When there aren't lots of great, low-risk investment ideas out there, the best idea may be to invest in cash...
Keep in mind, we're not saying you should sell everything you own. For lots of folks, holding 10%-20% of their investable assets in cash is a good amount most of the time. During less certain markets, even 30%-40% could be appropriate.
Hold however much cash makes you comfortable. If you're extremely nervous about stocks, hold more cash. Nerves lead to bad trading decisions... So you'll be better off. If you're confident that stocks are headed higher, hold less cash... But still hold some.
We always encourage readers to use intelligent asset allocation as part of an inclusive "catastrophe-prevention plan." Holding some of your assets in stocks, bonds, precious metals, and real estate will lead to less volatility in your overall investment portfolio... And cash is one of the most valuable assets you can own.
While other assets are dropping, the bull market in cash is on.
Brian Hunt and Ben Morris

Further Reading:

"Most investors will fail," Porter Stansberry writes. "This is the most important information I can possibly give you." To be successful, Porter says you need to understand why investors fail and how they fail. Learn the only chance you've got to be a successful investor.
Dr. David Eifrig says he has "seen ignorance of [asset allocation] ruin more retirements than any other financial factor." Learn more about smart asset allocation in this interview with Doc.

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Market Notes
Beauty-products maker Avon Products continues its descent... shares fall nearly 75% over the past 12 months.
The housing boom is alive and well... furniture store Bassett Furniture is up more than 140% since October.
Airline stocks march higher... Southwest Airlines, JetBlue, and Delta Air Lines are each up 100%-plus in the last two years.
Flooring company Lumber Liquidators is one of the worst-performing stocks of late... down nearly 80% since February.
From The Crux
Market Watch
Symbol Price
S&P 500 1941.57 -0.6% -2.8%
Oil (USO) 14.51 -2.8% -58.2%
Gold (GLD) 105.39 -0.9% -11.8%
Silver (SLV) 13.67 -2.3% -23.9%
U.S. Dollar 95.52 0.0% +13.4%
Euro 1.13 +0.2% -12.5%
Volatility (^VIX) 25.26 +3.7% +97.3%
Gold Stocks (^HUI) 102.45 -3.8% -53.9%
10-Year Yield 2.18 -1.9% -13.8%

World ETFs
Symbol Price
Israel (ISL) 18.73 +1.2% +10.0%
Japan (EWJ) 11.67 -0.5% -0.3%
USA (SPY) 195.17 -0.4% -0.7%
India (IFN) 24.33 +0.3% -5.1%
China (FXI) 35.94 -0.3% -11.0%
Taiwan (EWT) 13.60 -0.2% -14.6%
S. Africa (EZA) 53.89 -0.8% -19.9%
Singapore (EWS) 10.52 +0.0% -21.0%
S. Korea (EWY) 48.32 -0.4% -23.1%
Russia (TRF) 9.80 -0.4% -23.5%
Canada (EWC) 23.39 -1.2% -26.0%
Lat.America (ILF) 23.26 -0.6% -41.6%

Sector ETFs
Symbol Price
Biotech (PBE) 54.20 -0.6% +15.5%
Software (PSJ) 40.98 -0.6% +11.8%
Retail (PMR) 38.11 -0.2% +11.7%
Consumer Svcs (IYC) 140.75 +0.1% +11.8%
Health Care (IYH) 149.43 -0.3% +11.4%
Construction (PKB) 24.13 -0.4% +9.9%
Big Tech (QQQ) 104.61 -0.4% +5.7%
Defense (PPA) 33.99 -0.5% +4.2%
Insurance (IAK) 48.99 -0.3% +3.8%
Semis (PSI) 23.66 -1.3% +1.9%
Financials (IYF) 84.98 -0.3% +1.3%
Utilities (XLU) 41.30 +0.2% -0.6%
Real Estate (IYR) 69.23 +0.4% -2.1%
Industrials (IYJ) 98.83 -0.4% -3.4%
Media (PBS) 24.00 -0.8% -4.9%
Transportation (IYT) 144.25 -0.2% -5.2%
Telecom (IYZ) 28.23 -0.5% -6.3%
Water (PHO) 21.53 -0.7% -16.3%
Basic Mat (IYM) 68.71 -0.9% -20.1%
Alt. Energy (PBW) 4.36 -1.4% -36.0%