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Cash is Trash?

Written By: Cullen Roche  |  Posted: Wednesday, March 30th, 2011

            Cash has quickly become the biggest loser in recent years as euphoria moved to panic and panic moved to euphoria.  Many investors have noted this search for yield as investors are forced out of cash and into higher yielding assets.  This is exactly what the Fed has been hoping for of course.  It is, in my opinion, only one more contributing factor to the flawed theory that nominal wealth effects result in sustained wealth.  But cash is not always trash.  In his weekly letter Jeff Saut discusses the idea that cash is not trash and can actually be utilized quite strategically in a portfolio:

            To be sure, unlike many investors, I consider cash to actually be an asset class. To put this loathsome asset, i.e., cash, into perspective, Seth Klarman, an outstanding value investor, dissected the faulty rationale that "cash is trash" during an interview in Grant's Interest Rate Observer. To wit:

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