“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” — John Maynard Keynes
Americans are hoarding cash.
Should you be?
On this chart from Bloomberg, they claim that Americans are holding $5 trillion in cash.
That’s 5x more than two years ago.
Should you be holding cash or hoarding cash?
We’re gonna go over the answer in three easy steps.
Let’s jump into it!
1. Americans Are Holding 5x As Much Cash as Two Years Ago
Why are Americans holding cash?
During the beginning of COVID, we had a big panic.
There was a low savings rate at the time.
The government gave people stimulus in the forms of checks and PPP loans.
Some of that money is still sitting in bank accounts.
People are seeing risk and holding their cash.
The challenge with holding cash today is high inflation.
Inflation officially is around 8% to 9%, and unofficially more like 15% to 18% according to Shadow Stats.
Cash is losing value every single month.
The erosive power of inflation strikes again!
The confused mind will say to keep waiting and not invest.
Let’s say you’ve got $100,000 in the bank and you keep it there for the next two years.
By waiting, you could be losing between 35% and 40% of your purchasing power.
That’s just based on a 15% to 18% inflation rate!
2. Should You Hold Cash?
With those losses in mind, the question now becomes:
Should you hold cash?
The short answer is no.
Don’t hold cash.
I’m about 95% deployed right now, which means 95% of my net worth is in deals.
I have a little bit of cash, but I’d rather be in assets that pay me to hold them.
Saving is losing.
Remember: The national savings rate of Americans is $5 trillion.
The holding cost at a 15% inflation rate is around $750 billion a year.
Would you pay $15,000 for a bank to hold $100,000?
Ouch!
When you look at it that way, it’s painful.
Robert Kiyosaki and Ray Dalio both say cash is trash and saving is losing.
If you are sitting on cash, try to find some way to deploy it.
3. What Should I Do With My Cash?
What should you do with your cash?
The goal is to find assets that pay you to hold them.
You want to find an asset that will put money in your pocket.
Ideally, it should have some sort of inflation hedge component.
If you can use debt to invest, like you can with real estate, you can buy an entire apartment building.
Let’s say the apartment building costs $10 million.
You can put $3 million down as a down payment.
If the valuation goes up by $3 million, you’ve basically doubled your investment.
Even though the values only increase by 30%, you’ve had a 100% gain.
By using debt, you can also achieve this!
Multifamily is an awesome way to grow and become a passive investor.
We are all about real assets.
We also invest in precious metals like gold and silver.
We have an ATM machine fund.
You should look at any real asset that will pay you to hold onto it.
In summary:
People are hoarding cash trying to save money.
Right now is an incredible time to buy multifamily and other assets.
Even though we’re seeing high interest rates, they can be adjusted later.
The Fed will raise rates, and eventually they will lower them.
Now I want to hear from you!
What is your plan?
Are you hoarding cash or deploying it?
What are some things that you’re doing with your cash to take advantage of inflation?
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
