Yellen: "Cash Is Not a Very Convenient Store of Value"

scott

http://www.zerohedge.com/news/2015-03-27/santelli-stunned-janet-yellen-admits-cash-not-store-value

So, once again, Yellen telling people to own assets and that all this continues.

Also, if "cash is not a very convenient store of value", I'm curious of what things she believe are a "convenient store of value."

Finally, while Yellen is acting like the Fed is raising rates this year, she did say today that she considered negative rates (and she has discussed negative rates in years previous.)

rforno

It may not be a "convenient store of value" but it sure is a convenient "store of power" when you want to pounce on (desired long-term) assets that go 'on sale' due to market insanity. In that case, the 'value' of cash is quite reassuring to me, even if it's annoying to have it just sitting there ... waiting......waiting.

In my case, I have a convenient 'store of power' ready to go, but that's an intended slice of my overall investment positioning, and I'm more than comfortable with that vs everything else I have and their allocation.

Tampabay

Your right BUT it comes at cost.......that is "holding cash" ready to go

hank

Equities were a great store of value during 2008. LOL

BrianW

@hank: they were a great store, but not too convenient.

hank

BrianW said, " ... they were a great store, but not too convenient."

Brian, Equities following a market crash do represent a "store of value" if one has the time and patience to wait - and if they purchased those equities near market bottom. The post-March 2009 recovery has been swift, very unlike the 15+ years (along with massive government spending and a world war) it took to get back to "break-even" following the '29 crash. It's possible it has taught us the wrong lesson.

Most badly beaten up things probably do represent a store of value. Along with stocks we might include real estate, junk bonds and coffee bean futures ... But only if one can wait. That's a big "if" on a board where broadly diversified mutual funds are often sold following a short-term 5-10% decline. Most, I'm afraid, do not have the inclination to sit passively watching their life savings depreciate 38% over 12 months (meaning $100 in assets at start of year is worth $62 at year's end.)

"Store of value" is a great term - worthy of more thought than I can give it here. Much has to do with time frame involved. My original comment was somewhat tongue-in-cheek. Cash, as Yellen suggests, is not a good store of value. It is a tool which allows us to convert our various assets (skills, labor and things owned) into useful goods and services. However, I wouldn't completely dismiss cash as a part of one's portfolio. It does add stability - and some cash would have come in mighty handy in March 2009.

(One caveat here - During a deflationary period cash would be a very good store of value, increasing in worth as prices of goods and services fall. That's one reason we're currently seeing negative interest rates in some European countries.)

Regards

Bloomberg article summarizes 2008 market losses. The S&P 500 fell 38.5%.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a5RkfQG30k1k

Sven

However, I wouldn't completely dismiss cash as a part of one's portfolio. It does add stability and a store of cash would have come in mighty handy in March 2009.

@Hank, I concur. There are many who still remember 2008, and they have good reasons to stay conservative. Many skillful fund managers have taken advantages of the buying opportunities and have quite well the following year.