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Recession is coming and cash is trash (but only for some.)

Wednesday, May 4, 2022

In an inflationary environment, I hear so many people saying cash is trash all the time.

Do you believe me if I tell you only the rich can afford to say that?

For those of us who still depend on our salaries and who have loans to service, we better have more cash on hand.

In fact, we better have much more cash on hand in case another recession hits.

PM Lee has recently warned that a recession is  possibly coming and economists think it could last two to five years. (Source: CNA.)

Yes, two to five years.

Some gurus will tell us not to worry because we can always borrow money.

Well, those of us who have tried to borrow money before will know it is not easy to do so especially in an environment where credit is tight.

Coincidentally, central banks are tightening money supply to fight inflation.

Banks are fair weather friends and they mostly prefer to lend money to people who already have money.

Even if we manage to borrow some money, it is likely to be costly.

With interest rates going higher, it would definitely be the case.

To those who can afford to say cash is trash, please remember that most people are not in a position to think that way.

Making them think that way is irresponsible and almost wicked.

To those who are listening to people who say cash is trash, consider our circumstances.

No one cares more about our money than we do.

Things are likely to worsen in the next two years or more and we must do what is right for ourselves.

Peace of mind is priceless.

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1. Crisis and what should we do?
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Daniel Yip said...

If you ever feel cash is trash, just give it to me


AK71 said...

Hi Daniel,

I get right of first refusal here.

Get in line, please. ;p

Steven said...

Hi AK,

Cash is still cash. Its trash to some who have the luxury of other forms of currency. For the rest of us, cash is still cash as its purpose is still essential for day to day living. :)

AK71 said...

Hi Steven,

We have to be mindful of our circumstances.

I agree with your choice of words.

Not all of us have the luxury to think that cash is trash. :)

Staerfeldt said...

Hmm…No cash how to acquire good stocks at lelong prices :P ….. don’t want to watch by the side lines when opportunity comes.

AK71 said...

Hi Staerfeldt,

Always a good idea to have a war chest ready. :)

However, it hasn't been that long since the last bear market.

My poor war chest needs more time to refuel. -.-"

Alan said...

What is your opinion of ManulifeReit USD and Prime USD REIT. They are near all time low and has a return of 8.5 and 9.2 percent.


AK71 said...

Hi Alan,

Their businesses aside, I am somewhat unsure when it comes to S-REITs with US assets because they make use of some arrangement in order to circumvent taxation (i.e. withholding tax for foreign or non-resident investors) by the US government.

Could be a loophole that could be plugged or not.

Why did they choose to list in Singapore when the USA has a big REIT market?

Of course, I could be overly cautious but look at all the ruckus regarding ADRs now.

Anyway, if in doubt, I rather stay out. :)

AK71 said...

SINGAPORE, May 23 (Reuters) - Singapore's key consumer price gauge rose in April at its fastest pace in a decade, driven by higher inflation for food, official data showed on Monday.

The core inflation rate — the central bank's favoured price measure - rose to 3.3% in April on a year-on-year basis, the highest since February 2012. A Reuters poll of economists had forecast a 3.4% increase.

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