Cash Is King

For the last year and a half, that old adage was certainly true.  As the market continued its downward trend during that time, more and more people took the money out of equities and put them in safe money-market accounts (and/or mattresses), bringing total cash levels to unprecedented highs (see my previous post).

Those of us who were smart or lucky to get into cash a year ago are certainly feeling very clever and comfortable now.  But cash is not going to be king forever.  While inflation is nowhere in sight these days, and, moreover, deflation is more of a current concern, the fact the government is spending trillions of dollars to fight the financial crisis will undoubtedly bring inflation back to life.  Time will come when that comfortable feeling of sitting on a pile of cash in the mattress will not be so comfortable anymore.