Cash is King

A couple of years ago a wise, old, financial mentor of mine said to me after reviewing my financials, “I am very impressed. You have built up quite a net worth at a young age and are on a path to go far in life. However, if there is any advice I could give you it is that cash is king!” 

At the time I had good equity in a growing company, lots of real estate holdings and very little cash reserves. Although I understood what he meant, I did not know what he meant. I use the word know to mean - understand it to the point of creating powerful thought and action.

Fast forward three years. What if I had taken his advice to heart and been on a quest to accumulate cash? Everything is on sale right now!

Real estate as evidenced by the Case Shiller report shows discounts approaching 20% off in the nations largest 20 cities.

Stocks and bonds (at home and abroad) have had their prices slashed dramatically this year:

Dow Jones Industrial Average -- over 35% down

Nasdaq -- over 40% down

S & P 500 -- over 40% down

Emerging Market Stocks -- almost 60% down

REITS -- over 40% down

Welcome to a buyers market without any buyers!

Very few have cash right now. They may have equity but cannot get to it. This is the time you want to be buying, in a buyers market without any buyers. If you have cash, now is the time to be building your fortune like those in the time of the Great Depression did.

Warren Buffet was quoted as saying, “When the prices are right, I can buy companies faster than Imelda Marcos can buy shoes.”

Lessons I will apply the next cycle:

1. Don’t get greedy when everything is racing up – remember Nordstrom has the Twice Yearly Sale, real estate and stocks have a Twice a Decade Sale

2. Take money off the table - it is not necessary to go all in, every hand. get comfortable with the coffers full of cash, poised for the next big sale

3. They are called cycles for a reason – prices go up and prices come down, round and round they go. be a buyer in the down cycle

4. Be a contrarian! 

5. Start now - now is the time to begin preparing for the next great opportunity. be a student now. build your wealth habits now.