Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6865090271542087680
Is All Cash #Equal? Are #Real #Dollars Equal to #IoU #Dollars? These were the #Risk questions on my mind as I read: Is #Cash A Good “ #Risk ” #Hedge? https://lnkd.in/eYUkZm-r
Its focus is on examining “fast” versus “slow” risk for Cash as a Hedge examining the #financial #impact on #equities and #cash over long-term periods: https://lnkd.in/eYUkZm-r :
I think through above in terms of contrasts such as:
Cash = #Real #Dollars That You #Own and #Control with #Guaranteed #Worth
vs.
Cash = IoU #Dollars that You Don’t Own or Control, not Backed by #Guaranteed #Worth.
Of course, it does matter what kinds of #Cash one owns, regardless of much ado about the #monetarily #depressed #USD under threats as the #Global #Reserve #Currency: contrasting examples being #Turkish #Lira: https://lnkd.in/etpN9cud and #Venezuelan #Bolivar https://lnkd.in/e9mW7Nrr where #financial #innovation of a #Million #Bolivar #note can’t restore its #real #worth as #7 #Million #Bolivar as #Seven one-#million #bolivar #notes — the highest denomination and very hard to come by — were needed to pay in #cash for one #loaf of #bread.
The above contrasts about #Riskiness & #Risk of #Loss as well its #Probabilistic, #Stochastic & #NonDeterministic #Likelihood apply as well to #asset #classes beyond #Cash as in case of #Credit & #Equity. In cases such as #Evergrande’s #controlled #implosion: https://lnkd.in/evS4tuyG, of all #creditors, such as Global Banks, who will be made whole versus who will be left holding empty bags. When the financial markets implode loosing up to 50%, how many #equity #bagholders will result from related #bankruptcies.
It is important to recognize such contrasts between #Real #Assets and #Unreal #Assets in current era of #Digital vs. #Physical goods as well. It’s now common for even #big #name #retailers to #accept #orders with implied #promise of #delivery for #Real #Physical #goods such as #name #brand #furniture and after months of delay declare that such goods are #OutOfStock validating the #Reality of #Fake #Inventory they rely upon for accepting #Real #Orders for Delivering #Real #Goods.
Similarly, in era of #easy #Credit fueled by near #ZIRP #interest #rates, one sees historically unprecedented pace at which #double- & #triple-#digit #billions & #billionaires disappear faster than it takes for them to appear with #market #movements as seen in recent $300 #Billion loss in #market #cap of #Tesla multiple times: https://lnkd.in/eHyijm-a.
Along with the #fictitious #derivatives #economy that is many times larger compared to respective #real #underlying #value, given such global #market #casino #bets… there are plenty of #homeowners who in fact are not really #owners but #borrowers with significant #loans & #mortgages that can go belly up in an #economic #recession… Some such #homeowners who had rented their #realassets were sleeping in their cars when their #rents got deferred for months further increasing risks of #defaults.
