What does this even mean?...CD's, a savings account, treasuries, money market account, money market fund, treasury etf's, individual bonds..what? All of the above or none of the above?

it doesn't mean treasury etfs or individual bonds.

matureag said:

---

What does this even mean?...CD's, a savings account, treasuries, money market account, money market fund, treasury etf's, individual bonds..what? All of the above or none of the above?

---

Money market is the easiest instrument to use as "cash". It's paying ~ 5% and you can easily purchase equities with it if you want to get back in. Most big bank savings accounts still pay less than 1%. High yield savings accounts are out there, but it's not as easy to move back to a position where you can purchase stock.

Fidelity, Schwab and I'm sure others all have money market accounts paying ~5% right now.

In order of liquidity, here's my take:

1. Paper money stuffed under a mattress
2. Checking account
3. Savings account
4. Money market funds
5. CDs
6. Annuity or Life Insurance Cash Value

Most other things are not really cash equivalents -- not gold bullion, treasuries, bonds, bitcoin, commercial paper, etc. They all have enough market risk, credit risk, liquidity risk, or interest rate risk to make them VERY poor cash substitutes (although they might be very good investments).

That said, I'd generally stick to options 4 and 5 above to get the best current risk/reward tradeoff on cash positions you choose to maintain. Specifically, I'd say half in money market and half in laddered CDs would be a good starting point to begin your analysis.

Please explain the difference in risk between buying a CD vs buying a treasury note/bond.

With the bank weirdness going on in Australia, cashless banking, "going cash" means something entirely different.

"Customers have five days until Macquarie Bank goes cashless"

Quote:

---

From November 1, Australia's fifth-largest bank will become completely cashless.

Customers will be unable to write or deposit personal cheques, deposit or request bank cheques, deposit cash or cheques over the counter at NAB branches and make a super contribution or payment via cheque.

Any cheques received after October 31 will be returned to the sender.

---

Globalists demand cashless societies. All digital means tighter controls on people's spending. I don't like it...not one bit.

GasAg90 said:

---

Please explain the difference in risk between buying a CD vs buying a treasury note/bond.

---

That is a very involved question, but maybe if I give a few examples, it will help. They really are quite different. One of our banker posters could do a much better job than I.

An attempt to explain interest rate risk and reinvestment risk: First: If you could buy a 30 year CD (you can't) to match the timeframe of a newly issued 30 year treasury, the differences might be small, and they might be large. The timing of semi-annual T-bond interest payments (coupons) vs. the internal reinvestment of the CD's interest crediting method and compounding (daily, monthly, quarterly, annual?) of a particular CD is a big factor. How do you reinvest the first treasury coupon? In a new 30-year bond? In a 29.5 year maturity bond? In a 6 month CD? Who knows? Obviously, interest rates are changing every day, so it is virtually impossible that you will get the same result. So, at any time, the CD or the Treasury will be "riskier", but you never know which direction rates will go, or how the future you personally decides to reinvest the income.

As I understand it, the idea of "moving to cash" involves staying liquid, to invest elsewhere on some future "better day". We're generally looking at a pretty short time horizon, right? A CD does a pretty good job of this when you buy short term (3-12 months?) instruments. Worst case, you cash out early and pay a small penalty. A T-bond is quite different, as you're very dependent on the future interest rate environment. Bonds lost significant value in the last couple of years as the Fed hiked interest rates (as you were locked into long term lower interest coupons than what is currently available). In fact, it probably erased the value of all interest paid on the bonds if you bought in early 2022, for example. If you need the money now and liquidate, you'll be taking quite a hit. So, CDs probably win if your start date was Jan. '22. If you invest today, and rates plummet back to where they were in 2021, your t-bond will be quite a bit more valuable, and probably wins over a short-term CD. Timing is everything.

Bottom line - - treasuries are not a good place to hold short-term cash. Fit the solution to the problem, and I stand by my statement that money market and maybe laddered CDs are a good place to stash cash for future investment needs. If you want to get exotic and hedge the interest rate risk of treasuries, you might get closer to something optimal, but I doubt the results are worth the effort and frictional costs.

I bleed maroon said:

---

GasAg90 said:

---

Please explain the difference in risk between buying a CD vs buying a treasury note/bond.

---

That is a very involved question, but maybe if I give a few examples, it will help. They really are quite different. One of our banker posters could do a much better job than I.

An attempt to explain interest rate risk and reinvestment risk: First: If you could buy a 30 year CD (you can't) to match the timeframe of a newly issued 30 year treasury, the differences might be small, and they might be large. The timing of semi-annual T-bond interest payments (coupons) vs. the internal reinvestment of the CD's interest crediting method and compounding (daily, monthly, quarterly, annual?) of a particular CD is a big factor. How do you reinvest the first treasury coupon? In a new 30-year bond? In a 29.5 year maturity bond? In a 6 month CD? Who knows? Obviously, interest rates are changing every day, so it is virtually impossible that you will get the same result. So, at any time, the CD or the Treasury will be "riskier", but you never know which direction rates will go, or how the future you personally decides to reinvest the income.

As I understand it, the idea of "moving to cash" involves staying liquid, to invest elsewhere on some future "better day". We're generally looking at a pretty short time horizon, right? A CD does a pretty good job of this when you buy short term (3-12 months?) instruments. Worst case, you cash out early and pay a small penalty. A T-bond is quite different, as you're very dependent on the future interest rate environment. Bonds lost significant value in the last couple of years as the Fed hiked interest rates (as you were locked into long term lower interest coupons than what is currently available). In fact, it probably erased the value of all interest paid on the bonds if you bought in early 2022, for example. If you need the money now and liquidate, you'll be taking quite a hit. So, CDs probably win if your start date was Jan. '22. If you invest today, and rates plummet back to where they were in 2021, your t-bond will be quite a bit more valuable, and probably wins over a short-term CD. Timing is everything.

Bottom line - - treasuries are not a good place to hold short-term cash. Fit the solution to the problem, and I stand by my statement that money market and maybe laddered CDs are a good place to stash cash for future investment needs. If you want to get exotic and hedge the interest rate risk of treasuries, you might get closer to something optimal, but I doubt the results are worth the effort and frictional costs.

---

For short-term "cash" needs, a T-bill is better than a CD right now.

BTHOB said:

---

For short-term "cash" needs, a T-bill is better than a CD right now.

---

If you live somewhere with a state income tax, that's likely true. For others, it's close to a wash. You can't really go wrong with either for short term needs in the current inverted yield curve environment.

My statements above were in response to the poster's question about longer term t-bonds and T-notes, not short-term T-bills.

Treasuries are not cash. While you are technically "guaranteed" a return of your money, you are still investing with faith in the treasury to pay you back, and the treasury has no money. While that's seemingly never been a problem in our history, we've never been in a time of peace, in an inflationary environment, with record debt and deficits. Also, should you need the liquidity, you are at risk of losing money.

A money market account through your broker is not cash, unless you know for certain you can pull every dollar out tomorrow. Do they have your cash? If not, where did they put it and what is the risk profile of that holder? And what if you stock broker goes under? Where is your cash? Is some government entity that is also broke guaranteeing you cash they don't have?

While technically cash in your bank account is "cash", they don't have your money. They don't have 90% of any deposits. It's been loaned out or is parked somewhere else. The entire system is leveraged 100 times over. Should you come calling for your cash at a time where many others are as well, you likely aren't going to get it.

If you are truly going cash, as in.. you want to guarantee the cash you have is in your hands and you have direct access to it, you better be sure your bank is safe or you better have physical cash.

Now I'm not saying that's what you should do. But you absolutely need to understand the unprecedented risks in the system right now.

I bleed maroon said:

---

In order of liquidity, here's my take:

1. Paper money stuffed under a mattress
2. Checking account
3. Savings account
4. Money market funds
5. CDs
6. Annuity or Life Insurance Cash Value

Most other things are not really cash equivalents -- not gold bullion, treasuries, bonds, bitcoin, commercial paper, etc. They all have enough market risk, credit risk, liquidity risk, or interest rate risk to make them VERY poor cash substitutes (although they might be very good investments).

That said, I'd generally stick to options 4 and 5 above to get the best current risk/reward tradeoff on cash positions you choose to maintain. Specifically, I'd say half in money market and half in laddered CDs would be a good starting point to begin your analysis.

---

Paper money really isn't liquid anymore unless you are talking amounts under $10k. It is very hard to move large sums of cash.

The most liquid thing is a checking account by far. you can write a check for 100k and no one blinks, I can transfer 100k online in seconds. Leaves a trail, but by far the easiest way to move money.

knoxtom said:

---

I bleed maroon said:

---

In order of liquidity, here's my take:

1. Paper money stuffed under a mattress
2. Checking account
3. Savings account
4. Money market funds
5. CDs
6. Annuity or Life Insurance Cash Value

Most other things are not really cash equivalents -- not gold bullion, treasuries, bonds, bitcoin, commercial paper, etc. They all have enough market risk, credit risk, liquidity risk, or interest rate risk to make them VERY poor cash substitutes (although they might be very good investments).

That said, I'd generally stick to options 4 and 5 above to get the best current risk/reward tradeoff on cash positions you choose to maintain. Specifically, I'd say half in money market and half in laddered CDs would be a good starting point to begin your analysis.

---

Paper money really isn't liquid anymore unless you are talking amounts under $10k. It is very hard to move large sums of cash.

The most liquid thing is a checking account by far. you can write a check for 100k and no one blinks, I can transfer 100k online in seconds. Leaves a trail, but by far the easiest way to move money.

---

Disagree completely. You introduced new information (who was talking about $100k+?). Checks are not cleared immediately - money is held at the receiving bank until cleared, and any number of verification processes happen (especially for larger checks) which can slow the process down. Cash is transferred physically, and immediately, in almost all cases (regulatory reporting of transactions over $10k is a separate issue to consider).

While I in no way recommend it, cash is king.