According to Wall Street and even the Federal Reserve Chairman, the holding of cold, hard, cash is a bad investment because there is no apparent return on your money.
Yet, when simply evaluating yields, stashing your coin away for ten years in a guaranteed U.S. treasury bond at 1.6% doesn’t seem very attractive. (Of course, in prior columns we’ve discussed the capital gain potential as interest rates go lower.)
On just pure income, 1.6% pales in comparison to junk-bonds that yield approximately 6%. Obviously, the rub is that the higher the yield (income), the greater the risk, or maybe not. In my opinion, both Wall Street and Mr. Bernanke are approaching this subject from the wrong perspective.
Why do I feel that way?
It’s because the underground economy, so prevalent around the world, is starting to gain momentum right here in the USA.
Last weekend, prior to Thanksgiving, I perused my local newspaper in search of any arts and crafts shows; I found two that were held every weekend in the fall.
I attended one of the shows late in the afternoon and noticed that in addition to the normal jewelry and paintings, there was a booth that was offering homemade pies for sale. Just before the pie merchants were ready to leave for the day, I made an offer for one pumpkin pie and one apple pie.
I’m very happy to report that my negotiated price turned out to be a whopping one-half off their list price, which equated to 40% below what I would have paid at a bakery.
Emboldened, the next day I once again checked the local newspaper advertisement section, this time in order to find my turkey, potatoes, corn, homemade elderberry wine, and almost every other Turkey Day delight that was being sold by farmers, homemakers, and anyone else who may have wanted to make a little extra cash from the products I desired.
Even though trying to negotiate in a grocery store is virtually impossible, dealing directly with someone who is looking to swiftly move a product and not have it rot, or just sit, is much easier than you think. Just consider that every week thousands of people attend auctions, from the highest-caliber like Sotheby’s to the less glamorous business liquidation sales, garage sales, and church festivals.
In every instance, if the demand is lacking and the supply is great, prices get cheaper.
Rather than a large corporation which can afford to stay firm on price, if the seller is someone who needs quick cash, the potential opportunities are unlimited.
By the way, the total discount of my turkey dinner vs. the grocery store price was 35%, yet further negotiation generated an extraordinary 45% savings.
In my world, the safety of my own pocket and a 45% return on investment greatly outperforms anything that Wall Street and Mr. Bernanke can suggest.Now, if I could somehow negotiate lower gasoline prices.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.