recession we had to have

Ca$h is king

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Ca$h is king for investors around the world

THE world is drowning in cash. Global sharemarkets may have ended the week with a bounce but investors the globe over are still hoarding hard currency like there is no tomorrow.

Cash held in bank deposits, mutual funds and by central banks is still at historically high levels. It underscores the reluctance of individuals -- even professional money managers -- to charge back into sharemarkets and other riskier asset classes with any significant conviction.

Figures compiled for The Weekend Australian by Macquarie Capital Securities show that in the US alone, $US2.9 trillion ($3.3 trillion) is being held in cash and cash-equivalent securities funds.

The total is down slightly from the peak of the global financial crisis, when, with banks crashing around the world and putting the financial system at risk, investors fled to the safe haven of cash.

However, the amount in cash or equivalents is 53 per cent higher than just five years ago, when equity markets were rising and the double-digit returns of the stockmarket dwarfed the low returns offered on cash.

In Europe, $350 billion is in cash investments. In Australia, the most recent numbers reveal cash investments held by managed funds, super funds, life insurers and cash management trusts are worth $216bn.

Most analysts define cash as traditional bank deposits as well as liquid securities with a maturity of less than a year; most "cash" is in local and international money markets.

Australia's four major banks hold total deposits from businesses, households, governments and other banks of $938.4 billion, up 11.9 per cent from a year ago.

This is money that could be pumped into the market but is being held back.

The Commonwealth Bank of Australia has the largest amount of deposits on its books with at least $276.03bn -- more than the sum of all deposits in Australian banks before the financial crisis.

Total deposits in all Australian banks now top $1.26 trillion.

To put that in context, it is a figure larger than the market capitalisation of the entire stockmarket.

The Commonwealth Bank has a vault in its flagship Martin Place, Sydney, branch that holds cash for the bank's inner-city operations.

The Weekend Australian was granted exclusive access to the vault yesterday. It is the second-largest vault door in the world and weighs 30 tonnes.

It was built in Wembley, in north London, by Chubb and shipped to Australia in 1926.

The vault door is 2.13m in diameter and 68.5cm thick.

It is constructed of steel laminated with metal alloys and is fitted with four time locks.

The vault is a place that provides a feeling of great safety. And that is what investors are seeking. Safety.

Macquarie's senior economist, Brian Redican, said the flight to cash was a natural reaction by investors seeking a safe haven, particularly as markets around the world remained ultra-volatile.

The Australian sharemarket is today 36 per cent below its peak of 6828 on November 1, 2007.

In the US, the S&P500 index is 31 per cent off its high reached on October 9, 2007.

"There are a lot of people sitting on the sidelines," Mr Redican said.

"That's driven by the fact that investors are still cautious, they don't have the confidence so they are sitting out of the market," Mr Redican added.

"I think that is going to continue until we see some confidence return to the market."

Mr Redican said investors were still spooked by the severity of the global financial crisis and were frightened to buy back in. As a result, the performance of markets and economies had not followed the same pattern as after previous downturns. "We haven't seen the usual trend yet because everyone is still so cautious," he said.

"The balance sheets of US companies are in fairly good shape but there is not the confidence to deploy the cash" in the same way as in previous recessions.

"Usually economic recoveries are tepid, but then it kicks into gear and the money comes flowing back into the market. We saw that in the US in 2001, it was a very sharp recession but the economy recovered very quickly."

Mr Redican said if the money that was currently sidelined was pumped back into the market quickly, it could create fresh volatility as equity prices readjusted.

"There can be a downside of having so much money around."

In Australia, the amount of cash held by investment funds as part of their overall asset exposures remains historically high.

The most recent data, from the Australian Bureau of Statistics, shows that, for managed funds, cash currently makes up 12.1 per cent of all investments, slightly below the peak of 13.7 per cent in June last year. However, the ratio is still well up from the 6-8 per cent level recorded during the bull market days up to 2007.

For Australia's superannuation funds alone, cash makes up 15.7 per cent of their total investments, compared with 18.3 per cent at the peak of the crisis and 12.8 per cent in September 2007.

Citigroup equities strategist Richard Schellbach estimates that of the $216bn in cash investments in Australia, about $50bn should be allocated to other asset classes.

If institutional investors, pension funds and super funds were either over- or under-allocated in cash as an asset, it could take a number of years for allocations to return to normal, he said.

For allocations to return to more normal historic levels, an estimated $50bn would have to be allocated out of cash, "and that could come back to the market", he said. But it would take "many quarters, if not a number of years, for that to happen".

In Australia, cash investments peaked in June 2009 at $223bn. In March 2007, cash was worth $140bn and one quarter later, after the former government introduced a range of superannuation reforms, the balance rose to $188bn.

"When there was a build-up in 2007, it coincided with the start of the GFC so that money, that liquidity did not come out of cash," Mr Schellbach said.

"Markets started to tank, people got frightened and thought 'let's leave it in there'. On top of that there's the natural inflow into the cash market.

"The cash investments did peak in June last year but in terms of normalising, it's been quite moderate and I would say with the volatility and the negative headlines it's going to stay that way."

On top of the volatility argument for the flight to cash is the strong push by the four major retail banks in Australia to attract a growing volume of deposits. In the past year, the retail deposits of the top four have increased by 7.8 per cent, from $299.5bn to $322.9bn.

The deposit campaign has been driven by higher interest rates, with the banks currently offering more than 6 per cent on some term deposit accounts.

UBS Global Asset Management strategist Mark Rider said risk aversion was pushing investors away from equities or fixed income into pure cash investments.

"There's the attractiveness of rates and the volatility that exists right now," he said.

"People that might have gone into a bond fund, or equities, or even a cash enhanced fund . . . they are seeing that the banks are offering term deposits . . at high rates.

"The banks rates are offering much more competition to fixed income funds, let alone equities funds where you get the volatility coming through.

"The volatility is the key issue. We think in valuation terms the market is quite attractive at these levels, and there is volatility but we'd expect returns to grind higher over the longer run.

"But with the volatility and the competitive rates, we've seen a flood of money into term deposits. People are saving more and they are doing that in cash."

The cash rush is not confined to investors. Banks around the world are also starting to hoard cash, and European sovereign debt concerns have accelerated the process.

Australian banks currently have $2.6bn "on call" with the Reserve Bank, well above the recent average, but dramatically below the $16.1bn that was stashed with the central bank in one night during December 2008.

Nice size vault...

post-112-12787475753518_thumb.jpg

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At least in Australia, you earn some interest on your cash. In the US, Bernanke is forcing people to speculate as they get close to 0% on their savings.

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At least in Australia, you earn some interest on your cash. In the US, Bernanke is forcing people to speculate as they get close to 0% on their savings.

But in Australia, real interest rates are negative, especially when housing is taken into account. Cash is not king and absolutely will never allowed to be.

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But in Australia, real interest rates are negative

I have some savings in a term deposit at 6.5%. Do you really think that the non-fudged CPI is that high?

especially when housing is taken into account.

Well, that depends how far back you go. When we moved back to Oz at the start of 2008, many people advised us to buy a house. Fortunately, we can count, so we decided not to. Even given the ridiculous gains in 2009, we're still way ahead.

Cash is not king and absolutely will never allowed to be.

It's pretty naive to think that governments can control this kind of stuff in any environment. Take a look at the M3 data in the U.S. You don't think helicopter Ben wants this to grow?

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Tonight's 60 Minutes had a piece called Boomers Go Bust that talked around some of the financial issues Boomers are facing, namely being unprepared for retirement, now finding themselves in a jam due to decreased Super values and reset expectations of wealth.

I wonder how many now trying to retire will go "all in" on shares after the events of the past few years. My guess is a fair bit of that Boomer money is now parking on the sidelines for good. Not all of it, certainly, but some of it. 6% TDs are noyce, too. Most people don't understand the issues of negative real interest rates.

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pair_of_twos.jpg

well that's still a lot better than a 7-2 offsuit. you might hit a 2 on the flop and then you have the prospect of a big payday.

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well that's still a lot better than a 7-2 offsuit. you might hit a 2 on the flop and then you have the prospect of a big payday.

Odds are 1 in 17 - 16:1

The other bugger has

bigstockphoto_Big_Slick_-_Ace_King_With_Poke_1188569.jpg

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The Commonwealth Bank has a vault in its flagship Martin Place, Sydney, branch that holds cash for the bank's inner-city operations.

The Weekend Australian was granted exclusive access to the vault yesterday. It is the second-largest vault door in the world and weighs 30 tonnes.

It was built in Wembley, in north London, by Chubb and shipped to Australia in 1926.

The vault door is 2.13m in diameter and 68.5cm thick.

It is constructed of steel laminated with metal alloys and is fitted with four time locks.

The vault is a place that provides a feeling of great safety. And that is what investors are seeking. Safety.

absolutely no shortage of cash at this bank sir. come have a look at the huge pile of 50 dollar notes in our safe. look how well protected your deposit is. please sir, would you like to reconsider that large cash withdrawal?

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gold up on early trading woo hoo, my gold buy isnt losing as much as it was friday. maybe i shoulda moved out of trading account into cash

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Odds are 1 in 17 - 16:1

The other bugger has

bigstockphoto_Big_Slick_-_Ace_King_With_Poke_1188569.jpg

Heads up 2-2 vs A-K is a coin flip

Also SG, yes you would fold 2-2 in most suituations in a poker tournament

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The cowboy with the big slick has also got two diamonds. With 2-2 if its cheap to see the flop I will.

I'm with you.

Also depends how many are left playing. If your down to two either hand is a keeper but especially the King Ace.

I love going hard early on chance and the King / Ace combo same suit is good enough for me to go hard.

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The cowboy with the big slick has also got two diamonds. With 2-2 if its cheap to see the flop I will.

You're doing it wrong. Poker is all about getting out as soon as possible so you can have fun drinking, smoking and talking sh*t with the other people that are out, leave the boring math and staying sober to people that care :)

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You're doing it wrong. Poker is all about getting out as soon as possible so you can have fun drinking, smoking and talking sh*t with the other people that are out, leave the boring math and staying sober to people that care :)

Yeh, gone are the days you could smoke, drink and play poker at the same time!!!

I see at the casino some people who clearly used smoking as some kind of pretend tell, maybe lighting up a smoke on a "good hand" now go to the cas with a half used smoke and sit there pretending!

The casino is way too stressful for me anyway I am always panicking about etiquette and a lot of the time like you look forward to going through my minimum buy in so I can relax and get back into smoking etc. I have before when down to my last 5 bucks rather than going all in and having to force the dealer to split the pot etc, I just push it in and say I'm out like I would be stealing from them to walk away with it. Tried giving it to the dealer before but they are not allowed to accept apparently.

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The cowboy with the big slick has also got two diamonds. With 2-2 if its cheap to see the flop I will.

I'd gladly play poker with you, then.

Pocket 2's play heads up and very rarely in any other situation. Grab a deck of cards give yourself dueces and deal 9 other hands and flop out 5 cards, see how often your 2's get up.

Warning you could be there for several days.

I was a dealer in a past life (in card rooms before Holdem became popular) and I can give a beartrap 103pc gaurantee that ppl with an attitude like tor are much more likely to have a good time, and in the current environment of everyone thinking they are a poker player, are also more likely to win.

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I was at the Casino recently (cash game) and no one was raising pre flop except me when to the right of the button. All sorts of peoplewildebeeste with sh*t were getting to see the flop for just the price of the big blind and some scoring three 2s or two pair with 7-3. As soon as I raised to 3x or 4x the blind pre-flop theres only two or three players and some of the bogans were getting narky/snaky. If I'm the big blind or the cost of the flop is just the blind I'm not folding a pair because they are sh*t tacticians, if I'm in position I'll make them pay. 5 - 10 years ago poker was good, a niche game its slid since every asshole with foxtel thinks he's Bart Maverick but plays tell Helen Keller with the demeanour of a junk yard dog.

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I'd gladly play poker with you, then.

Pocket 2's play heads up and very rarely in any other situation. Grab a deck of cards give yourself dueces and deal 9 other hands and flop out 5 cards, see how often your 2's get up.

Warning you could be there for several days.

I was a dealer in a past life (in card rooms before Holdem became popular) and I can give a beartrap 103pc gaurantee that ppl with an attitude like tor are much more likely to have a good time, and in the current environment of everyone thinking they are a poker player, are also more likely to win.

Sounds like a challenge!

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I was at the Casino recently (cash game) and no one was raising pre flop except me when to the right of the button. All sorts of peoplewildebeeste with sh*t were getting to see the flop for just the price of the big blind and some scoring three 2s or two pair with 7-3. As soon as I raised to 3x or 4x the blind pre-flop theres only two or three players and some of the bogans were getting narky/snaky. If I'm the big blind or the cost of the flop is just the blind I'm not folding a pair because they are sh*t tacticians, if I'm in position I'll make them pay. 5 - 10 years ago poker was good, a niche game its slid since every asshole with foxtel thinks he's Bart Maverick but plays tell Helen Keller with the demeanour of a junk yard dog.

You are right - the wildebeeste are a strange breed of creature, and act even more strangely when confronted at the poker table. They often bring big dark sunnies from home (these disguise the fact you don't know how to play apparently). And are easily upset that you dont let them see the flop with their sh*t cards, and can't understand why.

Your problem Bernie is you are intelligent, logical, understand the game and the mathematics behind it, that is only of benefit if the people you are playing against also understand these things. If you are playing with people that think 7-4 play understanding the game becomes a massive liability. If you were at the cas 10 years ago, you would have had a much better time.

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5 - 10 years ago poker was good, a niche game its slid since every asshole with foxtel thinks he's Bart Maverick but plays tell Helen Keller with the demeanour of a junk yard dog.

I don't know about you but I prefer playing poker against people who think they are good than those who actually are good.

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You are right - the wildebeeste are a strange breed of creature, and act even more strangely when confronted at the poker table. They often bring big dark sunnies from home (these disguise the fact you don't know how to play apparently). And are easily upset that you dont let them see the flop with their sh*t cards, and can't understand why.

Your problem Bernie is you are intelligent, logical, understand the game and the mathematics behind it, that is only of benefit if the people you are playing against also understand these things. If you are playing with people that think 7-4 play understanding the game becomes a massive liability. If you were at the cas 10 years ago, you would have had a much better time.

sh*t you guys are like big game hunters in it for the game not the meat apparently!

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Sounds like a challenge!

I am already smoking and drinking so I am halfway to winning already!!!

Duty free arrived yesterday, 25 robustos and 2L of laphroaig w00t w00t w00t.

Mind you I also lost all my bets this morning thanks to those spanish bastards :)

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I was at the Casino recently (cash game) and no one was raising pre flop except me when to the right of the button. All sorts of peoplewildebeeste with sh*t were getting to see the flop for just the price of the big blind and some scoring three 2s or two pair with 7-3. As soon as I raised to 3x or 4x the blind pre-flop theres only two or three players and some of the bogans were getting narky/snaky. If I'm the big blind or the cost of the flop is just the blind I'm not folding a pair because they are sh*t tacticians, if I'm in position I'll make them pay.

WTF? I recognise all of those words, but the above paragraph makes NO sense to me laugh.gif

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WTF? I recognise all of those words, but the above paragraph makes NO sense to me laugh.gif

Yahoo serious festival

"I know all those words but in that order they make no sense"

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