In addition to having been an actor, game show host (Win Ben Stein’s Money), ambassador for Clear Eyes brand contacts, and speech writer for President Nixon, Ben Stein is also a financially savvy investor who writes a smart column for the New York Times on personal finance. (He also went to grammar school with Sylvester Stallone, and I bet he got his ass kicked daily by him).
In a recent column, Benny Boy suggested having the majority of your assets in cash right now. His reasoning behind that:
No one ever went broke from too much liquidity. In volatile times like these, cash is your best friend, aside from your dogs and cats. True, you earn very little interest on cash these days. True, if the stock market has a huge move up and you are largely in cash, you will be sad. But it is also true that cash does not crash Ã¢â‚¬â€ although it does slowly but surely lose its value. You can pay your bills with it without having to sell it at a loss.
It seems like a sensible conservative strategy, but at what point do you draw the line? Is it when you realize you’ve become nothing more than an old lady with wads of cash stuffed in shoeboxes under your bed?
But Ben goes on to say that the heart of the problem is the out-of-control, living-beyond-our-means lifestyle that exists today. Without sounding too preachy, he’s totally right. Massive credit card bills, second and third mortgages, 2nd car loans, vacation homes? If people want to be smarter with their money, they’re going to need to hold onto it for a little while longer. Or if you want to keep up the outrageous spending, at least change your name and flee the country when the bill comes. I suggest using, ‘Juan Realnameington’.
But that laying low also means biding your time before diving head-first into the market again. According to big Ben’s (Stein, not Bernanke) research, the best time to buy stock or buy a house is when all the pundits are blue in the face from saying how hopeless and desperate the economy is.
Looks like we’re pretty close to that right now. Let us know in the comments section if you agree or disagree with Ben’s strategies.
New York Times: Time to Go On a Liquid Diet, March 30, 2008