The recession is coming. Many of you are doubling down on stocks, property, Bitcoin, real estate, or other long-term investments. But everyone needs access to short-term operating capital – cash. Where are you parking your idle cash?
While government reports CPI to be 8.6%, the true number is around 12% (app.truflation.com
). Cash in your bank account is losing 12% per year. Because the recession is likely to deflate all assets, you may lose even more with just about any investment.
With 12% inflation, so-called “high-yield” savings accounts and certificates of deposit with APRs of under 1% are barely going to put a dent into your losses. You must take on some risk of loss of principal to preserve more than a trivial portion of your cash.
Here is what I’m doing:
JPST: JPMorgan Ultra-Short Income ETF. About the safest investment you can make. This ETF fell 1.5% during the initial COVID crash, which is the likely maximum of volatility. The yield on JPST is 1.77%.
VTIP: Vanguard Short-Term Inflation-Protected Securities Index Fund.
TIPs are theoretically protected from inflation, but because the U.S. government lies about inflation numbers, they will still underperform. Still, there is some proportionality between inflation and returns, at around 3% return. Because they are short-term, the price volatility is minimal.
Stablecoin yield: previously, I had recommended CeFi lending platforms, highlighting Celsius Network in particular. But Celsius has frozen withdrawals for an indefinite period. I’m confident Celsius will recover, but currently, all CeFi stablecoin earning platforms are questionable. Nevertheless, I maintain my recommendation of using CeFi platforms for stablecoin yield. Currently, Gemini Earn offers 6.9% on the Gemini dollar, which I think is the safest bet in CeFi for US users.
As you can see, none of these options come close to matching the 12% inflation rate. Your best bet is to minimize your need for operating cash by (1) paying your obligations with debt and (2) stockpiling the goods you are likely to need.
What do you think? Do you have better ideas for idle cash?