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Cashing Out
Old 07-13-2008, 09:24 PM   #1
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Cashing Out

I was just wondering about something... I've read several posts where people talk about the fact that they "cashed out" in the fall or they want to now, etc. Where do you put all that cash? Is it actual cash?

I mean, we have cash. Like MMF, CD, savings account cash. But, if we cashed out our whole portfolio I would be at a loss - do you put 95k in lots of banks to avoid FDIC risk (which I hadn't really worried about until now) or in MMFs and hope for the best, treasury bills (we are getting out of technical cash here), under the mattress, what?

Anyway, I'm not planning to do this. I was just wondering what people mean when they say they are cashing out.
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Old 07-13-2008, 09:27 PM   #2
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I was just wondering about something... I've read several posts where people talk about the fact that they "cashed out" in the fall or they want to now, etc. Where do you put all that cash? Is it actual cash?

I mean, we have cash. Like MMF, CD, savings account cash. But, if we cashed out our whole portfolio I would be at a loss - do you put 95k in lots of banks to avoid FDIC risk (which I hadn't really worried about until now) or in MMFs and hope for the best, treasury bills (we are getting out of technical cash here), under the mattress, what?

Anyway, I'm not planning to do this. I was just wondering what people mean when they say they are cashing out.
I doubt most go beyond a MMF or CD's but I did hear today about the mattress and jars in the back yard.
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Old 07-13-2008, 09:55 PM   #3
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Who cares about FDIC insurance? When you have more than $100K, you skip the bank middlemen and go directly to the US Treasury. There are plenty of Treasury mutual funds and money market funds. No worries about safety since it's the US Treasury. They are even bailing out Fannie Mae and Freddie Mac.
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Old 07-13-2008, 10:23 PM   #4
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Originally Posted by shiny View Post
I was just wondering about something... I've read several posts where people talk about the fact that they "cashed out" in the fall or they want to now, etc. Where do you put all that cash? Is it actual cash?

I mean, we have cash. Like MMF, CD, savings account cash. But, if we cashed out our whole portfolio I would be at a loss - do you put 95k in lots of banks to avoid FDIC risk (which I hadn't really worried about until now) or in MMFs and hope for the best, treasury bills (we are getting out of technical cash here), under the mattress, what?

Anyway, I'm not planning to do this. I was just wondering what people mean when they say they are cashing out.
Aren't the Japanese people famous for having large sums of cash hidden away since the interest earned is paltry or the bank accounts are taxed or something?
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Old 07-13-2008, 10:33 PM   #5
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Aren't the Japanese people famous for having large sums of cash hidden away since the interest earned is paltry or the bank accounts are taxed or something?
Yes, they carry huge wads of cash around. One time we saw a guy counting his money on the subway - there had to be at least $30,000 on him.

Old people die with moldy money stashed all over their house.

There was a recent news story that was picked up by Newsweek about 2 old ladies who had around 5,600,000,000 yen in their garage. That was mainly due to the 50% inheritance tax. Japanā€™s Cash Love Affair | Newsweek International | Newsweek.com

I have gotten used to carrying and spending more cash but, alas, I am not Japanese, so I'm still interested in having it in a financial institution.
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Old 07-13-2008, 11:02 PM   #6
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[quote=shiny;682784]
do you put 95k in lots of banks to avoid FDIC risk (which I hadn't really worried about until now) or in MMFs and hope for the best, under the mattress, what?


Yes!! - to all of that!

I have cash too, Shiny - and more coming in. Never thought that would be a problem. I looked at Bankrate.com today to find the soundest and highest rated banks to open up some more CD's. Tomorrow I'm going to "Rebalance my CD's".

Better in the safe deposit box than under the mattress do you think?
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Old 07-13-2008, 11:27 PM   #7
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Where do you put all that cash? Is it actual cash?
I mean, we have cash. Like MMF, CD, savings account cash. But, if we cashed out our whole portfolio I would be at a loss - do you put 95k in lots of banks to avoid FDIC risk (which I hadn't really worried about until now) or in MMFs and hope for the best, treasury bills (we are getting out of technical cash here), under the mattress, what?
Anyway, I'm not planning to do this. I was just wondering what people mean when they say they are cashing out.
Money markets. Brokerages are generally insured to a minimum of $500K by SIPC and most carry additional insurance.

Brewer can back me up on this, but the very few times that a MMF broke the buck they were made whole by the brokerage.

Not to nitpick, but IIRC IRAs are insured to a greater amount-- $250K? And with joint CD accounts held between two people you can go as high as $400K split $100K per account.
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Old 07-13-2008, 11:56 PM   #8
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I'm not Brewer, but yes, it remains true that no one has ever lost a dollar in a money market account. "Breaking the buck", or allowing the net asset value to fall under $1.00, has seldom happened, and shareholders have indeed always been made whole through the brokerage or mutual fund family making up any shortfall so as to return NAV to parity, thus salvaging the reputation of the financial institution. Wasn't this the case with the old Strong fund family, before other indiscretions sullied their name?

Tom
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Old 07-14-2008, 02:20 AM   #9
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Yes, they carry huge wads of cash around. One time we saw a guy counting his money on the subway - there had to be at least $30,000 on him.
A guy I know runs a bank in Tokyo...when they opened a new branch, they offered 0.1% or so more than the big national bank across the street. Mind you, that means probably double the interest they were paying at the big nat'l bank. He was there for the opening, and a few little old ladies came trundling across the street from the big nat'l bank with garbage bags and wheeled shopping baskets (their own, not the supermarket's) full of cash. One had nearly a half million dollars in her little shopping trolley...glad there weren't anny muggers out that day...

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Old 07-14-2008, 08:38 AM   #10
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A guy I know runs a bank in Tokyo...when they opened a new branch, they offered 0.1% or so more than the big national bank across the street. Mind you, that means probably double the interest they were paying at the big nat'l bank. He was there for the opening, and a few little old ladies came trundling across the street from the big nat'l bank with garbage bags and wheeled shopping baskets (their own, not the supermarket's) full of cash. One had nearly a half million dollars in her little shopping trolley...glad there weren't anny muggers out that day...

R
Yea, periods of rapid inflation (Zimbabwe now, post-WW1 Germany) and deflation (Great Depression, Japan in the 90s) make most money practices during "normal" times seem absolutely ridiculous. Their housing market was collapsing and to try to keep it going, the Japanese central bank had their interest rate set at 0%... best way to have your purchasing power grow was to just hold onto your money!
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Old 07-14-2008, 10:01 AM   #11
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... thus salvaging the reputation of the financial institution.
... and deflecting attention from how badly they had to have screwed up in the first place!
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Old 07-14-2008, 10:14 AM   #12
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My original retirement plan (in the early 80s when I was still a snot-nosed kid) was to make a lot of money from savings and by taking some risk by investing in equities and real estate, then selling it all and putting all my cash in the bank at a guaranteed 7% for the rest of my life.

That plan was only good in theory.

I wasn't experienced enough at the time to understand market cycles, inflation, and all the different types of investment risks.

Cashing out may make you look really smart (or maybe just really lucky) if you do it at the right time. But over the long-term, chances are you will end up looking really stupid.
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