Your Riskiest Investment
We believe that cash is trash. That’s right, cold hard cash is your riskiest investment. Not the stock market, not real estate, not private loans, not precious metals, not even Bitcoin. Cash is definitely the thing that scares us the most.
Now, here us out…
Remember the saying, “cash is king?”
For over 100 years, in North America, cash was truly king. Those who saved and didn’t spend frivolously got ahead.
We grew up with this mindset. Our Italian parents were hard workers and crazy savers.
They paid off their mortgage in 5 years. They never took on another ounce of debt and handed their money over to their trusted financial advisor.
And they turned out ok. Both are retired with a healthy nest egg.
They have urged us to do the same. And we totally did not and don’t plan on it.
Why? Because cash is no longer king. Cash is trash!
It seems inevitable that our Canadian dollar is being devalued.
What happens when our dollar gets devalued? Look no further than Venezuela over the last 10 years. Money printing caused hyperinflation, forcing over 3 million people to flee the country. I won’t bore you with all the details, but you can read all about it here: https://theconversation.com/what-caused-hyperinflation-in-venezuela-a-rare-blend-of-public-ineptitude-and-private-enterprise-102483
But that’s one example right? Well you can look 10 more years back to the 90s and hyperinflation in Yugoslavia.
In a great paper by Zeljko Bogetic and Pavle Petrovic, they state that “the Yugoslav hyperinflation, the second highest and the second longest episode in economic history, was driven by excessive money supply that monetized various deficits that emerged upon the disintegration of the country.” (You can download the full paper here: https://www.researchgate.net/publication/4969125_The_Yugoslav_Hyperinflation_of_1992-1994_Causes_Dynamics_and_Money_Supply_Process (it’s a boring paper if economics doesn’t excite you LOL).
There are so many more examples, but you can look those up for yourself.
So, doesn’t this all sound familiar? Isn’t Canada doing the exact same thing right now?
Check out these headlines over the last 6 months:
Government spending is becoming a problem and printing money is a dangerous solution (Financial Post)
The Bank of Canada’s vast experiment in printing money may not end well (The Globe & Mail)
Canada’s Budget Deficit Has Grown By More Than Any Other G20 Country Amid Pandemic (Huffington Post)
Sounds no different than Venezuela and Yugoslavia to us.
Quite scary, isn’t it?
That is why we shared an article a few months back titled “Savers Are Losers”.
And it’s unfortunate. Savers get punished for being responsible because of decisions made by the Federal government and the Bank of Canada that depreciates their hard earned Canadian dollars.
So how do we protect ourselves from this?
We do whatever we can to acquire assets that produce cashflow.
We become Cashflownaires.
That is because when you own assets that produce cashflow, you have control over the income and expenses of these assets.
If you go back to Venezuela and Yugoslavia, asset owners are the ones that didn’t really get squeezed.
The middle class got squeezed.
It was people like our honest, hard-working, penny pinching parents that got squeezed.
So Vince & I decided not to get caught in that trap that we think is coming. We have gone and this Quest4Cashflow and have not looked back.
You all can guess that any investment focused on cashflow has done our net worth well over these last 5 years (real estate especially). But we don’t care!
We’re more proud of the cashflow we have built.
When shit hits the fan, our net worth might come back down to earth. But our cashflow should be maintained (people need a place to live and businesses go on).
We say cash is trash and we mean it. We would rather have our cash sitting in hard, income-producing assets than colorful government papers we call the Canadian dollar.
If you set out on a Quest4Cashflow like we did, you create and acquire hard, income-producing assets intuitively.
When you set out a goal of becoming a Cashflownaire and reaching the Position of FU, the acquisition and creation of these assets comes naturally.
It goes back to the great quote by Napolean Hill, author of “Think & Grow Rich”: “Whatever the mind can conceive and believe, it can achieve.”
Remember, average people tell you: “Investing on your own is risky.” “Investing in individual stocks is risky.” “Investing is real estate is risky.” That’s why they are average.
Your cash is your riskiest investment. Your cash is trash. It’s what you do with your cash that will dictate how you spend the rest of your life.
Best,
Vince & Mike
P.S. You know cash is risky when guys like Warren Buffett take a major stake in companies like Barrick Gold.
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