Investors Cash Out to Hedge against Euro Woes

Global economic woes and new fears about the euro zone's instability are causing many investment advisors to advise their clients to get into cash in a big way right now. 


Recent events in Greece have done little to dispel fears about the euro zone's stability, and fears of the European Union's economic woes are increasingly spreading to the U.S. At the same time, the economies of super powers like the U.S. and China are having problems of their own, and give little reason for economists to be optimistic about the wisdom of future investments, regardless of how stable they might appear at first. The current economic doldrums respect no national boundaries, and new investments of any kind could be perilous these days.

In that light, it is not surprising that some major investors and their advisers have decided the only safe investment right now might simply be holding on to more cash. Despite the obvious difficulties in most financial sectors right now, a few investors still cling to the misguided belief that further economic accommodations like 'easing, firepower, and stimulus' will be able to address the world's current debt problems successfully because throwing money at solvency problems will work out in the long run. Other than those few economic optimists, most independent investment advisors have been telling their clients to 'get into cash' in a big way right now. 

Although many investors are already currently holding is between 10 percent and 20 percent of their assets in cash, the word on Wall Street is that even 25 percent might not be enough, and some economists are saying a 100 percent cash position is the only way to reduce the risks associated with the evolving problems in Europe and beyond.

Since the financial crisis got up to full-speed in 2008, many investors have observed that there is a pattern to the global financial markets' manic mood swings, and whenever the fiscal or banking crisis gets worse in one part of the world, usually Europe or the United States, it results in a market sell-off pattern, and a few governments and central banks will launch bailout programs that have so far failed to solve any of the real underlying problems. The severity of the situation makes moving one's investments into part-cash or all-cash in this climate of reactionary approaches seem like a very good plan, and for the time being, it may be the safest plan as well.

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