But can they? The whole U.S. equity REIT market has only $250 billion in market capitalization, according to NAREIT – about the same as Apple or Microsoft. So, ZIRP has helped to turn what was a stable long-term asset class into a short-term leveraged casino. It has distorted the U.S. REIT market and made it toxic for prudent investors, perhaps for years to come.

Inflation Expectations and Commodities – When the world's largest economy goes into ZIRP mode indefinitely, the whole world gets jittery about inflation. Commodity and precious metals indexes rise in anticipation of continued loose-money policies and stimulus measures. As the price of crude oil rises, so does the U.S. trade deficit. If ZIRP has pushed oil prices $20 a barrel higher than they otherwise would be, it is increasing the U.S. trade deficit by about $80-90 billion per year. The extra cost is depleting consumers' wallets, weakening the dollar, and increasing global trade imbalances.

Waiting and Panicking – After 18 months of ZIRP, some retired people in the U.S. who depend on cash yields are growing edgy and even panicky about the future. They no longer trust the Fed and can't understand what it is doing – in part because ZIRP policies are opaque and not well communicated. This is making already-vulnerable savers and investors easier prey for all types of hustlers and scammers. When there is no difference in yield between money market funds and stuffing cash in mattresses, some people forget that cash is suppose to be kept in a safe place.

Five Key "Cash Reminders" to Offer Your Clients

Cash is the bedrock – Even before asset allocation strategies became popular in the 1990s, cash was the bedrock asset class for building financial security. Financial planning courses taught that each household should maintain 3-6 months of average spending in cash, at minimum, to be prepared for hard times or emergencies. With an all-time record 15 million Americans now officially unemployed, cash is more important than ever.
Cash is a balancer and risk-reducer – The cash component of asset allocation strategies acts as a counterweight to the risk of stocks. In the two stock market crashes of the last decade, many investors who had allocated even 20-25% of a portfolio to cash were able to hold on through the deepest part of declines.
The timing is wrong – In the modern era, the Fed loosens or tightens monetary policy in incremental moves spread over many months, or even years. The table below summarizes three recent Fed loosening/tightening cycles.

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Help Your Clients Fight "The War on Cash"

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