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"No brainer" is a delightful expression that infers the answer is obvious. In finance, change is never far away, and static comparisons that give "obvious" answers are not so obvious once change arrives.
Memory is rarely present in current financial decision making. Indeed, many businesses lose their corporate memory as people leave or retire, and consequently re-invent the same issues after an interval of a few years.
Back in April 1990, a quality financial newspaper wrote an article headlined "Gilts - do you really need them?". The nub of the argument was that you could earn 15% on cash deposits, what is the point in buying Gilts yielding 12% to 13%? This was a perfect example of a static comparison leading to the "no-brainer" conclusion, keep your money in cash. But the whole point was that the Gilt market was correctly anticipating ever lower interest rates. To step off the falling cash interest rate ladder at that time meant anticipating the great changes - falling inflation and falling interest rates - that then lay ahead. Two years later, it was plain that being in Gilts was the right answer. Those who waited for cash interest rates to fall simply earned less later.
Guess what we saw in (different) quality financial pages a couple of weeks ago? The advice that, as Gilt yields are lower than cash yields, one should simply stay in cash! Since we were right before, we now boldly claim: cash interest rates will go the way of Japan, down to less than 1%. Anticipation is, once again, the name of the game.
So the source of this "obvious" advice, to stay in cash, is unaware of the lessons from 15 years ago about the need to anticipate events and the prospects for lower interest rates.
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