Oh, the things you could do with the enormous Cash pile!

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At Daily Fintech we have been monitoring Cash for various reasons. The more Fintech factors relate to watching digital currency trends, digital wallets and the potential of a cashless economy; and the more traditional Finance reasons, relate to income yielding options and flows towards public investment vehicles. The latter ones are more significant and quantifiable at this stage; and the former ones are nascent.

The cash Pile

We have been monitoring the “Unadvised Assets” as the leading factor for the market opportunity for the Robo-advisory business (see videographic here). The $13 trillion pile (a 2013 figure for the US) is pretty much unchanged. It actually accounts for roughly 15% of Financial assets as reported by FRED. For those less familiar with FRED (website and app) it started in the 90s!

In the US, there is $13trillion Cash, which is 15% of financial assets.

Short for Federal Reserve Economic Data, FRED is an online database consisting of more than 385,000 economic data time series from 80 national, international, public, and private sources. FRED, created and maintained by the Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data. In essence, FRED helps users tell their data stories.

The current level of cash (not absolute but as a % of financial assets) is average when comparing to the levels over the past two decades. The lowest % cash levels, which are associated with stock market peaks (as expected) were seen in 2000 and 2007 (the peaks proceeding the two major bubble crashes).

According to Daily Fintech data calcualtions, in the Euro area, the total is just over €10 Trillion. In the UK, it is £1.6 Trillion (a peak reached this August) and in Hong Kong it is around €1.3 Trillion (11.6 HKD trillion).

Blackrock’s president, Rob Kapito, at the Barclays Global Financial Services pointed out that “There’s more cash in the system than ever before”; while also admitting that cash figures are tough to estimate and referring to a $70 trillion global cash pile. He was focusing on the potential of this cash pile going to work and boosting the stock market.

Blackrock says, globally there is $70 trillion in cash.

The places cash resides!

Most of this cash is sitting in deposit institutions, i.e. banks. Brokers and investment management business may be holding some cash as collateral. There are some under mattresses. And finally, a growing part is residing in cards like Starbucks. See graph from Starbucks has more customer money on cards than many banks have in deposits.

Cash starbucks.jpg

Oh, the places this Cash could go to!

According to FRED, the lowest cash levels we have seen since the 1950s is around 12% (of financial assets). So, where could the 3% excess (from the historical average) go to work for?

  • Blackrock ETFs or some such (with the help of Robo-advisors)
  • Marketplace lending platforms (with the help of financial advisors and wealth managers)
  • Real Estate liquid vehicles (with the help of REIT Fintechs)
  • An innovation that replaces Money Market funds and the Repo market, as a large scale liquid alternative

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network.  Efi Pylarinou is a Digital Wealth Management thought leader.

 

 

 

7 thoughts on “Oh, the things you could do with the enormous Cash pile!

  1. Another idea for using this pile is to invest in venture capital of start up companies that have developed R&D assets and their product application assets that are securitilzed as diversified and differentiated “pools” of titles to back up the VC investments. In case of company default or inability to achieve target VC return, the underlying assets can be sold or leased to earn royalties to the investors.

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    • Is this a financial product that is in the works? Sounds like a tradeable liquid financial structure – asset-backed by a pool VC investments. Is there an MVP?

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      • No its an idea that I have proposed to VC firms but there is a problem that their bylaws have not allowed for such a contingency. However, it can be done if designed and proposed….I am constantly thinking of new ideas Efi…..hahahaha!

        Liked by 1 person

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