As financial advisors we are often asked, "how much cash should we set aside?" while others wonder, "why hold it at all, given such low returns relative to equities and fixed assets?" A proper answer to the second question requires a discussion of Modern Portfolio Theory - an involved topic for another day.  Today, we look at the question more fundamentally, in human terms. Cash means different things to different people.

Despite an overwhelming amount of evidence that passive investing over a lifetime generates far more wealth than active, hands on investing, most people still hold to their losing programs. It doesn't sound logical because it isn't. Logic has been overcome by the emotion of hope - the hope of winning big. Logic alone doesn't really have a chance, it is outgunned. For real progress, there has to be a third component.

In the last couple of Briefs we discussed Monte Carlo and how it can help a wise investor navigate the uncertainties that market swings create when they coincide with both large and small investment cash flows. We saw that wealth and lifestyle could be significantly impacted.

Here we are once again – 'out with the old and in with the new.' We know it as a time when the gyms, sidewalks, and trails fill beyond capacity with eager new exercisers, walkers, and cyclists. Sales of tobacco, liquor, and wine plummet. Our tables are crowded with fruits and vegetables and the fatty meats and sugary desserts have become scarce.

With their third swing at the plate the Commerce Department has increased their estimate of third quarter economic growth from 3.6 to 4.1%. The new estimate showed the gross domestic product, the broadest measure of all goods and services produced in the economy, expanding at the fastest pace since the fourth quarter of 2011 and the second-fastest since the recovery began in mid-2009, according to the WSJ.

Flying back from Rwanda earlier this week gave me hours (33 to be exact) of time to reflect on many things. When I completed notes from my meetings in Kigali, I spent some time looking ahead to next year and what we as investors might expect. While I'm usually optimistic, the logical conclusion seems to be pointing considerably more negative than positive. Odds are for a slow-down, maybe even the 'R' word.

Everyone on the planet who invests money is wondering if Ben Bernanke and his Federal Reserve cohorts have another off-script trick up their sleeves to wean the US capital markets and the economy from their $85 billion monthly deluges of free cash. One thing is certain - it has to end eventually, but when and how are sizing up to the biggest unknown in 2014.

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