All That Glitters Is Not Cash Equivalent

The properties of pyrite – fool’s gold, as it’s commonly known – are worryingly similar these days to the characteristics of many short-term portfolios investors are using these days for maintaining defensive liquidity-minded cash positions. Investors have in recent weeks sought refuge from volatility by delving into the mines of “cash equivalent” portfolios in search of greater stability. While many money-market strategies, especially those that favor credit, look like valuable commodities, their appearances may prove deceiving and may even, like pyrite, blow up if left unmonitored in the wrong environment.