Cash outperforms stocks as M2 money supply contracts, echoing Great Depression trends.

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Investors are facing a peculiar predicament as holding cash becomes a more enticing option than venturing into the stock market. This scenario, last observed before the Dot Com bust, raises concerns about the current state of the financial landscape.

The M2 money supply, a key indicator of the total amount of cash circulating in the economy, is contracting at levels reminiscent of the Great Depression. This contraction suggests a scarcity of money, contrary to the common belief that the economy is flooded with liquidity.

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Historically, periods when cash outperforms stock market gains have been precursors to economic downturns. The cautionary tale from the Dot Com bust serves as a stark reminder of the potential risks associated with such a trend.

Investors are now grappling with the dilemma of whether to embrace the safety of cash or navigate the uncertainties of a volatile stock market. The warning signs are clear, prompting many to reassess their investment strategies in anticipation of possible economic challenges ahead.

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