"Cash is king," counsels market sector expert Jim Farrish who has chosen "cash" as his latest "sector spotlight". Here is his latest on the need for "patience" from his SectorExchange service.

The sector expert explains, "The market volatility and downside momentum has been king for 2008. Outside of short term trading and/or being short the markets the best place to have been invested is cash.

"My question is why is it so hard for investors to hold cash in their portfolios? Why do so many investment advisors not increase cash positions when market trends shift? Why do professionally managed mutual funds not increase their cash holdings?

"It goes against the psychological grain of investing. It is human nature to believe we may miss out on something. The emotions of investing are in full swing when a prolonged downtrend begins. These emotions dictate how we think and how we act during this period.

"Derivatives - the 'global Vesuvius of debts and bets' that we have been warning about since 2006 is beginning to erupt," says Martin Weiss.

The editor of The Safe Money Report explains, "The time is now to build cash and the best place to put it is in United States Treasury bills or equivalent." Here, he looks at the benefits of Treasuries and the various ways that investors can add them to their portfolios.

"We now have overwhelming evidence of a severe recession. And we have a solid confirmation in the stock market itself. But we also forecast that the Fed would fight back, and do so aggressively, fomenting an
inflationary recession.

"They're pumping in massive amounts of money, trying to calm markets and seeking to avert a recession. But it's too little, too late for the economy. And it's too much, too soon for the already-shaky dollar. *Result: Gold has surged along with other commodities.

"And consumer price inflation, long a side-show on the American scene, is now surging back. Our urgent appeal: If youhaven't done so already based on our earlier issues, the time is now to shift from complacency to protective action ... from bull-market plays to income opportunities ... from risk to safety.

Just last week I reported about the insolvency problems in New Jersey to Walletpop readers, see: The snowball starts in New Jersey. Now, that nasty old snowball has streaked across the country and landed in the California suburb of Vallejo, wreaking havoc on the local government there. CNBC reports that Vallejo Councilwoman Stephanie Gomes states "Our financial situation is getting worse every single day". Ask not for whom the bell tolls, it tolls for the heavy handed labor unions which have coerced sweet pay and benefit packages for the 30% of our workforce which is supported via tax dollars produced by the rest of us who actually make things.

The insolvency of Vallejo should come as no big surprise, and in fact Vallejo is just the leader of what will become a very large pack. Before the end of this year I envision the entire state government of California will be in tears due to a lack of spending cash. You've been warned, it's to become a nationwide trend.

We just can't expect that private sector declines will leave the government sector untouched. The toughest part is that there's nothing government agencies can do about it, except to cut spending or raise taxes. Local governments are in the business of taking constructive dollars from the people who created them and then throwing them into the bottomless pit of entitlements, waste and graft. Now, the chickens have come home to roost, and they're big, mean, ugly chickens at that.

This article is part of a 20 article special report on "Metals, miners and money".

The case for gold and/or other commodities in large part rests on a forecast for higher inflation. With a contrary view, Bob Prechter -- well known as the leading practitioner of Elliott Wave theory -- offers his assessment for deflation. As such, his top investment idea within this scenario is not gold or oil -- but cash.

The editor of The Elliott Wave Theorist explains, "When the bull market in inflation is over, an unprecedented number of IOUs, stacked in an inverted pyramid, will collapse in value in a deflationary rush, and prices from stocks to commodities to goods and services will fall along with them.

"In 1998, we called for a huge bull market in oil that would carry to new all-time highs. That run is now in its final stages. Market psychology fits a major top, because short-term measures of optimism match all-time extremes.

"Investors everywhere have come to the conclusion that the world is running out of oil, despite the fact that the real price of oil (the oil to gold ratio) is lower than it was seven years ago.

"Today, oil is near the end of wave 5. But this is only part of the picture. The rise from 1998 is itself a fifth wave, so the entire advance from 1933 is also ending.

According to the Investment Company Institute, the percentage of cash held by equity mutual funds hit a record 3.7% in March, which is beneath the previous low-water mark of 4.0% seen at the time of the March 2000 stock market peak.

Historically, analysts have viewed the equity fund "liquidity ratio" as one of several long-term indicators that can help gauge investor sentiment.

When portfolio cash is high relative to historic norms, it indicates that investors are overly cautious and that the weight of money on the sidelines will eventually drive share prices higher. Low levels of liquidity, in contrast, suggest that there is not enough firepower to keep the bullish momentum going for very long.

For busy families that have a lot of service providers to thank (house cleaners, babysitters, hairdressers, etc.), the tipping tally can easily total in the thousands of dollars. (Read SmartMoney's take on what is reasonable and expected for year-end gratuities or take AOL's tipping quiz to see if you know it all already.)

As much as you might fantasize, you can't skip the tips. If you want to keep your tipping budget to a reasonable level, you don't have to play scrooge this season. Here's some ideas for how to thank the folks who help you out year-round without busting your budget:

My much needed blogging break is over! Rather than go into what I did during my hiatus, I'll just jump right into the cold water and hope there's no shrinkage in your interest with my posts!

Fellow Canadian BloggingStocks contributor, Melly Alazraki, posed the question that Microsoft Corp. (NASDAQ:MSFT) investors are eager for the board to do something with its big cash reserve. I kept thinking about the subject and made the following observations:

• Why do investors always have to insist on share buy-backs and special dividends?
• The age-old question: Which is better? Buy-backs or dividends?
• Microsoft will always face these problems due to its immense cash-flow generation
• I'm more interested in where Microsoft is investing its cash. There may be something I can learn as an investor?

Did you notice I didn't consider dividend increases? Since the folks at Redmond have already doubled the company's initial regular dividend payout, it wouldn't be unreasonable for things to hold steady. But if anybody can keep doubling their dividend every few years, it's Microsoft!

I broke out the 2006 Microsoft Annual Report to see what assets Microsoft are invested in. I should disclose that I was an investor when Microsoft hit its lows this year. But as the stock appreciated 30% for me, I have since liquidated those holdings in favor of other stocks with more upside and less downside risk. Here's a few interesting tidbits from looking over the data:

The most valuable thing on earth after life itself is TRUST.

Why is President Bush watching his approval rating collapse month after month -- Do you trust him? What has he done to build trust? Why are we so comfortable living with England having nuclear weapons and are panic-stricken by Iran's having them -- do you trust them? What have they done to build trust?

What was the cause of Adam & Eve's being banished from the garden of Eden? A breach of trust. Right from the start, up until this very moment it is trust that creates brotherhood between peoples and also builds strong brands. Trust that allows a temporary leap of faith until the facts are known and it is trust that positions the market place for "just-in-time" manufacturing and without which the process would come to a swift and grinding halt.

Johnson & Johnson did all the right things way back when they had the now-historic Tylenol tampering scare to contend with and they wisely focused their attention on maintaining trust at all costs. Enron did all the wrong things. Arthur Anderson drowned in a sea of mistrust flowing from their own questionable ethics and we witnessed a very valuable enterprise rapidly collapse. In my architecture practice I have lectured on this subject constantly to everyone who would listen; staff, clients, consultants, public officials etc. Anything that builds trust is a good thing, anything that reduces trust is a bad thing!

8:02 a.m. As I wrote yesterday, Strategic Decision #1: Steve Ballmer's decision to speak today, "directly to investors." He'll be answering questions from the little guy and the question on everyone's lips: will he be defensive?

8:04 a.m. Ballmer wants to speak about the business from both the perspective of an investor and a manager, and he promises not to yell at the audience. Heh. He starts out by saying that the next 10 years has as much potential for world-changing strides in computers and software as the last 10 years, and he's excited to be part of a company which "invests, profits from, and takes advantage of the incredible opportunity there is to innovate."

8:06 a.m. The thing that will change in the next 10 years? Digital writing. "Pencil and paper will be replaced by superior technology that is digital. And somebody will have the ability to benefit from that technology." He already sounds both (a) angry and (b) frantic. Maybe it's just his thang.

We got a comment in from a reader, Edward Schmidt, who suggested Microsoft should use more of its cash to cut back on the amount of shares outstanding, "and I mean by a substantial amount; like a billion shares," he writes.

That would raise the stock's earnings per share, lower it's p-e ratio and cut back on the amount it pays out in dividends. Oh yeah, it should also boost the stock price.  

Increasing buy backs seems like a good idea to me. Although this Forbes story notes that Microsoft announced a $30 billion buyback program in 2004 and that certainly hasn't done much to boost the stock.

But Microsoft has a $35 billion cash pile. Schmidt thinks that cash would be better spent on buying back shares than acquiring small companies. But with the size of its cash pile, Microsoft could certainly do both.