I think most Americans can sense that there is something wrong, particularly in economic affairs.  While high unemployment has certainly been a problem, even people with jobs are finding times to be tougher than normal.  This includes people who have been able to maintain their salary.

The Federal Reserve has been on a tear the last 5 years, more than quadrupling the adjusted monetary base.  But due to a lack of bank lending and a high demand for money (low velocity), consumer price inflation has stayed somewhat tame.

I think many libertarians, even followers of Austrian school economics, have been misled into thinking that the consequences of the Fed’s loose monetary policy has to proliferate in the form of the boom/ bust cycle and high price inflation.  But as we have seen, there hasn’t been really high price inflation yet.  It hasn’t come close to reaching levels like Americans saw in the late 1970s.

However, this doesn’t mean there aren’t immediate consequences.  I think a much better measure is looking at wages as compared to the cost of living.  In many ways, Americans are richer than ever with smartphones and flat panel televisions.  But when it comes to basic needs such as food, medical care, education, and housing, times are tough.

I was just at the grocery store where I usually shop.  I typically eat one avocado per day (they are healthy).  The price used to be $1.50 per avocado.  There would occasionally be a sale for $1.00, but you can’t stock up on too many avocados because they only last so long.  The price just went up.  They are now listed at $1.69 each.  These are non-organic from Mexico.  While a price hike of 19 cents doesn’t seem like a lot, this is a 13% hike in the price.  Maybe there are supply and demand issues I am unaware of with avocados.  But I’m guessing the likely hidden culprit is monetary inflation.

This all adds up over time.  Even if the price goes up 13% every two years, this is still quite a big percentage increase, especially if you consider it happening with all food items that you purchase.  This would still be a yearly increase of over 6%.  I know most people are not getting raises anywhere close to 6%.  In today’s economy, most people getting raises at all are lucky if it covers the increased premiums in their health insurance.

Our standard of living is getting better in terms of electronics.  It is actually shrinking if you measure it in terms of basic needs.  This is all happening subtly due to massive government spending and massive monetary inflation.  While consumer price inflation has not been nearly as bad as some predicted up to this point, it is still taking a toll.  If prices are going up faster than wages, then it means harder times for people.

That is why many libertarians refer to inflation as a hidden tax.  It really is hidden.  Most Americans are looking around, not understanding why they are struggling more than in the past.  This includes people with jobs.  This includes people who have gotten raises.

The problem is real wages.  If you are getting a 2% raise each year and your average expenses are going up 4% per year, then you have a major problem.  You are getting poorer.  And just as 2% growth really adds up in the longer term, a 2% decline each year will make you a lot poorer over the course of 5 years or more.

I don’t think most Americans understand what has happened.  They know that times are tougher, but they aren’t quite sure why.  They know that all is not good with the economy.  I can only hope that more and more people come to understand that the government and the Federal Reserve are continually making people poorer.

It looks as though Obama, the so-called peace president, is going to start dropping bombs on Syria soon.  Of course, there is no declaration of war, as there hasn’t been since World War II.  There isn’t even a pretend resolution by Congress this time.  Dictator Obama and his cronies in the military industrial complex have taken it upon themselves to order an attack.

The U.S. government is accusing Assad, the president of Syria, of using chemical weapons to kill people.  I’m not so sure what is so special about chemical weapons.  Is death any less bad when it happens from a nuke or drone bombing, both of which the U.S. government has used against innocent civilians?

So in order to get revenge on Assad for supposedly using chemical weapons, Obama and company are going to drop bombs and murder more innocent civilians.  That will teach those people.

Of course, the whole report is probably false.  How do we know that chemical weapons were really used?  How do we know it was Assad who did it?  How do we know that it wasn’t the rebels in Syria? How do we know it wasn’t a false-flag operation by the U.S. government?  Almost everything Obama and company say are lies, so why should we believe anything?  Most of what the mainstream media reports is simply a repeat of what the government told them.

The good thing is that I don’t think most Americans are going to get suckered in this time.  These are the same made up stories that Bush told about weapons of mass destruction in Iraq.  I suppose Chuck Hagel is playing the part of Colin Powell.

So what about investments?  In the big picture, this is just another minor war, at least to Americans.  Of course, there is always the possibility that it could blow into something bigger in the Middle East, particularly if some country starts lobbing missiles into Israel.  If things start to get out of control, then I expect gold and oil to do well.  With all of the prior monetary inflation, these two commodities are ripe for big gains, so a trigger event like war in the Middle East is the perfect excuse for investors to jump in.

The stock market has been down lately.  Some headlines were blaming the news in Syria on the fall of stocks.  I’m not so sure this is the case, but we can’t be certain.  I would not be shorting stocks because of what is happening in Syria.  Perhaps there are other good reasons to short stocks, but I don’t think a war in Syria is one of them.  In the past, wars have not necessarily hurt the stock market.

Some might speculate that this coming war with Syria is a distraction from the bad economy.  I actually don’t really think this is the case because the politicians in DC are clamoring for war even when the economy isn’t in really bad shape.  Obama is simply part of the establishment and they will always push for more war.  It is an exercise in power.

If Syria turns into something bigger, this will do more long-term damage to the economy.  Everything has to be paid for in some way, whether it is higher taxes, more borrowing, or more inflation.

In conclusion, intervening in Syria is a huge mistake, but we have to face the reality that it is likely to happen at this point.  I think defense stocks may do well, but I would stick with gold and oil.  I am already bullish on gold and oil and this could be a spark for the start of a new rally in both.  It might also be worth looking at gold stocks, as these have been really beaten down in the last couple of years.

If you follow Austrian school economics, then you probably understand that the boom and bust cycles that we see today are mostly a result of government policy and central bank policy.  An interesting topic for discussion is whether a boom and bust cycle can occur in a free market, but I think most Austrian followers would agree that booms and busts would be much more mild in a free market environment, if they happened at all.

I think more people are coming to accept the Austrian explanation of what has been happening in the economy.  The Keynesian explanations just haven’t worked out too well and they really don’t make much sense, even to the common man who doesn’t study much economics.

It can still be difficult in discussing the boom and bust cycle with people because Austrian school followers can come across as pessimistic, especially in times like today.  It is not that we want a bust or we’re hoping for a bust.  It is just that a bust is virtually inevitable at this point due to prior policies by the Federal Reserve and the government.

While talking about a “boom phase” indicates a positive notion, this is actually the negative aspect when we are talking about an artificial boom.  Meanwhile, the “bust phase” sounds negative, but this is actually the healing process from the bad things that happened during the so-called boom.  It is true that the bust phase is quite painful for a lot of people as they realize that the good times don’t last forever.

The interesting thing that many people don’t realize, even Austrian school followers, is that the boom phase is also a difficult time for many people, especially near the top of the boom.

One analogy I like to use is to think of a middle class person who is taking an extended vacation.  Imagine this person has $50,000 in life savings and he decides to take a leave of absence from work to spend in the Caribbean.  He spends a few months living in a resort, drinking fine wine, gambling, getting massages, and living the good life.  If an outsider looked at a snapshot of this guy’s life during this time, they would think he was wealthy.  They would think his lifestyle could be sustained.

Unfortunately for this guy, he is in nothing but consumption mode.  He had some prior savings that he was able to use, but not enough to sustain him for a long period of time without working.  Once he blows through his $50,000 in savings and perhaps the use of a few credit cards, he is forced to return to his previous lifestyle.  He will have to go back to work and he will have to save money if he ever hopes to have any kind of a vacation again.

But in this example, the guy had to realize that his lifestyle could not be sustained.  When he was down to his last few thousand dollars, he knew that his time was almost up.  Perhaps he even cut back on the fine wine a little bit, just so that he could stretch out his vacation a little bit longer.

I think of people in the boom phase, particularly near the top, and many are not doing well at all.  If there is a stock market bubble or real estate bubble, then the investors are probably doing well up until the end, or at least they think.  But I can’t help but think of someone who bought a house near the top of the housing bubble in 2005 or 2006.  I suppose this could even apply to some people who bought at lower prices before then.  Think of all of the foreclosures and short sales that ended up happening in the years after.  Many are still happening to this day.

When someone ends up having their house taken from them because they were unable to pay the mortgage, then there were problems building up to that point.  I suppose there are some foreclosures due to people walking away from their underwater house.  But a majority of foreclosures, particularly at the beginning of the bust, occurred simply because people didn’t have the income to sustain the lifestyle that they tried to buy.  They couldn’t keep up with the mortgage payments and all of the expenses that come with “owning” a home.

I can just imagine a family in 2005 struggling to meet the monthly mortgage payments.  They see a boom around them and think everyone else is doing well and is happy.  They wonder what is wrong with themselves.  The husband and wife probably get into fights, thinking they are the only ones in this world who are going to lose their house.  They never should have bought their house in the first place, but they felt they had to because prices would just keep going up.  They stretched themselves too far and simply couldn’t pay their bills.  This is what happens in a “boom” economy.  The boom phase is when all of the damage is occurring and many people will feel the pain before the official bust occurs.

In conclusion, we are in somewhat of a boom phase right now.  Yet, Americans as a whole are struggling now even more than they were 5 years ago.  There is an official bust coming at some point.  But most Americans are already in a bust phase in that they are struggling to pay their bills each month. It isn’t much comfort that the stock market has been doing well to most middle class Americans.

I recently saw an interview with Robert Kiyosaki.  He is an investor and most well-known for his Rich Dad Poor Dad books.  While the books are not highly specific in most areas, they are great motivational books and they give a general overview of his philosophy when it comes to investing.

One of the things Kiyosaki said in the interview is that a house is not an asset.  It is a liability.  This is coming from a man who has made a big portion of his wealth from investing in real estate.  But Kiyosaki is not really referring to investment real estate.  He is talking about someone buying their primary residence to live in.

I recently wrote a blog post on housing costs and I referred to a house as a consumer good.  This is really the same thing that Kiyosaki is saying in that a house is a liability.  From a financial perspective, he is correct.  Houses cost a lot of money and I’m not just referring to the mortgage.  There are a lot of costs that go into owning a house.  While I see nothing wrong with spending money on a house that you like (as a consumer good), I also don’t understand why so many people become house rich and cash poor.

This goes against conventional thinking that owning a house is an asset.  But that is why so many people are not rich.  In fact, most people barely have any savings at all.  They may own a nice looking house, but they are a few missed paychecks away from a near financial crisis.

I remember watching a special program one time with a panel of “experts”.  One of them was Robert Kiyosaki.  He had a different view of things from the rest of the panel.  Someone asked a question about real estate investing.  One person on the panel suggested that it was a good idea if you can get rent to cover 70 or 80 percent of your costs (I don’t remember the exact percentage that was given, but it was below 100 percent).

Kiyosaki scoffed at this idea.  He said that cash flow should be 130 percent or more (or some percentage close to that if my memory serves me correctly).  He believes it is foolish to buy an investment property that produces negative cash flow, even if there is a good chance of appreciation.  He believes in positive cash flow.

You don’t get rich when you are paying out more each month than you are taking in.  I suppose over a long period of time you could pay off the mortgage and eventually get positive cash flow.  But then how many years will it take just to break even with the previous negative cash flow?

I am a proponent of investment residential real estate if you are in a decent position to do so.  But one thing I make clear is that it should always be positive cash flow.  (Note – there could be exceptions if you already own the place and you are moving and you can’t get positive cash flow right away.  But if you are buying a place for investment purposes, then you should be able to produce positive cash flow quickly or else it is a bad idea.)

In conclusion, if you are buying a house to live in, it should be viewed as a consumer good.  You should not justify paying a lot because it is an “investment”.  It is not an investment.  It is a cost of living.  If you want to pay more for some luxury, then at least be honest with yourself that you are spending more for this and that it is not for investing.

If you are buying a house (or condo) for investment purposes, your primary focus should not be on appreciation.  Your primary focus should be on producing positive cash flow.  You will not get rich, or anywhere close to rich, if your property expenses are higher than the rent being collected.

I enjoy discussing the economy, and investments that could benefit from the economy.  I like to give advice on saving money, spending money, and protecting the money you have.  That is one of the main focuses of this blog, along with commentary on politics and libertarianism.

For this post, I just want to remind people not to forget about an important investment.  It is more important than your financial investments.  You must invest in yourself.

Perhaps this sounds cliche, but it really is something people forget about.  You would be amazed at how many people will risk thousands of dollars in the stock market, yet won’t pay a couple of hundred dollars to attend a seminar to advance their career or that might help them in a side business.

While I don’t think you should throw money away by just picking things at random, there are worthwhile things to invest your money in for yourself.  Maybe you need to get a couple of good marketing ideas that will provide the breakthrough you need in a side business.  Maybe attending a seminar will provide a contact for you that will help advance your career.  Maybe you are interested in real estate investing and should attend a real estate investing seminar.  Perhaps just attending will give you the motivation you need to buy your first property.

There are any number of examples that one could come up with.  But the point is that you shouldn’t be a cheapskate when it comes to investing in yourself.  Almost anything that gives you greater knowledge and better networking can be viewed as money well spent.

Most people will not get rich.  For the few that do get rich, most of them won’t do it by investing in financial instruments.  It will mostly be done through higher incomes from really good jobs or from running a business.  Of course, when you make a high income, you do have to be wise enough to not squander your money.

I don’t want to say that investing is like playing the lotto.  But unfortunately, some people actually view it this way, except they think they can win this one.  But most people will not get rich quickly, or really get rich at all, by just investing in financial instruments.

Compounding interest over time can certainly be a powerful tool and it shouldn’t be ignored.  But it is probably even more important that you have your own compounding interest for your knowledge and productivity.  For this, don’t forget to invest something in yourself.

There is an interesting article that was run on Market Watch.  The author discusses the fact that the 10-year yield has risen from 1.6% to over 2.8%.  He suggests that this is setting up bad news for the stock market, as investors can lock in better returns from U.S. Treasuries.  He runs some numbers with a scenario of where the 10-year yield hits 4.5%.

I think the author brings up an important point and he could end up being right.  However, at the same time, we do have to consider the different scenarios that could play out.

First, just because the 10-year yield has been going up as of late, it doesn’t mean it will continue.  There are several scenarios we could see where the yield stops going up, or even goes back down.

Second, we have to consider the reasons for higher rates.

If the Fed slows down its “quantitative easing”, then this could certainly force rates higher as other investors would not likely step in and buy government debt at the current rate.  If this is the case, then the author is probably correct that the stock market is in for trouble.  We have seen, just by words spoken by Fed officials, how the stock market can move up or down in anticipation of what the Fed is going to do.  The current stock market boom is living by the Fed’s monetary inflation and it will likely die by the Fed’s monetary inflation ending, or even slowing down.

Another scenario is that the Fed keeps up its monetary inflation (or even worse, steps it up) and we start to see higher price inflation.  Even with the Fed buying big amounts of government debt, we could still see rates rise due to a fear of future inflation.  So if the 10-year yield were to hit 4.5% in this case, then it may or may not spell the end of the stock market rally.  While stocks do not always do well in times of higher inflation (you can see some examples during the 1970s), stocks will generally benefit, at least in nominal terms, from a dollar that is being devalued.

The interesting thing is that if there is some kind of a major pullback in the stock market, we might see interest rates go back down lower from where they are now.  During times of recession, it is likely that investors will seek safety, assuming there is not a lot of fear about inflation.  We saw this in the fall of 2008, when bonds were the best investment around.  Whether you like it or not and whether you think it is rational or not, investors find safety in U.S. government debt.

So while the author may be correct that higher yields could pull some investors out of the stock market, it is also important to know that a lot of different scenarios could play out.  It is also hard to determine cause and effect.  Are investors leaving the stock market to get better yields in bonds, or are investors going to bonds simply because they want out of stocks?

There is always a question about whether it is financially smart to borrow money for certain things.  Most people think that borrowing money for a house (taking a mortgage) is acceptable.  While even this can be bad for some people, I think taking on a mortgage is fine as long as it is done wisely.  It should be a fixed rate loan in most cases (yes, there are exceptions) and the payments should be manageable.  There are too many people who find out what they can qualify for and then find a house for that price.  But in most cases, you should be finding a house that is priced well under what you qualify for.

Cars are a tough one.  Some people say that you should always pay cash.  But unfortunately, this is not realistic for some people (probably a good majority of people).  Even a decent used car might cost $10,000 these days and most people don’t have that kind of money lying around.

Having a car is a tool.  Most people need a car to drive to work, go shopping, etc.  So if you need a car and you don’t have the money, then there is not much choice but to take out a loan.  Again, this should be done wisely.  You don’t need all of the bells and whistles on your car.  You just need something safe that will get you from A to B.  You probably need air conditioning and heat.

The key point is that if you don’t have the money to buy a car outright, then you should be limiting what you get.  If you buy new, then it should be to keep the car for a minimum of 10 years, but hopefully longer.  And it should be a reasonable price.  If you are paying $30,000 for a new car and you have to take out a loan, then I think you are not making a wise decision.  You should simply be buying a much cheaper car.

After this, there is not much that I would recommend borrowing money for.  Obviously, if there is an emergency (medical, unexpected house expense, etc.), then you have to do what you have to do.  Hopefully you are in a good situation though, where you have an emergency fund set up.

I am not against using credit cards, as long as you pay the balance off each month.  Credit cards are convenient and can be very useful if used wisely.  The key thing is that you don’t pay any interest.  In fact, if you use a credit card, you should be getting some kind of cash back or rewards.

It would be an interesting study on how much the average American pays in interest every year.  If you include mortgage payments, I’m guessing the average American pays well over half a million dollars in interest during his lifetime.  While leverage can be useful if used in a smart way, it mostly makes people poorer.  If you are constantly paying interest to lenders, it is hard to get rich yourself.

You want interest to work in your favor with compounding interest.  Unfortunately, most Americans have this in reverse and are paying out the interest instead of collecting it.

I am hesitant to comment on financial markets based on just a few days of moves, even if they are big moves.  A few days up or down do not necessarily make a trend.

With that said, it is interesting to observe what has happened in the markets over the last week or so.  The stock market has done poorly.  Bonds have also done poorly, as the 10-year yield is getting within striking distance of 3% as of this writing.  You can’t always believe the headlines, but many are speculating that the recent down days for stocks and bonds is over fear of the Fed’s possible “tapering” of its monetary inflation.

The problem here is that gold has been doing well recently.  While this could certainly change quickly, the price of gold (in terms of dollars) is nearing $1,400 per ounce.  While this is obviously still well off its all-time highs, it has bounced up from its recent lows.

So if stocks and bonds are down due to fears over the Fed reducing its easy monetary policy (the understatement of the century), then why hasn’t gold gone down too?  Perhaps the simple explanation is that gold was not being propped up as much as stocks and bonds from the Fed’s “quantitative easing”.  You could say that stocks and bonds are bubbles.

Regardless, it looks as though gold is breaking any correlation it had with stocks.  One of the reasons that some financial advisors recommend gold for a portfolio (although usually too low of a percentage) is because gold and stocks are not highly correlated.  If stocks do poorly, the hope is that gold will soften the blow.

However, in the last several years, gold and stocks have actually been somewhat correlated.  They were going up together prior to 2008 and they went down together with the crash of 2008.  They also bounced back together.  It was only in the last year or so that gold pulled back while stocks made new all-time highs, at least in nominal terms.  And now it seems that they have really divorced themselves, as gold rises in the face of falling stocks, even if temporarily.

This is particularly interesting because much of the talk in the investment world has been revolving around the Fed’s monetary policy.  If the Fed’s monetary inflation were the sole source of investments doing well, then you would expect gold and stocks to be more highly correlated at this time.

It is always important to remember that investment markets don’t have to be rational.  Demand is made up of millions of people making decisions.  For some reason, in this round of quantitative easing, the newly created money has found its way into stocks.  There has been no bubble in gold.

It is also important to remember that things can change quickly as we have seen in the last couple of weeks.  All of a sudden, gold is showing signs of life, while stocks are struggling.  Again, this isn’t to say that it will continue this way for sure.  But maybe this is the early sign of a newly recharged bull market in gold that will see new all-time highs.

On August 16, Yahoo! Finance ran an article titled “Ben Bernanke’s Huge Gift to Taxpayers“.  It was written by Rick Newman.  It was the headline article at one point during the day.  Later in the day, it was nowhere to be found, at least on the main Yahoo! Finance page.  Perhaps it was because of the hundreds of comments by the non-experts who embarrassed the writer and Yahoo! Finance for publishing such garbage.

The article starts out saying, “Critics of the Federal Reserve often accuse it of printing money.  What they may not realize is that the Fed has been printing profits, too.”

About the only good thing I can say about this piece is that the author essentially admits that the Fed is creating money out of thin air.  You usually can’t even get this basic admission from most of the establishment.  The author says “printing money”, but it is really “creating digits”.  But the point is still essentially the same.

The articles says, “The Federal Reserve earned nearly $90 billion in 2012, after accounting for all its expenses.  If the Fed were a corporation, its chairman, Ben Bernanke, would be the most celebrated CEO in the world, sitting atop annual profits more than twice what Apple and Exxon earn.”

I like the author’s use of the term “earned”, as if Bernanke and the Fed actually produced anything to “earn” this money.

The author praises Bernanke saying he would be “the most celebrated CEO in the world”.  I think any CEO who had the power to artificially create almost endless money out of thin air would be very “profitable”.  All you have to do is enter some digits into the computer and, bang, there are your profits.  It is not as if Bernanke actually has to produce iPhones or gas refineries.

The article continues further down saying, “Even if the Fed ends QE in 2014, as many analysts expect, it will retain an enlarged asset portfolio for years, since it will sell assets slowly or perhaps even hold on to many of those bonds until they mature.  By 2025, the Fed’s total profits under QE will amount to about $820 billion, the Fed researchers estimate, or $315 billion more than under the counterfactual scenario.”  It goes on to say, “All the Fed’s profits go to the Treasury, and that’s real money that lowers the federal deficit and helps reduce the need for tax increases.”

I really don’t like to be rude to people, but this guy Rick Newman is either a complete moron or he thinks is audience is full of complete morons.  I have little tolerance for people like this.  It is not as if he is talking at the water cooler at work and spouting off some information that he knows little about.  He is a columnist for a major website and the things he is saying are simply moronic.

Yes, the Fed’s “profits” go back to the Treasury.  Where does he think most of these so-called profits come from?  They come from the Treasury.  It is nothing but an accounting gimmick.

The Fed buys government bonds with money created out of thin air.  This allows the Treasury to spend more and run up deficits without depending on other investors as much.  The Treasury has to pay interest on the debt that it issues.  Therefore, the Treasury makes interest payments to the Fed for the government debt being held by the Fed.  Voila!  There is your “profits”.

The Treasury makes these interest payments either with tax money collected or more debt issued.  So these magical “profits” that this guy is talking about is either coming in the form of taxpayer money or newly created money (which devalues the money held by everyone else, which is essentially like a hidden tax).

The only other “profits” being collected by the Fed are from mortgage-backed securities that it has obtained from bailing out the banks.

So here we have this guy who wants us to celebrate Ben Bernanke for massive monetary inflation and to believe that this is a “huge gift to taxpayers”.  This guy is a complete joke.  My optimism lies in the fact that most of the comments below the article are from people who saw right through this guy and made it known that he is a fraud.

Most financial advisors will recommend that you have an emergency fund.  This could be for anything unexpected such as a job loss or major expenses like medical bills or home repairs.  If you are saving money to purchase a new car, this would not count as part of an emergency fund.  You are expecting to buy a new car.  It is not being set aside for an “emergency”.

I have seen advisors recommend anywhere from 3 months of living expenses to 9 months of living expenses.  In this economy, perhaps it should be even more.  But it is important to emphasize that each individual’s situation is different.

If you are a 25-year old single male who makes $12 per hour and shares an apartment with two roommates, then a 9 month emergency fund is probably not necessary.  Such an individual could probably find another job for something close to what he currently earns.  And if his expenses are expected to stay low, then a smaller emergency fund would likely suffice.

This isn’t to say that such an individual should stop saving.  You need to save for retirement and future expenses.  The 25-year old may want to purchase a house.  Saving for a down payment would not be part of an emergency fund.  But I see no reason that the person could not purchase a house (assuming it is affordable) if he had only a 6 month emergency fund as opposed to a 9 month emergency fund.

On the other hand, someone who earns $50,000 per year and supports a wife and children would probably want at least a 9 month emergency fund.  It would not be a good idea to make other major purchases until that money is set aside.

I think there are also some gray areas in terms of what would be part of an emergency fund.  Cash (technically digits) in a bank account is the obvious.  It is liquid.  Paying extra on your mortgage each month is about the opposite.  It is not liquid at all, unless you are planning to sell your house or take out cash from a refinance.  A 401k plan is another example of money that is not liquid, particularly if you are still employed with the same firm that holds your plan.  You will not likely be able to access it unless you leave the company.

If you are in a situation where you need a 9 month emergency fund, here is my recommendation.  Get 3 months of living expenses into the bank, either in a checking account, savings account, or money market fund.  This is your most liquid money.  For the other 6 months, I think it is acceptable to have investments that may not be liquid in one day, but is relatively easy to access in a short period of time.  These could be investments in gold and silver (the physical metals).  It could be stocks, mutual funds, and ETFs that are outside of a 401k plan.  It could even be investments inside a Roth IRA, as you can at least withdraw your principal contributions without a penalty.  But you should also account for any volatility that may take place in your investments.

In conclusion, I think it makes sense to have an emergency fund.  This should be for unexpected expenses.  It does not all have to be cash in the bank, but it should be relatively easy to access in case you need it.  Each individual and family situation is different, so you should adjust according to your own needs.