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How much cash do you hold?


Hawks
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Also fully invested. I don't really understand people always keeping x% in cash (I mean, I understand why they do it, just doesn't make much sense to me). If I have enough viable opportunities I'll be fully invested. If something rises past fair value I may sell and sit on some cash until another opportunity arises. Just kind of ebbs and flows over time.

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9 month's  expenses in I-Bond's

1 month's expenses in the bank

 

For fun/ to satisfy my paranoia streak

1 month in bitcoin

1 month in gold

 

I try to keep my cash completely separate from investments, and use put protected leverage to reduce the opportunity cost of owning a good amount of i-bonds.

 

 

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I'm roughly 80% (or so invested). I've been adding cash throughout the year. My taxable accounts are almost fully invested but my 401k is a bit more conservative since I can only use mutual funds.

 

For the guys fully invested, how long have you guys been investing? I'm curious because from most measures it seems stocks are a bit overpriced, in aggregate. What makes you feel so confident?

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For the guys fully invested, how long have you guys been investing? I'm curious because from most measures it seems stocks are a bit overpriced, in aggregate. What makes you feel so confident?

 

I don't view it as confidence, or any commentary on the market at all.  I like the stocks I own, and would continue to buy many of them if I had more cash.  I don't think I'm smart enough to make any calls on the market as a whole, so I'm just sticking with whether I think my stocks are cheap or not. 

 

I fully expect to be wrong on many of my picks.  Hopefully, I'm more right than wrong, however.

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For the guys fully invested, how long have you guys been investing? I'm curious because from most measures it seems stocks are a bit overpriced, in aggregate. What makes you feel so confident?

 

I don't view it as confidence, or any commentary on the market at all.  I like the stocks I own, and would continue to buy many of them if I had more cash.  I don't think I'm smart enough to make any calls on the market as a whole, so I'm just sticking with whether I think my stocks are cheap or not. 

 

I fully expect to be wrong on many of my picks.  Hopefully, I'm more right than wrong, however.

 

race, is that the same for retirement accounts (I'm referring to ones in which you can't buy individual securities)?

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I am fully invested as well. I have about two years of expenses set aside as cash; it would take 2009-like bargains to get me to go lower than this amount of cash.

 

I have been fully invested for quite a while, but have been wondering if I should raise more cash given the sense I have that the market is overvalued. But the studies that racemize did made a convincing case against doing this. At least some of the stocks I own -- such as the financials -- are still under fair value I think, so I'll just hold them and not be too concerned about raising cash because the market looks frothy.

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I need to read race's study. I have a few days off for Thanksgiving.

 

I'm looking at it like this (sorry for the macro!):

 

 

Negatives:

 

CAPE is virtually at the same level as the 2007 peak (3rd highest on record)

Buffett's measure (Market cap to GNP) is at the 2nd highest level - the 1st is 2000.

After tax profit margins are way, way outside the norm (Buffett also looks at this with caution - at least from an article he wrote in 2001).

Interest rates are incredibly low - a rising rate environment affects every financial asset.

High yield spreads got down to 3.35 in June. Less than 100 basis points away from the low in 2005-2007 (they were lower then and in the late 1990s). 

We're in the 4th longest bull market since the Great Depression

According to at least one report, we are now in a time of wealth inequality that exceeds the time before the Great Depression

More anecdotal evidence: Spain 10 year was yielding less than US for a while, Berkshire has largest cash stake ever, I believe. Munger said he hasn't bought anything in 2 years.

 

On the positives:

People have been burnt twice recently - in 2000 and 2007. This scarring makes people take less risks for a while.

Not a rosey consensus - GS is anticipating 2% S&P 500 returns next year (they were predicting a 14% for 2008).

The top selling products aren't emerging markets or normal stocks - it's things like "liquid alternatives" - a "safer" way to invest - well, marketed that way, anyway.

 

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Guest longinvestor

fully invested.  I wrote an essay on this posted elsewhere, if you are interested.

+1

Will stay fully invested thru the coming end-of-the-world.

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Today the cash level sits above 60%, due to the fact that some investments along with our "top runner" in which we were heavily concentrated in got bought out of the market this year.

 

I dont know if this is considered as bad luck or good luck  ??? since we saw a great assets depart and got cash which creates a difficult challange in this environment.

 

Regards,

 

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For the guys fully invested, how long have you guys been investing? I'm curious because from most measures it seems stocks are a bit overpriced, in aggregate. What makes you feel so confident?

 

I don't view it as confidence, or any commentary on the market at all.  I like the stocks I own, and would continue to buy many of them if I had more cash.  I don't think I'm smart enough to make any calls on the market as a whole, so I'm just sticking with whether I think my stocks are cheap or not. 

 

I fully expect to be wrong on many of my picks.  Hopefully, I'm more right than wrong, however.

 

race, is that the same for retirement accounts (I'm referring to ones in which you can't buy individual securities)?

 

Oh, I just dollar cost average and don't think about it. I'm also in value funds, so I let them make the decision re cash themselves.

 

I do not think I have the ability to time the market, and am highly doubtful very many people in the world can.

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race,

 

I agree that it's impossible to time it perfectly. However, I do think there are times to be super aggressive (in times of extreme fear) or times to be super conservative (in times of extreme greed). Perhaps I'm wrong, but I think moving things slowly -as the pendulum swings - should help with overall results. Even Buffett (his personal account) and Munger were sitting in cash/bonds before 2008.

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race,

 

I agree that it's impossible to time it perfectly. However, I do think there are times to be super aggressive (in times of extreme fear) or times to be super conservative (in times of extreme greed). Perhaps I'm wrong, but I think moving things slowly -as the pendulum swings - should help with overall results. Even Buffett (his personal account) and Munger were sitting in cash/bonds before 2008.

 

Absolutely agree.  Selling slowly into increasingly extreme valuations can't be bad, nor buying when things are silly cheap.

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Anecdotal: Everyone I talk to is more interested in stocks today then they were 2 or 5 years ago. At the sametime, everyone seems to be scared of the upcoming crash.

 

I am not sure what to make of it. But, the excitement isn't there yet. In the past everyone would be talking or investing in stocks without being too worried of losses in the near future.

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Anecdotal: Everyone I talk to is more interested in stocks today then they were 2 or 5 years ago. At the sametime, everyone seems to be scared of the upcoming crash.

 

I am not sure what to make of it. But, the excitement isn't there yet. In the past everyone would be talking or investing in stocks without being too worried of losses in the near future.

 

I agree, wisdom. Before the crash in 2007, people couldn't get enough emerging markets and real estate. Now, popular choices are dividend payers, market neutral and tactical investments. People are not as bullish as previous times before a big drop but they are way more aggressive than they were a couple years ago. That's why I'm mostly invested but have a bit of cash, too. 

 

One other thing to think about (I don't actually believe this but it's more of a thought exercise) -  but perhaps QE and the rest of the stimulus has now pushed us to a territory in which will never have a severe recession/depression again. If the risk of extreme events have decreased since government will always come to the rescue, the risk premium should be smaller and the higher valuations are justified.

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