Anyone else sitting on a lot of cash?

[Sweet]

I find myself with a very large cash position for the first time in about 5 years.  I’m not sure the exact percentage but I’m somewhere between 60-70% cash right now.

 

My large cash position is not by design, I exited some positions earlier in the year and haven’t found anything to buy.  I’m not bearish on the market, yes I think there are areas of the market which are expensive, but there many which aren’t.

 

I could buy bonds but IBKR are offering 4.5% on cash held in USD so I don’t see much point in going down that route.

 

I can see areas of potential opportunity from rising rates and reduced money supply but nothing I want to pick at yet.

 

I can’t be the only one sitting with more cash than they are comfortable with?

 

 

Edited July 8, 2023 by Sweet

[dipod]

Largely in cash. But selling very short term CSPs in the interim on stocks I don't mind owning. Have some bearish options positions. Hard to time anything, but not liking the current pricing situation in the market.

[ACooke]

Yep, I'm at a tad under 50% cash. Not really by design but am having trouble finding a lot at valuations that i like currently, although a lot is close and I have a fair few bids floating. That's probably more of a tell-tale of me being more tentative to enter a position and wanting to hold closer to the 10-15 positions mark on top of a bunch of large positions i was taken out of due to buy-outs over the last 2ish years.

 

Most of the cash currently sits in 'offset' accounts against some RE investments and offsets the interest rate due on whatever portion of cash is sitting there so I see it as a quasi 5% return, although in reality it's flipped. Can pull it as I please.

Edited July 7, 2023 by ACooke

[RedLion]

I’ve got about 35% in T bills, but just entered into contract on a real estate deal that’s going to take all of that cash, and put me up to 33% margin at least until I’m able to do a cash out refinance. 
 

Will be looking for things to sell in my portfolio since I’m feeling a bit over my skis, but should have enough unencumbered real estate to refinance with a mortgage(s). 

[thowed]

8 hours ago, Sweet said:

I could buy bonds but IBKR are offering 4.5% on cash held in USD so I don’t see much point in going down that route.

 

How I feel.  Don't have loads of cash, as most stuff I own seems OK, but I'm not a Bond expert so this cash interest is better than I can find elsewhere.

[Sweet]

1 hour ago, thowed said:

 

How I feel.  Don't have loads of cash, as most stuff I own seems OK, but I'm not a Bond expert so this cash interest is better than I can find elsewhere.

I have part of my money in Schwab and I think they pay 0.45% which is a bit of a joke.  If they don’t change that soon I’ll move it out to IBKR which is paying 10x more.

[Martian]

42 minutes ago, Sweet said:

I have part of my money in Schwab and I think they pay 0.45% which is a bit of a joke.  If they don’t change that soon I’ll move it out to IBKR which is paying 10x more.

Just a note. IBKR will not pay any interest for the first $10,000.

[UK]

14 hours ago, Sweet said:

I find myself with a very large cash position for the first time in about 5 years.  I’m not sure the exact percentage but I’m somewhere between 60-70% cash right now.

 

My large cash position is not by design, I exited some positions earlier in the year and haven’t found anything to buy.  I’m not bearish on the market, yes I think there are areas of the market which are expensive, but there many which aren’t.

 

I could buy bonds but IBKR are offering 4.5% on cash held in USD so I don’t see much point in going down that route.

 

I can see areas of potential opportunity from rising rates and reduced money supply but nothing I want to pick at yet.

 

I can’t be the only one sitting with more cash than they are comfortable with?

 

 

 

Personally  I hate owning meaningful part of portfolio in cash or long term bonds (I want much more than 4-5 per cent, even from government bonds, which happened to me only once) for a longer term and I would not put more than 20-30 per cent  portfolio in cash, even if markets seem somewhat expensive/exuberant and greedy (last time I felt this way in 2021), if it is possible to find something at least fairly valued, meaning with an expected return of >8-10 per cent. I like BRK as a theoretical benchmark and real alternative and I think it met very well this criteria in 2021 and still meets today (and perhaps every year since 2007, even including some periods of being more noticeably undervalued). To go to >50 cash, I really have not such real experience, but maybe it would be possible to imagine (also depending on long term rates etc) if market would trade at something like >30 normalized PE, with BRK>1.6-1.8 PBV and it would be impossible to find anything else sensible, without seriously compromising quality. But it seems that even during such periods like 2000 it was possible to find something with reasonable valuations and I hope it will be the case in the future:). Also for me the similar thinking applies to  the other side, meaning if I feel the market is cheap (maybe already <15 normalized PE or even better if less), off substantially and with a lot of fear in it, then, depending on the opportunities, I would consider adding 20-30 per cent leverage. So most of the time I am about 100 per cent invested, but while being 70-80 per cent invested (defensive for me), I still have capacity to add about 60-40 per cent to my long exposure, if something exiting comes along, as last time I felt was the case with the market (and especially big tech etc) last year. I think if today I was given 100 per cent cash portfolio I would put at least 50-60 per cent of it into BRK and FFH (and this one is not even at 8-10 but more likely at >15 per cent expected return) on Monday and then in near future add to them / some other things until being 80-90 invested. Maybe even only with SNP500 available, I think I would still put 50 per cent of cash it into it and then think what and when to do with the rest. 

 

 

Edited July 8, 2023 by UK

[boilermaker75]

3 hours ago, Sweet said:

I have part of my money in Schwab and I think they pay 0.45% which is a bit of a joke.  If they don’t change that soon I’ll move it out to IBKR which is paying 10x more.

 

Yet their margin rate for $0 -$24,999.99 is 13.250%!

[boilermaker75]

Small %  cash; selling anything would result in a lot of taxes.

[SharperDingaan]

We hold a mid 30's weighting in equity cash equivalents; ubs  btc, gxe. If we did nothing, we would very likely have doubles a year out, and in the interim take home a monthly 5%+ cash yield.

 

SD

[gfp]

10 minutes ago, SharperDingaan said:

We hold a mid 30's weighting in equity cash equivalents; ubs  btc, gxe. If we did nothing, we would very likely have doubles a year out, and in the interim take home a monthly 5%+ cash yield.

 

SD

 

Just to clarify, do you hold mid 30's % allocation to cash equivalents or are you counting equities like UBS Group as an "equity cash equivalent?"

[sleepydragon]

1 hour ago, gfp said:

 

Just to clarify, do you hold mid 30's % allocation to cash equivalents or are you counting equities like UBS Group as an "equity cash equivalent?"

By this standard , I am holding 75% in equity cash equivalent because of my Brk holdings. 

[Sweet]

1 hour ago, sleepydragon said:

By this standard , I am holding 75% in equity cash equivalent because of my Brk holdings. 

 I doubt that’s what he means… maybe I’m wrong though.

[Dinar]

9 hours ago, Sweet said:

I have part of my money in Schwab and I think they pay 0.45% which is a bit of a joke.  If they don’t change that soon I’ll move it out to IBKR which is paying 10x more.

Just buy SNOXX (treasury money market fund at Schwab) that pays close to 5%, and is not subject to state & local income tax, a big deal in NYC, NY state, California, Hawaii, et all.

[SharperDingaan]

4 hours ago, gfp said:

 

Just to clarify, do you hold mid 30's % allocation to cash equivalents or are you counting equities like UBS Group as an "equity cash equivalent?"

 

We spat out the industry blue pill a long time ago, and recognize that when you have the risk tolerance; there are alternatives to the typical T-Bill/Canada cash equivalents. We are also still in the get rich phase, NOT the stay rich phase, so ...... different strokes.

 

UBS is a GSIB, and so was CS. The combined two GSIBs are guaranteed directly by the Swiss National Bank, and indirectly via every other central bank in the world that is part of the Basel agreement; including the US Fed  It isn't going to go under, it pays a dividend, and share appreciation is as near to guaranteed as you can possibly get. A cash equivalent.

 

BTC is a direct cash alternative, the next halving is sometime in 2014, following which history suggests a double within 6-12 months. Should a Blackrock, etc. get an BTC-ETF approval, a double might occur a lot sooner. Should there subsequently be a e-USD, a e-Euro, or e-BRICK 'soft launch', a double might occur sooner still. Maintaining a significant exposure, is just prudence.

 

GXE trades for < CAD 1.00, pays a 12% monthly dividend, with a double dependent upon future oil prices. Cheap way of obtaining an average cash yield on the 3-stock combination, comparable to a 1-year Canada.  

 

Obviously, not for everyone

However if we can tolerate the volatility, and it works as hoped; our annual cash return is > 100%, for little additional risk.

 

SD

    

[Parsad]

Yup, sitting on close to 55% cash in short-term T-bills earning 4-4.25%.  Markets aren't stupid expensive, but certainly aren't cheap either.  Am finding very small pockets of cheap stocks, but the broad market seems more than fairly valued...especially considering we haven't reached the peak of the increases in the risk-free rate and we've seen it rise from like 1.5% to 5% in less than 12 months.

 

I have a universe of 300-350 stocks that I know very well.  At this point in my life, I just wait for mispricing in a few of them every year, and then buy one or two in significant amounts.  Not much is popping up right now...certainly not worth the risk relative to the risk free rate available.  At 22-23 times earnings...you are getting a 3.25% yield from the S&P500 plus like 1.5% in dividends...so around 4.75%.  The 2-year treasury risk free rate is slightly above that and should be closer to 5.5% in the next few months.  

 

Cheers! 

[Gamecock-YT]

Well over 50%, probably close to 60%. A nice slug in ibonds I’ll probably cash in by the end of the year. Rest of the portfolio sitting in 4/8 week bills that I roll and money market funds in the tax-free accounts. Worse problems to have than sitting in cash. 

[gfp]

11 hours ago, Parsad said:

At 22-23 times earnings...you are getting a 3.25% yield from the S&P500 plus like 1.5% in dividends...so around 4.75%.

 

Seems like 22x earnings would be more than a 3.25% earnings yield and to add dividends on top of the earnings yield is double counting.  Where does the money come from to pay the dividend - the earnings you already counted.

[Castanza]

Sitting at 7% cash but have about 30% tied up in MANU, AIV, VTS, GENGF which are more of trading positions to me. Hoping some of these get some action the next two quarters 

[ICUMD]

Sitting at -35% cash. 

Holding mainly yield bearing equities.

Don't like holding cash in this high inflationary environment, plus I can write off the interest.

[Gregmal]

Only cash I ever sit on are the few dollars I keep in my wallet for when the kids need ice cream at those cash only places.

[Paarslaars]

0% cash, roughly 15-20% in trading positions/options like Castanza

[Sweet]

On 7/8/2023 at 1:14 PM, UK said:

 

Personally  I hate owning meaningful part of portfolio in cash or long term bonds (I want much more than 4-5 per cent, even from government bonds, which happened to me only once) for a longer term and I would not put more than 20-30 per cent  portfolio in cash, even if markets seem somewhat expensive/exuberant and greedy (last time I felt this way in 2021), if it is possible to find something at least fairly valued, meaning with an expected return of >8-10 per cent. I like BRK as a theoretical benchmark and real alternative and I think it met very well this criteria in 2021 and still meets today (and perhaps every year since 2007, even including some periods of being more noticeably undervalued). To go to >50 cash, I really have not such real experience, but maybe it would be possible to imagine (also depending on long term rates etc) if market would trade at something like >30 normalized PE, with BRK>1.6-1.8 PBV and it would be impossible to find anything else sensible, without seriously compromising quality. But it seems that even during such periods like 2000 it was possible to find something with reasonable valuations and I hope it will be the case in the future:). Also for me the similar thinking applies to  the other side, meaning if I feel the market is cheap (maybe already <15 normalized PE or even better if less), off substantially and with a lot of fear in it, then, depending on the opportunities, I would consider adding 20-30 per cent leverage. So most of the time I am about 100 per cent invested, but while being 70-80 per cent invested (defensive for me), I still have capacity to add about 60-40 per cent to my long exposure, if something exiting comes along, as last time I felt was the case with the market (and especially big tech etc) last year. I think if today I was given 100 per cent cash portfolio I would put at least 50-60 per cent of it into BRK and FFH (and this one is not even at 8-10 but more likely at >15 per cent expected return) on Monday and then in near future add to them / some other things until being 80-90 invested. Maybe even only with SNP500 available, I think I would still put 50 per cent of cash it into it and then think what and when to do with the rest. 

 

 

My own personal view is that the composition of Berkshire is increasingly not the product of Buffett and Munger.  Apple is their biggest position, where revenue seems to have stalled and it’s at 30+ yield to market cap.  

 

17 hours ago, Parsad said:

Yup, sitting on close to 55% cash in short-term T-bills earning 4-4.25%.  Markets aren't stupid expensive, but certainly aren't cheap either.  Am finding very small pockets of cheap stocks, but the broad market seems more than fairly valued...especially considering we haven't reached the peak of the increases in the risk-free rate and we've seen it rise from like 1.5% to 5% in less than 12 months.

 

I have a universe of 300-350 stocks that I know very well.  At this point in my life, I just wait for mispricing in a few of them every year, and then buy one or two in significant amounts.  Not much is popping up right now...certainly not worth the risk relative to the risk free rate available.  At 22-23 times earnings...you are getting a 3.25% yield from the S&P500 plus like 1.5% in dividends...so around 4.75%.  The 2-year treasury risk free rate is slightly above that and should be closer to 5.5% in the next few months.  

 

Cheers! 

This is my feeling too.  I don’t see the point in buying something unless it’s a lot better than the risk free.

 

2 hours ago, Gregmal said:

Only cash I ever sit on are the few dollars I keep in my wallet for when the kids need ice cream at those cash only places.

This is how I would prefer to be.  I think it’s easier to add to positions you already own here than to open a starter though.

[changegonnacome]

-20% Cash….tbills 

- Starting to build up a LONG volatility book again via various means which I guess could be achieved by upping cash allocation but don’t like mkt exposure to drop below 80%

- tax considerations are clouding one or two holdings ….in a Roth world I’d consider trimming….in the past when I’ve made those types of holding because of tax I’ve regretted it…might be time to evolve here a bit

There are one or two more economic data points to come out before a self imposed before September 1st personal positioning deadline-  BLS wage data, SuperCore - and if the trend continues i.e. zero weakening progress…..zero supercore progress….which kind of IMO ends any tiny tail possibilities of a soft landings….I’ll get more even more bearish…..a whole swath of institutional guys are IMO coming back in September and gonna take 2023 returns ‘to the bank’ by hedge my out 2023 returns. 
 

There are times for being a hero….and now isn’t one….the simple historical market heuristic is be a hero sometime after the 1st rate cut….when the ‘system’ wants stocks to go up, when Joe Sixpack has a shot again at expanding his purchasing power.