Your Current Cash weighting

[Smazz]

Im kind of bored today... Dont take this poll to seriously - Im sure this thread will take twists and turns but on this terribly (in the North East) humid day - the answer on the poll will give a good indication of your current economic sentiment.

 

BTW, notice quite a few double digit decreases today so I may be opening my wallet soon! :)

[Myth465]

22% and falling weekly it seems. Im trying to figure out how to up it, but see alot of great values right now.

[hyten1]

38% or so, can't seem to find many great values

 

i can find many decent ones, but are waiting/looking for the fat pitch

[Smazz]

 

i can find many decent ones, but are waiting/looking for the fat pitch

 

I tried to explain this to someone the other day:

 

imagine being an avg hitter but you are allowed 1000 balls if you want?  :o

[Myth465]

For me I think KSP might be a fat pitch, but I have all I want without more information.

 

Aside from that I see alot of low risk high reward leap positions available due to the moratorium / operational issues. ATPG, SD, ESV. One can invest a small amount of capital on in the money leaps and let things play out over the next year and a half. Besides that you guys are right.

 

No real fat pitches, that are on my radar.

[twacowfca]

We have a chamelion allocation to near cash of 27% of the net value of our portfolio through Third Avenue Focus Credit fund ( TFCIX ).  But we are also net long 140% As a consequence of using very long dated non callable derrivatives with no collateral requirements.  TFCIX has been a good investment with about 14% return including distributions since inception last October, and better returns are likely in the future as many  funds are beginning to transition to stretch for greater yield as the european bank crisis settles down.

 

 In the two market selloffs since their IPO TFCIX's beta was about 1/4 that of the market.  Therefore, in the event of a crash, it's likely that TFCIX's value would be relatively unimpaired, and shares could be cashed out immediately at NAV and deployed to pick up bargains that would be available.  This likely ability to preserve and deploy capital into equities after a crash is most unusual in any portfolio that is net long in mostly equities.  Plus, TFCIX almost certainly will give us a return that's many times the return we would get by actually holding a lot of cash.  :)

[twacowfca]

For me I think KSP might be a fat pitch, but I have all I want without more information.

 

Aside from that I see alot of low risk high reward leap positions available due to the moratorium / operational issues. ATPG, SD, ESV. One can invest a small amount of capital on in the money leaps and let things play out over the next year and a half. Besides that you guys are right.

 

No real fat pitches, that are on my radar.

 

 

In five weeks, the period of risk for the worst hurricanes will be about half over, but the geographical risk will shift from the western gulf to the Florida and atlantic coast. Cat exposed insurance companies with mostly energy exposure in the western gulf that have not experienced a big windstorm loss will become increasingly fat pitches as the period of greatest risk starts to wind down in the weeks following.  

[biaggio]

We have a chamelion allocation to near cash of 27% of the net value of our portfolio through Third Avenue Focus Credit fund ( TFCIX ).  But we are also net long 140% As a consequence of using very long dated non callable derrivatives with no collateral requirements.  TFCIX has been a good investment with about 14% return including distributions since inception last October, and better returns are likely in the future as many  funds are beginning to transition to stretch for greater yield as the european bank crisis settles down.

 

 In the two market selloffs since their IPO TFCIX's beta was about 1/4 that of the market.  Therefore, in the event of a crash, it's likely that TFCIX's value would be relatively unimpaired, and shares could be cashed out immediately at NAV and deployed to pick up bargains that would be available.  This likely ability to preserve and deploy capital into equities after a crash is most unusual in any portfolio that is net long in mostly equities.  Plus, TFCIX almost certainly will give us a return that's many times the return we would get by actually holding a lot of cash.  :)

 

Dang that's aggressive.

[biaggio]

I am 32% cash.

 

I would like to get down to 15-20% by end of year (I would like to have cash on hand to take advantage of any corrections along the way. Have been too conservative buying in opportunities presented over the last several months)

[beerbaron]

I'm 15% cash, it keeps going down... not because I'm buying like a drunken sailor but because this year is a good year for me so far and my stocks keep going up. I'm still searching for fat pitches Mr. Market please give me more volatility.

 

BeerBaron

[twacowfca]

We have a chamelion allocation to near cash of 27% of the net value of our portfolio through Third Avenue Focus Credit fund ( TFCIX ).  But we are also net long 140% As a consequence of using very long dated non callable derrivatives with no collateral requirements.  TFCIX has been a good investment with about 14% return including distributions since inception last October, and better returns are likely in the future as many  funds are beginning to transition to stretch for greater yield as the european bank crisis settles down.

 

 In the two market selloffs since their IPO TFCIX's beta was about 1/4 that of the market.  Therefore, in the event of a crash, it's likely that TFCIX's value would be relatively unimpaired, and shares could be cashed out immediately at NAV and deployed to pick up bargains that would be available.  This likely ability to preserve and deploy capital into equities after a crash is most unusual in any portfolio that is net long in mostly equities.  Plus, TFCIX almost certainly will give us a return that's many times the return we would get by actually holding a lot of cash.  :)

 

Dang that's aggressive.

 

 

Maybe not.  The derivatives give a total equity return, not just capital appreciation.  The prices were bargains, equivalent to a very low interest loan for a number of years on equity positions that don't have to be repaid and can't be called.  The equity positions underlying the derivative aren't very correlated with the market.  They actually went up in 2008 and 2009 when the market was generally down.

 

 

In addition to TFCIX, an additional 16% to20% of the portfolio is sometimes in cash to be available for opportunistic situations that are high probability events.  This opportunistic cash went into FFH last year when it sold way below its forward BV, came back into cash when they delisted from the NYSE, went into BRK before its run up prior to S&P 500 admission, came out and stayed in cash through the market correction and then back into BRK as it started its run up prior to Russell 1000 admission.  Currently this cash is mostly in BRE, a very high probability take out in my opinion.

 

In summary, it's a "barbell" portfolio, apparently aggressive on one end, but very liquid and conservative on the other.  :)

[Viking]

67% cash (CAN$)... Should the CAN$ pass parity with the US$ I will shift some CAN$ cash to US$. Current strategy: should markets fall 15% from current levels I will move to 33% cash and should we get the mother of all sell off again I will move to 0% cash.

[alwaysinvert]

I really don't see the big point in having mostly cash in your portfolio if the market is not monstrously overvalued (in an almost unheard of way; think 1929 or 1999 or maybe even worse). Even if there aren't big values out there today I don't see the point in selling off good companies at times like these. Doesn't most of our percieved edge lie in taking part of the cash flows of well-run companies over time, anyway? Not even hard-necked deep value guys like Walter Schloss went that much cash is king in very bullish times from what I have heard.

[Viking]

alwaysinvert, I agree that holding mostly cash is not ideal. I also am not trying to closely imitate Buffett or the other gods of value investing. I am going with a strategy that works for me (I sleep at night and my long term return has been more than acceptable).

 

I have benefitted a great deal over the past 10 years by being very, very cautious. It's funny because my friends and family think I am an optomist; most on this board likely see me through my comments as being quite a pessimist. Past experience has taught me that there are times to be fully invested and other times when cash is a beautiful thing. Currently, my preferred asset class is cash and I have no problem holding a chunk for a year or two. Yes, stocks are not overvalued like they were in 2000. However, I do not think they are screaming buys like they were in the late 1980's. And it looks to me that a slowing of the economy is the most probable outcome over the next 12 months and stocks are not priced for this scenario; the risk of capital loss is too high and the reward is too low. If I am right I will do well; if I am wrong I forgo some return and I am OK with that.

[Smazz]

Days like today in these uncertain times are why I keep my Cash weighting high.

I can buy what I sold about a month ago for about 7% gain already.

I may wait a bit longer.

 

BTW, Im not advocating what I do is right or the best way, just to add to the conv of why someone may have X Cash vs X+/-

[Myth465]

Lucky man, I was thinking about this thread today. Quite painful.

[Smazz]

I seem to have more grey hair then luck - I think that has something to do with it :)

[alwaysinvert]

alwaysinvert, I agree that holding mostly cash is not ideal. I also am not trying to closely imitate Buffett or the other gods of value investing. I am going with a strategy that works for me (I sleep at night and my long term return has been more than acceptable).

 

I have benefitted a great deal over the past 10 years by being very, very cautious. It's funny because my friends and family think I am an optomist; most on this board likely see me through my comments as being quite a pessimist. Past experience has taught me that there are times to be fully invested and other times when cash is a beautiful thing. Currently, my preferred asset class is cash and I have no problem holding a chunk for a year or two. Yes, stocks are not overvalued like they were in 2000. However, I do not think they are screaming buys like they were in the late 1980's. And it looks to me that a slowing of the economy is the most probable outcome over the next 12 months and stocks are not priced for this scenario; the risk of capital loss is too high and the reward is too low. If I am right I will do well; if I am wrong I forgo some return and I am OK with that.

Ok, fair enough. Seems you are fairly confident in making macro calls/guesses in situations that I don't have a clue what to make of (I am a huge beginner compared to you, as well). To each his own :)

[Smazz]

My weighting still hasnt changed much from the time of the original poll.

 

 

[alertmeipp]

Last few days has been bad. I disagree with other posters that said there aren't keep stuff out there but they just get cheaper!

 

[Munger]

About 85%.

 

And based on Prem's positioning, I should be holding more cash.

 

[Myth465]

I love this quote, its one I reach for when my knees get a bit wobbly - Warren Buffett - "An argument is made that there are just too many question marks about the near future; wouldn't it be better to wait until things clear up a bit? You know the prose: “Maintain buying reserves until current uncertainties are resolved,” etc. Before reaching for that crutch, face up to two unpleasant facts: The future is never clear and you pay a very high price for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values."

 

 

With that said. The cash I have is doing a great job of allowing me to sleep at night. I think I will hold onto it for sometime.

 

 

Here are 2 other gems. I am waiting for the last one to play out. Right now we have frustration. Fear should be right around the corner.

 

Levy Harkins - "Certainty, You pay a very high price for it in the investment world, and then you hardly ever get what you paid for."

 

Warren Buffett - "Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful."

 

[Viking]

myth465, your Buffett quote below rattles around in my head quite a bit. Lynch has some great ones as well about the foolishness of trying to time the markets (I like to re-read One Up On Wall Street about every second year because I like Lynch's stuff so much).

 

What gives me pause is the chance we are entering a 'US in the 30's' or 'Japan in the 90's' type slowdown (not necessarily another great depression; perhaps just a decade long absence of growth that rewards bonds and punishes equities as earnings shrink).

 

I do not want to end up like Ben Graham in the early 30's; I want to keep what I got (as I almost got enough)! If I was younger, with a small base and adding to my capital every year in a big way then I likely would be more fully invested. Today I am 13% equities and 87% cash (having recently sold a chunk of equities); about 25% of my portfolio is US$; 75% is CAN$.

 

 

 

 

[Smazz]

If you guys think being in Cash today is trying to time the market then we are worlds apart.

[omagh]

Viking,

 

In the past 18 months, I have had shares in 5 companies taken off my hands out of the 12 that I held with the latest coming a few weeks ago as a going private transaction.  What that tells me is that private market valuations are higher than stock market valuations for specific companies.  As these transactions have provided me with cash now up to 30%, I'm letting it sit idle and continue to do my homework.  I've added one new position this year in insurance which I view as an increasingly cheap proxy for long bonds with significant underwriting capacity as upside.

 

I'm liking these doldrums where there is no defined trend and the markets nervously twitching up and down.  It's providing me with opportunities to do homework on my valuations.  One area of interest is matching dividend yield rates in high quality companies to bond rates.  It appears that the herd has moved into bonds while leaving some tasty morsels for those of us with patience.  The challenge as an investor is putting capital to work at acceptable rates or waiting for the next pitch.  October 2008-March 2009 was the last significant period where I put most of my available capital to work and now I'm much more selective.

 

The availability of capital was reinforced to me in the 2008 credit crisis as I read Klarman and Templeton and re-read Graham.  However, the macro fears are cushioned by private market valuations and the availability of cash on many corporate balance sheets.

 

BTW: congrats on "almost got enough"

 

-O

 

myth465, your Buffett quote below rattles around in my head quite a bit. Lynch has some great ones as well about the foolishness of trying to time the markets (I like to re-read One Up On Wall Street about every second year because I like Lynch's stuff so much).

 

What gives me pause is the chance we are entering a 'US in the 30's' or 'Japan in the 90's' type slowdown (not necessarily another great depression; perhaps just a decade long absence of growth that rewards bonds and punishes equities as earnings shrink).

 

I do not want to end up like Ben Graham in the early 30's; I want to keep what I got (as I almost got enough)! If I was younger, with a small base and adding to my capital every year in a big way then I likely would be more fully invested. Today I am 13% equities and 87% cash (having recently sold a chunk of equities); about 25% of my portfolio is US$; 75% is CAN$.