Money Managers Liking Cash Right Now... Do You?

FIREdreamer · 07-01-2007, 11:23 AM

So last night I was running Morningstar X-ray on my IRA (end of the quarter check up) and I found out that my asset allocation was out of whack. As it turns out I am holding close to 20% in cash right now (instead of th 5% I usually keep on hand for buying opportunities) because many of my funds' managers are holding huge chunks of cash at the moment. So with 15% of my IRA invested in bonds, my asset allocation is now 65% stock / 35% bonds and cash instead of the 80%/20% I usually like. What's going on? Is the stock and bond markets' outlook so bad that the wall street pros feel compelled to pile up on cash? And for those "dirty market timers", what is your outlook on the market? Do you feel like cash is king right now?

Danny · 07-01-2007, 11:31 AM

Right now I'm not in the accumulation stage of my financial life - more preservation...so cash (CDs, MMF, Muni & Income CEFs) is about 80% right now - although I do take short term positions in equities and then back to cash when an opportunity presents itself...

yona · 07-01-2007, 12:11 PM

I am always 100% stocks. I am just not in the same playing field as the fund managers, so I don't compare with them. Thier universe contains hundreds of stocks while mine contains thousands. I try to invest in stocks with market capital of less than 100 million and prefer the ones with less than 10 millions.

LOL! · 07-01-2007, 12:15 PM

You must be using actively managed funds with alot of overlap if you have that much unsuspected cash. Our asset allocation is right where we want it to be. With our ETFs and passive index funds, there is little room for cash in those.

It is true that the bond funds in our 401k have a significant fraction of cash. I consider cash to be part of my fixed income, so it doesn't bother me.

FIREdreamer · 07-01-2007, 12:33 PM

Most of my index funds are in my taxable accounts. I use the IRA for managed funds and bond funds. The largest holding in my IRA is Fairholme, right now 20% in cash. I also own Pimco All Asset, right now 55% cash. Even my global bond fund is 50+% invested in cash. Finally the Vanguard Asset allocation fund (which I do not hold) is 20% cash / 80% stocks right now (it was 100% stocks a few weeks ago).

brewer12345 · 07-01-2007, 01:52 PM

Cash as a % of an actively managed fund can be due to a lack of things to buy, but it can also be the result of the manager getting flooded with cash after a hot streak and taking their time about putting it to work.

I would also not read too much into the cash position of your PIMCO fund. IIRC, PIMCO likes to play games where they use unlevered, cash collateralized derivatives to replicate positions rather than own the asset outright.

calmloki · 07-01-2007, 02:16 PM

Money Managers Liking Cash Right Now... Do You?

wull yeah. Duh. I like gold coins, silver, stacks of 100s paperclipped together, numbers on the ELoan and FNBO and PenFed websites. I figure it only costs me the inflation rate (read: funding the Iraqi Freedom/Democracy campaign). Pretty cheap given my stunning ability to buy high and sell on the stock market. Might not be the best for those who do well in the market.

retire@40 · 07-01-2007, 02:42 PM

I'm in a hold strategy right now. In fact, I don't think I have purchased any new equities in over a year.

I have been saving extra money in money market accounts for a while. Even so, my equity/cash allocation has kept constant since my equities have performed really well over the past year or two.

audreyh1 · 07-01-2007, 02:42 PM

If you hire fund managers by buying actively managed funds, then you need to let those fund managers do their job for you, including deciding how much to hold in cash.

In particular the bond funds - holding cash is reasonable if they feel that cash is better "value" under current circumstances.

Audrey

Delawaredave5 · 07-01-2007, 03:02 PM

Quote:

Originally Posted by retire@40

I'm in a hold strategy right now. In fact, I don't think I have purchased any new equities in over a year.

I have been saving extra money in money market accounts for a while. Even so, my equity/cash allocation has kept constant since my equities have performed really well over the past year or two.

I've been the same. Equities keep growing - to keep AA at target, cash I save from w*rking has been going to fixed income accounts.

FinanceDude · 07-02-2007, 09:20 AM

Quote:

Originally Posted by brewer12345

Cash as a % of an actively managed fund can be due to a lack of things to buy, but it can also be the result of the manager getting flooded with cash after a hot streak and taking their time about putting it to work.

I would also not read too much into the cash position of your PIMCO fund. IIRC, PIMCO likes to play games where they use unlevered, cash collateralized derivatives to replicate positions rather than own the asset outright.

Spot on...........looking at Treasury yields, some managers are parking some money in short-term, while waiting for a pullback in the market to buy things on sale........almost like they feel one is imminent.......

unclemick · 07-02-2007, 09:39 AM

Just spot checked - Vanguard Asset Allowcation fund is holding 20% cash versus 100% stock when I looked ? months back.

They use some kind of quant model to allowcate between stocks, bonds and cash aka short term reserves.

Sooo - what's up doc?

Love my Target Retirement - let those Vanguard computer programs do my heavy lifting.

Meanwhile - the putz factor says I need to keep dinking around to find the next great Dell, Harley Davidson or other stock that's going get me that villa in the Bahamas.

heh heh heh

.

Spanky · 07-02-2007, 11:08 PM

Cash is almost 40%, contemplating shifting more into short-term or intermediate treasury bond funds or possibly Vanguard REIT index.

pedorrero · 07-04-2007, 09:30 PM

Interesting. I just read somewhere that mutual fund cash levels are near historic record lows, which is usually given as evidence of a major bull top. OP claims the opposite.

Another problem of using mutual funds: their cash levels. Of course, if you want actively managed, that is fine, out of the 7000 or whatever funds. On the other hand, there are many options where you can be sure that your investment will remain entirely, or at least mostly, in stocks or whatever, come Hell or high water...

Of course, none of that applies if you invest in a fund where you expect manager to vary the mix....I guess that is what those "blend" funds are. Not my cup of Hemlock, though.

cute fuzzy bunny · 07-04-2007, 10:41 PM

Quote:

Originally Posted by unclemick

Just spot checked - Vanguard Asset Allowcation fund is holding 20% cash versus 100% stock when I looked ? months back.

Wow, that must be really recent because I checked their AA just about a month ago and it was still pegged at 100% equities. I was a bit surprised then that they hadnt lightened the load a bit.

Lancelot · 07-04-2007, 11:16 PM

I noticed tha AA was 10% in cash last April...

Vanguard Asset Allocation fund now 10% cash...

cute fuzzy bunny · 07-05-2007, 09:40 AM

Swear to god, I looked at it in the month of june...maybe late may...and it was at 100% equities. Its one of the handful of things I look at from time to time to see which way the wind is blowing.

FIREdreamer · 07-05-2007, 10:06 AM

I agree with the bunny,

I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities.

cute fuzzy bunny · 07-05-2007, 10:08 AM

Cool. I was wondering if I had started hallucinating again.

FinanceDude · 07-05-2007, 01:15 PM

Quote:

Originally Posted by FIREdreamer

I agree with the bunny,

I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities.

Well, a 10% correction won't bode well for that AA................

07-01-2007, 11:23 AM	#1
FIREdreamer Thinks s/he gets paid by the post Join Date: May 2007 Posts: 1,307	Money Managers Liking Cash Right Now... Do You? So last night I was running Morningstar X-ray on my IRA (end of the quarter check up) and I found out that my asset allocation was out of whack. As it turns out I am holding close to 20% in cash right now (instead of th 5% I usually keep on hand for buying opportunities) because many of my funds' managers are holding huge chunks of cash at the moment. So with 15% of my IRA invested in bonds, my asset allocation is now 65% stock / 35% bonds and cash instead of the 80%/20% I usually like. What's going on? Is the stock and bond markets' outlook so bad that the wall street pros feel compelled to pile up on cash? And for those "dirty market timers", what is your outlook on the market? Do you feel like cash is king right now?

07-01-2007, 11:31 AM	#2
Danny Thinks s/he gets paid by the post Join Date: Jul 2005 Location: Minnehaha Posts: 1,999	Right now I'm not in the accumulation stage of my financial life - more preservation...so cash (CDs, MMF, Muni & Income CEFs) is about 80% right now - although I do take short term positions in equities and then back to cash when an opportunity presents itself... __________________ Danny's Waking Up To Another Beautiful Day Danny's American Diners Drive-ins Roadhouses Joints & Dives Waking Up With Nothing To Do...Trying My Very Best To Get It All Done Each and Everyday Golden Rule and Good Actions = Good Results

07-01-2007, 12:11 PM	#3
yona Dryer sheet aficionado Join Date: Jun 2007 Posts: 46	100% stocks I am always 100% stocks. I am just not in the same playing field as the fund managers, so I don't compare with them. Thier universe contains hundreds of stocks while mine contains thousands. I try to invest in stocks with market capital of less than 100 million and prefer the ones with less than 10 millions.

07-01-2007, 01:52 PM	#6
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,227	Cash as a % of an actively managed fund can be due to a lack of things to buy, but it can also be the result of the manager getting flooded with cash after a hot streak and taking their time about putting it to work. I would also not read too much into the cash position of your PIMCO fund. IIRC, PIMCO likes to play games where they use unlevered, cash collateralized derivatives to replicate positions rather than own the asset outright. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

07-01-2007, 02:42 PM	#8
retire@40 Thinks s/he gets paid by the post Join Date: Feb 2004 Posts: 2,580	I'm in a hold strategy right now. In fact, I don't think I have purchased any new equities in over a year. I have been saving extra money in money market accounts for a while. Even so, my equity/cash allocation has kept constant since my equities have performed really well over the past year or two. __________________ No man is free who is not master of himself. --- Epictetus Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo

07-01-2007, 12:15 PM	#4
LOL! Thinks s/he gets paid by the post Join Date: Jun 2005 Posts: 2,277	You must be using actively managed funds with alot of overlap if you have that much unsuspected cash. Our asset allocation is right where we want it to be. With our ETFs and passive index funds, there is little room for cash in those. It is true that the bond funds in our 401k have a significant fraction of cash. I consider cash to be part of my fixed income, so it doesn't bother me.

07-01-2007, 12:33 PM	#5
FIREdreamer Thinks s/he gets paid by the post Join Date: May 2007 Posts: 1,307	Most of my index funds are in my taxable accounts. I use the IRA for managed funds and bond funds. The largest holding in my IRA is Fairholme, right now 20% in cash. I also own Pimco All Asset, right now 55% cash. Even my global bond fund is 50+% invested in cash. Finally the Vanguard Asset allocation fund (which I do not hold) is 20% cash / 80% stocks right now (it was 100% stocks a few weeks ago).

07-01-2007, 02:16 PM	#7
calmloki Thinks s/he gets paid by the post Join Date: Jan 2007 Location: Independence Posts: 1,398	Money Managers Liking Cash Right Now... Do You? wull yeah. Duh. I like gold coins, silver, stacks of 100s paperclipped together, numbers on the ELoan and FNBO and PenFed websites. I figure it only costs me the inflation rate (read: funding the Iraqi Freedom/Democracy campaign). Pretty cheap given my stunning ability to buy high and sell on the stock market. Might not be the best for those who do well in the market.

07-01-2007, 02:42 PM	#9
audreyh1 Thinks s/he gets paid by the post Join Date: Jan 2006 Posts: 2,203	If you hire fund managers by buying actively managed funds, then you need to let those fund managers do their job for you, including deciding how much to hold in cash. In particular the bond funds - holding cash is reasonable if they feel that cash is better "value" under current circumstances. Audrey

07-02-2007, 09:39 AM	#12
unclemick Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Jul 2003 Location: north of Kansas City Posts: 5,528	Just spot checked - Vanguard Asset Allowcation fund is holding 20% cash versus 100% stock when I looked ? months back. They use some kind of quant model to allowcate between stocks, bonds and cash aka short term reserves. Sooo - what's up doc? Love my Target Retirement - let those Vanguard computer programs do my heavy lifting. Meanwhile - the putz factor says I need to keep dinking around to find the next great Dell, Harley Davidson or other stock that's going get me that villa in the Bahamas. heh heh heh .

07-02-2007, 11:08 PM	#13
Spanky Thinks s/he gets paid by the post Join Date: Dec 2004 Location: Minneapolis Posts: 2,780	Cash is almost 40%, contemplating shifting more into short-term or intermediate treasury bond funds or possibly Vanguard REIT index.

07-04-2007, 09:30 PM	#14
pedorrero Recycles dryer sheets Join Date: Dec 2006 Location: East Butt Plug, FL Posts: 217	Interesting. I just read somewhere that mutual fund cash levels are near historic record lows, which is usually given as evidence of a major bull top. OP claims the opposite. Another problem of using mutual funds: their cash levels. Of course, if you want actively managed, that is fine, out of the 7000 or whatever funds. On the other hand, there are many options where you can be sure that your investment will remain entirely, or at least mostly, in stocks or whatever, come Hell or high water... Of course, none of that applies if you invest in a fund where you expect manager to vary the mix....I guess that is what those "blend" funds are. Not my cup of Hemlock, though. __________________ I've got nothing against an honest day's work, provided that someone else does it.

07-04-2007, 11:16 PM	#16
Lancelot Recycles dryer sheets Join Date: Mar 2004 Posts: 439	I noticed tha AA was 10% in cash last April... Vanguard Asset Allocation fund now 10% cash... __________________ If you think you can, or you think you can't; either way you're right... Henry Ford

07-05-2007, 09:40 AM	#17
cute fuzzy bunny Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Dec 2003 Location: Losing my whump Posts: 22,527	Swear to god, I looked at it in the month of june...maybe late may...and it was at 100% equities. Its one of the handful of things I look at from time to time to see which way the wind is blowing. __________________ Many an optimist has become rich by buying out a pessimist

07-05-2007, 10:06 AM	#18
FIREdreamer Thinks s/he gets paid by the post Join Date: May 2007 Posts: 1,307	I agree with the bunny, I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities. __________________ "Fortune favors the brave" - Virgil

07-05-2007, 10:08 AM	#19
cute fuzzy bunny Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Dec 2003 Location: Losing my whump Posts: 22,527	Cool. I was wondering if I had started hallucinating again. __________________ Many an optimist has become rich by buying out a pessimist

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)