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Time to speculate on up move?
Old 10-18-2016, 06:34 PM   #1
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Time to speculate on up move?

I noticed this article on Bloomberg: Investor Cash Levels Jump Toward Levels Not Seen Since 9/11 - Bloomberg

Quote:
The amount of dry powder in portfolios is above that seen during both Europe's sovereign-debt crisis and the U.S. debt-ceiling debacle, according to Bank of America Merrill Lynch's monthly survey of money managers.
...
Quote:
“This month’s cash levels indicate that investors are bearish, with fears of an EU breakup, a bond crash and Republicans winning the White House jangling nerves,” said Michael Hartnett, the bank's chief investment strategist.
Could be a good time to speculate on a quick upward market move. I don't do this normally. After thinking about it, I generally just remember my overall goal is to hold a fairly high level of stocks rather then to keep "dry powder" and then time entries/exits. But just maybe I could sell some bonds and increase the equities. Maybe just this once? Hmm...

Your thoughts?
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Old 10-18-2016, 06:41 PM   #2
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Cash is high because people want to be in cash, not time the market. So be careful.
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Old 10-19-2016, 09:13 AM   #3
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I think an upmove is likely, following a down move. You need a catalyst to cause folks to invest cash. Not sure I see one but YMMV.
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Old 10-19-2016, 09:35 AM   #4
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Gee. Today my "dry powder" is a whole $129 more than the percentage that my financial plan has dictated for the past decade or so. Time to party?

I halfway expect that the market may drop soon or next year, but I'm certainly not planning to act on that expectation. That would be foolhardy, IMO, since (despite forum rumors) my prophetic abilities are abysmal.

I'll stick to my financial plan, and rebalance if/when my plan tells me to do so. That has worked out best for me in the past.
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Old 10-19-2016, 11:13 AM   #5
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Tis the season I play for a January effect and this year is no exception. Divergence seems stronger than usual as many of this year's big losers are diving steeply into year end. No idea about the stock market as a whole, but I'm guessing a decent snapback on some of today's dogs by Valentine's day.
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Old 10-19-2016, 12:07 PM   #6
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Unusually high level of cash is a bullish indicator. A possible trigger for that cash to be put to work are the presidential election results because that will reduce uncertainty.
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Old 10-19-2016, 03:57 PM   #7
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I didn't sell anything but I stopped contributing to my investment accounts which has caused my cash/savings accounts to go up a bit out of proportion. I just don't see any good buying opportunities right now so I'm going to start DCA'ing little by little but ultimately hoping for some good investment opportunities to come up.
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Old 10-19-2016, 07:59 PM   #8
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Quote:
Originally Posted by Lsbcal View Post
I noticed this article on Bloomberg: Investor Cash Levels Jump Toward Levels Not Seen Since 9/11 - Bloomberg

...
Could be a good time to speculate on a quick upward market move. I don't do this normally. After thinking about it, I generally just remember my overall goal is to hold a fairly high level of stocks rather then to keep "dry powder" and then time entries/exits. But just maybe I could sell some bonds and increase the equities. Maybe just this once? Hmm...

Your thoughts?
This is only a survey for funds with more than 500 Billion in Assets. This also is not a US survey but a world wide survey. So you are talking about a survey size of 10-20 members?
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Old 10-19-2016, 08:44 PM   #9
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Just filed my taxes and got my small refund back after a few days. Maybe there are lots of people like me with tax refunds that have swelled their cash positions?
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Old 10-19-2016, 09:26 PM   #10
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Just filed my taxes and got my small refund back after a few days. Maybe there are lots of people like me with tax refunds that have swelled their cash positions?
In October? Extension filers with a refund have to be in the minority, by a huge margin. Why would you extend if you have a refund coming?
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Old 10-19-2016, 10:47 PM   #11
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This is only a survey for funds with more than 500 Billion in Assets. This also is not a US survey but a world wide survey. So you are talking about a survey size of 10-20 members?
I took this as a reasonable sample of money managers, not individual investors. Do you think it is an inadequate measure of cash positions overall?
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Old 10-20-2016, 09:06 AM   #12
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I can't square it with valuations in bonds and equities at record or near-record levels.

Housing isn't cheap either.

So how can we have record levels of cash?

If every (sub)asset class is more than fully valued, something strange is happening ..
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Old 10-20-2016, 09:11 AM   #13
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...something strange is happening ..
You are preaching to the choir. The Cavs win the NBA Championship and the Indians are in the World Series. Strange isn't the half of it...
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Old 10-20-2016, 09:54 AM   #14
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If every (sub)asset class is more than fully valued, something strange is happening ..
The current situation reflects lots of liquidity, cash has been invested everywhere, and there's yet more waiting on the sidelines. Eventually demand will rise to meet such supply but my crystal ball won't reveal when that will be.
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Old 10-20-2016, 10:02 AM   #15
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I took this as a reasonable sample of money managers, not individual investors. Do you think it is an inadequate measure of cash positions overall?
How many money managers are managing 1/2 trillion portfolio’s? I think it is taking the opinion of 20 out of hundreds of millions of investors. The responsibility for a 1/2 trillion portfolio is quite different than an average investor. They have to have genuine fear of a major downturn and have funds available to keep from forced sales in a downturn. Now this could be an indicator that the 20 most influential money managers see a real potential for financial crisis and as such the global central bankers may need to step in to “save” the system again but I think it says little about the average investor and cash balance.
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Old 10-20-2016, 10:08 AM   #16
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I wouldn't try to foertell the Market moving up, ahead of time. Especially hard to predict before the Election. If it does move up, I will consider increasing my stock allotment.........but I'm not into trying to out-guess Mr. Market. . I have Cash at the ready and can move it into my existing Index Fund with one mouse click.

BTW -- Just as a Test Bed, I bought $10K of FSITX the US Bond Index so I could track the performance. Coming up on 3 months and the quarter has not been good to Bond Funds. I'm glad I'm not too heavily invested in Bonds right now.
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Old 10-20-2016, 10:14 AM   #17
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I can't square it with valuations in bonds and equities at record or near-record levels.

Housing isn't cheap either.

So how can we have record levels of cash?

If every (sub)asset class is more than fully valued, something strange is happening ..
Here's my take on it. You have sovereigns in the bond market, buying like a drunken sailor = high valuations.
Then have huge company buybacks over the last few years fueled by low interest rates. Thus shrinking the supply of stocks = higher valuations.

So without the average fund manager or the average retail investor spending any cash, you get high valuations.
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Old 10-20-2016, 10:15 AM   #18
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I wouldn't try to foertell the Market moving up, ahead of time. Especially hard to predict before the Election. If it does move up, I will consider increasing my stock allotment.........but I'm not into trying to out-guess Mr. Market. . I have Cash at the ready and can move it into my existing Index Fund with one mouse click.

BTW -- Just as a Test Bed, I bought $10K of FSITX the US Bond Index so I could track the performance. Coming up on 3 months and the quarter has not been good to Bond Funds. I'm glad I'm not too heavily invested in Bonds right now.
The 10 year went from about 1.5 to about 1.8 in that time span. Ouch. That was a bad quarter.
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Old 10-20-2016, 06:20 PM   #19
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I'll probably just wind up sticking with my current equity allocation. The only thing I might do differently is, if stocks move up I'll be slow to rebalance. For my planning, I am very close to a rebalance point. Mainly I posted this because I like to see positive sounding news when there are so many gloomy gus's out there nowadays.

FWIW, I do not view equities as overvalued as some do. First, valuations tend not to bring down markets i.e. not a very good short term predictor. Second, valuations based on PE1 and PE10 are not at nose bleed levels. Just maybe somewhat higher then they have been over the last 30 years. PE10 ranks at about the 74% rank for the last 30 years (my personal way of looking at it). I'm sure some will take exception to my views and think they are overly rosy. Well, that is what makes a market ... opposing views baked into the prices.

Feel free to differ.
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