Increasing cash positions

[targatom2019]

+1 that is right where I am right now... there is too much smoke in the air to see anything clearly... the prospect of 100,000 - 240,000 deaths in the US with the interventions is truly stunning.

I do believe in American business and will get back in once the smoke clears.... but perhaps not direct equity investment for a while... likely investments with more limited downside like LEAPS calls.

So did you sell all your equities and go cash to wait until the market calm down to buy it back ?

 

[tdv2]

+1 that is right where I am right now... there is too much smoke in the air to see anything clearly... the prospect of 100,000 - 240,000 deaths in the US with the interventions is truly stunning.

I do believe in American business and will get back in once the smoke clears.... but perhaps not direct equity investment for a while... likely investments with more limited downside like LEAPS calls.

What type of investment returns do you anticipate using this strategy long term? i.e. 10 years or more.

 

[audreyh1]

I already had a pretty big cash position.

 

[pb4uski]

So did you sell all your equities and go cash to wait until the market calm down to buy it back ?

On the first part, yes... equities are all gone. Currently 47% CDs, 40% MM, 12% preferreds.

On the buy back part... will do someing but undecided what. May just buy LEAPS calls rathern than equity index ETFs to have stock exposure.

SWAN is looking interesting as an equity substitute but I'm still studying it. May end up value averaging back in at some point.

Only time will tell whether it is a smart move or dumb move.... not looking all so smart so far, but it is real early.

 

[pb4uski]

What type of investment returns do you anticipate using this strategy long term? i.e. 10 years or more.

I'm looking at the Amplify Blackswan Growth & Treasury Core ETF (ticker SWAN). They essentially are a version of what I was thinking of doing... they invest 90% of the fund in US Treasuries and 10% in LEAPS calls. The fund is only a little over a year old but has seemed to generate good returns in the good times and much lower drawdowns during market turmoil. I may start a separate thread on that later.

 

[targatom2019]

On the first part, yes... equities are all gone. Currently 47% CDs, 40% MM, 12% preferreds.

On the buy back part... will do someing but undecided what. May just buy LEAPS calls rathern than equity index ETFs to have stock exposure.

SWAN is looking interesting as an equity substitute but I'm still studying it. May end up value averaging back in at some point.

Only time will tell whether it is a smart move or dumb move.... not looking all so smart so far, but it is real early.

I went the other direction from 60/40 to 96/4 last two weeks. Good luck to you.

 

[Jerry1]

I went the other direction from 60/40 to 96/4 last two weeks. Good luck to you.

That’s a pretty bold move! Good luck to you.

 

[bigcmagor]

I went the other direction from 60/40 to 96/4 last two weeks. Good luck to you.

That Viper must be a twin turbo with all the goodies. You sir, have guts.

 

[WyomingLife]

Hope everybody is healthy, safe and following the experts' recommendations.

No right answers here. Everybody is different. And I totally get the OP's situation.

My potential retirement has been all over the place for a variety of reasons: health, job, you name it. Health has recently settled, but now job stuff looks uncertain. It is always something, I suppose. Anyway, the current plan is to retire in 4-5 years, so that is our window. I could be tossed into a different situation any month now for job reasons, however, so we are definitely conservative. I don't take anything for granted.

Before the crisis, we were roughly 60/34/6. We haven't sold anything, and continue to dribble in small amounts monthly as we have always done. In terms of NW, we are basically back where we were this time last year. So after a multi-year bull market, we've given up a small amount of icing over the past month. I view that situation as economically healthy actually -- take some air out of the balloon. Certainly doesn't feel like the Great Depression version 2.0.

We are now roughly 55/38/7. And we are planning on starting to move some of the cash into equities. We're aren't calling the bottom. The market could go down another 20% from here. Who knows? It is cheaper now than it was a few weeks ago, and we have no plans to take the money back out anytime soon.

It always feels like "this time is different" but I don't think it is. It is just the next debacle, and that isn't to make light of those in peril due to the virus. It's a serious situation. Unless I truly had to, however, I would never cash out of a down market. Have a plan and stick with it.

And science will fix this dilemma. And we basically know when that scientific fix is apt to arrive, worst case. I think the 2021 Games in Tokyo are going to be quite the party. And societies will be more resilient post-virus. I also think health care programs will be more forgiving and caring in the United States post-virus. I used to lose sleep over ObamaCare being struck down by the courts and basically replaced with nothing. I don't see that as a credible risk anymore. I think we (in the United States) will now move closer towards either single-payer or Medicare for all. And I think that will alleviate HC concerns for those in the FIRE community.

Again, however, if I knew I was 6 months away from pulling the trigger, I might have a different take. So none of this is criticism of the OP. I just feel good about the future. And we certainly aren't cashing out.

Stay safe everyone.

 

[48Fire]

I understand Brokrken's opinion which is: "My only point is that if you plan to buy back in, why not just wait it out. Timing the market rarely works out well. There have been plenty of articles written about the global financial crisis and how much money you would have lost if you only missed the best 5 or 10 days of the recovery."

I have long thought this way. But my wife and I face retirement in May one of three scenarios would occur: 1) lose a lot of $ in the market this year thereby risking near-term retirement ; 2) a safe well funded more conservative/moderate retirement; or 3) attempt fat-fire moving to a very expensive/posh area.

With the market dropping we figured we better ensure retirement type #2 and admit retirement type #3 most likely an unrealistic reach at this point. #1 situation- potentially having to continue working because we lost too much $ is to horrible to think about.

Still could get back into the market. Who knows, it may work out well. Otherwise eventually getting back in to market helps hedge against inflation- hopefully. But I realize we will probably miss biggest gains. We rather miss the biggest gains but not have to work any longer vs potentially losing a lot, with potentially a slow market recovery, and having to work or forever or have a skinny retirement.

Hopefully this point of view makes sense.

Smart move, in my opinion. I did the same thing in 2013. I saw too many co-workers learn a hard lesson in 2001, and reset their retirement plans. Good luck!

 

[Markola]

Not increasing our cash position. I believe in picking an asset allocation that lets one sleep at night, stay fully invested and stay the course. I have evolved in my mid-50s to a 50/50 allocation, which is down 11.1% for the year. My domestic total bond fund is enjoying a strong 2020 so far. Anyone who’d panic sell at a 11.1% decline should be in rental houses or CDs. We’ll see where we are on Dec. 31st and then I’ll...do nothing.

 

[sheehs1]

I'm pretty much out of the market. today, I had our FA move our two largest IRA's to cash. I understand this goes against all recommendations but I just can't get past the feeling that the bottom hasn't even come close yet. I don't want to be alarmist, but I seriously think we're in 1929 right now. I'm not willing to tuff out a 50% drop from here.

Just a few things that took me over the edge:
- How easily the gov't threw $2T at the problem compounding or national debt with little more than a few weeks of discussion.
- The unemployment rate, which I think will be higher than the depression, just maybe not for as long.
- There are companies that will either go under (stock to $0) or be bailed out and controlled by the gov't.
- First quarter earnings are going to be coming out in April. I think it will be brutal and I don't see the 2nd or 3rd quarter getting much better.

The optimist in me does see better times ahead so now my goal is to find products that are responsive to a few things. One - I think I'm going to need some inflation protection that provides some income. That may be as simple as cash. Not sure yet. Second - I'll be on the lookout for good companies or segments of certain industries to get back in with. For example, I don't see touching a travel/hospitality/restaurant stock any time soon but healthcare may still be strong. We'll see.

Right now, I came to basically the same conclusion and Mountain skier:

I had significant cash positions when this started with about 35% equities. I came to this same conclusion and am basically out except for a few individual corporate bonds I wasn't willing to sell at the time at fire sale prices.

I think the shocks are just starting and there will be more than one wave of this virus.

 

[stepford]

I'm pretty much out of the market. today, I had our FA move our two largest IRA's to cash. I understand this goes against all recommendations but I just can't get past the feeling that the bottom hasn't even come close yet. I don't want to be alarmist, but I seriously think we're in 1929 right now. I'm not willing to tuff out a 50% drop from here.

Just a few things that took me over the edge:
- How easily the gov't threw $2T at the problem compounding or national debt with little more than a few weeks of discussion....

I wanted to discuss this one point a bit more. If, as it appears, the Fed is going to try to print its way out of this crisis, doesn't that point to a significant devaluation of the dollar - making cash like assets a poor position? I agree that equities are risky and very likely to fall from here, but I'm not at all sure cash is the answer.

FWIW my best solution to this is still to hold my nose and keep my equity allocation, but I would think that a good argument could be made for commodities or RE. I'm curious about what you folks think.

 

[razztazz]

I wanted to discuss this one point a bit more. If, as it appears, the Fed is going to try to print its way out of this crisis, doesn't that point to a significant devaluation of the dollar - making cash like assets a poor position? I agree that equities are risky and very likely to fall from here, but I'm not at all sure cash is the answer.

FWIW my best solution to this is still to hold my nose and keep my equity allocation, but I would think that a good argument could be made for commodities or RE. I'm curious about what you folks think.

I'm glad you asked. I've been staying out because I can't tell which way any of this is going. I do not see wild inflation as a fait accomplait (pardon my French) no matter how much money gets printed. There are ways to handle that. And if we have no money, like a depression, NO MONEY, how is actually having money going to cause inflation? Money on top of money yes, maybe, but not if it's just filling a hole where there needs to be money. But I am not an economist and even with ways to deal with any future inflation the Head Shed might choose not to for a variety of reasons (mostly political probably) or might be earnest but just incompetent about it.

All that being said... so since inflation would suppress stocks for a while (possibly my remaining lifetime) and cash is obviously going to lag, what's good to own?

Real estate? Gold? They're the 2 biggies everyone always brings up. I do not want to own actual real estate. Would REIT funds be a suitable surrogate? There are funds that invest in gold related companies but people have told me they can go under and only real physical gold will do. I say that's a crock. Almost nobody could feasibly own gold.

And what percentage of a portfolio would be needed to reasonably keep up with inflation?

 

[targatom2019]

That’s a pretty bold move! Good luck to you.

That Viper must be a twin turbo with all the goodies. You sir, have guts.

Thanks.

Targa now and no more Viper. If the DOW comes back to 30,000 you might see a Ferrari458tom

 

[Jerry1]

I wanted to discuss this one point a bit more. If, as it appears, the Fed is going to try to print its way out of this crisis, doesn't that point to a significant devaluation of the dollar - making cash like assets a poor position? I agree that equities are risky and very likely to fall from here, but I'm not at all sure cash is the answer.

FWIW my best solution to this is still to hold my nose and keep my equity allocation, but I would think that a good argument could be made for commodities or RE. I'm curious about what you folks think.

I'm glad you asked. I've been staying out because I can't tell which way any of this is going. I do not see wild inflation as a fait accomplait (pardon my French) no matter how much money gets printed. There are ways to handle that. And if we have no money, like a depression, NO MONEY, how is actually having money going to cause inflation? Money on top of money yes, maybe, but not if it's just filling a hole where there needs to be money. But I am not an economist and even with ways to deal with any future inflation the Head Shed might choose not to for a variety of reasons (mostly political probably) or might be earnest but just incompetent about it.

All that being said... so since inflation would suppress stocks for a while (possibly my remaining lifetime) and cash is obviously going to lag, what's good to own?

Real estate? Gold? They're the 2 biggies everyone always brings up. I do not want to own actual real estate. Would REIT funds be a suitable surrogate? There are funds that invest in gold related companies but people have told me they can go under and only real physical gold will do. I say that's a crock. Almost nobody could feasibly own gold.

And what percentage of a portfolio would be needed to reasonably keep up with inflation?

These are good questions and thoughts. I don’t have an answer. Figuring that out is my next step. I doubt there’s a simple answer but hopefully I can have a better outcome by trying. I think there’s probably some low hanging fruit, like stay away from (xyz). What “xyz” is, I don’t know yet but I’m sure it’s there. I’m sure there’s also some things to move toward, though I agree, I don’t see myself owning large percentages of gold.

I think the most likely thing is that I will focus on high quality cash products like short term govt bonds and CD’s but I believe I’ll also get back in the market. Probably focusing (over weighting) in certain industries. The research begins.

 

[RobLJ]

I increased cash slowly (by taking gains) over the last two years, but put a 8% of cash back in stocks two weeks ago when we bounced off the 40% stock allocation (back up to 43%, now 46%, a level at which I feel a bit better).

My online gig ends in May (checks end in September), so in part I was building cash for that, and also felt the market was a bit "richly" valued for rosy outcomes.



After SS, I do plan to gradually move back up to a 60-30-10 allocation on a rising path allocation (I moved down to 48% from this over the last 24 months, very gradually). This helped, although if the market had a to the moon shot over the last 6 months, I probably would feel not so good (but OK). I figured the next 3-4 years are the most crucial, so I dialed back on risk until I draw SS.

 

[razztazz]

I think the most likely thing is that I will focus on high quality cash products like short term govt bonds and CD’s but I believe I’ll also get back in the market. Probably focusing (over weighting) in certain industries. The research begins. .

That's my interim position. Cash, short term bonds, as somebody on this forum said about 10 yrs ago when we were discussing this exact same thing, are the closest thing to "overnight money." You'll never get rich but at least it's something and it keeps you in the game for a while.


I'd own lots of gold if I thought was it's the place to be. But not physical gold.

So, what companies do better in an inflationary environment? This might not be the best time for index investing since inflation overall doesn't help stocks till it's over or nearly over. Then it takes years to level out.

Haven't checked in years but there are/were specialty funds that are essentially "commodities index funds." Maybe 25% of a portfolio would be acceptable and efficacious a la the Permanent Portfolio's 25% gold....?

 

[brokrken]

how is actually having money going to cause inflation? Money on top of money yes, maybe, but not if it's just filling a hole where there needs to be money.

Ask Zimbabwe. I’m pretty sure that wasn’t money on top of money

 

[razztazz]

Ask Zimbabwe. I’m pretty sure that wasn’t money on top of money

Like that has to apply to us? There's a ton of information behind that story.

 

[Montecfo]

In the fall and early this year I was selling some long held positions into rallies.

As the market began to fall, I redeployed my cash awaiting re-investment (well, still have about 3% available) into long term secular growth stocks as the market was declining.

I also repositioned some of my bond money with an eye toward higher quality. During the selloff I liquidated a portion of my ST bond fund to raise cash for possible use in the next 3-5 years out of an abundance of caution. I expect to reinvest that in bonds once we are on the other side.

I also put a lot of cash into CDs over the past 12-18 months which is looking very good right now.

During the selloff I was buying.

 

[Freedom56]

+1 that is right where I am right now... there is too much smoke in the air to see anything clearly... the prospect of 100,000 - 240,000 deaths in the US with the interventions is truly stunning.

I do believe in American business and will get back in once the smoke clears.... but perhaps not direct equity investment for a while... likely investments with more limited downside like LEAPS calls.

I don't believe that was what they were saying. They put a high number out to shock some people into staying at home. Many are not following the rules even in New York. Mass religious services were still being held in New York, Florida, and other states. This is how it all started in New York and in South Korea. A lot of people are not taking this seriously. Many are sick and still going out in public. San Francisco was the first city to lock down followed by Los Angeles and then the state of California. That may have made shocking headlines, but they did it for good reason as they don't have enough test kits and pending test results are now at 57,400. The private test labs are becoming a bottleneck. City and state officials wisely shut things down as they realized it would be futile to contain a pandemic without adequate testing capability.

As this article states: "Within the clinical-testing world, it is an open secret that Quest Diagnostics—one of the industry’s two big players, along with Labcorp—has struggled to scale up its operations in California. And yet, Quest has continued to accept specimens from across the country, leading to a huge backlog of tests at the company’s facility in San Juan Capistrano."


https://www.theatlantic.com/health/archive/2020/03/next-covid-19-testing-crisis/609193/

I don't think Los Angeles will be like New York as the population density is nothing like New York. What the governor is worried about from today's conference is finding the elderly dead at home like in Italy. So he is taking measures to make sure people in the community check on their neighbors by phone, text, or email.

Italy, Germany, and Switzerland appeared to have reached their apex.

Cities and states that have not shut down will only prolong the problem.

 

[pb4uski]

So you're thinking that the graphic that they displayed that I included in post #25 is a big head fake? It could be. I dunno... but the graphic certainly got my attention... and from the President's somber tone during the press conference, it seems it may have captured his attention too.

Other speculation that I have read is that it is overstated so that if the actual fatalities are "only" 20,000 that the Administration can claim what a great job they did.

I don't get the concern about inflation... I think deflation is more likely as demand for goods will fall off the cliff and providers of goods and services will be desparate for sales and income. There are a lot of dominos.. unemployed people can't pay rent... landlords in turn can't make mortgage payments, etc. It could get ugly.

 

[Freedom56]

Other speculation that I have read is that it is overstated so that if the actual fatalities are "only" 20,000 that the Administration can claim what a great job they did.

That's what I believe. Set the bar so low, and claim victory. The average person is pretty gullible. The unknown variable is just how many will take a stay at home seriously. Italy did not until about 8 days ago.

The Fed will have to come in and save the commercial mortgage backed security market. That's already expected by the market. With tenants skipping on rent, those mortgage bonds are no better than subprime mortgages. When the effects of the stimulus wears out, we are in for some serious trouble.

Many sectors are racing to zero or are circular firing squads like energy and retail. The travel industry will take some time to recover and so with the restaurant industry. The strong businesses will survive and the weak will perish. This is pure Darwinism as applied to industry and commerce.

 

[Rickt]

I have increased cash position by selling equities that I had gains in, AA now at 63/24/13. Staying the course and will increase stock percentage slowly (to 75/20/5) after the Corona virus growth curve flattens in the US as long as the unemployment stays below 10%. If unemployment goes over 10% I will not add to equities. In any case I will maintain a minimum of 25% in Cash and Bonds for living expenses for the next 10+ years, letting equities run up or down.