As of yesterday, cash is up to around 50% of the entire portfolio.
I know I mentioned on Monday that it was at around 30%. I’ve been eyeballing how strong the bounce from the bottom of the recent correction has been. I guess I’m not feeling as great about any sort of continued melt up. Upon reflection, I think I’ve been trading in and out for a little while because I don’t believe deep down the narrative that everything is rosy and the market will continue to march higher and higher. So I’ll sit in cash, earning about 0.9% interest and wait.
Stocks are expensive relative to history. The 10 year US Treasury continues to go up. I will be cautious. If I’m completely wrong, as I said 3 years ago, I will just index everything to the total stock market and forget about playing fund manager.
Only advice I have is to do as I say (index, DRIP, and forget) and not as I do (what I’ve just written about).
So I wrote this super long, rambling post exceeding 1000 words, listing all sorts of various trades and fairly esoteric math that only I would probably understand about opportunity cost gains and losses in the portfolio. I realized at the end of it, I didn’t really want to hit that publish button. So I think the compromise is to keep this as simple as possible.
Here we go again: another round of doom and gloom as the markets swoon. The finger is being pointed at China for their volatile stock exchange and circuit breakers stopping trading there. Some speculate that it is a sign of China slowing down. Whatever. The market was volatile back in October 2014. It was volatile in August 2015. It was volatile in mid-December 2015. And it’s volatile now. J.P. Morgan released an informative little “Guide to the Markets” at the end of the year. Yes, the same J.P. Morgan that I took vast amounts of clippings from the CEO’s letter in the 2014 annual report. But that is neither here nor there. Here are some slides I found interesting. Perhaps it will provide some perspective on all this doom and gloom prevailing in the financial media.
I’ve only been writing since 2013 so I haven’t been able to go through blogging during a real market correction like in 2008. Some of the best businesses in the world are starting to look very attractive at fair-to-below-fair value. Coca Cola, Johnson & Johnson, Berkshire Hathaway, Exxon, Chevron, etc. – high quality large cap companies that should make the foundation and backbone of any investors’ portfolio. These are some of the greatest companies in the world, minting money year after year after year. This is the time to go pick up some ownership in these incredible businesses. They are sitting there at fair value, or less than fair value. Could prices drop even further? Sure they could: you should expect +30% declines in quoted market price of your holdings in the markets. But remember, price ≠ value. And in this world, getting fair value for ownership in some of the best businesses in the world is not some great tragedy in life.
I’m so giddy! No, not because it’s Thursday, silly. Want to know why? Because I can FINALLY use this picture I had so masterfully crafted over a year ago (yes, I am highly artistic as you can clearly see). The problem with this image was that when I created it, the market was red hot. Then it kept on getting hotter. I didn’t feel like I could use this and write until the markets started tumbling. And tumbling it has in the past week. The timing couldn’t be more perfect. So come join me for a pleasant introduction to financial pornography.