# Stuck Sitting on Cash



## mike06 (Aug 4, 2011)

How many other people in here are stuck in this spot? And what is your plan for the next few months? I am in the process of transitioning from an all stock portfolio to an all indexed one and in this transition have accumulated about 40% cash right now. Another 40 is already indexed and the last 20 is still in stocks. I am feeling trapped in cash as the market keeps hitting new highs. Despite the obvious headwinds, we seem to be in an 'all news is good news' type of market and I dont know what its going to take for it to come down, but cant seem to justify a buy at these levels. What is one to do.


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## SkyFall (Jun 19, 2012)

I am, right now I'm sitting on 70% of cash... most is because I decided that some of the investment I had (stocks) were becoming riskier at their respective level so I took the capital gain. It depends a lot of your investment time horizon, I am currently only 22y/o which mean I have at least 40-50years in front of me "knock on wood", so I know it's temporary I still buy front time to time stock even at these levels because I wanna at least keep a foot in the door, it's a risk I am ready to take... so don't worry if you are sitting on cash it's not that bad....it's better then just dumping everything in the market and get burn. Investment is not like baseball, you don't have a strike count so you can wait wait wait and wait....


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## Islenska (May 4, 2011)

That's a tough call, if I was in a pile of cash right now would not be jumping into equities.

A long term horizon and your cash can be deployed at lower levels. Patience is a virtue and all that.......


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## Jon_Snow (May 20, 2009)

Back in June I was sitting on a ridiculous amount of cash... Sometimes I would log in to my TD account and just gawk at the number. I sucked it up and went shopping for stocks and ETF's. Made a big bet on CPG which had been excellent for me. Bought a bunch of REITS after their correction... and I will admit to some yield chasing here and there. 

Now my cash stash is creeping up again... I've always thought that having excess cash sitting is a pretty good problem to have.


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## GoldStone (Mar 6, 2011)

OP: what's your target asset allocation?

Ben Graham recommended no more than 75% in equities, even to most aggressive investors. If you go by this rule, you are only 15% from the target.


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## Four Pillars (Apr 5, 2009)

mike06 said:


> How many other people in here are stuck in this spot? And what is your plan for the next few months? I am in the process of transitioning from an all stock portfolio to an all indexed one and in this transition have accumulated about 40% cash right now. Another 40 is already indexed and the last 20 is still in stocks. I am feeling trapped in cash as the market keeps hitting new highs. Despite the obvious headwinds, we seem to be in an 'all news is good news' type of market and I dont know what its going to take for it to come down, but cant seem to justify a buy at these levels. What is one to do.


I've been in this position in the past. However, it really shouldn't happen - if you were invested in equities and sold them and are converting to an index portfolio - you shouldn't think of the buy side as 'buying into equities'. Really you are doing an equity sell/buy or maybe you could think about just converting your equities from one form to another?

I know in reality that this process involves having cash for a little while so it's tough to deal with rising markets. I ended up dividing it up and buying some equities every couple of weeks on a schedule.


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## Sampson (Apr 3, 2009)

Four Pillars said:


> I've been in this position in the past. However, it really shouldn't happen - if you were invested in equities and sold them and are converting to an index portfolio - you shouldn't think of the buy side as 'buying into equities'. Really you are doing an equity sell/buy or maybe you could think about just converting your equities from one form to another?
> 
> I know in reality that this process involves having cash for a little while so it's tough to deal with rising markets. I ended up dividing it up and buying some equities every couple of weeks on a schedule.


this is what we did also. In fact, I would try to use that cash immediately to avoid issues caused by volatility in the market. Think of it as trading and if as GoldStone points out, your asset allocations c all for you to have the monies invested, do it.


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## leeder (Jan 28, 2012)

@ mike06: what's your time horizon? If your horizon is short, then I sympathize with your situation. But if you intend to be invested for a long time, I would go ahead and invest now. This waiting game is just a form of market timing. The problem is we don't have a crystal ball. The indices can swing up or down. An example is my gf's portfolio. She invested in index product around late August. With all the issues we've had in the last couple weeks, she's up about 2.3%. Of course, the opposite could be true where you lose money. That's where your time horizon comes in. If you contribute every year and rebalance back to your target allocation, you would be dollar cost averaging down. Eventually, you will reap the benefits when the markets heat up.


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## fatcat (Nov 11, 2009)

i have read several articles that recommend just going all in ...
http://www.theglobeandmail.com/glob...-in-all-at-once-the-winner-is/article8408480/

cash mangement is critical, make sure you are prepared for a pullback and will have no need to dip into equities


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## My Own Advisor (Sep 24, 2012)

@Sampson,

So selling stocks now then quickly buying equity ETFs as a replacement is still a good move now? 

I'm struggling with this decision myself, since some stocks have appreciated nicely but I don't want to sell them and would rather buy new ETFs like ZCN, XIU or other when markets slide. I think I'm gonna wait for a bit but I suppose this is a good problem to have...further to fatcat's poing about cash management. 

I'm just impatient and want my money invested as much as possible but I recognize this is not good investor form.


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## james4beach (Nov 15, 2012)

Obviously you should pursue whatever asset allocation strategy you have... if you have a goal to have X% of your money in equities, then by all means, go for it.



mike06 said:


> I am feeling trapped in cash as the market keeps hitting new highs. Despite the obvious headwinds, we seem to be in an 'all news is good news' type of market


Emotionally speaking, I think you should try to fight _this_ feeling. That kind of feeling, that "I'm missing out" or a sense of desperation to join the party often leads to poor decision making. I'm just saying, try to keep a clear head and try to make rational decisions... not emotion-based decisions.

There's another aspect, which is very important: the US markets are heavily manipulated by stimulus and the Federal Reserve. US stocks are hitting new all time highs, yes, but many other places in the world are not. The US stock market has diverged significantly from other markets. For instance the Chinese stock market has been falling for 4 years now. Commodities are also about 25% below their peak prices.

American stocks are rising along with Federal Reserve QE:
1. This was the first time I realized this, in a BMO chart
2. Recent post from zerohedge showing very strong correlation between Fed balance sheet and S&P 500


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## Jon_Snow (May 20, 2009)

I really think the TSX may be in the process of "catching up" to US markets - I'm thinking thinking Canadian equities, resourced based right now.

Garth Turner suggested the same on his blog yesterday - I know everybody here is a Garth fan.


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## Ihatetaxes (May 5, 2010)

Jon_Snow said:


> I really think the TSX may be in the process of "catching up" to US markets - I'm thinking thinking Canadian equities, resourced based right now.
> 
> Garth Turner suggested the same on his blog yesterday - I know everybody here is a Garth fan.


I agree and hope you and Garth are right as I am loaded with XIU and have been waiting patiently for it to run back up over $20.


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## Sampson (Apr 3, 2009)

james4beach said:


> Emotionally speaking, I think you should try to fight _this_ feeling. That kind of feeling, that "I'm missing out" or a sense of desperation to join the party often leads to poor decision making.


This highlights the problem I have with 'staying out of the market' and holding the cash.

@MOA, if you succumb to the above, then you are implicitly stating you can time the market. I didn't trust myself to do that so tried to simply move the monies into the new product ASAP.

In fact, I was doing this change around 2007/2008 as we shifted into some 'immature' portfolios into a real strategy. My emotions did get the better of me, I didn't transfer everything at once, so we did benefit from fortuitous timing. Selling into 2008 (early decline), and buying some back in 2009. Not for the faint of heart, and certainly fortuitous.

If we had anymore assets to 'transfer'. I would sell and buy the new product immediately - just think of you money as already invested, and stick with your asset allocation plan (sounding a bit like Belguy here).


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## Sampson (Apr 3, 2009)

Jon_Snow said:


> I really think the TSX may be in the process of "catching up" to US markets - I'm thinking thinking Canadian equities, resourced based right now.


But this has nothing to do with Canadian equities being Canadian since American big oil has performed relatively poorly also. Same with fertilizer and seed stocks.

Resources stocks have severely lagged (and as a result, Canadian indices) because of low Global demand. What has changed? Is there a global recovery occurring that we haven't heard about? If anything, isn't there significant risk that the Chinese economy slows further? thus further reducing demand for resources?

Resource stocks took a beating a while back and have been relatively stagnant in the past 6-12 months. No reason to believe things have turned around now.

Except for Garth's expert analysis of the resource sector.


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## kcowan (Jul 1, 2010)

One of the luxuries of being a private investor is holding a large cash position. MF managers often lament that they can't.


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## Feruk (Aug 15, 2012)

What you're trying to do is called "time the market." This has been proven nearly impossible time and time again.


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## Eder (Feb 16, 2011)

How will it feel sitting in cash and TSX goes to 16000...will you invest at that point? There are decent buys right now...commodities, utilities and a few REITs are what I have been adding...lots of negative sentiment yet decent forward pe's and reasonable dividend pay out ratio's.
I like to keep 10% cash in case things like the government courting Verizon happens and no brainer buy points are created, but too much cash is useless.


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## Jon_Snow (May 20, 2009)

In general I would agree about market timing - but when I loaded up on BCE during the Verizon scare, same with POT when the cartel broke up - isn't this a form of market timing? If so, it can certainly work.

Or is market timing associated to the broad market, not individual stocks?


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## Toronto.gal (Jan 8, 2010)

Jon_Snow said:


> Or is market timing associated to the broad market, not individual stocks?


Why not with stocks?

And sure it works, it's just that most people don't have the cash required to jump-in when the big opportunities appear, nor interest/time to follow/understand the markets. You had great entry points on many purchases because of the high level of cash you had just waiting patiently for your prize, but those that don't recognize and/or can't take advantage of market corrections for x,y,z reason, simply say that it's a fools game.

When I was reading about the decline of gas prices a couple of years ago [yes, it started long before 2012], I sold ECA and TLM, only to get them later at 1/2 price. There are many such examples, but of course we can't catch them all, nor be right ALL the time.


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## leeder (Jan 28, 2012)

To me, it really depends on the time horizon and what kind of investor you are. If a business is high quality and growing and you intend to hold the stock for a number of years, does it matter whether you're buying it at $35 or $30? Also, when do we ever know we're buying something at the bottom? We could easily be 'catching a falling knife'. I think people who invested in Blackberry is a good example. Also, maybe the price will keep going up. Then what -- does that mean you just don't buy?

In terms of the broad market, who knows when the next pullback will come? You could potentially have gained a significant amount before a pullback occurs. Likewise, today could be the end of everything as we know it. Who knows?

It's a lot of questions... I would rather just keep investing and rebalancing.


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## kcowan (Jul 1, 2010)

Feruk said:


> What you're trying to do is called "time the market." This has been proven nearly impossible time and time again.


Yup, that is it. Wait until QE is finally put to rest and then go bargain shopping. There are early warning signs that even QE will not bail them out this time...


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## Toronto.gal (Jan 8, 2010)

leeder said:


> 1. Also, when do we ever know we're buying something at the bottom?
> 2. We could easily be 'catching a falling knife'. I think people who invested in Blackberry is a good example.
> 3. does it matter whether you're buying it at $35 or $30?


*1.* Of course we don't know either way; I never go for superlatives, but surely we know our desired entry prices at the very least. If a stock I wanted to buy or average down, were to reach my desired price, I would not wait to see if it would fall further, unless there was enough information to suggest that, so discipline & being informed plays a part.

*2.* Market timing is about more than buying/averaging down. What if the stock in your example, had been purchased 7 years ago, was it a falling knife back then? Would you not have sold since? Even the darling of the markets, the stock that could do no wrong just a year ago, became oversold very quickly.

*3.* Entry price indeed makes a HUGE difference, not when talking about a few % points as in your example, but have you really not experienced any dramatic ups and downs the last few years? 

If you bought 1,000 shares for $40 instead of $20, it would not have made a difference long-term? Even a simple earnings report can make a stock soar or dive these days, so with these dramatic moves, it is possible to time the markets, but not an easy endeavor, but neither is buying & holding blindly IMHO [I mean holding blindly].


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## My Own Advisor (Sep 24, 2012)

Thanks Sampson.

I think I'll continue investing in some equities, but also in some REITs. They have been beaten up, as has CPG and EMA. 

That is a good way to see it, just sell and buy the new product immediately. You're just transferring really, one market high stock for another high product (ETF).


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## Feruk (Aug 15, 2012)

Toronto.gal said:


> If you bought 1,000 shares for $40 instead of $20, it would not have made a difference long-term? Even a simple earnings report can make a stock soar or dive these days, so with these dramatic moves, it is possible to time the markets, but not an easy endeavor, but neither is buying & holding blindly IMHO [I mean holding blindly].


If you've got the ability to consistantly get the stock at $20 and sell it at $40, then that strategy makes sense. However, it's something like 97% of financial advisors can't beat the market in two consecutive 5 year cycles. If they can't, then chances are we can't either. I'd never advocate blindly holding a stock, but I would advocate holding a diversified group of ETFs and simply adding more regardless of short term price volatility. That way you buy some at $20 and some at $40 and you're not trying to time the market, which has been shown not to work time and time again. Long term effect is close to matching the market, which is more than most "stock pickers" can do.


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## favelle75 (Feb 6, 2013)

I would have hated to be sitting on any cash this week. I am up 11% for the year-to-date, but this week alone accounted for 5.8% of that! Over half my earnings in one week....cash would have made me depressed big time this week. But then, there is always next week, LOL...


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## mike06 (Aug 4, 2011)

Thanks for all the replies! I completely agree with what most of you are saying. Its funny, I am a big advocate of indexing and not trying to time the market, yet when put in the situation myself I am gunshy because we are at the highs and things dont look all that rosy to me with the government issues, possible taper, etc just around the corner. All the facts point to lump sum investing rather than market timing. I need to just suck it up and go with what the #s say.


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## james4beach (Nov 15, 2012)

If it makes you feel better, I am sitting on a lot of cash and I don't lose any sleep over it.


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## Canuck (Mar 13, 2012)

Jon_Snow said:


> I really think the TSX may be in the process of "catching up" to US markets - I'm thinking thinking Canadian equities, resourced based right now.
> 
> Garth Turner suggested the same on his blog yesterday - I know everybody here is a Garth fan.



totally agree


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## Canuck (Mar 13, 2012)

favelle75 said:


> I would have hated to be sitting on any cash this week. I am up 11% for the year-to-date, but this week alone accounted for 5.8% of that! Over half my earnings in one week....cash would have made me depressed big time this week. But then, there is always next week, LOL...


Ya I'm fully invested and couldn't be happier, at an all time high as of today, and I do think that Canada might play a bit of catch up with the U.S market so I'm sitting tight and collecting those dividends


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## andrewf (Mar 1, 2010)

Hmmm, all this euphoria is making me nervous...


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## GoldStone (Mar 6, 2011)

andrewf said:


> Hmmm, all this euphoria is making me nervous...


Yup. Three stages of a bull market: 1. Denial. 2. Acceptance. 3. Euphoria. 

Historically, some of the strongest gains come in stage 3. The catch is, you give some of them back in the inevitable crash.


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## kcowan (Jul 1, 2010)

The S&P is up 22% YTD. What could go wrong? Is it a great time to buy or what?


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## james4beach (Nov 15, 2012)

I've said it before around here, if you have a diversified portfolio and several asset classes you invest into, at least you have choice of what to buy more of (it doesn't have to be the S&P 500). I know there's no such thing as market timing but a rule of thumb that's worked well for me through the years is to buy things below their 100 day moving averages.

When I have flexibility to choose between assets, this has helped me buy things when they're out of favour instead of buying at local highs. The beauty is that everything becomes out of favour at some point; there is always some reversion to that mean. This tool helps me exercise patience with the confidence that everything has its turn becoming out of favour. It will happen to US stocks too.

Currently most things are above their 100 day averages: TSX, US stocks, div stocks, REITs, foreign stocks
But there are some things below, which I'll call out of favour: *Bullion and miners, materials (commodities in general), and bonds*

So in my diversified portfolio, if I wanted to add new money I would lean towards buying some more bonds or fixed income at this point -- and that's exactly what I have been doing in my own portfolio and family accounts. Not buying more commodities because we already have enough gold exposure, but if I didn't, that would be an area to buy as well.


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## Toronto.gal (Jan 8, 2010)

Feruk said:


> *1.* ability to *consistently*
> *2.* I would advocate holding a diversified group of ETFs and simply adding more regardless of short term price volatility.
> *3.* Long term effect is close to matching the market.
> *4.* 97% of financial advisors can't beat the market


*1.* I often hear people say this, but I'm never sure what they really mean, because it's obvious that it can't be consistent, and I highly doubt that there are many fools out there, that believe otherwise, unless they have a magic crystal ball. Also, timing the market does not necessarily mean getting out nor trying to predict the bottom or top; when you catch either one, is purely by accident. For example, I wasn't even close to catching the bottom in 2009, and in fact, waited until Oct.09 to buy individual stocks for long-term, and for the 1st time I might add. But I soon realized that with the significant amount of volatility & market fluctuation that we were experiencing due to the various crises since, that there were several ways to correct/time/tweak one's portfolio, and without receiving the label of being a 'core market timer', but it takes interest/time/work, so I realize it's not for everybody. 

At the end of the day, all I try to do is lower my ACBs, precisely because my focus is very long-term! And yes, at times, I have started fresh per mentioned examples already, and why not when there had been many screaming opportunities to do so? *For big rewards, you have to have started very low after all.* 

*2.* I neither disagree [do the latter already], nor advocate anything, I simply share here some of my strategies. 

*3.* I have much to learn still, and will compare as time goes on.

*4.* They may have the title of professionals, but frankly, few have impressed me, and I ignore most of the optimistic/pessimistic BS that's written all over the place. Even when I had an FA, I made sure my funds were managed by someone with 40+ years experience.
*
'Volatility Reigns Supreme'.*


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## Freddie70 (Oct 19, 2013)

mike06 said:


> How many other people in here are stuck in this spot? And what is your plan for the next few months? I am in the process of transitioning from an all stock portfolio to an all indexed one and in this transition have accumulated about 40% cash right now. Another 40 is already indexed and the last 20 is still in stocks. I am feeling trapped in cash as the market keeps hitting new highs. Despite the obvious headwinds, we seem to be in an 'all news is good news' type of market and I dont know what its going to take for it to come down, but cant seem to justify a buy at these levels. What is one to do.


I'm in the same boat, need to add stock and so far thinking either right before the next US deadline or longer and wait for the end of QE will get a discount to today. Only real concern is if the politicians wait til the last minute again then they may wait even longer to start tapering QE . But even if it's only 5% it really adds up in the long run.


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## favelle75 (Feb 6, 2013)

Although not truly "timing the market", could one try to always have cash on hand to buy on the dips to constantly lower dollar-cost-average? So not buying and selling frequently or even trading per se....but just buying in on dips, deploying cash when its more lucrative. That's a solid (safe) strategy, no?


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## Islenska (May 4, 2011)

Rather than cash on hand why not a margin account especially with interest rates as low as they are.

When you see a can't miss buy, deploy capital and then later if not comfortable with your margin level take some (hopefully) profit.

Of course your "can't miss buy" could be a dud but keep margin levels reasonable and this low interest period is attractive. Positive markets like now make margin room very attractive-you are not using your own cash and gaining.

In a down market simply wait it out, costs you some interest, just don't max things out, be prudent!


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## MoreMiles (Apr 20, 2011)

If you are in an accumulation phase, you should always have extra cash on a regular basis.

How long are you going to wait? The same thing happened in 2012... markets went up big. So if you waited, you would have missed the 2013 20% move... Sure there may be a correction, but if you can make 30% until then, are you still worried about the correction everyone is anticipating?

Just look back the forums here... everyone was saying "Sell in May go away..." How did that work out so far? Right?


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## underemployedactor (Oct 22, 2011)

I'm no Macro guru (or any kind of a guru for that matter), but I do believe that "volume precedes price". NYSE volumes are still low which may indicate that there are a lot of people like you with cash waiting on the sidelines. Given the low volumes since the 2009 selloff, I would think that any increase in volume may precede an increase in overall value. So watch the volumes and when they uptick, pile in and make a fortune! Or just buy some GICs and sleep at night....


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## Sampson (Apr 3, 2009)

underemployedactor said:


> I'm no Macro guru (or any kind of a guru for that matter), but I do believe that "volume precedes price". NYSE volumes are still low which may indicate that there are a lot of people like you with cash waiting on the sidelines. Given the low volumes since the 2009 selloff, I would think that any increase in volume may precede an increase in overall value. So watch the volumes and when they uptick, pile in and make a fortune! Or just buy some GICs and sleep at night....


According to this logic, you would not have bought since 2009. Does this mean you think a tick up in volume will result in a larger increase that the 100-150% we have already seen in the S&P500 ?


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## underemployedactor (Oct 22, 2011)

I meant that within each of the peaks and values in that 5 year period large volume selloffs would be followed by price increases after the volume began to increase again. It just looks like an interesting tool for indexers to find points of entry.


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## Toronto.gal (Jan 8, 2010)

underemployedactor said:


> 1. "volume precedes price".
> 2. So watch the volumes and when they uptick, pile in and make a fortune!
> 3. buy GIC's and sleep at night....


*1.* AKA: herd mentality.
*2.* That may result in playing catch-up with the bulls, that can end badly if not timed right. Volume however, is a valid indicator, but not in isolation.
*3.* Don't need those [yet] to sleep well at night.


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## james4beach (Nov 15, 2012)

Let's not lose sight of the fact that capital allocation is a very personal decision...

Staying in cash (say investment accounts) is a totally valid option for people out there. I really think cash is under-appreciated. Myself, I keep lots of it around, always, through all market conditions


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## Sampson (Apr 3, 2009)

james4beach said:


> Staying in cash (say investment accounts) is a totally valid option for people out there. I really think cash is under-appreciated.


I think this is actually a very valid point. The fear of inflation erroding savings is always over stated.

I know many wealthy people whom have made horrendous investment decisions, yet remain wealthy because they have earned and saved the majority of their working income.


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## james4beach (Nov 15, 2012)

Sampson I totally agree "the fear of inflation eroding savings is always over stated"

It is the #1 tool that banks and mutual fund companies use to _*scare*_ people into buying products. Fear of inflation is very, very, very good for the investment business, and real estate business. But expectations of deflation or stagnation are HORRIBLE for business.

I'm not saying there is no inflation, but investors should be aware that any fears they hear about inflation are skewed (upwards) due to the bias and self-interests of the financial industry. For instance if you go to a TD analyst and ask if they're concerned about inflation, of course they will say yes. What are they going to say ... no we expect deflation, please store your cash in a vault at home and forget about our investment bank?

I agree there are reasons to be concerned about inflation (low interest rates, QE, government stats that manipulate CPI downwards). But it's a complex topic and there is no definitive way to measure inflation. For instance, although there is a QE program in the USA, statistics on money velocity show consistently declining velocity (reduced goods & services transactions in the economy) which is not consistent with inflation. The imminent deleveraging in Europe is another potentially huge deflationary force. Also, commodities are steadily dropping... again, not consistent with inflation.

I would believe the inflation story much more if gold and commodities were at least holding steady.


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## favelle75 (Feb 6, 2013)

Seeing as inflation can be easily quantified and calculated, I don't see how its possible to over state it.


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## Sampson (Apr 3, 2009)

favelle75 said:


> Seeing as inflation can be easily quantified and calculated, I don't see how its possible to over state it.


It is not the amount of inflation, but the impact of inflation that I think is overstated.


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## james4beach (Nov 15, 2012)

favelle: inflation itself is not straightforward to quantify. It even depends on what school of economic theory you ascribe to. For instance in the Austrian school of thought, inflation has a monetary definition... means the rate at which the money supply is increasing. And then there's debates of what encompasses the monetary supply... does one include credit? Does one include derivatives? These are all open for debate.

Even if you forget about money supply and focus on ONE effect -- price inflation of goods & services (which is usually what people mean by 'inflation' -- the calculation of CPI isn't straightforward either. The government applies non-intuitive adjustments, there's hedonics, etc. Take a look at shadow stats and you'll see one can calculate a whole different CPI.

So even calculating "price inflation" isn't straightforward. And even if it was straightforward, it's still not the same as monetary inflation


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## favelle75 (Feb 6, 2013)

But for the sake of forgoing investing income from said money, I assume we are talking about monetary inflation where $1 today buys you $0.98 next year. That is calcuable and quite predictable. So not only are you forgoing any investment interest (3%, 5%, 12%, 0%, etc), that "pile of cash" is also becoming worth less and less every day. To me, that's not getting ahead....that's losing out.


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## GoldStone (Mar 6, 2011)

favelle75 said:


> But for the sake of forgoing investing income from said money, I assume we are talking about monetary inflation where $1 today buys you $0.98 next year. That is calcuable and quite predictable. So not only are you forgoing any investment interest (3%, 5%, 12%, 0%, etc), that "pile of cash" is also becoming worth less and less every day. To me, that's not getting ahead....that's losing out.


I strongly disagree with this mindset. The only number that matters is the total portfolio return. My portfolio is ~50% equities, ~50% cash. I'm up 12% year to date. Well ahead of inflation.

Cash returned about 1.8% - 2.0%. Barely enough to cover inflation after taxes. But why would I care? 12% is the only number that matters.

Paraphrasing Buffet: Cash is a call option with no expiration date, an option on every asset class, with no strike price. Buffet made billions in 2008 crash because he was sitting on a mountain of cash. He picked great assets at a deep discount.


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## james4beach (Nov 15, 2012)

favelle75 said:


> But for the sake of forgoing investing income from said money, I assume we are talking about monetary inflation where $1 today buys you $0.98 next year. That is calcuable and quite predictable.


I think you're talking about purchasing power.

How do you calculate it? I don't think it's so straightforward. When you say $1 today buys you $0.98 next year ... well, buys you what? A basket of what things? Food, housing, energy? Devil's in the details


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