CASH (CASH)

(Note the short timeframe.)  We have a yin and yang market. He just published a video yesterday on this, with 4 technical reasons why the market is bullish, and 4 fundamental reasons why it's bearish. His conclusion is that we'll probably get a pullback in the near term, and then it all depends on what the orange man says next ;)

He's holding some cash because markets rarely make V bottoms. A pullback to the 200-day moving average or so is likely. And then maybe the market will go up. But he can't make that call today.

(The total return depends on how and where an investor held the cash.)

People accuse him of always being bullish, but that's actually not the case. He's played defense through lots of downturns. There's a time to be aggressive and a time to be more cautious. Right now, there are so many uncertainties that having cash gives you flexibility. Some of the best investments you'll make are when you see something hold up when the market retests a low. His client portfolios have between 35-45% cash.

The current situation could be short term, or it might be a more drawn-out process. His guess is that the news flow will stay bumpy. He likes to have an option to make investments as we see leadership become clear. There's no race to do that.

He has too much cash in his portfolio as a consequence of some dispositions. Normally, he tries to run 10-12% in his portfolio, and he's much higher than that right now. This has happened over the last year or so. He's been unable to deploy all his cash in suitably attractive opportunities. He's comforted in the fact that Warren Buffett's in a similar situation.

Cash gives you the tools and sometimes the courage to take advantage of difficult market conditions.

He's now at 20% cash. The S&P just broke below its 200-day MA. He doesn't have opinions about these things, just lots of rules. One rule is to give a breakdown between 3 days and 3 weeks grace.

Next week, if the S&P is still below its 200-day, he's going to raise another 5% cash for a total of 25%. He'll just have to keep an eye on what's happening. He gives it at least a 50% chance that we're falling into a bear market and, if we do, he'll move his bare cash into something that at least pays some interest. Lots of ways to park cash.

If he thinks it's just a pullback within a bigger uptrend, he wants his cash ready to deploy into opportunities. He wants it readily available, with nothing in his way. But if he becomes even more convinced of a bear market (POSSIBLY something like 2022 with a 25% drawdown), he wants cash in a vehicle such as a HISA, as he knows it'll be there for 3-4 months as the market continues to wash out.

The markets in Toronto and especially New York have done very well the past two years. It's time to pause. Typically, markets will go sideways or fall. It's likely we'll see more volatility like in December. Higher interest rates will hurt growth stocks, particularly tech, and overall markets. He's cautious near term.

CPI missed expectations today, so maybe the market now things cutting 25 basis points from interest rates isn't so bad. We need to wait for Q3 earnings starting in October before knowing whether the bottom is in. He doesn't know yet. It's wise to still hold some cash and to stay in the megacaps.

Have cash handy, because there's more room for markets to fall though markets tanked today. The panic could come back. He's holding onto cash and is ready to buy, but buy in portions, not all at once. Be ready for more fear.

He's pretty close to 25% cash right now in his conservative platform, and that's high for him. Why? Because there's a lot of overvalued stuff out there in the market, and he's worried. He's not selling purposely to raise cash. But if he takes profits, he just doesn't want to reinvest yet. 

There will come a time to redeploy that cash. Though July can be a good month, August and September not so much. So maybe in the next 2-3 months there will be an opportunity. Something can be a buying opportunity, but not if you don't have the cash ready.

Still owns it but a lot less, as he's gone more into equities and tax-favourable coupon bonds. Still a very compelling offering. At this moment, instruments are yielding slightly over 5%, though the rate moves around.

Sitting tight and not buying. He expects a 4-5% pullback short term.

Interest classified as income on this product - therefore taxable. Not a significant premium, but very safe option. Good overall. 

Rate of return may have come down slightly since then. Chose it because of high chance of recession. You got 5%, risk free, with high level of optionality, beautiful. It's a gift that we didn't have for 30 years. With chances of soft landing increasing, much of this cash has been deployed into equities and coupon bonds.

In a 70/30 portfolio, he's about 76% equities right now, as the market's had a fabulous run. But trees don't grow to the sky, so he wouldn't be surprised by a pullback in equities. The rest of this money will be available to deploy when that happens.

It was a non-earning asset for over a decade, but not now. The only risk is in reinvesting say, a GIC--where to put that money. He chooses bonds and has been reducing cash for clients from over 10% to much lower. Likes US 10-year treasuries paying nearly 5%, a gift. Rates will decline going forward, but not to 0. 3.5-4% is the target.