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Longtime bull (Ed Yardini) says he’s sitting on cash ahead of a possible market correction

The link includes a link to the interview....
That’s Yardeni pointing to the possibility of a 10% drop from recent market highs in an interview on CNBC on Friday.....

Yardeni, who says he’s going to keep cash on the sidelines until he gets more clarity on the coronavirus, remains bullish longer term.

“Interest rates are so extraordinarily low,” he said. “The central banks have basically provided no interesting reasons to buy in the fixed-income markets and lots of reasons to buy in the stock market.”
https://marketwatch.com/story/heres-why-one-longtime-market-bull-is-keeping-powder-dry-even-with-the-fed-giving-a-green-light-to-buy-stocks-2020-02-09

Comments

  • edited February 11
    Thanks for the story. At around 1% returns on cash that’s an expensive seat cushion.:)

    “ ‘If I’ve got some spare cash, I’d like to just keep it as dry powder until I get a little bit more clarity on this coronavirus,’ Yardeni said.“

    Keeping dry powder ? Gosh - That one goes way back. Younger ones here may not know it.
    - “Dry Powder” INVESTOPEDIA

    Another oldie I like - (opposite of keeping powder dry): Backing up the truck .
    - “Back Up The Truck” INVESTOPEDIA

  • I have no concerns with anyone, myself included, who has 20% or less in cash. If you're ALL in cash, you're definitely missing out on market returns ... but I always prefer to have some dry powder to buy into weakness on things I want to own or want to own more of.
  • IMO, the headline could be misinterpreted as Ed Yardeni has been bullish and continues to be bullish since March 2009. (Read his blog.) What he was referring to in the cited interview was whether he would currently invest spare cash at these levels, given the uncertainty / risk of the coronavirus. From the headline, one could imagine that Yardeni is sitting on a pile of cash which I believe not to be accurate.
  • edited February 12
    Old_Skeet is currently in a cash build mode due to relative high stock market valuation. Plus bond yields are low. Awaiting better buying opportunity.
  • Thanks for these comments. I anticipate receiving repayment in full of an outstanding real estate secured loan (about 30% LTV) within about 30 days. I have allowed the % of stock holdings in my primary investment account to drift up in anticipation of this influx of new cash. It will represent about 10% of the total in this account once it is received. Looking at my current investment plan, about 20% of it will go into stocks with the balance into bonds (including into increases to my "near cash" ZEOIX, SEMRX, SHV, and JPST holdings). I will wind up with perhaps 53% in stocks. That's still on the high side of my long term 50% target....mostly due to the current stance of the global central bank crowd and persistently low interest rates. The details remain a work in progress, especially regarding how much volatility to take on with the bond side investments. So, reading these comments is helpful.
  • I never understood the cash thing when markets are going up?
    For your cash portion....why not use a simple liquid index like SPY/QQQ with a close % for sell trailing stop.

    In the last 3 months, the SPY made over 9% and QQQ over 15% and their price never lost more than 3.5% from any last top...(chart)
  • edited February 12
    Since I retired about five years years ago I dialed my risk down by holding less equity and more fixed income. I have averaged a little better than a seven percent annual return since I retired. By holding cash I can put a special investment position into play during a stock market pullback. Generally, I have in the past made five to seven percent off of my spiffs sometimes more. So, for me, I await a better buying opportunity before opening an equity spiff position.

    I'm also fully invested within the confines of my asset allocation of 20 percent cash, 40 percent income and 40 percent equity. At times I can overweight equities by up to 5 percent if felt warranted.

    Thus, for me I have found it beneficial to hold a little extra cash to make some special buys from time to time during stock market pullbacks. Buy the dip then sell the rip and pocket the margin.

    @FD1000 ... Sounds like we might be in the same hymn book but on a different page.
  • edited February 13
    FD1000 said:

    I never understood the cash thing when markets are going up?
    For your cash portion....why not use a simple liquid index like SPY/QQQ with a close % for sell trailing stop.

    In the last 3 months, the SPY made over 9% and QQQ over 15% and their price never lost more than 3.5% from any last top...
    ==================================
    And I never understood your "All bonds all the time/bond OEF momentum" investment strategy when markets have gone up FOR 10 YEARS.

    It should be noted that you posted on M* that you sold all of your stocks near/at EOY 2019, you have not reported any stock buys since then, staying 100% in bond OEFs. So despite you reporting that data, you have not participated in any of the 2020 YTD stock market gains.

  • edited February 14
    Of course there is a MARKET correction coming......................someday. There always is.
  • @Old_Skeet I turn 70 this month and am about 15 years into retirement having taken advantage of a downsizing "early out" opportunity in 2005. My stock weighting has varied between about 40% and 60% during that time.

    My portfolio percentages will probably be in the neighborhood of 55% stocks, 40% bonds and 5% Other after the new cash arrives. Most of that new cash will likely be used to increase existing positions in VWINX, WFLEX, IOFIX, ZEOIX, and SEMPX. (I'm thinking about adding to RPHYX too given its recently improving performance.) My tendency to overweight stocks (vs my current 50/50 default mix) may well persist until 10 year treasury rates move meaningfully higher...maybe into the 3 to 4% range will get my attention (of course something else may come to convince me to abandon my current overweight to stocks!). My present plan is to keep the default mix at 50/50 at least until I turn 80 unless my health status declines significantly.

    I have incorporated a sub-portfolio within my ongoing mutual fund portfolio over the past year and a half. Its settled out at 22.5% of the total portfolio (counting the new cash). Its 1/2 income oriented and 1/2 "income with growth" oriented and is populated with individual dividend paying stocks (3%+ dividends), REITS, CEFs, BDCs, and LPs. The individual holding sizes are bit sized enough that it could be used to engage in some "spiffing" although my current plan is to invest for income and long term capital gains.....Anyway, your comments and perspectives are appreciated.

  • edited February 13
    @davfor, one of the reasons that I am 40 percent equity is that my advisor recommends only a 10 percent weighting to high yield and aggressive income and I'm at 20 percent. Thus, I reduced equity by 10 percent from their reccommended 50 percent based upon my risk tolerance. Thus far by using a spiff from time to time I have out performed my advisor's 50-50 model portfolio plus my portfolio has a higher yield. In addition, to the higher yield my out performance comes because my fund selection deviates from their list of reccommended funds contained in their model.
  • A couple of days ago, John Rekenthaler had an article on Morningstar "Why not 100% equities?" This would be in comparison to the traditionally recommended 60/40 portfolio.
    He referenced a 25-year old article on the topic and talked about options and alternatives (including using leverage to really juice returns). The main criticism was: who could withstand the big downturns??!!

    Of course, if we think the market will generally go up over time, it makes sense to be "all in".

    My Dad lived to 98+ and his philosophy was to buy dividend-paying stocks and pretty much hold them forever. He was willing to ride out the downturns. Of course, he grew up in the Depression and was pretty frugal with his money -- the cost of living for Mom and Dad was pretty low (fitting -- his pension had no cost of living increases).

    A lot of him rubbed of on me, but I'm more adventurous. No bonds, but I like to hold some cash to take advantage of opportunities. I bought some AKRIX a few months ago, having learned about it on this board. My biggest holding is FSELX; #2 is SO (barbells?). Bought a little more SBUX recently.

    When markets keep going up -- every strategy looks like genius!

    David

  • Old_Skeet said:

    @davfor, one of the reasons that I am 40 percent equity is that my advisor recommends only a 10 percent weighting to high yield and aggressive income ... .


    Sorry for ignorant question, but you who for years have listed vast and detailed holdings using many fund selections within a dozen 'sleeves', use an adviser??

    I missed that.
  • stillers: And I never understood your "All bonds all the time/bond OEF momentum" investment strategy when markets have gone up FOR 10 YEARS.

    It should be noted that you posted on M* that you sold all of your stocks near/at EOY 2019, you have not reported any stock buys since then, staying 100% in bond OEFs. So despite you reporting that data, you have not participated in any of the 2020 YTD stock market gains.
    The above was your usual inaccurate agenda. I owned stocks constantly several years in the last 10 years. In the last 2 years and especially since retirement, I'm invested mostly in bond OEFs and I trade stocks/ETF/CEF several times annually. That fits perfectly with my goals which I exceeded easily
    I don't post most of my trades and holdings anymore.

    In the past, you said several times that
    1) I will never retire but I did
    2) I will never have enough but I already have more than 30 times our annual expense without drawing social security.

    and now you said, "So despite you reporting that data, you have not participated in any of the 2020 YTD stock market gains." I didn't claim that I used "sell trailing stop" it was just a generic post. There is no way for you to know if I owned stocks and how long.

    I can't find where you posted your holdings, their % and trades in the last 1-2 years. Your quote said "markets have gone up FOR 10 YEARS" while you were holding a huge % in CD and bond OEFs for years

    @Gary1952 Of course there is a correction coming......................someday. There always is.
    No correction is needed unless you can find something wrong I said.
    My comment about sell trailing stop was a generic one that I used to do years ago. I do trade riskier funds short-term, usually days to 2 weeks.

    I suggest that you guys stay on topic and not rehash Morningstar posts, after all, this is MFO.
  • edited February 14
    @davidrmoran

    Yes, I have had access to an advisor for many years with a grandfathered account where I received a good number of A share funds from my late parents. It is in this account that I can, at times, purchase some A share funds at nav or reduced commissions depending on the fund company. Also, I can hold C shares if desired; but, thus far have elected to hold only A share funds. Perhaps, you have failed to remember that I became an investor at the age of 12 in, or about, 1960.

    In addition, there are no fees charged to me for this mutual fund holding account other than what the fund companies pay the broker. This also applies to my self directed IRA account for both me and my wife but not to my health savings account which does have a fee associated with it.

    From my perspective I've got a good deal that probably could not be had today without some sort of direct or wrap fee arrangement associated with it.

    According to Morningstar Instant X-ray my mutual expense computes to 0.78 percent.
  • edited February 14
    FD1000 said:

    stillers: And I never understood your "All bonds all the time/bond OEF momentum" investment strategy when markets have gone up FOR 10 YEARS.

    It should be noted that you posted on M* that you sold all of your stocks near/at EOY 2019, you have not reported any stock buys since then, staying 100% in bond OEFs. So despite you reporting that data, you have not participated in any of the 2020 YTD stock market gains.
    The above was your usual inaccurate agenda. I owned stocks constantly several years in the last 10 years. In the last 2 years and especially since retirement, I'm invested mostly in bond OEFs and I trade stocks/ETF/CEF several times annually. That fits perfectly with my goals which I exceeded easily
    I don't post most of my trades and holdings anymore.

    In the past, you said several times that
    1) I will never retire but I did
    2) I will never have enough but I already have more than 30 times our annual expense without drawing social security.

    and now you said, "So despite you reporting that data, you have not participated in any of the 2020 YTD stock market gains." I didn't claim that I used "sell trailing stop" it was just a generic post. There is no way for you to know if I owned stocks and how long.

    I can't find where you posted your holdings, their % and trades in the last 1-2 years. Your quote said "markets have gone up FOR 10 YEARS" while you were holding a huge % in CD and bond OEFs for years

    @Gary1952 Of course there is a correction coming......................someday. There always is.
    No correction is needed unless you can find something wrong I said.
    My comment about sell trailing stop was a generic one that I used to do years ago. I do trade riskier funds short-term, usually days to 2 weeks.

    I suggest that you guys stay on topic and not rehash Morningstar posts, after all, this is MFO.
    FD, please take a breath, relax and re-read my post. I did not comment on your investing. The correction I posted about was a MARKET correction, about the OP. I had the misfortune to post after a derogative post. My post had no quote attached. No apology needed.
  • @Old_Skeet Your comment about reducing your stock percentage to accommodate your overweight in high yield bond funds sounds familiar to me. I finally settled on accounting for that issue by including all but very short duration high yield and EM bond funds in the allocation made to my Mixed Asset 1 Pot. Current holdings in that pot include VWINX, HBLAX, WFLEX, and MAINX. ARTFX was previously held in that pot but was sold to help fund the purchase of the bond CEFs now held in my newly created Mixed Asset 3 Pot (PDI, MCI, and DSL). I discussed that new pot above without using that title. I was able to reestablish a position in PDI on 12/24/18 at a slight discount thanks to a timely heads up from @expatsp I read on this site!
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