Author Topic: How much cash do you have?  (Read 2400 times)

no_free_lunch

  • Hero Member
  • *****
  • Posts: 1572
Re: How much cash do you have?
« Reply #10 on: November 06, 2019, 07:13:53 PM »
I voted. Although, I am more interested in the second question by OP.

Best ways to park cash in Canada. Thanks for suggesting XFR.TO. I didn't know about that. I wonder what the tax and risk profile is compared to a money market fund. Something, I'll have to look into.

I have been using Money Market fund from my brokerage's parent bank (TD, in my case). All other large banks have that offering. Although I am quite interested to see the large banks off "Investment Savings Account": See https://www.td.com/ca/en/asset-management/additional-solutions/ as example.  The interest rate is higher than their own CAD money market fund.

Any other ideas that Canadians have for having a ready place to park case. Ready, being available within 24-48 hours.

I don't know about taxes as I hold it in tax free accounts.

It's about 70% CMHC bonds, 20 provincial binds, 10 bank bonds. The cmhc is backed by the government of Canada.  Probably more risk than money markets.


LC

  • Hero Member
  • *****
  • Posts: 3728
Re: How much cash do you have?
« Reply #11 on: November 06, 2019, 09:44:24 PM »
About 10% right now. Am thinking of raising up to about 20-25%. Looks like a slowdown is coming.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
----------------------------------------------------------------------------------------
brk.b | irm | mmm | mo | nlsn | pm | pypl | tap | v | wm

kab60

  • Hero Member
  • *****
  • Posts: 1004
Re: How much cash do you have?
« Reply #12 on: November 07, 2019, 04:44:22 AM »
My spouse took out equity in her flat to match my investments, so a couple of weeks ago I was around 40 pct. cash after being around -20 pct. Now I'm (we're) at 0% cash after adding to most positions and taking a 20 pct. position in Berkshire friday. I last bought it in January 2016 (and sold for a quick gain). I'm 33, we save a lot, so I'm not gonna waste time trying to time this or that. I still don't understand why so many smart people (if their time horizon is long) prefer cash earning 0 when one can buy decent/good/great businesses at +10 pct. FCF yields, but obviously there's a lot of variables involved (if one can live the sweet life off the existing portfolio, there might be no reason to risk something you need for something that woudn't improve quality of life).

Portfolio is around 10-12 years of savings, but it wouldn't change anything whatsoever in our daily life if there was a big drawdow. Having only invested in a bull market (since early 2015) I'm somewhat aware that I haven't really been tested yet, so while I think the above sounds rational, I hope I can stick to that framework instead of choking and selling at the bottom to buy gold and canned food when the next bear market hits. We'll see. :o

KJP

  • Hero Member
  • *****
  • Posts: 844
Re: How much cash do you have?
« Reply #13 on: November 07, 2019, 05:59:00 AM »
I still don't understand why so many people (if their time horizon is long) prefer cash earning 0 when one can buy decent/good/great businesses at +10 pct. FCF yields, but obviously there's a lot of variables involved (if one can live the sweet life off the existing portfolio, there might be no reason to risk something you need for something that woudn't improve quality of life).

I keep what is (for me) a large amount of cash because the earnings from my labor are very lumpy, infrequent and uncertain, so a large amount of cash prevents me from ever having to sell for liquidity, rather than fundamental reasons.   For similar reasons, if I have X assets today, having .25X in assets next year would have a much greater effect on my life than having 1.75X in assets next year.  I also have a limited amount of time to devote to investing, so I'm not particularly nimble with buying and selling and do not expect to sell before any large market decline.

I'm also not aware of many great businesses currently selling at greater than 10% FCF yields that aren't levered up to their eyeballs, but I also look almost exclusively at US companies.  Can you name 5 or 10?

LC

  • Hero Member
  • *****
  • Posts: 3728
Re: How much cash do you have?
« Reply #14 on: November 07, 2019, 06:22:52 AM »
At about 5-10% but just temporary, I usually try to be fully invested.

The point here is market timing : you think the market is going to drop (i.e. a recession is coming) and you want to move to cash.

I would say, unless you have positions which you think are over-valued and want to trim, it may be more prudent to buy general market protection (SP puts).
"Lethargy bordering on sloth remains the cornerstone of our investment style."
----------------------------------------------------------------------------------------
brk.b | irm | mmm | mo | nlsn | pm | pypl | tap | v | wm

John Hjorth

  • Hero Member
  • *****
  • Posts: 2819
Re: How much cash do you have?
« Reply #15 on: November 07, 2019, 06:35:22 AM »
... I'm 33, we save a lot, so I'm not gonna waste time trying to time this or that. I still don't understand why so many smart people (if their time horizon is long) prefer cash earning 0 when one can buy decent/good/great businesses at +10 pct. FCF yields, but obviously there's a lot of variables involved (if one can live the sweet life off the existing portfolio, there might be no reason to risk something you need for something that woudn't improve quality of life). ...

kab60,

I'll just say, that your line of thinking based on your description of your household makes perfectly sense to me. Holding cash or the opposite [use of leverage] is a personal question, to which each has to make up their own mind, based on personal situation & risk appetite [or the opposite].
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Jurgis

  • Hero Member
  • *****
  • Posts: 4615
    • Porfolio
Re: How much cash do you have?
« Reply #16 on: November 07, 2019, 06:47:59 AM »
it may be more prudent to buy general market protection (SP puts).

This conclusion is not straightforward and depends (among other things) on your portfolio performance vs SP during the put position, cost, sizing, and scenarios considered.
While cost, sizing, and scenarios is mostly math, I'd say the expectation that your portfolio will outperform SP during the put position is of (most) concern. Isn't that how Fairfax (among others) screwed up their returns? A lot of people don't outperform SP. Even more don't outperform SP during relatively short time periods that put holding would imply.
"Before you can be rich, you must be poor." - Nef Anyo
--------------------------------------------------------------------
"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

HalfMeasure

  • Full Member
  • ***
  • Posts: 143
Re: How much cash do you have?
« Reply #17 on: November 07, 2019, 06:58:34 AM »
this question should not be understood as a bull v bear market test but rather where you are in your investing life cycle (age/objectives etc) imo

Great point - my cash balance is high however the primary drivers aren't necessarily a call on market valuation but rather i) the fact a large portion of the money was saved recently and ii) some is earmarked in case we want to buy a property at some point in the next few years. Earlier in your investing life cycle, a large % also isn't a large absolute $ amount. >50% cash at a <$25,000 net worth would seem to me to be responsible, but >50% cash at a $10M+ net worth might not be unless there was a specific reason.

cherzeca

  • Hero Member
  • *****
  • Posts: 2357
Re: How much cash do you have?
« Reply #18 on: November 07, 2019, 07:19:11 AM »
"but >50% cash at a $10M+ net worth might not be unless there was a specific reason."

such as being retired, never wanting to work again and hoping that one will have a need for money for another 30 years.  btw, one can find "cash" that yields 2% these days

kab60

  • Hero Member
  • *****
  • Posts: 1004
Re: How much cash do you have?
« Reply #19 on: November 07, 2019, 10:39:20 AM »
I still don't understand why so many people (if their time horizon is long) prefer cash earning 0 when one can buy decent/good/great businesses at +10 pct. FCF yields, but obviously there's a lot of variables involved (if one can live the sweet life off the existing portfolio, there might be no reason to risk something you need for something that woudn't improve quality of life).

I keep what is (for me) a large amount of cash because the earnings from my labor are very lumpy, infrequent and uncertain, so a large amount of cash prevents me from ever having to sell for liquidity, rather than fundamental reasons.   For similar reasons, if I have X assets today, having .25X in assets next year would have a much greater effect on my life than having 1.75X in assets next year.  I also have a limited amount of time to devote to investing, so I'm not particularly nimble with buying and selling and do not expect to sell before any large market decline.

I'm also not aware of many great businesses currently selling at greater than 10% FCF yields that aren't levered up to their eyeballs, but I also look almost exclusively at US companies.  Can you name 5 or 10?
I don't wanna sidetrack this, but you recently had a bunch of UK car dealers - Vertu and Motorpoint - which I'd rate at decent/great respectively - trading at some very solid FCF yield despite a tough environment. After the current runup I prefer Cambria which I'd also argue is good+ and VERY cheap. Last month you had MO around 10 pct. yield. ULTA is only 5 pct, but then analysts expect 10 pct. EPS growth. My favorite is Linamar though. 2/3 endmarkets are in the gutter, so you get to buy a good/great industrial busines below book value led by management with a crazy good track record AND around a 18 pct. FCF yield despite a tough backdrop.

Or if you don't mind leverage and serial M&A there's Berry at some +15 pct. FCF yield.

One can definately argue some of these have warts, but I've never found as many compelling setups than during 2019. I've only invested since 2015, so I might definately be the bagholder here, but even Berkshire looks cheap. And has looked cheap all year. With a multiyear horizon I really don't see how one loses when we get around 1,3xbook.