Cash is an Asset Now, The Rich are “Holding” It

Cash is an Asset Now, The Rich are “Holding” It


Richard Fisher, the former President of the Federal Reserve Bank of Dallas and a voting member of the Federal Open Market Committee (FOMC) from Y’s 2005 to 2015, is very savvy about the US Fed and the state of the US economy.

Recently he said publicly that he is worried about the $19-T in US government debt, +$11-T since Y 2008, because the Fed has fired all its monetary bullets and cannot expand its balance sheet any further.

When he was asked how his personal portfolio was positioned. Fisher’s response: “In the fetal position.”

Adding that, “All my very rich friends are holding a lot of cash.”

Not some, Not many, but All.

The take away is this, “Prepare your portfolio before it is too late.”

It is the same caution message I have been repeating since last October, and a growing number of Wall Street’ers are starting to take up the strategy, as the lofty valuation are eroding the market’s confidence, and the Top is rounding.

Many retail participants do not share the Caution outlook, and think their portfolios are chock-full of great stocks.

Everyone should remember, that no matter how good an investor they are, it is not easy making money in the stock market, even in good times.

Below is some Key scholarly data on the performance of more than 14,000 stocks between Y’s 1989 and 2015, as follows:

  1. 1,120 stocks (7.7% of all active stocks) outperformed the S&P 500 Index by at least 500%.
  2. 976 stocks (6.8% of all active stocks) lagged behind the S&P 500 by at least 500%.
  3. The remaining 12,404 stocks performed above, at, or below the same level as the S&P 500.
  4. 3,431 stocks (23.7% of all) dramatically under performed the S&P 500 by 200% or more during their lifetimes.

The Key to making money in the stock market is to avoid losers. That is easier said than done and almost impossible when the stock market is correcting.

So, the savvy participants have a defensive strategy in place when there is a Key reversal (cash), do not forget with every  Boom there is a Bust or what I call a “snap back to the line.”

The professional investors prepare by increasing the portfolio’s allocation of cash, and use stop losses to limit Southside risk, or buying some portfolio insurance in the form of inverse ETFs or Put options. Be prepared, else the pain will be hard to take.

Tuesday, US major stock market indexes finished at: DJIA -57.66 at 17674.82, NAS Comp -4.89 at 4843.55, S&P 500 -3.74at 2075.32

Volume: Trade was below average with about 880-M/shares exchanged on the NYSE

  • NAS Comp -3.3% YTD
  • S&P 500 +1.5% YTD
  • DJIA +1.4% YTD
  • Russell 2000 +1.1% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (-0.06) Bearish (-0.33) Neutral (-0.02) Neutral (0.17)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.09) Neutral (0.09) Neutral (-0.10) Bullish (0.29)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.03) Neutral (0.12) Neutral (-0.02) Neutral (-0.03)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.02) Neutral (-0.04) Neutral (0.07) Neutral (-0.08)

Stay tuned…

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