Subscriber is asking for input/suggestions re cash management etc

[SOL]

A subscriber sent this email. I felt it would be best addressed if different opinions were provided as no two people think alike and when something is viewed from multiple angles, it is possible to find a better alternative. I provided a brief response via email but will add to it here later on

Sol right now i have only around 4% of my TI portfolio in cash. And from the info TI has put out this is too low and also in light of macro mkt outlook by TI (preparation for a 40% correction late in the 3rd Q to 4Q.

To Raise cash

1. my initial reaction was Sol is saying (not in a clear statement i believe-needs clarification) that the mkt betwen soonish and the late Q3 will have a very good spike up AND therefor not to worry as can at some point just sell off a whole whack (maybe as hi as 70% of my portfolio including stocks in the red as most of holdings in a txable account. And congruent with this i could still keep buying (not using margin) just newco's (thinking odds better there than some 3rd and 2nd levels of downed stocks), as individual stocks sold off.
*(in 020122 u mention something about a fake bull sell trap - in early March 2022 mkt goes hi and then sells off in March/April but was not sure if that is just suppositional or your actual expectation - if the latter then early March would be the time for me to sell off to raise cash if that means early March will be the hi until endish Q3?)

2. my second thought is no, - U must just completely stop buying everything and let the cash build now as i would like to have 50% to 75% (unless u say that is too much) in cash for after the Q4 crash starts to recover And can also possibly use some of #1 if the short term bull run goes according to my impression of ur statements.(odds?)

As an aside to this i have been buying some leaps 1year in tiny # of contracts (1 to 3) to spread my thin cash (i have enuf margin in my accounts to exercise on them certainly at least one at a time and sell off most or all of the said stocks quite soon after) But now wondering if i should have not done this but only gone out to say Sept as per ur bigger correction time limit.

Your input (suggestions and clarifications)would very much appreciated with thks

[AstuteShift]

Sounds like the person over invested and now worried he/she will miss an even bigger opportunity.

I’d say, it’s better to be in the market than waiting for the big one, markets don’t have to listen to SOL or anyone of us even though SOL is probably the best I’ve seen.

As long as the trend is positive, then there is no worry despite all the acid and BS.

Cut all useless expenses, free up as much cash as possible. Live like a beggar if MOAB is generated. If FOAB is generated then it’s time to live in a car. These opportunities are rare and should NEVER be ignored.

I’d say have a business plan with TI methodology and follow it like the 10 commandments. This is will eliminate worry and fear.

[SOL]

Sounds like the person over invested and now worried he/she will miss an even bigger opportunity.

I’d say, it’s better to be in the market than waiting for the big one, markets don’t have to listen to SOL or anyone of us even though SOL is probably the best I’ve seen.

This is true, they don't have to listen to us, but what remains true is that pullbacks should be viewed through a bullish lens until the trend turns negative. Hence the suggestion that one should not only modify the TA indicators one uses but eventually adapt the strategy we suggest to suit your needs.

Living below one's means is a very good way to build up extra money. A great saying is to eat like a poor man but sleep like a rich one. People assume that this would be starving but what it implies is that one should simple meals, don't spend on crap that appears to be lavish but does 10X damage to the system

Another thing is one should always have at least 10% of their portfolio in cash but ideally up to 30% for those great opportunities. Also, take profits along the way so your cash reserve is always replenished.

Lastly, until profits start rolling in or you have a large portfolio or an outside source of Strong cash flow (via work, real estate, etc) one should limit their exposure to high risk plays. It is not essential to take part in all the plays. And we specifically highlight higher risk plays in the service. Here is an example, first get into the lower risk plays you like or that appeal to you and then to start of invest in no more than 30% of the higher risk plays.


The worst investor in history would have still fared well if they held through thick and thin through all the crashes that ever occurred but continued to deploy steady amounts of capital into strong stocks. However, to put this into play one needs the discipline of a monk or a ninja.

[Triplethought]

I'm a noob with only 2 years in the stock market and using my IRA funds only. but I currently have 35% of my IRA account in cash and the rest in stocks. I wish I were 50% in cash right now but I'd have to sell at losses to do that which I refuse to do. I also wish I had more deployed in broad spectrum ETFs like SPY, DIA, or QQQ. I keep waiting for the big dips to do that but they never seem to come. I do still buy SOLs picks when they hit entry points. The fact that I'm still above where I started when I subscribed gives me the courage to do what SOL says. I should mention that outside my stock account 70% of my net worth is in real estate.

Unfortunately like a lot of people here I have a lot of holdings in the red. Unless they turn around I may well lose money overall this year. I have several weaknesses as an investor. My achilles heel is that I tend to follow the Buffet rule rather than the SOL rule (Buffet rule is simply don't ever sell at a loss. Meaning if something is down just hold it). sophisticated investors call that the sunk cost fallacy I think. I missed a couple of SOL's stops that would have gotten me out of stocks at less of a loss and subsequently taken even more losses.

My key mistakes have been

• Missing Stop losses (partly Vanguards fault since you can't set both a high sell and a low stop on the same stock)
  
  Pigs get slaughtered (overbuying both my own and SOL's recommendations without regard to risk -red or green plays)
  
  Buying based on friend recommendations such as Zillow. (and overbuying it instead of only 1 lot). This was also a "catch a falling knife" problem as I bought it on the way down - part of how I got over deployed in it.
  
  Playing with Options. At this point I'm not feeling great about options. SOL has had some good hits but also some major stinkers. And I made the stinkers worse by not paying attention to the 1/6 buy rule of thumb on options. Initially I was using full 1/3 lot sizes and sometimes buying a 2nd option at a lower strike price. The combination of messing with the rules and the time expiration has been a real killer, forcing me to take losses this year

My last comment is somewhat off topic but I will mention again that I've deployed over $90K into ibonds at 7.12% using cunning and trickery (US treasurydirect.gov limits ibond purchases to 10K per US person per year but you can do more if you have multiple business entities or a spouse or use your kids EIN#s). I may slow down on these depending on what happens when rates adjust in May. I expect inflation to go down slightly in May. but I'm treating this as a small safe cash stash that I hope to grow over the next 5 years. With my SSN and 5 business entity EINs I can deploy $60K per year into this asset class. I'm looking into whether I can get an EIN for my trust as well. While it's true 7.12% is less than the overall market growth it is govt guaranteed. If inflation goes down the interest rate will go down but the opposite is also true. And if inflation goes below 3% I can bail out of these with only 3 months of interest penalty.

[AstuteShift]

You cant expect mega gains every year, doesn’t work that way.

There are times to buy, to sell and to sit and wait. If you pay attention to what the market is telling you, it’s easier to develop that intuition, it’s like taking a test but a test to see if your emotions of greed and fear will take hold.

When times are grim, depressing and down right nasty, that is the best chance to buy, no exception besides you not pulling the trigger.

When times are fantastic, everyone is making money and chasing like a hamster digging for cheese that’s the time to slowly take profits and relax.

A trading journal is extremely valuable and pulls out fantastic data to look at during times of despair or uncertainty and see what the markets do. The markets give this very clear pattern of MP and it’s wise to use it. If you don’t use it then you lose.

Buffet is just a guy who gotten data and better deals in advance. He missed the dot com bubble and also missed the 2020 crash then fast boom also. A fat sardine and nothing more

Look at quotes from John Templeton, Rothschilds, it’s extremely clear what needs to be done

[Yodean]

I should mention that outside my stock account 70% of my net worth is in real estate.

Oy vei, ya estas muerto. Maybe. There's likely going to be a significant pullback in North American real estate in Q4 or early '23. Obviously, depends on location, but that's a lot of large eggs in one paper basket.

A lot of my personal sentiment indicators for real estate being ripe for a big drawdown has been triggered recently.

It's gonna all be about liquidity going into the 4th ...

[Yodean]

Buffet is just a guy who gotten data and better deals in advance. He missed the dot com bubble and also missed the 2020 crash then fast boom also. A fat sardine and nothing more

This is a recent, minor example of the advantages that the middle tier of top players have over the retail investor:

***

Warren Buffett's Berkshire Hathaway Inc (BRKa.N) acquired nearly $1 billion of shares in Activision Blizzard Inc (ATVI.O) before Microsoft Corp (MSFT.O) agreed to buy the video game maker for $68.7 billion, according to a Monday regulatory filing.

Berkshire said that as of Dec. 31, it owned 14.7 million shares worth about $975 million of the "Call of Duty" maker.

Microsoft announced its plan to buy Activision Blizzard on Jan. 18, in its largest ever acquisition.

Another prominent investor, Daniel Loeb's hedge fund Third Point, bought 2 million Activision shares in the fourth quarter.

Berkshire disclosed its Activision stake in a filing detailing its U.S.-listed stock investments as of Dec. 31.

Other media have quoted Buffett, a longtime friend of Microsoft co-founder Bill Gates, as saying he would not buy Microsoft shares because of potential conflicts of interest.

Apple Inc (AAPL.O) remains Berkshire's largest common stock holding.

*****

I suppose it could be a coincidence.

[Triplethought]

I should mention that outside my stock account 70% of my net worth is in real estate.

Oy vei, ya estas muerto. Maybe. There's likely going to be a significant pullback in North American real estate in Q4 or early '23. Obviously, depends on location, but that's a lot of large eggs in one paper basket.

A lot of my personal sentiment indicators for real estate being ripe for a big drawdown has been triggered recently.

It's gonna all be about liquidity going into the 4th ...

I agree about the liquidity. Next year I may move from doing hard money loans back into the market. But I'm keeping a chunk of cash for now. I've not really tempted to sell any real estate. But perhaps I'll have an opportunity to sell a couple commercial buildings this year from my dad's estate tax free (stepped up basis) so I'm going to consider that.

[Yodean]

But perhaps I'll have an opportunity to sell a couple commercial buildings this year from my dad's estate tax free (stepped up basis) so I'm going to consider that.

Nice, congrats ... sounds like Daddy TTH left you some good stuff when he left Metaverse Earth for Soul Recycling.

FWIW, if I were you, I'd sell some of that commercial real estate (that toxic sh*t's gonna go down, Zillow-style, methinks, something fierce, and soon enough) and wait for the minor MOABs and FOABs that's coming down the pipeline. You're probably better off buying a bit of virtual real estate in the nascent Metaverse.

The primary trend for commercial real estate is, for the most part, straight down. Like plunge, Olympic diving, down ...

[Triplethought]

The primary trend for commercial real estate is, for the most part, straight down. Like plunge, Olympic diving, down ...

Maybe. But Elon's tesla and the panasonic battery plant that feeds it is keeping business hopping around here. That and the trex decking factory. Right now people are begging to find space but that could turn around quickly if mainstreet dives along with wallstreet.

[SOL]

Buffet is just a guy who gotten data and better deals in advance. He missed the dot com bubble and also missed the 2020 crash then fast boom also. A fat sardine and nothing more

This is a recent, minor example of the advantages that the middle tier of top players have over the retail investor:

***

Warren Buffett's Berkshire Hathaway Inc (BRKa.N) acquired nearly $1 billion of shares in Activision Blizzard Inc (ATVI.O) before Microsoft Corp (MSFT.O) agreed to buy the video game maker for $68.7 billion, according to a Monday regulatory filing.

Berkshire said that as of Dec. 31, it owned 14.7 million shares worth about $975 million of the "Call of Duty" maker.

Microsoft announced its plan to buy Activision Blizzard on Jan. 18, in its largest ever acquisition.

Another prominent investor, Daniel Loeb's hedge fund Third Point, bought 2 million Activision shares in the fourth quarter.

Berkshire disclosed its Activision stake in a filing detailing its U.S.-listed stock investments as of Dec. 31.

Other media have quoted Buffett, a longtime friend of Microsoft co-founder Bill Gates, as saying he would not buy Microsoft shares because of potential conflicts of interest.

Apple Inc (AAPL.O) remains Berkshire's largest common stock holding.

*****

I suppose it could be a coincidence.

When the big players make consistent moves that are great it's always a coincidence lol. They purposely make a few mistakes to make it look like the playing field is level, like Buffet dumping airline stocks right at the bottom

[Budge]

Buffet is just a guy who gotten data and better deals in advance. He missed the dot com bubble and also missed the 2020 crash then fast boom also. A fat sardine and nothing more

This is a recent, minor example of the advantages that the middle tier of top players have over the retail investor:

***

Warren Buffett's Berkshire Hathaway Inc (BRKa.N) acquired nearly $1 billion of shares in Activision Blizzard Inc (ATVI.O) before Microsoft Corp (MSFT.O) agreed to buy the video game maker for $68.7 billion, according to a Monday regulatory filing.

Berkshire said that as of Dec. 31, it owned 14.7 million shares worth about $975 million of the "Call of Duty" maker.

Microsoft announced its plan to buy Activision Blizzard on Jan. 18, in its largest ever acquisition.

Another prominent investor, Daniel Loeb's hedge fund Third Point, bought 2 million Activision shares in the fourth quarter.

Berkshire disclosed its Activision stake in a filing detailing its U.S.-listed stock investments as of Dec. 31.

Other media have quoted Buffett, a longtime friend of Microsoft co-founder Bill Gates, as saying he would not buy Microsoft shares because of potential conflicts of interest.

Apple Inc (AAPL.O) remains Berkshire's largest common stock holding.

*****

I suppose it could be a coincidence.

When the big players make consistent moves that are great it's always a coincidence lol. They purposely make a few mistakes to make it look like the playing field is level, like Buffet dumping airline stocks right at the bottom

Or when he got caught not once but twice trying to emulate the Hunt Bros by trying to corner the silver market. I suppose trying to do it out of London doesn't count. Damn Bank of England!

[Budge]

I should mention that outside my stock account 70% of my net worth is in real estate.

Oy vei, ya estas muerto. Maybe. There's likely going to be a significant pullback in North American real estate in Q4 or early '23. Obviously, depends on location, but that's a lot of large eggs in one paper basket.

A lot of my personal sentiment indicators for real estate being ripe for a big drawdown has been triggered recently.

It's gonna all be about liquidity going into the 4th ...

I agree about the liquidity. Next year I may move from doing hard money loans back into the market. But I'm keeping a chunk of cash for now. I've not really tempted to sell any real estate. But perhaps I'll have an opportunity to sell a couple commercial buildings this year from my dad's estate tax free (stepped up basis) so I'm going to consider that.

Keep an eye on tax matters. Last year, FJB tried to kill the stepped-up basis in his tax bill but met too much opposition. So he then tried to sneak it through in his Build Back Better POS.

[Yodean]

The U.S. Securities and Exchange Commission (SEC) is probing whether financial executives may have broken the rules by tipping off hedge funds ahead of large sales of shares, known as "block trades," according to a source with knowledge of the matter.

The Wall Street Journal first reported the probe on Monday. The newspaper said the SEC was investigating Morgan Stanley (MS.N) and Goldman Sachs (GS.N), along with the U.S. Department of Justice.

Broker-dealers frequently buy and sell blocks of shares, either on behalf of clients or as part of a hedging strategy, which are large enough to move the company's share price.

Block trading tends to increase during times of volatility as institutional investors rebalance their portfolios.

Information on such share sales ahead of time could be extremely valuable. Inappropriately sharing material, nonpublic information could run afoul of U.S. laws, the source said. Firms could also face scrutiny if they fail to have processes in place to prevent misuse of information.

The SEC has sent subpoenas to several hedge funds and banks, demanding trading records and information about investors' communication with bankers, according to the WSJ report, which also said regulators had begun looking into irregularities related to block trades since at least 2019.

Investigators are probing whether bankers improperly alerted favored clients ahead of public disclosure of trades and if such information benefited the funds, some of which act as "liquidity providers" to Wall Street firms, the report said.

*****

More Wall Street chicanery aimed at stealing from the retail investors. At most, the perpetrators of these shenanigans get a slap on the wrist.

[Yodean]