Cash Is Never Trash

When a crisis hits, investors will start to sell off their most leveraged positions first.

When that isn’t enough, they sell off the core holdings they thought they’d have forever.

And when that isn’t enough, anything that isn’t nailed down goes too.

The final stage of a market selloff is when assets that have been holding up relatively well such as gold also start to tank.

The key to coming out ahead? Lean against the markets. When stocks are soaring, raise cash. You’ll feel a lot better when the fear hits – since you’ll have less to lose.

That’s the approach that’s worked well for Berkshire Hathaway, which now holds over 30% of its investment portoflio in cash:

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Berkshire Hathaway now sits on its highest cash levels ever.

Markets haven’t liked the stock since Warren Buffett announced his retirement at the annual meeting. In the past 90 days, shares have dropped nearly 15% from all-time highs.

With a 30% cash position, however, Buffett and his successor Greg Abel, are in a position to buy up entire companies without having to issue debt.

Until they do, that cash, mostly invested in short-term Treasury bills, will earn over 4% per year, still higher than inflation.

And with market valuations well over the “Buffett indicator” for greed, measuring a stock market valued at 207.4% of GDP, a record high, the market is ripe for a strong pullback.

~ Addison

P.S. We see continued market volatility as part of President Trump’s Great Reset plan. And Trump may be willing to rattle markets again, following the rise of the TACO – Trump Always Chickens Out – mentality prevailing on Wall Street.

Stay tuned for more volatility – and make sure you have enough cash so you can sleep soundly through a big pullback – and have cash to put to work later on.

That doesn’t mean sell everything – a 30% cash position means Buffett is still 70% invested. But now’s now the time to be all-in. And you can even use put options to profit from a quick swing lower, as we’ll be doing in a trade for members of the Grey Swan Trading Fraternity later today.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

When a crisis hits, investors will start to sell off their most leveraged positions first.

When that isn’t enough, they sell off the core holdings they thought they’d have forever.

And when that isn’t enough, anything that isn’t nailed down goes too.

The final stage of a market selloff is when assets that have been holding up relatively well such as gold also start to tank.

The key to coming out ahead? Lean against the markets. When stocks are soaring, raise cash. You’ll feel a lot better when the fear hits – since you’ll have less to lose.

That’s the approach that’s worked well for Berkshire Hathaway, which now holds over 30% of its investment portoflio in cash:

Turn Your Images On

Berkshire Hathaway now sits on its highest cash levels ever.

Markets haven’t liked the stock since Warren Buffett announced his retirement at the annual meeting. In the past 90 days, shares have dropped nearly 15% from all-time highs.

With a 30% cash position, however, Buffett and his successor Greg Abel, are in a position to buy up entire companies without having to issue debt.

Until they do, that cash, mostly invested in short-term Treasury bills, will earn over 4% per year, still higher than inflation.

And with market valuations well over the “Buffett indicator” for greed, measuring a stock market valued at 207.4% of GDP, a record high, the market is ripe for a strong pullback.

~ Addison

Stay tuned for more volatility – and make sure you have enough cash so you can sleep soundly through a big pullback – and have cash to put to work later on.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

When we compare apples to apples—median home prices to median household income, both annualized—we get a much more nuanced picture. Housing has indeed become less affordable, with the price-to-income ratio climbing from roughly 3.5 in 1984 to about 5.3 today. In other words, the typical American family now has to work much harder to afford the same home.

But notice something crucial: the steepest increases coincide precisely with periods of massive government intervention. The post-dot-com bubble recovery fueled by Fed easy money after 2001. The housing bubble inflated by government-backed mortgages and Fannie Mae shenanigans. The recent explosion driven by unprecedented monetary stimulus and COVID lockdown policies.

It’s hardly a secret that the national debt has surpassed $37 trillion.

This morning, the Peter G. Peterson Foundation, released a survey showing 79% of Americans say they are deeply concerned about the fiscal outlook, across party lines. The Fiscal Confidence Index sits at 49 — well below neutral.

The public sees what the market ignores: pressure on interest rates, inflation risk, and a government living beyond its means.

Yes, growth is slowing down. What can you expect when you have 50% growth happening year over year over year?

At some point in time that stops.

We’re seeing the first signs of that with Nvidia reporting a slowdown in AI server revenues – but that’s hardly reflected in the market price yet.

So right now, jobless claims are in a sweet spot that coincides with a pretty decent economy, 225,000 plus or minus.

Why are they hovering so low? And the reason I believe has to do with fear of deportation.

I believe that the Hispanic community is not applying for the jobless benefits that they’re entitled to because they are afraid of being deported. There are lots and lots of anecdotes out there of workers showing up at a government agency and being nabbed by ICE and being deported.

So rather than run the risk of deportation, these folks would rather run the risk of just not having as much money in their pocket from being eligible for jobs claims and not filing. Lemme explain by talking about California. In general, nationally right now, jobless claims are up about 10% year over year, except when we talk California, and that’s where everything signals under reporting.