Cash is King!!

I just read a tremendous piece from Doug Kass and he echo’s what I have been worried about for a while: I just can’t get a handle on the market. It was encouraging to see one of the greats say the same thing. While he is more articulate in outlining his rational behind the erratic behavior, I can see it in my trades.

So, were to we go from here? Smaller trading and investment positions. This means keeping 30% in cash reserves at all times just to make sure settlement issues are never a problem and I can trade 10% a day at will. It means never being fully invested for the rest of the year, perhaps longer. There is just no way of knowing which way the wind will blow. However, this will put a higher importance on short and intermediate term trading as it may be the only way to grind out decent returns in an era of substandard returns.

I say bring it on! Trading is hard, but letting clients (and mine!!) money sit around earning nothing is not an option. You have to preserve and simply take smaller bets as we go forward. This doesn’t mean you give up on profits! You win some, you loose some, but you keep on fighting. Only, smaller and more reserved for a while. . .

On another note, yesterday I sold my BAC too early and was mad as hell. The issue was the position size. I figured that everything I need to learn about my biz comes from my 1 year old daughter and the movie Wall Street.

1. My daughter has taught me to bounce back and recover fast. She has no memory of being sick or falling down.

2. Gordon Gecko was right: the most important thing is your capital reserves, it allows you play in the tall weeds with the big dogs. Now, for those that know the movie will note I sanitized that for our own protection.

3. “I don’t like losses”

That about sums up my feelings for the week. . .