Cash = 100%
In light of this Wednesday morning’s commentary, a few emailers asked me were we stood after today’s action.
The short answer: We are now all cash. We have no positions long or short. We are actively looking for shorts.
I will post an update when we make a serious change in our tilt.
~~~
UPDATE: May 6, 2010 5:27am
Several readers wanted to know the reasoning behind this:
1) Greece/EU had nothing to do with our tactical rebalancing.
2) This was strictly a technical call — market internals, sentiment, duration of rally, volume were amongst the factors that came in.
3) This is not an end of primary trend expectation — rather, it is looking at the potential of a secondary trend.
4) Ideally, if we get lucky, we will see a rally over the next week, with deteriorating characteristics — that sets up a better entry for shorting new positions.
5) We had a very good Q1 with a handful of strong positions — EK, MGM NYT, THOR, C — so some of the thinking behind our move was locking in a profitable 1st half of the year. We can now look be very selective in identifying trading opportunities.
6) We are now concentrating on screening and identifying new short ideas . . .
Tweet
Facebook
Reddit
Digg this!
May 5th, 2010 at 11:35 pm
Interesting. I’m about 25 long 60 cash 10 tips. . . but i’m not looking for shorts. Got burned last time and stopped out. I think I’ll just stay in my MM account at 1.5% and wait for some really good buys if they come along and not risk a false start. Wish I’d gotten out of some of my materials/energy mining stocks last month before Australia decided to tax the living crap out of the industry and the giant Oil Spill debacle. Oh well, can’t predict the future.
May 5th, 2010 at 11:36 pm
That was supposed to be 15% TIPS
May 5th, 2010 at 11:55 pm
All cash??? Holy snikees! And to think I just dumped my CNBC right when it’s about ready to give Comedy Central a run for it’s money again… Who could forget Dennis Kneale telling viewers to “invest for the long haul” when the DOW was around 11,000, prior to the run at 6,800. Jim Cramer opening his Mad Money show in the fetal position beneath a red spotlight. Larry Kudlow ditching his credo, having his show renamed, and a co-anchor added. CNBC management: “Quick, bring back the $1,000,000 portfolio investment game so everyone invests in triple-levered ETFs…”
May 5th, 2010 at 11:56 pm
triple-levered short ETFs…
May 6th, 2010 at 12:00 am
Hahaha…Looks like the broken robot Alacra traders are going to crash the market tomorrow! To the FAZ-mobile!!!
May 6th, 2010 at 12:03 am
A massive change from 69% to 100% cash in one day. It is unlikely this move was entirely because of stop-outs. Would you be willing to share the reasoning for your repositioning?
~~~
BR: I discussed the broad overview here:
http://www.ritholtz.com/blog/2010/05/market-changes-tone-during-correction/
May 6th, 2010 at 12:05 am
is this a test for the Hedgies blog-scrapping algorithms? Anybody else watching the futures?
May 6th, 2010 at 12:21 am
@BR: Thanks. I have not been in for a long, long time.
But that was a very important signal.
Thanks.
May 6th, 2010 at 12:22 am
@BR: BTW, you’ve been hinting at this for some time. But you did not know the timing.
Seems you’ve solved that one too.
May 6th, 2010 at 12:35 am
Had a feeling this was coming. BR dropping hints left and right lately.
May 6th, 2010 at 12:43 am
So 25% from last intraday S&P top of 1218 puts us at 913. I’m looking at that 875 area bounced off in Oct 08, Dec 08, Apr 09, May 09, July 09. Seems reasonable.
May 6th, 2010 at 2:36 am
The Euro thing is, in my opinion, a major cause for concern.
Look how long it’s taken to figure something out for Greece? What is this 6 weeks and we still don’t have a clear bailout or not? The country is erupting in violence.
What happens if they really do have to face the same issues in Spain, Portugal, Ireland and Italy? What we have 2 year ahead of us of no clear rescue package for Eurozone countries?
Here’s a thought, if the Euro continues to weaken, how will this affect the earnings of US companies for Q2/Q3? This is like a dollar rally that isn’t. If Bernanke has to raise rates the dollar could really climb back faster than they intend.
I saw a bloomberg article today about manufacturing leading us to a solid recovery. Hmm…
May 6th, 2010 at 2:42 am
PS Barry,
C’mon I hope you still have DGIT. You recommended that on Yahoo at the start of the semester (along with RVBD and SGI). I made some short-term money on RVBD and SGI but DGIT has been killin’ it still.
Paid for my law school books this summer. Thanks.
May 6th, 2010 at 4:15 am
Wow, Wow, Wow!!! 100%?!!! I had to check the date, no, it’s not April 1st. Maybe an after effect of Cinco de Mayo, but not likely. Maybe, after the post about hedge funds monitoring your blog, you’re pulling their chains, that one I can believe. ;-)
All joking aside, is it due to Greece and the contagion effect? Or is it just due to the market’s going down for a bit, why participate? Or is it due to hedge funds and big money, being highly leveraged again, having to sell since their computers tell them to do so, so why not just wait them out in cash?
Thank you for the information, and your post a week or so ago indicating your feelings on things being toppy. I sold 2/3rds of everything on Tues. It was getting toppy, and the 3rd 90% or so down day in a bit over a week just did it for me. Until Tuesday, it seemed like the normal nearing the end of the month runnup bid under the market by the quants with money happened last week, and a bit of a fall on the last day of April since they couldn’t manipulate their stocks higher on the final day. Then the normal Monday rise and first part of the month money inflows. But, when the normal beginning of the month inflows really didn’t happen like it should have on Tuesday, goodbye.
A couple of articles I really liked, one from Doug Kass explaining the mechanics of the momentum based quants selling. And the latest letter from Jeremy Grantham, that scepticus also highlighted.
http://www.thestreet.com/story/10744909/1/kass-quants-causing-trouble.html
http://www.gmo.com/websitecontent/JGLetter_ALL_1Q10.pdf
I’m in Jeremy Grantham’s camp, that whenever this conniption ends, the massive amount of money the Fed is throwing into the system by keeping rates far too low for far too long will case asset inflation in stocks. And a bigger conniption will just cause the fed to throw money at the prob for far longer. In a couple of weeks things will become clearer in terms of effects on various company’s profits. It may still be that Intel’s forward P/E ex cash is still 10 or 11, Hewlett Packard’s is still 9 or 10, Cisco’s is still like 13, and Apple’s is still about 15 (by annualizing the previous quarter). Significantly too low for each of them, to put it mildly, especially with the massive amount of product each is selling. And then the banks aren’t going to get hurt bad by the Dodd bill, which will provide very good upside to both big banks and regional banks.
Thanks again for the pointers!
May 6th, 2010 at 4:43 am
Just looked at The Big Picture by checking out the S&P500 monthly charts. Prices has just retreated from the 50 month moving average. Which, incidentally, is sloping down.
~~~
BR: That is a significant technical development
May 6th, 2010 at 5:27 am
Not seeing it yet…going to cash, that is. I’ve covered longs with puts, so I supposed the net effect is same, but it’s a trade in a correction.
It would be nice to know what triggered such a move to 100% cash, as we all have our indicators we used to make decisions. Or was this because of the giant mess in Europe and the high probability of contagion?
I don’t think the serious contagion reaction happens until later this summer, if it is going to happen.
May 6th, 2010 at 6:23 am
Its strictly a technical call — looking for the first 10% correction — could be a 10-15% move.
If we get lucky, we will see a rally the next few days, which will create a better entry for shorting new positions.
May 6th, 2010 at 7:03 am
[...] not the only bear either. Someone much smarter than me is 100% cash right now. Like this post? Share [...]
May 6th, 2010 at 7:27 am
BR-
so . . .I guess you don’t have to swallow hard and “buy what you hate” anymore :D
~~~
BR: I guess I should have called that “Trade what you hate.” (the Citi trade popped from 4 to 5 in a very short period of time).
May 6th, 2010 at 7:54 am
Ahab:
No, but now he has to short what he loves.
May 6th, 2010 at 7:56 am
[...] Barry Ritholtz goes 100% cash, @Dasan very positive [...]
May 6th, 2010 at 8:00 am
Watch SPX 1150 as a major support line . . .
May 6th, 2010 at 8:08 am
TZ-
I have never gotten the impression BR is “in love” w/ any stock-
I can see him buying an iphone, ipad , ipod and and a macbook shorting AAPL the whole while :D
May 6th, 2010 at 8:23 am
Barry,
One obvious short is your friend overstock.com, they had a huge rally on questionable news just as retail stocks were reaching an unsustainable peak.
May 6th, 2010 at 8:31 am
BR – you’re playing with fire! The hedgies follow your every move! Look out below!
Ahh. I just realized a deeper game is afoot. You’ve already got your shorts on and you’re going to fade their lemming-like next move. Sweet.
But what if their SPARC-boxes anticipated your fade? The mind reels.
May 6th, 2010 at 8:41 am
I am long myself and short other people…
May 6th, 2010 at 9:09 am
Bring’em on!!! We havent had any fireworks for some time, a little shakeout would not be out of place.
May 6th, 2010 at 9:46 am
since I’m logged in an no other thread yet exists .. slightly off Top .. but speaking of charts that matter .. why is the Unemploment Insurance Chart so important – could it be to a businessman – insurance payments matter more than a worker being in the wings and waiting?
May 6th, 2010 at 9:51 am
Uh-oh. Those blog-quants you spoke of yesterday are gonna take down the market based on your call. Look out below!
May 6th, 2010 at 9:59 am
I’ve never gotten more than 40% in at any point since since the fall of last year, and I’ve missed a lot of growth because of it. I will probably never be more than 50% all in during my lifetime, as the first 10 years of my working career saw the SP 500 index return somewhere, plus or minus, zero.
There’s an entire world of us early 30-somethings who just don’t think the Wall Street scam will ever give us true wealth. Lots of us who’ve bought in, but a lot of who haven’t. What they giveth, they can easily taketh away.
May 6th, 2010 at 10:45 am
100% cash seems lazy
~~~
BR: And your 4 word comment — is that supposed to be a model of industriousness and intellectual rigor . . . ?
May 6th, 2010 at 11:09 am
You are growing wise, ashpelham2. It is game rigged to let you win when they wish, and to let you lose when they wish as well.
I’ve never been “all in”, and I’m a good bit longer in the tooth than you. I worked too hard for my dough to fritter it away chasing dreams of Wall Street riches. I don’t concern myself as much with return on principal as I do with return of principal.
May 6th, 2010 at 11:09 am
Too bearish. I’m margined long with winners and puts on AIG just in case. How about bargains like AOI and EIHI. How about the exploration mining companies which have priced in $350 gold despite gold trading at $1200.
Although the 100% cash to play the 10% correction is intriguing. Have you calculated the short term capital gains tax on that move, though? Would need to be more than 10% gain to make up for what you owe to the good uncle…
May 6th, 2010 at 11:25 am
Watch SPX 1150 as a major support line . . .
Wilco. In real time, we’re almost there (1153 @ 11:30 eastern).
May 6th, 2010 at 11:40 am
SPX 1150 “major support line”. That’s funny. Almost choked on a peanut when I read that. There’s no support at 1150. Your astrolabe must be malfunctioning.
May 6th, 2010 at 11:41 am
You could do worse than shorting tech/cyclicals imo. Short QQQQ is the poor man’s way of doing it.
May 6th, 2010 at 11:49 am
Barry,
Wow, 100% cash! That must have been some really bad picks you made recently, if they all have gone to Zero already!
I have 35% stocks long and increasing, currently. The rest is cash.
~~~
BR: Tell you what — I’ll put up our Q1 performance versus yours, and I’ll spot you 250 bps.
How much do you want to wager on this?
May 6th, 2010 at 12:05 pm
Oldest trade in the book: sell in May and walk away…
May 6th, 2010 at 12:42 pm
Thanks for the update BR. China is already going through correction fro some time.
May 6th, 2010 at 12:57 pm
[...] Barry Ritholtz has moved to 100% cash. (Big Picture) [...]
May 6th, 2010 at 1:21 pm
There goes 1150.
May 6th, 2010 at 1:32 pm
Cap’n…she cahn’t take anymore…she’s bustin’ through all the stops…cap’n what can we do…cap’n?
(SPX 1147)
May 6th, 2010 at 1:37 pm
Me thinks A LOT of shorts are waiting for the bounce to go all-in short. They might be waiting a while.
May 6th, 2010 at 1:58 pm
Well, that was quick. What’s your next support level, BR?
May 6th, 2010 at 2:01 pm
I still got my FAZ on from way back, when I bet some of my play money that this weren’t over, not by a mile.
May 6th, 2010 at 2:16 pm
look out bellllllooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooowwwwwwww!
May 6th, 2010 at 2:23 pm
Oh ya, this SURRREEE looks like a healthy, robust market and economy to me. Is this really what it looks like? Get real.
May 6th, 2010 at 2:26 pm
BR: Nice day to call you just went 100% cash. Prescient. Beautiful. See how powerful you are now? All you gots to say is 100% cash, and the frigging world steps off a cliff. Cognos?
May 6th, 2010 at 2:27 pm
But…but I believed in Cognos when he said Apr 29th is the bottom!
May 6th, 2010 at 2:29 pm
Impressive call Barry.
May 6th, 2010 at 2:38 pm
SPX–3% down. Any bets on how long ’til the SEC reinstitutes its short-selling ban? Short-sell now or be forever locked out of the market. But can they make it illegal to short-sell a whole economic system?
May 6th, 2010 at 2:38 pm
Yikes. Where is cognos? Of course, nowhere to be found.
May 6th, 2010 at 2:40 pm
Barry, really outstanding stuff. THANK YOU.
May 6th, 2010 at 2:43 pm
Yes, excellent work, BR. You da man!
May 6th, 2010 at 2:48 pm
make that 4+% on the SPX…
May 6th, 2010 at 2:48 pm
Cognose? Did you just buy?
May 6th, 2010 at 2:49 pm
The most telegraphed crash in history.
May 6th, 2010 at 2:51 pm
7.5+%…damn. I can’t keep up.
May 6th, 2010 at 2:53 pm
Dow 10,000…where’s my hat, again?
May 6th, 2010 at 2:53 pm
wow-
market in a free fall-
BR you are either the luckiest or one of the smartest mofo’s on the planet- lol
your timing is impeccable(-:!!!!!!
I wonder if cognos had stops set???? He was pretty sure of himself- so probably not(-:!!! only AWESOME- hahahahahha
May 6th, 2010 at 2:53 pm
I think the “China may crash” trade is the one to be in….I went long FXP in late april, otherwise I am in cash as well.
http://www.businessweek.com/news/2010-05-03/china-may-crash-in-next-9-to-12-months-faber-says-update3-.html
May 6th, 2010 at 2:57 pm
@ahab: Maybe it’s a bit of both. Anyway, I’d MUCH rather be lucky than good.
May 6th, 2010 at 3:01 pm
Thank God for the shorts being there to buy, what the stop-loss orders sell. That was one heck of a 30 minuttes :-)
May 6th, 2010 at 3:02 pm
Should +0.00% YTD be in green or red? Discuss.
May 6th, 2010 at 3:02 pm
Again, what’s the problem? This market totally “healthy”. LOL.
May 6th, 2010 at 3:03 pm
@Transor: The way things had gone for me last year, I’d put it in GREEN.
May 6th, 2010 at 3:03 pm
U da man
May 6th, 2010 at 3:04 pm
Now let’s see if they can juice it back up before the close. The Obama administration might be having regrets about pissing off Goldman about now:
Timmy Treasury: “Goddamit Lloyd, I didn’t have anything to do w/ that stupid lawsuit. C’mon, where’s the love. Give me some of that good, market-making mojo you gots in your drawer. For the people, Lloyd, for the people, for chrissakes…what do you think’s gonna happen if this all goes to hell again?”
Lloyd: “Fuck you, Timmy.”
May 6th, 2010 at 3:05 pm
Wonderful cash call!
May 6th, 2010 at 3:08 pm
watch this rally today and tomorrow…..
The minis went haywire…. Algo’s are taking over the universe.. someone fat fingered P&G, aapl, and some others…..
May 6th, 2010 at 3:18 pm
http://www.huffingtonpost.com/2010/05/06/2-men-jailed-for-eating-t_n_565459.html
I have been warning you all for better than a year. It’s time to use your trading profits to start looking unappetizing. And remember. Eat the lean. The hefty only offer empty calories.
Mr. Ritholtz- most excellent prescience. Kudos. You’re better than Baretta (and almost nobody is-not even Telly Savalas).
May 6th, 2010 at 3:22 pm
Great Call! Kudos!!!
May 6th, 2010 at 3:25 pm
I called it!
http://www.ritholtz.com/blog/2010/05/cash-100/#comment-292415
May 6th, 2010 at 3:27 pm
“It’s all so easy”. Up, up, and up from here, guys.
May 6th, 2010 at 3:48 pm
1000 points crash. We can see a sell off in each full back.
May 6th, 2010 at 4:06 pm
100% cash! Barry, a LEGENDARY call!!!!!
But, as Hans Solo said, “Don’t let it go to your head, kid.” ;-)
It does all depend on what happens in the next week or two still.
I love the bozos on CNBC trying to blame it on an erroneous trade, rather than properly placing the blame on this is the way the system is set up to work/not work. Maria saying, “Where are the regulators on this?”, yeah, right. Try high frequency trading, momentum algorithms, stop losses, high leverage on sub 1% money, no human market makers to smooth the insanity, multiple market makers whose effects feed into each other in sub-second time, …
The system is broken. 600 trillion of derivatives written on a world GWP of 43 trillion. Nearly free money from the worlds governments flooding into financial games raising asset prices, like stocks, instead of it being able to be directed into productive uses that create jobs.
Congress needs to substantially strengthen the financial regulation bill going through now. They would have incredible political support for doing so, Americans are PO’ed at the financial shenanigans going on.
May 6th, 2010 at 4:18 pm
Rumor has it a Citi trader fat-fingered.
Tax payer dollars hard at work…..
May 6th, 2010 at 4:20 pm
That being said. There was 15 minutes of raw selling. Vacuum.
May 6th, 2010 at 4:32 pm
Put a tax on every trade. Then half of Wall Streets bonus babies can go get a real job that produce something real and valuable. All of this trading is way excessive and does more harm than good for society. How did we allow a simple function as allocating capital to where it is needed, to not only take over a third of the economy, but even with that much of the economy poured into it – it still does not work. The inefficiencies of market forces at work.
May 6th, 2010 at 5:37 pm
@BR,
100% cash? I thought you are a gold bug like me.
Or do you consider gold as non-nation/universal currency, as I do?
I’m 70% precious metal, 30% Emerging market stocks… but the today’s movement is making me more metal heavy.
May 6th, 2010 at 5:42 pm
My problem with 100% cash (US$)…What would you buy when DXY index (85 now) reverses?
When you consider the quantative easing all over the world, I think it makes sense to go long now (vs. short), betting on inflation/reflation?
Just my 2 cents…
May 6th, 2010 at 7:33 pm
BR,
Now you can buy that dream island, since you have a wad of cash lying about.
http://www.longislandpress.com/2010/05/06/us-schedules-hearings-on-sale-of-plum-island/
May 7th, 2010 at 9:10 pm
[...] Barry Ritholtz has moved to 100% cash. (Big Picture) [...]
May 9th, 2010 at 9:32 am
[...] A few others I read were very well positioned and had blogged it. For example, Barry Ritholtz had gone to 100 percent cash for certain client accounts just a day before the event . [...]
May 12th, 2010 at 7:19 am
[...] last weeks Wednesday morning and late night discussions about moving to 100% cash, the office phones lit up — long/short accounts, FusionIQ [...]
May 17th, 2010 at 8:30 pm
[...] of the stream early this morning was Barry’s post that he was all cash. @agwarner has a humorous tweet below that presents a world as it should be, where bloggers views [...]