What to do with cash?

Most of the replies in the thread remind me very much of the adage “never reach for yield”.
Only cash is cash. (in the conventional sense that 3-month T-bills are about the only acceptable substitute)

Either invest the cash or don’t, but it’s usually a poor idea to put the money into something pretending to be like cash but offering a better yield.
For the pretender assets, there is pretty much never a good match among the increased credit risk, the increased price risk, and your intended investment horizon.

If you think you know what you’d like to invest in, but think it’s not a very attractive valuation at the moment, there are alternatives.

  • Buy it anyway and live with no expected return for a while–let it grow into its price.
  • Wait till the price is attractive enough then invest it all in what you want. Spend the time reading about that thing and alternatives.
  • Conventional dollar cost averaging (DCA) into that asset over a fixed period. I’m not a huge fan, though the times it adds value is when starting at a very high valuation level.
  • Adaptive DCA over a fixed period, for the geeks.
    e.g., each month end calculate how much the thing’s current price is below its all time high.
    Multiply by 0.3 and invest that percentage of your starting cash pile into the asset in question.
    If it’s 30% below its all time high this month, invest 10% of your starting cash pile this month.
    This gets you gradually invested in increasing amounts during a typical bear slide, attempting to get you fully invested somewhere in the rough vicinity of the time it bottoms.
    It’s possible QQQE would be a good candidate for this starting now. Check back in a few years.

Of course, if you want yield, buy something with yield.
High yield bonds at under 3% really need a new name, so they don’t count.
But a basket of Russian large cap equities will get you around 11%.
Since you’re largely investing alongside the Russian government which needs the dividends, they might even be pretty reliable.
I guess the day to do that is during the market panic when the first shots are fired.
Of course, some people might not find that morally acceptable, including me.

I’m sitting on a cash pile waiting for an opportunity.
There’s always another one coming. (and there’s always one hiding on any given day, if you can find it)
For a different adage as a parting thought: You make most of your money in bear markets. It just doesn’t feel like it at the time.

Jim

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Treat cash as an investment in opportunities, not sitting in idle. With market valuation so high and so much risk in geopolitics, the expected return of opportunities looks good.

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Hopefully I’ve learned my lesson about reaching for yield. Unhappy with 0.5% at Ally, I thought I would stash a good chunk of cash that I wouldn’t need for at least a year in BSV (Vanguard short bond ETF)and eke out 1.2% or something like that. I would have been better off at Ally.

Now between Ally and I-bonds I’ve got a nice cushion.

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If you hunt around a bit you can get 1% returns on largish balances - e.g. T-Mobile Money which is where most of my cash is ATM. The rest is used to get bank and brokerage bonuses which have an effective yield around 3-4%. Does require some time.

Do you have the CUSIP for t mobile bond? Thanks

https://investor.t-mobile.com/financial-performance/fixed-in…

whoops, sorry about that. I don’t know the difference between a CUSIP and a ISIN.

Do you have the CUSIP for t mobile bond? Thanks

If you meant the Sprint/Nextel bond:

852061AS9

It is continuously callable and selling at a premium, so beware.
And the ratings agencies consider it speculative.

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Hopefully I’ve learned my lesson about reaching for yield. Unhappy with 0.5% at Ally, I thought I would stash a good chunk of cash that I wouldn’t need for at least a year in BSV (Vanguard short bond ETF)and eke out 1.2% or something like that. I would have been better off at Ally.

BSV is 1-5 years. That’s too long for a cash substitute. As you found out.
I use FLRN and VUBFX in IRA accounts. Both right about 0.5%.

Alliant CU is paying 0.55%.

A couple of other random choices.

  • Spend it? Just sayin’. Beer and pizza are getting more expensive, you might as well buy it now.

  • Buy Carmax stock? KMX at $113.40

Jim

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GM is getting into used car sales, it is the first car company, I expect others to follow. The intense competition phase starts. Why now?

ATVI
very contrarian at the moment. Expect dead money for a while, so maybe wait in cash. I don’t know, I suck at buy/sell timing.

Buy some well-diversified international stock ETFs! International stock markets are undervalued, especially Japan and emerging markets. Additionally, the underlying currencies are cheaper than usual in the Big Mac Index. The combination of undervalued stocks and undervalued currencies can yield a double play - appreciation stocks AND appreciating currencies. This combination yields a level of undervaluation that the US stock market hasn’t offered since the 1930s and 1940s.

This is the opportunity of a lifetime! It feels like a gift from the ghost of John Templeton for those of us too young to have bought US stocks in 1982.

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This is the opportunity of a lifetime! It feels like a gift from the ghost of John Templeton for those of us too young to have bought US stocks in 1982.

No, it’s not the opportunity of a lifetime.
As an example, Japan (where capital goes to die) trading at CAPE today around 33 does not at all resemble the US (where capital makes money) in 1982 at a CAPE of about 6.3

It’s certainly true that a lot of markets are not nearly as painfully priced as the US market is these days.
And a few are apparently cheap on basic metrics.
But most markets are not particularly cheap compared to their own histories or what they’re actually worth.

Russia is trading at a CAPE of about 10.5, but that’s actually more expensive than the historical usual for them which is in single digits.
Ladas are cheap for a good reason.

One exception might be Hong Kong.
Aside from geopolitical issues, at the top level it seems relatively cheap on both an absolute and relative-to-history basis.
But the index is skewed by a lot of heavy Chinese deadwood so that might be misleading.

Jim

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ATVI
very contrarian at the moment. Expect dead money for a while, so maybe wait in cash. I don’t know, I suck at buy/sell timing.

Pretty good call…

Microsoft buys Activision for $95/share, valuing video game company at $68B

https://seekingalpha.com/news/3788646-microsoft-in-talks-to-…

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ATVI
very contrarian at the moment. Expect dead money for a while, so maybe wait in cash. I don’t know, I suck at buy/sell timing.

Well, too late now! Apparently some sharp eyed vulture at Microsoft saw the same opportunity I did, but unlike me had $69 billion lying around. I will still pat myself on the back for ATVI (apparently) having been a good use for cash.

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OK so how about Unilever (UN/UL in US) then?
Crappy management can’t last forever. Better than VZ as a cash substitute for sure (j/k). PE under 20. Unkillable. Activists trying to change management.

I liked the idea of short term maturing bonds that pay over 1%.

Bought Merkel & Edison bonds today. Both mature in march 23 and pay a YTM over over 1.5%. They are both investment grade as well.

The sprint/T mobil bond was one level below investment grade.

I only bought a little today. Any thoughts from the peanut gallery.

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OK so how about Unilever (UN/UL in US) then?

I am beginning to think that, like Munger, I am an idiot savant - idiot in everything else but savant in picking stocks.
First ATVI and now UL. Up 6.9% today even as S&P 500 is down 3.8% as I type.

You want to know my intraday stupid sale or buy? Depending on the transaction I am a genius or…