June 8, 2016

Holding a higher levels of Cash in portfolio could be wise

In the summer of 2016 we exist amid capital markets that have been inflated by hyperactive central bankers who have had the burden of catalyzing economic growth owing to inert and partisan fiscal authorities and an electorate that is unwilling to take the pain of addressing structural headwinds.

This is a toxic combination of policies and condition.

While, to date, these policies have resulted in the abandonment of natural price discovery and what I believe to be a Bull Market in Complacency, one day (or days) in the future there will be a loss of the markets' artificiality we face today. At that point, one will not to be heavily invested in equities.

With our interest rates near generational lows and much of the world's sovereign debt in negative territory the risks are accumulating. Central bankers, whose forecasting ability speaks for itself, are endorsing policy that, to me, is now indefensible because it is doing more harm than good.

If monetary policy was as easy as keeping rates at zero, we would have had the condition for seven decades and not just seven years.

We are in uncommon and untraveled territory in which sitting on a lot of cash is the most sensible and prudent approach for those who respect their capital.