China, Total Cash Holdings Holdings, Matt discussed on Invest With Clarity
Eighty nine years. Old said I hope to see three more recessions in my lifetime and well because eating Lang was one hundred forty I mean three. He wants to see three more recessions sessions. Why because that's the opportunity to buy businesses on sale so the people got three point four trillion dollars sitting cash right now uncle Matt? What are they thinking? As we're hitting the time is right now oopsy daisy. I'll watch this. Listen to this assets in money. Market funds have grown by one trillion over the last three years. Here's to their highest level in around a decade. According to lipper data by the way on a year to date basis the positive flows into both money markets and bonds is staggering compared to stocks. And I have a chart that you know. Obviously no one can see it but people have taken are close to two two hundred billion out of Equity Funds and have put over four hundred trillion in the money mark. Four hundred billion sorry in Money Market Kit and about just under four hundred billion into develop bond funds. This is year to date on November seventh or eighth. Whatever the date is? We're doing our I show today now. Here's Romina blow you away. Even the so-called wealthy have moved to cash a UBS global wealth management. Serbia forty-six hundred wealthy entrepreneurs and investors showed that more than a third raised their cash allocations in the past quarter in response to flaring wearing trade words. I Want I want this on record. You know what I've been doing over these trade worries I've been buying China companies Chinese companies or. Thank you for the sale. I I mean I'll tell you it's unbelievable. Behavior of Investors Matt so in Total Cash Holdings Holdings rose to twenty seven percent of the survey respondents portfolios at the end of the third quarter from the previous quarter even as a growing number. He said they were increasingly optimistic on the global economy and stock performance. Listen bottom line. I fundamentally believe obviously compassionate by the you cannot put a price on clarity right. You know while people around the ATV in listen to everybody babble about no trading fees anymore Edberg brokerage firms and we're race to the bottom and zero fees and ETF's not apps on index ATF's. Nothing is free. I believe me these guys are GonNa make money one way or the other right. The the industry is so focused don fi fi fi. How much you're paying your portfolio manager? How `Bout you look at the value? The price of clarity you what you want to argue about the value of having clarity and stain invested in your discipline supposin. There's a reason why people do investment policy an objective setting questioners here absence to figure out where they're true. Level of tolerance for risk and volatility. Lie every time you open a brokerage account you've got to answer questionnaire on your risk of on your investment objectives objectives state investment objectives. Don't sit and try to guess it's your gambling in this. Why believe the power of knowing what you own and why and why you own it? Okay let me ask you a question. Let let's talk about that survey because just so you know we've actually never talked about that. You know you say you know what you on why you WanNa just a few times but when it comes to a true risk tolerance right so a lot of the people are taking money off the table whether they think that there's going to be increased volatility volatility. which in their mind would be the stock market going down to them losing money? What sort of questions do you ask these people because I want you to answer this? Because here's the deal. Mark people listening to this podcast cast might fall into these categories and they might say. Oh my God well you know. What would I like how they're looking at this? This is really how I define my risk tolerance and maybe maybe some of that three point four trillion dollars. Just start filtering right into naps. Okay so let me. There's one question Jim Chenevey is if the if if the quote unquote stock market had a ten fifteen twenty thirty forty fifty percent correction. You know work. Where'd you feel? Will you would start being uncomfortable. And don't WanNa see that happen. They check a box now. I don't do this anymore. I mean obviously at my advisors do what I used. I used to do these questionnaires for people time. I will tell you that one hundred percent of the time. When I've done that question I would say to the person they would say for instance well at twenty percent on? I'm getting pre nervous. That seems to be kind of middle ground the balanced area. If you will and I would I would say to them. Okay let me ask you a question if you were you able to log into your computer and you're literally able to look at your account and in your account you saw the companies you owned and you saw the visas of the world the the CVS is of the world you know. The city groups are banker. Whatever the companies are right you know allow these companies is right? Would you feel the same about that. Twenty percent correction or would you feel more comfortable and maybe thirty percent on you get more uncomfortable. Every single person goes up to thirty totally goes up. Goes up another level right so all the words what that should tell you is at the psyche of the individual really is hindered by not knowing what they own and why they own it right and so all these people are moving to cash because they own all these mutual funds and exchange traded funds lawns and the reality is their mentality. Is I invest in the stock market when the reality is you're not best in stock market you're invested in businesses and you're selling these mutual funds you're selling these exchange traded funds and going to cash because you don't even know what businesses you own you don't even know the greatest risks lie in your portfolio so no wonder you go to cash and that's it it's like going it's like going to Vegas and not knowing the ball's going to land on red or black when you play roulette it because you just don't know what's going on but what if visa goes from one hundred and eighty to one hundred fifty would you like to buy more. Yeah Yeah of course you know people always say to me well if you're one hundred percent vested and this is very important he will say well mark if you're one hundred percent vested in the portfolio in stocks let's say and there's a big correction. Where are you going going to go to buy more stuff on sale? ooh That's a good question. I love that question. I should've asked you that question. Because it's easy. Oh Oh good if you have a portfolio of twenty thirty five forty companies not. Everything's going down. Not Everything's going down the same amount and what corrections give you you. The opportunity to do is take profit in some areas. Recapitalize it in the other areas that you believe are vastly on sale. It's precisely what we did. During the twenty percent in the fourth quarter we tweet we tweaked the portfolio. And of course as you know we had the situation where the cell gene got bought. We bought sell Jeanette like sixty five dollars. A gone down from ninety eight or something like that. And it got bought by Bristol Myers at one hundred six. Let me give you a couple of names of stocks here that people sold December twenty four. Th was the bottom right. I'm GONNA give you some names of companies here and how much they're up later date. Don't you think China you think China's a a horrible place to be investing right now. Jd Dot com is a fifty seven point two six percents. This shear visas up thirty four point four seven as of right now B.'s. Under Chinese name up forty three and a half percent the sheer citigroup up forty three percent John General Mills where everybody eight thousand Crappy Company and was having troubles is up a paltry thirty four point eight by the way this is not this is without the dividends and even performers. Iq Out of China is up seventeen and a half percent chubs. Sixteen and a half MasterCard forty three picking up when I'm laying in down Martin's up forty four percent Raytheon twenty-five Aig forty. I just on the list are Chinese name. Because don't invest invest in China that one's up a paltry twenty nine percent year to date. My point. Is that while everybody's moving to cash. You should be contrarian you should be sticking more more than ever to your investment process. Does that mean you're not always doing research you're not you're looking at opportunities. Yeah here I'm always looking at opportunities. Opportunities and businesses to invest in Jeremy Siegel has said the famous Famed a Wharton School business professor. It's time in the stock market. Not Timing the stock market we take a step further and say it's time in a business not tiny a business bright. Look when you look at how people are thinking. Here's the other problem. Unfortunately a lot of money. Managers injures are thinking the same way as the investors fund managers pulled in the bank's latest survey said they are holding average of five percent cash of their portfolios by percent in cash compares with ten year average of four point. Six off so barons conducts a big money poll twice a year in the spring and fall with help from from Beta research. Out of New York. The fall drew responses from her and thirty four money managers across the country after a big year for. US stocks. Make that a big ten years American money managers are are money. Managers see trouble ahead or investors. Blame it on the muddled economic got look or the increasingly fractious political landscape any of which could stifle stocks advance in coming months. Now listen we have pounded the table all year to our advisers advisers and our clients about this. I completely disagree that we have trouble ahead now in markets Matt in Economic Expansion Expansion and contraction. You should expect recessions. Recessions are normal. They're expected and frankly healthy now. I don't know all when the next recession is I don't I don't know a we do modeling here. Internally we look at the numbers the percentage of the potential for a recession has has increased over the last couple years. Not to the point where we think it's bad and as a matter of fact I actually think that a recession is less likely now now than we've seen in a long time and I'll tell you why I believe. The stock market is a leading indicator of economic growth with all all this cash sitting on the sidelines. Eventually math they're going to say uncle and they're gonNA start investing and there are what's called secular bull markets cyclical bull markets secular bear markets and cyclical bear markets bull market is a rising market. A bear market is a flat downmarket cyclical short-term short-term seculars long-term were in the longest bull market right now supposedly in history. Okay now typically when second that can win secular bull markets and they end on euphoria. Now if you do do you think were in a euphoric market at all. Now ants. You know I've used this if quote from Sir John Templeton many times. Famous old portfolio manager or bull. Markets are born on pessimism. I I think we're in the verge of another next leg. Boo Bull Market Right now. They grow on skepticism. They mature on optimism optimism.