Blind, Deaf and Dumb: On Going to Cash

Nothing triggers me like seeing someone going into cash because of “high valuations”. I know I shouldn’t get riled up, but I do. Most of the time people admit that they shouldn’t be trying to time the market, but valuations are too high. Okay okay, I get it, most valuations are high. But you chose to be a stock picker and you can’t find any good deals?

We are in an age of transformation. A mass wave of digitalization that the market hasn’t fully priced in. The market is unsure whether the digitalization will stick, so it prices the stock in the middle. Valuations are cheap if the digitalization is real or expensive if it is a fad.

Some growth stocks are trading like value. Look at Facebook and Alibaba. Sure they have some fears holding them down, but I’d bet those fears are going to turn out to be boogeymen. Regulation generally helps larger companies more than it hurts them.

We are entering the golden age of audio. Spotify just spent hours showing how they were transforming the audio space. Spotify is iterating so fast that this write-up is already out of date. Just because a stock has gone up doesn’t make it expensive. Trillion dollar companies hiding in plain sight, but sure go to cash.

The reality is I don’t have any problem with going to cash. I carry a lot of cash. I barbell. I love cash as an instrument to reduce systematic risk. I just get triggered when people go to cash because of valuations. Cash as a tool to reduce risk is smart, but higher cash because you can’t find any good deals is a sign of something else. If you can’t find a good deal in the market, you aren’t looking.