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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Apollo who wrote (33515)	10/22/2000 10:21:18 AM
From: Seeker of Truth	Read Replies (2) of 54805

How much cash to hold is a colossal question. In times of really high inflation, bank interest rarely goes very far towards preserving capital. In such a case it's sensible to be fully invested and cash is an enemy. These days, bank interest minus income tax allows one approximately to preserve capital. I think cash is a friend in such a situation. I don't have to tell you how volatile the tech market has been lately. Manic elation is succeeded by manic despair and vice versa in quick alternation. In such an atmosphere cash helps you sleep nights, makes you a friendly relaxed person, helps you do more good with your job. With enough cash you can avail yourself of bargains when they appear. How would you like to see EMC at 80 or NTAP at 114 or etc.? These are all very recent prices, by the way. If you had cash these declines would be opportunities not disasters. So we need a cash reserve, for tranquillity and to catch bargains. That's very glib but hard to act on because when things are the cheapest our panic and the media stimulation of our panic are maximal. We tend to hug the cash in panic times and spend it when the market is up. The best way to overcome this is to observe oneself, over long periods of time. In any case there should be an irreducible minimum cash reserve. For Mike Buckley it is seven years living expenses. But the need to increase cash reserves depends on each individual's situation. Lots of luck. I personally 1. am increasing my cash reserve only because I didn't have enough. and 2. think the (eternal) Palestine/Israel crisis will be far less threatening to the stock market than the 1988 bank crisis in Asia was. Stocks were a great buy at the latter time, because they did go down sharply. Gorilla game investors floated through, calmly. By the way, I'm sure you know that when a broker sends you some junk recommending some stock that they want to get your commission. Similarly when the media bombard you about some crisis, remember that it's their business to get your attention and keep it so they can't resist the temptation to exaggerate every crisis. Also the stock market is a kind of amplifier. Trees bend noticeably in every wind but last time we looked they're still standing, eh? Some apparent maelstroms are tempests in a small pond.

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