Posted by Frugal on 27th May 2011
I have managed to liquidate various stock positions, and have about 50% in cash waiting on the sideline. Percentage-wise this is the second highest level of cash ever since 2008 stock market crash. Right before 2008 market crash, I reached 57% cash (but should have more). I’m raising so much cash because I feel like my risk tolerance has decreased quite a bit since 2008. I do have a feeling that I probably over-do it this time.
If I’m investing in the general market, I probably would be more relaxed. However, I’m more into commodity/PM sectors, and the volatility in this sector is at least 3X to 4X of the normal market.
Better safe than sorry. I’m actually quite content with what I have achieved so far since 2008 crash. My net worth is at least 20% higher than the pre-2008 peak. If the markets unfold as I am expecting, taking a mid-summer dip, build a base, and then comes back, hopefully I should be way on my way to get to 50+% total return in another 2 years.
So far, all the MACD indicators on mining indexes, and precious metals have made the positive cross. I have a suspicion that this may be a head-fake. However, I still have a lot in the market, and plan to just ride it out for a potential 16% fall from here. If it does fall, it will be one of the most terrific buying opportunity. If not, and the markets zoom up and leave me in the dust, my potential return will be halved, but I’m already taking lots of risk anyway.
Let’s see if my mid-June target date for another big correction in commodity will materialize. On the general stock markets (SPY, DIA related), I will be a buyer on a 10% pull-back. Furthermore, I will be buying into higher beta stocks this time. It is about time to turn bullish for the intermediate/long term (~5 years out only). Only time will tell whether I’m right.
Have a good memorial holiday. Pre-holiday market is almost always good like today.
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