In browsing through the noise with a focus on discovering the rare signal that emanates from within, I made the mistake of reading a blog posting from a financial advisor in which he unabashedly advocated a significant cash position in this bull market. I skimmed through the remainder of the article which cited various elementary arguments for remaining conservative in the face of an extraordinary bull market.
There is a certain degree of arrogance that comes with the opinion of maintaining a significant cash position in this market. Cash is not a position. It is, in fact, an opinion. The degree to which you remain in cash is the degree to which you disagree with the act of equity appreciation. For example, a 10% cash position with a 90% allocation towards equities is significantly bullish opinion about future prospects for a bull market. A 50% cash position within a secular bull market, on the other hand, is a significantly bearish opinion with respect to the prospects for future appreciation.
The arrogance disguised as conservative stewardship of capital comes from the act of disagreeing with a bull market that has been as consistent and steadfast in its appreciation as any of the past 100 years. It is always easy to argue bearish points because they appeal to the pseudo-intellectual crowd who grasp onto seemingly sophisticated measures of value or pending disaster that are predicated on data points subject to massive range expansions during a bull market.
As an example, it was about two years ago that nearly everyone was clamoring about margin debt levels being sky high. Voila! Two years later we are at record highs and margin debt levels have expanded even higher. The "normalized" range has expanded.
Everything from simple valuation measures to more sophisticated monetary measures are subject to expansion during a secular bull market. What you consider normal at the beginning of a bull market becomes stretched, contorted and disfigured to the point that it is unrecognizable by the time it all ends. In other words, it is all noise, with no signals.
As this bull market continues, more seemingly influential investors will sound the warning bell that all is not Le Beurre d'Echiré butter and warm French Bread at the dining table. They will argue that what we are in fact being served is a steaming plate of merde.
This consistent hum of noise will do its job to either dissuade investors completely or jostle them out of their existing positions. Despite the powerful tool for wealth creation that a secular bull market provides, very few actually take appropriate advantage. The sole reason behind this is because these investors are subject to influence from seemingly intelligent sources who are arrogant enough to consistently and loudly doubt the greatest voice of all.......the voice of the market.
Be wary of those advocating their voice as being superior to that of the market. They are ignoring the very basis of sound speculation, which is riding the primary trend.
