"Wall Street Traders Are Too Scared to Fight the AI Rally, Short sellers have gone missing amid meteoric Big Tech rally"

Garden path title

AI Bubble!

This is only going to end badly, and with the other issues like rising consumer credit card debt and commercial real estate, the longer people drag it out, the worse suffering there will be.

If interest rates go down, it may prolong it for a lot longer? People have to put their money somewhere.

Lol, with record low unemployment and more +inflation stats?

No one is lowering rates anytime soon. January is running too hot, CPI and PPI too high. Inflation remains the core problem on the Feds mind and is corroborated with the latest stats.

In fact, people are whispering the chances of a rate hike (!!!!!)

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Im no short, because I'm not risky like that. My bet is simply MMFs / holding cash like instruments. MMFs, FRNs, 3month treasuries and the like in ~15% numbers, which is healthy and just slightly conservative.

Im no permabear predicting a crash. But you don't need much cash to weather a downturn.

How is January running too hot?

And the tiny rise over expectations in CPI was predicted by WSJ based on technical factors that always lead to CPI running higher in January.

Can you elaborate about not needing much cash to weather a downturn?

You should have enough cash to weather your emergencies (job loss, or whatever). This is not "investment money", but instead your emergency fund.

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But even small amounts of cash can help protect you from a downturn. 90% stock / 10% cash on a $100,000 investment will save you $3000 in a 30% stock-market downturn. ($70,000 vs $73,000).

If this 30% decline happens over a year, you'll have to factor in the 5%-ish you'll get from the $10k cash investment (MMF is still returning 5.25%, and I expect rates to remain higher for longer). So you'll actually be $73,500, even with just a small 10% left in cash.

All in all, you're a full 5% better than the all-stock portfolio under this scenario.

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In an upwards market, of course stocks do better. Ex: a 20% increase in stocks does better if you're 100% invested in stocks instead of Stock+Cash, but note that Cash is earning 5.25% this year (assuming you use a money-market fund like VMFXX or SWVXX).

$100k turns into $120k after a 20% upswing. But... you really didn't fall behind that much. A 90% stock / 10% cash portfolio would rise to $108k stock + $10,500 (5%) after a year, or $118,500, meaning you're only down by $1.5k in the optimistic scenario. (Or you're 1.26% behind).

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EDIT: VTI (Vanguard's total stock market ETF) is a 1.35% dividend yield, which I forgot to add in the above math. But still, a 5.25% Cash interest rate is far above the ETF dividend yields and to cash's advantage. Stocks must grow above-and-beyond cash's interest rate to be worthwhile (and in a downturn, its doubly bad because Cash "would have earned money" as the stock crashes).