I have substantially liquidated a large position in my portfolio today and am sitting on an approximate 50% cash position yielding precisely 0.00%. The majority of this is denominated in US currency. I have no interest in swapping it for Canadian currency at this time.
For various reasons, while I have thought about investing cash temporarily in 30-year treasury bonds, at this time I prefer the comfort of plain cash. There are quite apparent liquidity issues concerning US treasuries (on an institutional level) that alerts my brain to a form of tail risk that I can’t quite express in words.
I have substantially completed nibbling on a small equity position in a company that I have not disclosed but since I am aiming for a 2% position and have obtained 1.3% to date, you can guess what kind of conviction I have for the underlying company. Looking for a double in a year for the reasons that the market is pricing in worse profitability than what will actually occur, and the industry the company is in can be described as fairly un-sexy at present.
Pinetree Capital (TSX: PNP.DB) will be redeeming more debentures at the end of this week and this will also result in a further injection of cash. There will likely be another redemption notice coming between now and the end of August which will clear out half of the remaining position, and the last half will occur between October and maturity (May 2016).
My largest equity holding is now Genworth MI (TSX: MIC) that I have held on since 2012. At its current price I am not interested in liquidating or purchasing more shares.
I am completely out of ideas and thus the next seven months may be a very boring period of time for portfolio management. I have a bunch of interesting companies that I have researched, but valuations are nowhere close to the point where I would pull the trigger. Examples include cash generators like Rogers Sugar (TSX: RSI) where I would ideally purchase under $4 a share. Companies like this I have on my watchlist, but are nowhere close to where I would want to purchase them with an acceptable margin of error.
I would not want to be a portfolio manager for a firm that required 100% deployment of capital. The decisions at this point would not be pleasant and I would take an extreme perspective of putting capital in the most defensive equities as possible. Most (if not all) of these have been bidded up due to the low interest rate environment.
For now, I wait and twiddle my thumbs.