All-In and All-Out

All-In is a stupid investment posture, so is All-Out.

I get asked about the fact that I’ve been pretty vocally bearish for the last few months yet maintain positions in stocks.  “Given your concerns about China and Europe and recession potential, why are you still 50% long stocks here?”  People don’t like nuance, it screws with with the way our minds are supposed to work.

It’s much easier to reconcile all-or-nothing opinions or stances, this is why a meathead like Sean Hannity has fans – no matter what the issue is you already know he’s to the far right of it with no frittering around in between, ever.  No nuance, no conditions, no qualifications – just black-and-white certainty.  It’s a great character to play on television, if he’s truly that big of a moron off the air then I give him a lot of credit.

Anyway, the Bull-Bear thing works the same way. It rarely pays over a considerable time period to be 100% in or 100% out when you manage money for others the way I do.  There are as few reasons for this:

1.  You’re not god, you’re not a clairvoyant, if you’re caught all-out and the S&P has a plus-6% week, you better hope you’ve caught at least some of that, it could be the entire year’s gain!

2.  When you go to 100% cash, something changes in your mind.  You get to this place where mentally you won’t be satisfied unless you pick the perfect entry point.  It’s harder to do some buying at 100% cash than it is at 75% cash or 50% cash – at least then you’re “adding to positions” rather than taking a stand from scratch.  Price will drive you crazy without an existing position or average cost to anchor you, whether it’s higher or lower than the current quote.

3.  There are high yields being paid on tons of stocks, yields in excess of what the bond market is offering.  When you buy a building in the commercial real estate market, you are buying it in large part for the rental income it will produce.  Sure you’d like to sell it at a higher price one day but there are no quotes online for what it’s worth on a day to day basis.  You except the fact that on any given week or month the building may be worth less than the week or month before.  But the rents are rolling in and you don’t have to pay attention to the swings in value on a daily basis.  Can you do that with stocks?  You should certainly try to in some cases.  If you own a non-cyclical stock with a 4% yield and you’ve bought it at a Shiller PE10 ratio of 8 or 9, what the hell do you care if it’s up or down a few bucks in a volatile tape?  You’re still getting paid and there’s no reason to react to the vicissitudes of the market today or tomorrow.  Think like a landlord, not a little bitch.

4.  There’s a tendency to pay closer attention to things when you’ve got money on the line, and a tendency to be lackadaisical about things when they aren’t making or costing you money.  If you’re 100% out of the stock market, you’re also 100% excused from having to pay attention to it – and you probably won’t.  Picture watching a football game between two teams in another conference and neither one of them means anything to you as a fan – it’s just a game and you can take phone calls, return emails, maybe even go out and pick up a sandwich.  Now picture you have $500 riding on one of the teams, teased with a bet on the under…you think you’re going to watch that game more carefully?  Hell yeah you are.  When I see a stock I think I like and want to commit to researching further, I throw a hundred shares in the “A account” sometimes as a tether line that keeps it in my sights.

5.  In real estate, they say Location Location Location.  In the stock market it’s Timing Timing Timing.  Everything is timing, it’s what makes the guy who bought Apple in 1996 a loser and the guy who bought in 2003 a genius – same stock.  If you bought Wal-Mart in 1999 thinking they could triple their earnings over the next decade, guess what – you were right!  But you made zero dollars, because while earnings tripled the price-to-earnings multiple contracted by 80% producing a flat share price over 12 years.  That’s timing.  If you’re endeavoring to be 100% on the timing of your equity purchases and sales then you’re playing the wrong game.  The average investor should be striving for maximum upside capture with minimum drawdowns and volatility.  Easier said than done, but for most people that’s the game – not pretending to be Paul Tudor Jones.

There are guys like Joe Fahmy who run a very specific momentum style and for them it might make sense to go 100% to cash when the market acts “unhealthy”.  For those running stock mutual funds, in many cases it’s their job to be 100% exposed to the market at all times, by the terms of their charter they can’t be anything but All-In.

But the rest of us don’t have those restrictions, we can be 30% in, 50% in, 65% out, 28% long and 44% short etc.  We can modulate our exposure as we go, assuring that we’ll never be fully exposed to a nasty fall or completely on the sidelines during a rip-your-face-off rally.

This isn’t just market sense, it’s common sense.


This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Cheap essay writing services commented on Sep 20

    … [Trackback]

    […] Here you will find 14529 additional Info on that Topic: […]

  2. Bitcoin Evolution Review commented on Sep 21

    … [Trackback]

    […] Read More Information here to that Topic: […]

  3. td bank login commented on Oct 19

    … [Trackback]

    […] Information to that Topic: […]

  4. devops consulting companies commented on Nov 02

    … [Trackback]

    […] Info to that Topic: […]

  5. Danfoss DHP-L Opti manuals commented on Jan 20

    … [Trackback]

    […] Info to that Topic: […]

  6. bmo mastercard online commented on Jan 28

    … [Trackback]

    […] Information to that Topic: […]