Cash and Opportunity Cost

Jim Grant sees some value in large cap stocks like Cisco (CSCO) and Johnson & Johnson (JNJ). Generally, however, he sees most asset classes as richly priced.

He suggests that one investment strategy in the current environment is to simply hold cash, because the opportunity cost associated with not being in T-bills and other short term instruments is 'not much.' Although you make next to nothing on the cash, it is available when other asset classes become more attractively valued. Overvaluation, he observes, often 'passes in a thunderclap' and those who are liquid can 'get fully invested in a comfortable way.'

This strategy has made sense to me for some time. I find it interesting coming out of Jim Grant's mouth because of his inclination toward inflationary macro scenarios. What he is describing his more consistent with what happens in a deflationary situation. After all, why hold cash if you think its value will be inflated away.

Currently my cash level is just over 50%. I wouldn't mind bumping this to the 60-70% range, and will be looking to sell strength to do so.

positions in CSCO, JNJ