Lying low before the storm

The recent market movements have become increasingly bizarre. I believe friends who have been following my operations can also vaguely sense the underlying anxiety and undercurrents beneath the market surface.

During this period, I have been repeatedly analyzing the upcoming macro trends. There is only one conclusion, and it's growing stronger: a systemic financial crisis is approaching. Based on this judgment, I have made an extremely conservative, even seemingly counter-market decision at present: significantly reduce positions, raising the account's cash reserves to over 80% for an ultimate defensive stance.

Many may find this puzzling. After all, my account has long been heavily weighted with defensive assets like Berkshire Hathaway $Berkshire Hathaway B(BRK.B.US), and Novo Nordisk $Novo Nordisk AS(NVO.US) has long achieved a negative cost basis. Even if the broader market falls, the portfolio has strong risk resistance on paper. So why such an aggressive withdrawal of funds?

The logic behind this stems from my respect for liquidity crises and a warning from a risky trade today.

Today, to speculate on Alibaba's $Alibaba(BABA.US) earnings report, I used margin to buy a wave of high-volatility positions. Although luck was on my side in the end, not only did I get out of the trap but also secured considerable profits, the immense psychological pressure from leverage felt like a profound warning. This made me re-examine the cards in my hand. When a systemic correction of possibly over 30% truly arrives, the market has no rationality. Liquidity drying up will cause institutions to indiscriminately sell all assets. Including those high-quality companies with perfect fundamentals and ample cash flow. Defensive stocks can resist declines, but in the initial panic where everything is sold off, the severe paper losses will also greatly shake one's holding mentality. What I need is absolute composure, not passively competing with the market on stress tolerance.

As a believer in deep value investing, I have always preferred picking up those 'cigarette butts' abandoned by the market but sitting on huge cash and high dividends. But the core premise of picking up cigarette butts is: cheap enough.

Current market valuations still haven't fallen enough. Holding stocks through a crisis is just passive defense; holding massive amounts of cash in hand is the most aggressive weapon in a crisis. When I raise my cash ratio to over 80%, I no longer fear the arrival of a financial crisis; instead, I begin to crave its arrival. Because only in extreme panic will those usually unattainable high-quality assets fall to mouth-watering safety margins.

Under the current circumstances, there are too many uncertainties. Rather than grinding for a few percentage points of profit in a volatile market, it's better to withdraw the main force from the battlefield.

My strategy is now set around the 2026 midterm elections. Before the grand narrative combining political cycles and macroeconomics materializes, this over 70% cash is my confidence. During this period, apart from maintaining a minimal proportion of funds for some left-side leveraged short hedging when irrational frenzy appears in high-valuation sectors like semiconductors $Direxion Semicon Bear 3X(SOXS.US), the rest of the heavy troops will remain on standby.

Giving up the tail end of the rally and enduring the loneliness of missing out is to have enough bullets to fire all at once when the real golden opportunity appears.

In this capital marathon, surviving and having food in hand is the only rule for laughing last.

So, friends who follow me, I'll be lying low for a while recently.