I find the discussion interesting, and I would like to touch upon "cash holding" and add my two cents to it.
Keeping the money, when the bulls are raging- as is the case now in my view- is very counterintuitive and emotionally challenging decision.
I have seen in few discussions above, not able to predict adverse scenarios for the market to correct. I agree, in the current market, it is tough to predict what could cause the market- Indian or global – to crash apart from North Korea(NK). In fact, there is more reason for the market to go up (e.g. flood of liquidity in MF).
In term of probability, I doubt the war will ever happen. If the USA attack North Korea (NK), and NK then use nuclear weapons- even if these weapons are directed to specific countries- like Japan, South Korea or the US for that matter- will cause irrecoverable damages. The effect of a nuclear catastrophe would not be limited to specific countries, but the whole region has a potential to get wiped out. Remember Chernobyl in 1986- when the nuclear reactor caught fire, the smoke and effects were not limited to Russia. They were felt across Europe, but due to timely action – if I can say so- prevented further damages at least to other countries at least. However, the same cannot be said with confidence when it comes to a nuclear war with NK.
When a person or an animal for that matter is pushed to the edges, he is likely to take an extreme action to defend himself (Behavioral Science). In the event of war with NK, the NK dictator will be pushed to the edges very soon, which has the potential to make the situation worse. I think this is an open secret, so in my view, there will be a lot of “Fast and Furious” talks, threat, scare mongering- but eventually they will settle- as happens for so many decades.
In fact, apart from NK, it is challenging to imagine any reason for the market to crash, and this lack of reason is fuelling rallies in the global market. Howard Market’s recent memo has few points, which I find fascinating and apt related to this:
But on the third hand, most people can’t think of what might cause trouble anytime soon. But it’s precisely when people can’t see what it is that could make things turn down that risk is highest, since they tend not to price in risks they can’t see. With the negative catalyst so elusive and the return on cash at punitive levels, people worry more about being underinvested or bearing too little risk (and thus earning too low a return in good markets) than they do about losing money.
Again, it is very difficult to predict the crash or correction in the market, but being prepared for the correction/crash – by having some cash- looks conservative now, but may well turn out to be remunerative in future (for some in my view), who knows!