Wealth Watch: “Don’t play the all-or-none game — What I have learned from 40 years of trading.”

Wealth Watch: “Don’t play the all-or-none game — What I have learned from 40 years of trading.”

April 27, 2022
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From the desk of Vance Howard:

Vance Howard Rings the NYSE Closing Bell November 2021

I have been doing this job of managing money just about my whole life and have loved nearly every minute of it. But as I get older and wiser, I do start to see things a lot more clearly. I had a younger member of our team ask me the other day “How do you seem so calm when the markets are falling part? It doesn’t seem to bother you at all.” I thought about that, and I realized that there are some advantages to getting older (even though I hate aging, it is better than the alternative), and two of those are experience and wisdom. The markets misbehaving makes me agitated, but not concerned. Why? Because I know the odds. We can’t guarantee anything in this business, so I will give odds from here forward. The odds of this market basing and moving higher are 99.9%, and the odds the indexes will make a new all-time are 99.9%. The only question is when.


The HCM-BuyLine® has been one of the most productive indicators I think has ever been built. It will not call a top or bottom, but it gives a very good picture of when to reduce exposure and when to start buying again. We are sitting on about $480 million of cash in Tactical, $300 million in Dividend, and about $390 million cash and one-month T-bills in Income plus, and that does not include all the cash on the SMA side. So, all said and done we have about 30-35% in cash at HCM. We are still getting slung around the room like everyone else, but we have a huge amount of buying power when the markets turn around. We probably have one of the highest levels of cash in the industry compared to other firms such as Fidelity, BlackRock, and Vanguard. Odds are that those firms are most likely fully invested and will not be able to capture the bargains that the markets are creating at this very moment. When the market turns back up, we should be able to take advantage.

If you remember during the start of the pandemic, we were roughly 60% invested and 40% in cash. When the markets turned around, we redeployed that 40% cash cash back into the market around the second week of April and ended up posting some of the best returns in the industry that year. You don’t have to go 100% to cash to make a big impact on your portfolio when re-entering the markets. Remember earlier I talked about experience and wisdom? Well let me share with you what I have learned, and it was a baptism by fire. Going 100% to cash in a volatile market is a fool’s errand. I have done it many times, and the only time I should have was in 2008. That is verified by the way.

Our trading rules are to reduce exposure to equites in a down-trending market, but keep 60-70% invested and 30-40% in cash. These days the only time we will go to 100% cash is if the banking system is falling apart, which at this time it is not. In fact, our banking system is very strong.  By going to 100% cash, you are basically trying to call a top or bottom and that is very hard, if not impossible to do. Yes, by moving a lot to cash you feel great and look like a financial genius if the market continues to fall, but usually that only lasts for a very short period. In my experience it is typically 1-2 months, and then the markets base, move off the bottom, and move up by 10-20% while you’re sitting in all cash. Having been there myself, you feel horrible and look like a fool. By staying invested and building a 30-40% cash position, and by not playing the “All-or-None Game”, you can still buy some real deals when the market turns back up. This can end up making a big impact on your overall returns. By staying somewhat invested you participate in the recovery rally, which is usually very fast and strong. By playing too much defense and trying to sidestep every drawdown the market has thrown your way you will destroy your long-term performance. One of the biggest mistakes I have made is trying to play too much defense and not looking at the long-term odds.

I have a 22-year verified track record, and the numbers speak for themselves; my returns are some of the best in the industry. Like Will Rodgers said, “it ain’t bragging if you did it”. With that said, my returns would have been double and maybe even higher over that time if I had not been guilty early in my career of “playing the all-or-none game”. Historically, the market has always worked itself out, so reducing exposure in bad markets and staying invested with the majority of my funds would have been a huge advantage. Like I said, a baptism by fire. Remember the odds I gave earlier: 99.9%. I don’t know when the market will base and turn higher, or even how low it will go from here, but I do know the odds. You don’t have to win every round to win the fight.

Vance Howard

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. Howard Capital Management is an SEC-registered investment advisor which only does business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Past performance is no guarantee of future results.HCM-011222.01

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