I Went to 100% Cash Before the Missiles Flew
Why I Sold Everything on February 27
By Bill Cara
On February 27, hours before the United States attacked Iran, I sold 100% of my portfolio.
This was not a reaction to headlines. It was the logical conclusion of a process that had been unfolding for months.
Early January: ~25% cash
Early February: ~50% cash
February 27: 100% cash
By the time the missiles flew, the decision had already been made.
This article explains why.
This Is Not a Normal Cycle
For years, I’ve argued that investors have lost sight of economic reality. That is the foundation of my upcoming book, Delusional Capitalism.
Markets today are not functioning as traditional discounting mechanisms. They are being driven by:
Futures market distortions of cash pricing
Record global debt and deficit expansion
Policy-driven capital misallocation
Geopolitical fragmentation
This is not a late-cycle environment.
It is a structural break.
The “Age of Austerity” Has Begun
In 2025, I wrote about the coming 2026 Age of Austerity. That phase has now started.
We are seeing the early characteristics:
Governments spending aggressively—but unproductively
War expenditures rising with no economic return
Inflation pressures re-emerging
Capital becoming more selective
This is critical:
Austerity does not mean immediate collapse. It means capital discipline returns.
And when that happens, markets reprice—often violently.
Inflation Is Not Under Control
The consensus view has been that inflation is moderating.
That view is wrong.
Two forces are driving inflation higher:
1. Commodities
o Oil and metals are rising due to supply constraints and geopolitical risk
2. War Spending
o Capital is being diverted into non-productive uses
As highlighted in the April 2026 shareholder letter from Jamie Dimon, inflation may prove “stickier” than markets expect.
Higher-for-longer interest rates are not a tail risk.
They are the base case.
Valuations: The Message from Smart Money
Investors should pay attention to what disciplined capital allocators are doing—not what they are saying.
Consider Warren Buffett:
Over $370 billion in cash
Refusing to deploy capital at current valuations
Clear statement to CNBC’s Beck Quick this week: “Not in this market”
That is not caution.
That is a valuation warning.
When the most patient buyer in history steps back, liquidity becomes fragile.
Credit Markets Are the Real Risk
Equity investors are focused on earnings.
They should be focused on credit.
From my analysis and supported by Dimon’s letter:
Private credit valuations are opaque
“Add-backs” and weak covenants are widespread
“Held-to-maturity” portfolios hide unrealized losses
This creates a classic late-cycle setup:
Underpriced risk
Overstated asset values
Sudden repricing potential
When credit breaks, equities do not gradually adjust.
They gap.
Geopolitics Was the Catalyst, Not the Cause
The Iran conflict did not create the risk.
It exposed it.
We are now in a world of:
Trade realignment (“Trade 2.0”)
Tariff-driven supply chain shifts
Expanding military conflict zones
Well before the February 28 US and Israeli air strike against Iran, markets were signaling stress.
The strongest charts globally?
Defense
Energy
My Defense portfolio was 50% in cash when I sold it on Feb. 27 for a gain of more than 12% since inception on January 1. That was timely investing, not a healthy bull market.
Defense and Energy as market leaders? That is pre-war positioning.
The AI Boom: Misunderstood Capital Allocation
There is a widespread belief that AI is the next great productivity wave.
Long term, it may likely be.
But today’s reality is different:
Massive capital spending
Limited near-term earnings visibility
Cash being consumed, not generated
Projected hyperscaler AI spending is approaching $700+ billion.
That is not efficiency.
That is speculative capital deployment by a few ego-driven intensely competitive individuals.
But the reality: in an austerity regime, markets punish delayed cash flows.
Sector Reality in an Austerity Regime
Based on current fundamentals, resilience is not evenly distributed.
Most Resilient:
Utilities
Consumer Staples
Healthcare
Moderate:
Technology
Energy
Industrials
Most Vulnerable:
Consumer Discretionary
Materials
Financials
This aligns with a simple principle:
Cash flow stability matters more than growth narratives.
Why I Sold Everything
By late February, the convergence was clear:
Elevated valuations
Rising inflation risk
Geopolitical escalation
Credit market fragility
Capital misallocation (AI, private equity)
The trigger was not the Iran strike.
The trigger was the realization that:
There was no margin of safety left.
At that point, remaining invested was no longer investing.
It was speculating on stability.
Cash Is Not a Cop-Out
Many investors view cash as failure.
That is a misunderstanding.
Cash is:
Optionality
Protection against forced selling
The ability to act when others cannot
Again, Buffett provides the framework:
Cash is a call option on crisis.
What Comes Next
This is not about predicting a crash date.
It is about recognizing a regime shift.
It doesn’t take superior intelligence to listen carefully to Jamie Dimon’s words written in his letter to shareholders this week.
Key risks ahead:
A potential 40% equity drawdown in a recession scenario
Doubling of credit losses
Continued geopolitical escalation
Persistent inflation pressure
Markets will not adjust smoothly.
They will adjust when forced.
Final Thought
On February 27, I did not sell because I knew what would happen the next day.
I sold because the system had already become unstable.
The missiles simply made that visible.
Most investors are still operating under assumptions that no longer apply.
That is why I am writing Delusional Capitalism.
Because in this cycle, the greatest risk is not volatility.
It is belief in a model that no longer works.