What is the rationale behind maintaining such large liquid reserves?
Its all about positioning. The maintenance of ample liquid reserves helps us answer two key prerequisites for intelligent investing: the intelligent investor must have (1) the psychological wherewithal to buy on market weakness and (2) the financial wherewithal to buy on weakness. The significance of positioning is most readily found in the teachings of combat and martial arts. From a position of strength, a fighter will find it far easier to subdue his/her opponent than from a position of weakness. Alternatively, if a fighter finds him/herself in a weak position, its almost always better to escape and save oneself, than to push a bad position and risk losing everything. Naturally, we prefer fighting from a position of strength.
