Do you have any backtest links that show a small cash position 'is an incredibly bad idea'?

A small cash position is another diversification strategy. As your portfolio increases in value, taking some profits to cash and then having it available on the dips may be perfectly valid. Buffet himself has called cash the never expiring call option.

EDIT

Schwabs CEO defends small cash position.

http://www.aboutschwab.com/press/statements/response-to-blog...