June 29, 2007
I've sensed a change.
Probably like the Titanic when finally, the people realized the ship was going down, there was no more arguing the basic fact that the ship was going down, and then the mad frenzy to secure a place on a lifeboat commenced.
The time for arguing is over.
Now it's time for the mad dash to the lifeboats.
Cash will be king. It hath been foretold:
· The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns.
· It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.
· In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: 'a larger and larger group of people seeks to become rich without a real understanding of the processes involved'.
· Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.
· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.