One more time, for the uninitiated, from Manias, Panics and Crashes (got cash?)

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.

Financial Times: Fund issues dire equities warning

We all know markets can stay irrational longer than you'd think, but some of the smart folks in the room are heading for the exits even as the market hits record highs. I think it was Buffet who said the key to investing success was to always sell early.

And since cash will be king during any unwinding, let alone The Great Unwinding (read Manias, Panics and Crashes), that means both illiquid (houses) and liquid (stocks) will be involved, not just the former.

A leading UK fund manager has sold off about half the equities in the portfolios he oversees in anticipation of an imminent and severe market correction.

Ken Murray, the founder and chief executive of Blue Planet Investment Management, has revealed he has offloaded equities and cut the gearing on the firm’s portfolios to zero in the belief a US economic recession is set to wipe more than 20 per cent from the value of global stock markets.

Blue Planet, a specialist investor in the financial sector with $350m of assets under management, operated three of the four best performing financial funds in the UK last year, according to figures from Bloomberg. Its Worldwide Financials fund was the best performing investment trust in the UK and the world over the last three years. About 25 per cent of Blue Planet’s portfolios are now in cash.

Mr Murray warned the impending market correction was likely to be considerably more severe that either of the two most recent downturns that began in February just past and in April last year.

Mr Murray, who began the share sales two weeks ago after the latest downturn, said a consumer spending slowdown was already under way in the US. Combined with rising inflation and a slowdown in corporate earnings, this would drag the world’s largest economy into recession.

“People don’t want to believe bad things will happen but the market will correct very sharply,” he said.