Peak Prosperity

Why are governments suddenly so keen to ban physical cash? The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age—that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.

By the time a central bank is behaving as recklessly as Japan, it's time to edge towards the exit, because the chance of a flash fire in the building has grown uncomfortably high. That is, instead of providing comfort, these most recent moves should invoke greater worry for those of us alert enough to see them for what they are: acts of panic:

We are at the rare moment in history, where probability is unusually high that a large move to the downside will happen in the financial markets in the relatively near future. This gives investors a degree of confidence in future price movement that they rarely enjoy. The importance of building dry powder and developing an actionable investment plan -- for before, during and after the coming price reset -- is of top priority:

Unlike past housing price cycles, the current environment is being driven not by natural household formation, but by a central bank-fueled investment cycle where institutional and foreign capital are the largest influence on the marginal price. This is unknown territory for homebuyers and certainly unsustainable at today's price levels. Brian Pretti shows how price mean reversion is inevitable; and urges homeowners (both residents and investors) to take steps not be as vulnerable as they were in 2008.

Heres a recently-released report on the stark choice that bubble markets force investors to make: to look like an idiot now, or look like one later. Those that have sought to position themselves prudently and defensively since 2008 currently look foolish as liquidity-inflated stocks and real estate prices have passed them by over the past 2 years-- while safe havens like precious metals have suffered mightily. But its critical to remember that the nefarious nature of a bubble is to suck in as many participants as possible before bursting and causing maximum damage.