Mr Market will teach investors a lesson - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 2 October 2015
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Mr Market will teach investors a lesson A  A  A

- By Bill Bonner

Bill Bonner
Rome, Italy

Dear Diary,

What's Bill doing in Rome?

We'll tell you Monday. That will give us time to figure it out...

In the meantime, remember: cash is king. Not only is it the best-performing major asset class this year, it's also - by far - the safest.

Billionaire Carl Icahn is now urging clients to get into cash.

Cash will someday disappoint us. But probably not today or tomorrow.

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However, the authorities don't like cash. They have a bitter animosity towards it that has become almost a religious creed. Like the Temperance League and alcohol; they are afraid that cash is a pernicious temptation, leading to sin and suffering. Many people have a 'propensity to save,' they say. This, they believe, causes all sorts of social ills - from poverty to unemployment, chiefly.

Fortunately, the feds are there to protect us from demon cash. They fight this weakness in the human character with a variety of measures. Zero Interest Rate Policy, for example. 'You can save your money,' say the feds, 'but you won't earn anything on it.' This is like alcohol-free beer; you can drink all you want without ever getting a buzz on.

And there's Quantitative Easing, too, which effectively offers wavering dipsomaniacs the opportunity for a more intense high. Prohibition drove drinkers out of honest bars and away from safe libations. You had to go get your liquor at an unlawful 'speakeasy, often run by mobsters. And much of the alcohol consumed was dangerous bathtub hooch. Now, the feds drive investors into speculative equities, often run by nefarious cronies, and dangerous high yield debt. Investors will end up with an awful hangover, we predict; but at least they won't go blind.

When those schemes fail to quench the thirst for cash, as they inevitably do, the feds turn to more drastic measures. After all, if you can make alcohol illegal, surely the sky's the limit on social and financial engineering. And when beads of sweat begin to form on regulators' brows - during the next 2008-style crisis - one of their first calls, we predict, will be to Ken Rogoff.

"So, Ken, how does that ban on cash work again?' they will ask.

Rogoff did some good work, showing that high debt levels retard economic growth. Then, as a percentage of GDP, debt grows faster and faster - until the whole thing blows up. But like almost all modern economists, Mr. Rogoff has little 'amor fati.' That is Nietzsche's phrase for letting nature take her course. Rather than relax and enjoy the show, Rogoff proposes to rewrite the script. He has a solution! But not the obvious one -- letting Mr. Market sort it out; instead, he wants to make cash illegal.

It's true that Mr. Market is likely to handle investors roughly. He practices a version of 'tough love,' in which he corrects mistakes by teaching investors a lesson. Still, he gets the job done...quickly and as painlessly as possible.

The goal of practically every regulator, politician, crony and economist is to stop him. Mr. Rogoff, for example, wants to ban cash in order to impose 'negative interest rates' on account holders. Negative interest rates are just a tax. With no recourse to cash, money will be trapped in bank accounts, where a 'negative interest rate' can be levied easily. No vote in Congress is necessary...no lobbying...no horse trading...no smoke-filled rooms - none of the messiness of modern pseudo-democracy. Instead, the bald headed, grey bearded Ph.Ds will simply make it part of banking regulation. Like a drone attack on a suspected terrorist, no questions will be asked!

Meanwhile, we continue wondering what it takes to live on $500 a month.

Remember, our goal is to live better. We're not sure if a used motor home in a Walmart lot will take us where we want to go. So, let's look at some alternatives:

Our son Will has been looking at shipping containers. You can buy them for as little as $1,500. They are spacious. They are strong. They can be outfitted in almost any way you like. And they can be easily set up, almost anywhere you like.

From 'Tom' on the container living website comes this information:

    There are an estimated 17 million of these throughout the world at the moment, with around 6 million currently in use; this means there are literally millions of these containers that aren't in use that could be recycled and put towards a better use. Recycling shipping containers into homes is one of the more eco-friendly approaches as it avoids the energy intensive process of melting the steel back down whilst it's being recycled.

    Firstly, they aren't susceptible to dry rot and other fungus infections. Secondly, wood is predisposed to mould which steel isn't. Finally water leakage is much more common in log cabs when compared to the steel roofs on container homes. This little blog has a very useful overview of a simple shipping container cabin build: http://seacontainercabin.blogspot.co.uk/

Container houses are cheap, flexible and fast, say proponents. Those who've tried them report making complete houses out of them for as little as $20,000. IF...if...you were able to finance that...at 5%....you'd pay about $100 a month.

But wait. You have to put them somewhere. Hmmm....how about this? Maybe you could build a house out of containers on someone else's land. You live there but when you die or leave, the container house reverts to the landowner.

Are container houses BETTER than regular houses? Remember, that is our goal, to live better on less. For that, we may need to think out-of-the-container-box.

And here, our readers are way ahead of us. Many have written in with useful advice and ideas. See below...

More to come...

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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