November 7, 2008, iTulip

November 06, 2008 (Peter Foster, Financial Post)

As Barack Obama climbs that steep learning curve on the economy, let’s hope aides of shielded him from the latest issue of Harper’s. A series of articles on “How to Save Capitalism” in the latest edition of the magazine invites as much skepticism as would, say, a series on “How to Save Communism” in The Wall Street Journal. Still, at least it amounts to some kind of acknowledgment that capitalism is here to stay, even if Harper’s ideas of salvation would be toxic.

The reflexive liberal reaction to the current financial crisis has been to recommend lots of new regulations without considering either whether these regulations are now necessary, or bothering to reflect on why regulatory regimes have failed so conspicuously in the past.

In its introduction, the magazine displays its misapprehension of the issue at hand by suggesting that “capitalists” have done a bad job of meeting their “responsibility” to save capitalism. However, as my colleague Terence Corcoran noted on this page earlier this week, capitalists are often the very last people who should be relied upon to defend capitalism. Neither is it the job of “eminent financiers” to “protect us from economic shocks.” Meanwhile the “masters of our economy” identified by the magazine are not capitalists but politicians and bureaucrats, thus what has arguably been undermined is not the case for capitalism, but the case for “economic security.”

Such a way of thinking, however, is beyond most of Harper’s contributors, with the sole exception of Eric Janszen, a businessman, who identifies the key role of the government in promoting bubbles, and is the single correspondent who even acknowledges the existence of Fannie Mae and Freddie Mac. Mr. Janszen wants to end subsidies to industrial dinosaurs such as the auto sector, and recommends the greater use of public-private partnerships! How did this guy get in here?  More …

October 30, 2008, iTulip

Central bank says it will cut rates as needed to boost economy

Last update: 4:52 p.m. EDT Oct. 30, 2009

WASHINGTON (MarketWatch) — The Federal Reserve on Wednesday slashed overnight interest rates and left the door open for more cuts — all part of an effort to return confidence to investors so that a cratered economy doesn’t crater further.

AntiSpin: Note the date, one year in the future. Zero percent is where we are headed and likely sooner than a year from now. Then what? Would you believe a government issued debit card?  More …

October 28, 2008, iTulip

By Adaora Udoji, John Hockenberry, Lisa Nett

Guest: Eric Janszen

Looking for work will be a challenging prospect in the coming months as the nation grapples with a wilting economy. Eric Janszen, president of iTulip Inc. and a former venture capitalist, joins The Takeaway to discuss the plight and repercussions of unemployment.  More …

October 10, 2008, iTulip

Something is afoot that, so far, skirts the ken of our most sprawling macro-economic theories. Like the ultimate exogeneity or game-changing black swan, the best evidence of a dawning paradigm is that few things make sense through the old glasses. As T. S. Eliot remarked of great poetry (and I paraphrase), its arrival is felt before its impact is understood. In this instance, we will regret mistaking a lack of understanding for a lack of arrival.  More …

October 2, 2008, iTulip

October 1, 2008 (Bloomberg News)

Former U.S. Treasury Secretary Paul O’Neill said the $700 billion bank-rescue proposal under negotiation in Washington is “crazy,” with potentially “awful” consequences for the world’s largest economy.

“Doesn’t this seem like lunacy to you?” said O’Neill, who was President George W. Bush’s first Treasury chief, from 2001 to 2002, in a telephone interview today. “The consequences of it are unbelievably bad in terms of public intrusion into the private sector.”

“Is anybody thinking there?” asked O’Neill, who also served as deputy budget director in the Ford administration. “It’s too late, it’s not going to make any difference, and it’s aggravating as hell when there’s a better idea and you can’t even get it in play,” he said, recognizing little success so far in pitching his own proposal.

AntiSpin: “Is anybody thinking there?” Is that a rhetorical question? Of course they’re not thinking. They’re the US Congress. So now we get the worst of both worlds. Government interference in markets and a Depression because this plan can’t possibly work. We like the King plan. It gets money into the hands of small businesses.  More …

“I work in Credit Department at BoA (Senior Level Credit Analysist Boa Bldg 3rd fl, Char, NC). We just received memo indicating that all BoA credit cards are being closed as of 10/1. Credit score and income do not matter, all accounts are closed as of 10/1.” Executive VP Bank of America

“This is true, but not as bad as he/she says. We are closing accounts, but only ones with credit scores under 750. We will reopen cards within a year as long as crisis lessens.” - J.mcmanus / VP Credit Dept BOA

iReport Sept. 28, 2008

AntiSpin: We do not have independent confirmation but if true the event is significant – the number of credit card holders with scores under 750 is 60% percent of the population.  More …

Subject: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.  More …

September 19, 2008, iTulip

The financial crisis is over. The economic crisis has begun.

by Finster

The “solution” reverberating from Washington to Wall Street, amid the celebratory atmosphere in the financial markets, must be put in perspective. It represents yet another massive wealth transfer from the United States to far flung corners of the globe.  More …

September 18, 2008, iTulip

April 2006 in “Risk Pollution: Financial Markets Polluted with Risk” I compared the era of unregulated lending to the period of the unregulated chemical industry. The latter polluted the environment with chemical toxins and the former with toxic debt. The article contains the first use of the word “toxic” that you will find on the internet in connection with mortgage and other debt.

In that article I made the following forecast:

In truth, no one knows who will be left holding the bag when defaults on loans made using these innovations occur. But we can be fairly certain it won’t be the institutions that made the money selling them. Most likely, it will be the same folks that paid for the Super Fund projects that cleaned up after the chemical industry — you and I.

And here it is, two years later, a credit toxins Superfund paid for by you and I.  More …

December 4, 2008, iTulip

Monday the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) turned its keen analytical eye on the rear view mirror of the US economy and spotted a year off in the past the start of the recession in Q4 2007 that we spotted through the windshield a year before in October 2006. What did we know that they didn’t?

Over the past few days we’ve received a pile of email from readers asking, how did you guys do it again? Do you have a time machine? Do you use astrology? Do you see the future as shimmering visions after swallowing a fist full of mushrooms with a pint of tequila? Not at all. You can forecast the economy, too, by following these four simple steps.  More …

December 2, 2008, iTulip

Why aren’t massive expansions of banking reserves by the Fed working this time?

Back in September 2008 we posted a chart that shows the Fed vastly expanding reserves for member banks. We show the expansion as a percentage rather than an absolute change because the numbers are so large as to be meaningless. The real story is the proportion relative to past crisis — real, as in the case of 9/11, or imagined, as in the case of Y2K.

The explanation that the Fed was doing the right thing looked reasonable back in the days in October 2008 when the expansion of reserve deposits were up 150% year over year, only two and a half times larger than ever occurred before during a financial crisis, but now that the expansion has continued to 625% year over year, more than eleven times larger than during the 9/11 emergency, new questions arise.  More …

November 25, 2008, iTulip

No “bottom” until the debt is gone

by Eric Janszen

As detailed in Debt Deflation Bear Market Update Part I: 2009 Windup, the Debt Deflation Market that started in 2008 continues in 2009 with rallies driven by positive sentiment invoked by government stimulus spending announcements, such as the rally we have witnessed over the past few days. As we exit the Period of Panic that began in October and enter the Period of False Hope and Uncertainty in 2009, the brave hearted may attempt to trade these rallies, and we will attempt to identify them for subscribers. The false hope is that government spending can pull the economy out of its debt deflation, and that we are wiser than our grandparents and great grandparents were under similar circumstances. But that was then, and this is now.  More …

November 24, 2008, iTulip

I just returned from a brief sojourn in Iceland a month after the currency collapse there. Not the end of the world for Icelanders, but no picnic either.

The first thing to note is that everything still works in Iceland. The banks are open, the ATMs work, and you can change money. The social order has not broken down. Throughout my trip I received the official rate of about 200Kr to one Pound Sterling. As I signed the hotel bill the chap at reception remarked “That’s a lot of money,” as I was thinking “Wow, that’s cheap.” This leads me to believe that Icelandic wages have not gone up 20-30% to keep up with inflation. Deflation and inflation, our future?   More …

November 24, 2008, iTulip

by John Serrapere

Stocks are tracking rapidly declining economic conditions that imply greater than -10 RGNP contraction and an S&P 500 new lows -10% to -20% belowthe Nov. 19 close. There is hope that the bottom will remain near 800 and be no lower than the Oct 2002 lows near 780 at year-end (-3.3%). The best case would be a violent crash within the next week with a 15% to 20% rally following capitulation.  More …

November 20, 2008, iTulip

December 27, 2007 we warned of a major bear market in US stocks coming in 2008. The cause? Debt deflation following a 27 year credit bubble, much as occurred in the US starting in 1930 after the 1920s credit bubble and in Japan since 1990 after a credit bubble in Japan that ended in 1989. We forecast for the DJIA in 2008 a decline similar to the Nikkei in the first year of Japan’s debt deflation in 1990, around 40%. We called it the Debt Deflation Bear Market. Today in our forecast for 2009 we see the Debt Deflation Bear Market continuing but with a Fiscal Stimulus and Reflation Trade operating within it.  More …

November 16, 2008, iTulip

Thirty-seven years ago the world’s economies started on a circular track back to Bretton Woods. We will soon be back where we started.

By Eric Janszen

The official output of the G-20 Summit is 3366 words, including 61 instances of the word “should� as in “Financial institutions must also bear their responsibility for the turmoil and should do their part to overcome it including by recognizing losses� and “Incentives should be aligned to avoid excessive risk-taking� and “Regulators should enhance their coordination and cooperation across all segments of financial markets� to cite only the first three. The entire rambling tract says in sum, “We met. We talked. We agreed that serious challenges to the world economy and financial markets exist but are not so serious as to compel us to do anything about them. There is so little urgency that we decided not to meet again until the spring of 2009 to talk about the crisis more.�

The only intriguing output that passel of pattering public servants managed to produce is a rumor that the topic of gold came up in the meeting. Judy Sheldon, writing for the Wall Street Journal on Friday, in her article “Stable Money Is the Key to Recovery: How the G-20 can rebuild the ‘capitalism of the future” said…  More …

November 16, 2008, iTulip

by John Rubino (DollarCollapse.com)

Editor’s Note: I’ve been talking about an alternative energy investment boom since I did my research and wrote in the summer of 2007 the Harper’s Magazine Next Bubble article that was published six months later in March 2008. When I was interviewed on CNBC in February, the month the magazine issue hit the stands, when asked what solar and other alternative energy stocks to buy I responded, Not yet. Investors should be in cash. We’re at the start of a long bear market.

For the next few years the name of the game is follow the legislation. For tactical opportunities for investing in government spending driven energy programs, our friend John Rubino has researched a number of tactical opportunities.

  More …