May 2, 2008, iTulip

This week saw more than the usual number of goofy interpretations of dubious government data. Today we are treated to bad but better than expected payroll employment numbers. President Bush expressed hope today that economic-stimulus rebates beginning to reach taxpayers this week will help the economy. “This economy is going to come on. I’m confident it will,” Bush said while visiting a technology plant in a St. Louis suburb, reported the Associated Press. We are reminded of similarly optimistic pronouncements in previous post-bubble periods. “I am convinced that through these measures we have reestablished confidence,” said Herbert Hoover, December 1929. “The spring of 1930 marks the end of a period of grave concern… American business is steadily coming back to a normal level of prosperity,” reported Julius Barnes, head of Hoover’s National Business Survey Conference, March 16, 1930. It’s only natural to see the data in the best possible light, especially in an election year.  More …

April 14, 2008, iTulip

The Treasury paid soldiers during the inflationary period of the American Revolutionary War with bonds indexed to a basket of commodities. Can the method be applied to tax rebate checks?

The business media are getting better at covering the silly political response to the collapse of the housing and mortgage bubbles. This story from Forbes is one of the better treatments of the subject.

Eight luxurious ways to spend your rebate
April 11, 2008 (Forbes.com)

“It was a harebrained scheme,” says Pam Danziger about the economic stimulus legislation. The president of Unity Marketing, a marketing consulting firm based in Stevens, Pa., she believes Americans will not hit the shopping malls, as the government intends. Instead, she says, they will pay off debt.

AntiSpin: Not bad but they are still missing the story. We call it the Inflation Abatement Check because it might just about cover a year’s inflation costs for the average recipient. For example, the DOE and DOT say an American auto is driven about 12,000 miles a year and gets an average of 24 MPG. The average price of a gallon of regular gas a year ago was $2.27 versus $3.11 today. The average car owner will spend about $375 more this year than last year just on gasoline, or 63% of that $600 “rebate” check. Sum the higher costs of energy, food, utilities, insurance, and tuition and that $600 check is already spent by inflation. Sad that so many recipients think they are going to be able to save it.  More …

April 5, 2008, iTulip

Two weeks ago three iTulipers where quoted in the New York Times story Crux of the Crunch about the true causes of the mortgage crisis: “Today’s ARMs were ‘designed to fail, so you have to refinance,’ Ms. Wachter said. ‘It shouldn’t be surprising that values go up and down in this kind of situation. And when you most need to refinance you can’t — the crux of the crunch.’”

Today iTulipers help tackle the topic of foreign exchange.  More …

March 27, 2008, iTulip

We published this notice Tuesday March 25 to make our readers aware that a group of home owners organized by the Neighborhood Assistance Corporation of America (NACA) planned to protest government bailout of Bear Sterns and other investment banks that made bad bets in the mortgage industry. The protesters are homeowners who do not believe that banks or homeowners should be bailed out.  More …

March 26, 2008, iTulip

March 26, 2008 (LA Times)

As the stock market gyrates, authors’ proposals flourish. But will their financial advice be relevant by the time a book’s in print?

NEW YORK — About a year ago, one of America’s bestselling business books was Michael Corbett’s “Find It, Fix It, Flip It!: Make Millions in Real Estate — One House at a Time.” Today, one of the hot finance titles picked up for publication is Stephen Leeb’s “Game Over: How the Collapsing Economy Will Shrink Your Wealth by 50% Unless You Know What to Do.”

As the U.S. economy deteriorates and millions wrestle with questions about their faltering 401(k)s and when — or if — to cash out long-term stock investments, major publishers are scrambling to cash in.  More …

March 20, 2008, iTulip

Today’s ARMs were “designed to fail, so you have to refinance,” Ms. Wachter said. “It shouldn’t be surprising that values go up and down in this kind of situation. And when you most need to refinance you can’t — the crux of the crunch.”

We operate on the principle that most reporters indeed want to help their readers and want to cover what is really going on but don’t always have access to sources who can help them understand often complex issues. So our approach is to do our best to help them. One way is to provide iTulipers as sources with expertise in finance and economics. The New York Times story from the cover of today’s business section is a perfect example. It has not one or two but three iTulip members as sources.  More …

March 16, 2008, iTulip

Once upon a time in a village as Winter was ending a man appeared and announced to the villagers that he would buy monkeys for $10 each.

The villagers knew that there were many monkeys in their forest. They left their farms and went to the forest and started catching them. The man bought thousands at $10.

As the supply of monkeys started to diminish the villagers stopped looking. Finding and catching monkeys was no longer worth the effort for $10. They started to return to their farms to get the Spring crop planted.

He then announced that he would buy monkeys for $20 each. This renewed the effort of the villagers and they started finding and catching monkeys again.  More …

May 12, 2008, iTulip

Buy used and use cash

by Eric Janszen

Back in November 2006 we wrote How much of your car should you finance? Zero percent. Back then, a month after we released our forecast of a recession due to start at the end of Q4 2007, the housing bubble fueled economy was only just starting to wind down, and the mainstream press was still in denial about the coming post housing bubble bust. Now that the recession has arrived our advice to buy a car with cash instead of financing is getting a whole lot easier to follow – if you also took our advice and saved cash, too.  More …

May 10, 2008, iTulip

We have since 1999 believed that the US was destined to inflate its way out of excessive debt, both public and private. The logic of our conclusion is simple. The government can never pay off its debts to foreign governments or to itself – not enough national income. US households can’t pay their debts either for lack of opportunities to increase income to cover debts. The Fed has the option to inflate in any economic or financial system crisis that might precipitate a debt crisis because the US is not on a gold standard as it was in the early 1930s when the US suffered a monetary deflation as a result of the last debt crisis. And, finally, monetary inflation is politically expedient because it cannot be readily blamed on one political party, arising as it does from the bipartisan Fed, whereas taxes – the honest means for paying public debts – is political death for the party that chooses it.

In any case, increasing taxes during the kind of economic contraction that typically leads to debt crisis is, as economists say, counter cyclical, like asking your wife if it’s okay if you go play cards and drink beer with your friends right after you’ve finished apologizing for forgetting her birthday, again.  More …

May 5, 2008, iTulip

By Eric Janszen

Since the early 1980s the US economy has become more feudalistic. Economic liberalization that was promised under the Reagan administration and carried forward by both Democratic and Republic party leadership ever since has succeeded in reducing economic rent on wage earners extracted by government in the form of taxes, formerly spent inefficiently on public goods, in exchange for increased economic rent by banks in the form of interest on debt, the money spent efficiently to increase the scale of the financial sector of the economy at the expense of the goods and services sectors.  More …

Transparency May 2008 - Eric Hodges

May 4, 2008, iTulip

A Distilled Markets and Macroeconomic Letter - May 2008
Transparency Detail

April 21, 2008, iTulip
From rising prices, to shrinking candy bars, to increased fees – how to avoid an inflation-induced household budget crisis that may be creeping up on you now

Inflation is unfamiliar to Americans who are not old enough to remember the horrors of disco. Not since the 1970s has America seen the kind of price inflation that is rampant today, in all its many forms. In the first part of our inflation primer Inflation in America we give you the basics. Like a frog heating slowly in a pot of water, if you’re not aware of how inflation works its corrosive effects on your budget you may find yourself financially cooked.  More …

April 16, 2008, iTulip

Bank robbed by insiders, loss covered by taxpayers

by John Olagues

Editor’s Note: John Olagues is the owner and principal consultant for Truth IN Options and a recognized authority on listed and employee stock options. In 1976, John became a member of the Pacific Stock Exchange in San Francisco trading and managing options positions in scores of different stocks. John joined with  partner to create Options Research, the first service to provide theoretical options values to market-makers and to the general public. In 1980, he became a member of the CBOE, where he personally traded more options in more diverse situations than any other trader.

In this article John makes the case that the Bear Stearns collapse was artificially created so that insiders could take large short positions in Bear Stearns stock prior and so that J.P. Morgan would in effect be paid $55 Billion of US tax payer money to shore up themselves and to buy Bear Stearns.   More …