February 3, 2010, iTulip

At least one good thing came out of the housing fiasco. We’ll never have to clean up after another mess made by mortgage brokers selling liar loans to borrowers who can’t afford to repay.

No more exploitation of the dreams of new entrants to the middle class, built on the fantasy that they can afford a home that sports a price that has been inflated by decades of government loan subsidies.

No more Fed buying blown up asset-backed securities that backed bogus sub-prime mortgages to rescue banks that should be allowed to fail.

That’s all behind us. We learned our lesson! The government will prohibit these kinds of loans, prosecute violators, and never allow this mistake to happen, again.

Wait. What?  More …

January 16, 2010, iTulip

by Joost de Jong - January 15, 2009

As we gently slide toward the second dip of our roller-coaster recession, it may be time to consider our oldest ally across the ocean. Britain, you might think, but alas, that is a relationship that took some time to develop after the nascent United States decided to take its own course some 234 years ago. No, I mean France, that stubbornly self-serving nation that enjoys a level of economic growth and stability that the US has yet to attain.

Much of the iTulip editorial for the past decade has been dedicated to identifying the poor monetary and regulatory policies that lead to a never-ending sequence of financial bubbles. In the spirit of offering constructive alternatives, we are compelled to look outside US borders for a better model, to another nation that appears to manage its responsibilities to its constituency better. For that, my choice is France.  More …

January 5, 2010, iTulip

I’m working on projects this afternoon, trying to focus, but I’m distracted. Helicopters hover nearby. For over an hour. Loud helicopters. Yes, black helicopters.

Don’t worry. They were not here to invade iTulip headquarters in our Boston suburb where MIT and Harvard graduates come to breed and avoid sending their offspring to second rate public schools. They rather spend their money on expensive homes and high real estate taxes than on that and private school tuition to boot.

It’s a place where you see a SWAT team as often as a giraffe. Yet as I tool the back roads to town on an errand, a SWAT team is exactly what I encounter. I take this picture through my windshield.  More …

November 15, 2009, iTulip

by Joost de Jong

As a European investor, the DJIA has lost 44% over the past ten years, and that’s not the worst of it.

It was hard to miss the DJIA returning to the glorious level of 10,000 first achieved more than ten years ago, in March 1999. Recently various stock market pundits came together to celebrate the regaining of that level with a flood of uninformed cheer the airwaves and cable channels exhorting, We’re back, baby! Time to pay bonuses! In Goldman we trust! From our European vantage point, things look a little different.  More …

November 5, 2009, iTulip
Uncle Sam as Landlord

In 2005, as we saw tracts of homes spring up all over South Florida, Nevada, Arizona, and California, we guessed that in the aftermath of the housing bubble, the federal government was eventually to own not only the securities that backed the mortgages on these homes, and then the mortgages, but eventually the homes themselves. We envisioned Uncle Sam as landlord, renting houses and condos built by Toll Bros. and other major home builders. That day has arrived.

Fannie Mae to rent out homes instead foreclosing
November 5, 2009 (AP)

Fannie Mae to allow troubled borrowers to hand over deeds to homes, let former owners rent

Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday.

The government-controlled company, through its new “Deed for Lease” program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that.

AntiSpin: During the 1980s, the federal government sought to replace public housing with private housing made available to lower income families via affordable, government-backed mortgage loans. But the fact is, not everyone can afford to buy a home or condo. Now the process of privatization of public housing begins to run in reverse.  More …

August 19, 2009, iTulip

by Janet Tavakoli, president of Tavakoli Structured Finance

Chicago is beautiful in the summer for lucky people like me. It offers outdoor symphony concerts, boat trips on the lake, bike outings, outdoor festivals, art fairs, hiking and more. But the picture would not be complete if I didn’t mention that I believe the city budget is running out of money, and crime is on the rise. I believe this increased violence is related to the economy, and it is not mere crime, it is civil unrest.

Chicago news shows have provided little coverage up until now; but at least one community—Chicago’s Uptown area—is forcing the issue. This video was shot by a frightened citizen during recent gang violence at Leland and Sheridan, a neighborhood in the process of gentrifying:  More …

June 23, 2009, iTulip

Why did the government take so long to comment? Why did government representatives say so little? Why were the perpetrators Japanese? Why did the Italian authorities let them go? Why has the mainstream media said so little about it? No secrets revealed!  More …

June 18, 2009, iTulip

What happened: In a time when public trust in government and media are at an all time low, conspiracy theories flourish, creating a broad platform for demagoguery. The recent story of the $134.5 billion in fake U.S. bonds is a case in point.

In News of the Weird: June 10, 2009 we were the first U.S. website to cover the case of the $134.5 billion in fake U.S. government bonds after one of our readers located the story on a German site. We posted the first video about it the same day, June 10. Other sites picked it up the next day and put various conspiracy spins to it. Since then the story has been picked up by hundreds of sites around the world. Conspiracy theories quickly took the limelight.  More …

June 2, 2009, iTulip

Back when we started talking up gold in August 2001 when the metal traded at $270, if we suggested that some day a large insurance company will buy hundreds of millions of dollars worth of gold to “hedge against further asset declines” we’d have been laughed off the Internet. And then…

Northwestern Mutual Makes First Gold Buy in 152 Years
June 1, 2009 (Bloomberg - Andrew Frye)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines. 

AntiSpin: Today, with this announcement, gold officially exited the Early Adopter stage of market development and entered the Early Majority stage.  More …

February 1, 2010, iTulip

It’s the FIRE Economy, stupid.

• GDP mystery solved
• Retail’s Armageddon-lite
• Productive Economy falters
• The great asset price collapse
• Why stocks are falling

If not from cash income earned on the job or credit tapped from credit card and other revolving credit sources, where is the money coming from to finance the consumer economy recovery? What is “Personal Consumption Expenditures� anyway?

A seemingly simple and innocent question about personal expenditures once again leads us to unexpected places, in this case through the bowels of the U.S. National Income and Product Accounts (NIPA) and Fed Flow of Funds data. There we discovered that approximately half of the Personal Consumption Expenditures (PCE) measure appears to have little to do with consumers spending money on dinners and iPods in the Productive Economy and everything to do with paying interest on mortgages, bank fees, and other economic rents in the FIRE Economy. In the process, we discover just why the economy feels as bad as it does even though the PCE numbers present an economy on a rapid recovery path, and why the latest GDP report is utter nonsense.  More …

January 20, 2010, iTulip

Here in Massachusetts, a state with three times as many registered Democrats as Republicans and half of voters are independent, the senate seat previously held by the nation’s most famous Liberal Democrat, Ted Kennedy, was tonight lost to a relatively unknown Republican, Scott Brown. He beat the supposed Democratic shoo-in Martha Coakley by a narrow margin.

Political analysis will chalk the loss up to Coackley’s lack of charisma and her endorsement of the Obama health care plan. But Massachusetts has a long history of electing less than electrifying candidates to office, and it’s not the health care plan itself but what it represents that puts voters off. There was more to this election than meets the eye.

What did Coakley do wrong and what did Brown do right, and what does it mean for the 2010 Congressional elections in November?  More …

December 31, 2009, iTulip

Victory is sacrifice, sacrifice is continuity, continuity is tribulation.
-Jack Kirby

Imagine you were knocked over the head in 1999 with the December issue of the Red Herring magazine. It weighed in at two pounds, such was the demand for advertising in that west coast technology bubble catalogue at the time. The NASDAQ had climbed over 4000, the S&P500 near 1500, and gold averaged $283 that month.

You wake up ten years later in the hospital. The nurse left today’s Wall Street Journal by your bed. You pick it up. It’s dated Dec. 31, 2009. Holy cow! You’ve been in a coma for ten years. Then you spy the headline “2009: Banner Year For U.S. Stocks� and you smile. Whew! You may have been out of it for a decade but at least your portfolio, heavy in tech stocks and the S&P500, kept growing as you slept.

Then you start to read the story.  More …

December 11, 2009, iTulip

The past two U.S. economic recoveries were enabled by asset bubbles, first in stocks, then in housing. Monetary and fiscal stimulus was pre-committed by government reflation policy to counter the macro economic damage caused when they inevitably collapsed. As we forecast, Great Depression type commodity price deflation didn’t follow. Instead, we have the perverse side-effect of high unemployment, high commodity prices, and low profits. Stocks rise not due to future earnings but asset price inflation directly. Worse, the U.S. economy remains dependent on bubbles for economic growth, to generate incomes to tax, for receipts to finance outrageous government outlays. The economy cannot grow its way out of debt without them.   More …

November 3, 2009, iTulip

ASPO-US Conference Denver 2009 Trip Report and analysis

In October I attended and was a speaker at the annual Association for the Study of Peak Oil and Gas in Denver, Colorado. Approximately 500 attendees watched 70 speakers present on the geology, economics, and politics of peak oil. In this two-part report I synthesize what I saw.

For readers who are not familiar with the theory, peak oil refers to the process of total world oil production reaching a peak and then declining on a global scale as occurred in net oil exporting countries, such as the U.S. until the 1970s, the UK until the year 2000, and Norway before 2001.

My own interest in the topic started in the early 1970s when I read the 1972 book on energy and resource limits, Limits to Growth. I majored in Natural Resource Studies at the University of Massachusetts in the early 1980s, and later graduated with a BS in Resource Economics. My first iTulip writing on the topic was Energy and Money in March 2006.

I presented at the ASPO conference on the outcome of inflation versus deflation debate, and participated in a panel on energy and the economy with author Kevin Phillips, Adam Robinson of RBS, and Dave Cohen of ASPO. My presentation is available to ASPO members and to iTulip Select members in Part II.

Before we discuss the controversial issues raised at the conference, we review and update the basics of the peak oil argument.  More …

October 26, 2009, iTulip

For the past ten years we could run ourselves ragged trying to counter the gold disinformation machine. For example, the lead story in the Markets section of today’s Wall Street Journal “Odd Couple: Stocks, Gold Share Same Ride Higher. �

Let’s look at the key assertions in this opening paragraph in the context of actual data, the price of gold and of the S&P over the past ten years since iTulip opened shop and we started buying gold. We also correlate the data with the political economy of the FIRE Economy that drives gold and stock prices.  More …