|iTulip.com was first
launched in November 1998. The stock market bubble was fully
inflated. iTulip.com, and few others, were warning visitors not
put their retirement money in the speculative bubble that the U.S.
stock markets had become. Jim Cramer was ranting on CNBC about the
latest dot com "can't lose" stock. We warned that the stock
market was due to crash, most likely by the first or second quarter of
2000. It did.
August 2002, the stock market was
we forecast 1999. We had just gone through a short
recession and the
Fed and Congress were furiously pumping up The System, cutting rates
and slashing taxes as we forecast in 2001. We received many
letters of thanks from visitors who got out in time with their
retirement accounts intact.
I have followed your
website with religious zeal since its inception in
1998. I ducked the NASDAQ implosion while others have suffered. I
even managed to sell at the top of the market bubble in Feb 2000!
Many thanks to your prescient website!!!!
December 3, 2000
we went off the air and the founder, Eric Janszen, went off to run Osborn Capital portfolio company Bluesocket, Inc.
Fast forward to March
2006. The NASDAQ has mostly
stayed in the dumper,
with various dot com stinkers sinking and disappearing
into the history books, again, predictably.
DJIA, by a combination of a re-constitution of the easily manipulated
stock index -- throwing out some losers and adding in some winners --
and inflation has fought its way back to where it was six years ago
– flat. Except that, adjusted for inflation, it is down at
20%. But that hasn't kept
Cramer from returning to CNBC to rant and throw chairs around while
touting the latest "can't lose" stocks. Not
coincidentally, gold has gone up, as
we forecast in 2001
when gold was trading near 20 year lows and widely derided as a loser
investment class. But what really kept the U.S. out of poorhouse,
if only until now,
was the housing bubble. But not only did we fail to predict the
housing bubble in 2001 as the Fed's answer to the stock market bubble
we argued that the Fed would never allow one to develop.
Our thinking was that in the past the Fed has been very quick to stop
speculation in real estate, much more quickly than stock market
speculation. Why? Real estate involves the banking system
much more than the stock market bubble did and looking after the
banking system is Job One for the Fed. Letting
homeowners buy real estate they can't afford with mortgages they can
never pay back is a surefire road to mass defaults that can cripple the
banking system. When a relatively normal housing cycle boom ended
early 1990s, the U.S. banking system seized up. That response to
the downside of that minor real estate cycle was a gran mal seizure
compared to the massive stoke that the banking system is likely to
suffer on the back end of this real estate freak show. More
importantly, the political aftermath of a real estate bubble is
the macro economic devastation of the host country's economy.
unemployment and negative wealth effects that keep consumers home
sulking and saving, not out at the mall buying goods from Asia that
keep Asian central banks inspired to lend, and the virtuous circle of
lending, borrowing, importing and exporting going, in our case leading
recessionary, inflationary and other re-election sensitive negative
economic conditions. So why take the chance? Because it
better, at the time, than the obvious alternative: a hugerecession
and unemployment before the 2008 elections – never good for
anyone's re-election bid.
If we'd been listening more carefully, we would have heard Greenspan
noting in public hearings in 1999, when one senator wondered aloud if
Al was worried about the inevitable collapse of the stock market
bubble, and he replied that only a small percentage of U.S. households
stocks whereas 70% of household wealth is tied up in real estate. Don't
worry about it. We got a plan.
Alas, we at iTulip.com
missed the cue. What we didn't understand was that the Fed
convinced themselves at the time, and may still believe today, that
by the magic of securitization, the risk of defaults on all those
mortgage loans that can never be repaid with current dollars is spread
so far and wide around the planet that the aftermath of a housing
bubble won't be anything the Fed can't deal with. Not so, and
we'll explain over the next several months just how and why, and what
that's going to mean to you.
So we got the housing bubble prediction wrong in 2000. We didn't
understand that the Fed could be so short sighted and politically
motivated to make policy decisions that might doom the nation to a
decade or more of bad economic times, and all that implies socially,
politically, and militarily. But the Clinton/Greenspan regime and
the Bush/Greenspan regime that followed turned out in retrospect to be
classic Nixon/Burns president/central banker pals. Except that
rather than inflation in goods and services as a consequence of the
deal cut to maintain the economy through the next election, not to
mention an unpopular war, we got inflation in assets that makes nearly
everyone happy, as long as the asset prices stay that way.
But they won't. The housing bubble will end and money will be
printed to reflate the economy once again and that money will flow
elsewhere. Not to stocks or real estate or bonds or hedge funds
or venture capital or private equity. But where?
If we missed predicting the housing bubble in 2000, at least we were
one of the first to write, back
in 2002, that in fact a housing bubble was happening, at a time
when most of the financial press was arguing immigration rates and all
manner of nonsense not worth repeating to justify silly real estate
price increases. Checked housing prices around your neighborhood
lately? Here's where they're headed.
So what's next? We have our theories, as the pictures and
comments below vaguely suggest. But rather than just say, we're
going to bring the iTulip.com message forward in a new way. No
more missing central banker clues about what's next for The System,
perhaps the next bubble, as when Greenspan noted in 1999 that 70%
of household wealth was tied up in real estate.
The New iTulip.com is a community of the best and the brightest who
will work together figure out not only what's coming next, but what to
do before, during and after the events we collectively predict.
We intend to guide a lively discussion among our prized and loyal
members, especially those who contributed so much to our predictive
success in the 1990s.
Change is coming. Stay tuned. If you're new to iTulip.com,
welcome. If you're an iTulip.com veteran, welcome back.
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