|A B C D E F G H I J K L M N O P Q R S T U V W X Y Z|
1998, iTulip has adopted or invented new words and concepts so we can
discuss the peculiar economics and markets of our time. Some words
replace terms that have lost meaning. The "Currency Formerly Know
as the US Dollar" is too wordy, so we adopted the term "bonar" instead,
to meet dual requirements for brevity and levity. The bizzarre
economic landscape requires new language to explain odd phenomena that
iTulip has identified, such as "Risk Pollution," "Frankenstein Economy"
and "Bubble Cycle." Then there are pet hypotheses, such "Ka-Poom
Theory". And so on. |
This glossary is a work in progress. Requests and submissions are welcomed.
bonar : n. 1. a debt instrument backed by the full faith and credit of the latest corrupt
US political regime; 2. a share in USA, Inc., a technically bankrupt Enronesque nation whose monetary institutions have been alternately managed by crooks
and fools; 3. a currency which will eventually be valued at a rate of $1,000,000 bonars to one barrel of oil; 4. the currency issued by the United States of America, formerly know as the US dollar. See "US dollar."
bubble cycle : n. (Janszen 2005) the cycle of asset bubbles that now dominate the US economy. See article The Bubble Cycle is Replacing the Business Cycle.
: n. previously a measure consumer employment and income expectations, now a
gauge of consumers’ expectations of future access to credit.
deflation : n. negative rate of inflation, e.g., "CPI inflation averaged -1.3% in 2007."
disinflation : n. declining rate of inflation, e.g., "CPI inflation declined to 2.1% in Q4 2007 from 2.5% in Q3 2007."
dollar debt hot potato
: n. (Dr. Michael Hudson) Supporting the dollar via purchases of newly issued U.S. debt has
become the Hot Potato of global central banking. The U.S. Debt Hot
Potato is tossed from one holder or holders to the next. Foreign
central banks cannot allow the Hot Potato to be dropped. If it is
dropped, the dollar will crash and the value of their large US debt
holding will crash with it. Before the Hot Potato is tossed, a new
holder has to be ready to catch and hold it for as long as domestic
economic affects (inflation) and political affects (diversion of
reserves from domestic needs) allow. So it gets tossed from one unhappy
holder to the next–from Japan, to China, to oil producers, and so
on. This has been going on since 1971. Thus the value of the dollar has
become a political not an economic arrangement. Perhaps alternative
arrangements are being made, such as a floating tariff, so that some
day no one has to hold to U.S. Debt Hot Potato, or maybe a mis-step or
miscommunication occurs in the next hand-off and the Hot Potato gets
dropped on the ground. (See also US trade deficit financing.)
: n. 1. the orthodoxy de jour of a self-serving collection of
government bureaucrats, financial services and real estate industry
shills, and random crackpots; 2. a tortured excuse for failures to
predict economic events that will never reoccur; 3. is to economic
forecasting as the Farmer's
Almanac is to weather forecasting.
economic M.A.D. : n. the concept of Mutually Assured Destruction applied to the economies of China and the US. See article economic M.A.D.
n. 1. an economy, hideously out of proportion, as if pieced together from
odd parts of various dead economies and re-animated by monetary
inflation of assets, household and business credit based on the
collateral value of those inflated assets, GDP growth based on profits
and fees from the exchange of inflated assets, cash flow financed with
money borrowed from exporting countries lent to finance domestic
consumption, and repeated injections of liquidity into its increasingly
opaque markets; 2. an economy without accountability, sustainability, or
stability; 3. a large, ugly, stupid economic monster. See article Frankenstein economy.
: n. 1. the conceit that global trade is an invention of our current
era; 2. a global system of economic interdependence among countries worldwide through
increasing volume and variety of cross-border transactions in goods and
services, free international capital flows, and rapid and widespread
diffusion of technology; 3. like a global system that peaked at the turn of the 20th century and collapsed
with the end of the last politically independent international currency
standard (gold); 4. a system likely to end when the current bonar
currency standard fails.
hedge fund :
n. 1. a fund, usually used by wealthy individuals and institutions, which
is allowed to use aggressive strategies that are unavailable to mutual
funds, including selling short, leverage, program trading, swaps,
arbitrage, and derivatives; 2. a funds exempt from many of the
rules and regulations governing other mutual funds, which allows them
to accomplish aggressive investing goals, restricted by law to
no more than 100 investors per fund, and as a result most hedge funds
set extremely high minimum investment amounts, ranging anywhere from
$250,000 to over $1 million; 3. as with traditional mutual funds,
investors in hedge funds pay a management fee–however, hedge funds
also collect a percentage of the profits (usually 20%) from Investor Words.
Tepper, 49 years old, is head of Appaloosa Management, a $4.5 billion
hedge fund that owns 9.3% of Delphi's stock. Mr. Tepper has gotten rich
investing in America's broken companies and declining industries
… Mr. Tepper says he is not causing economic pain -- he is just
capitalizing on it … Delphi wants to close many plants and lay
off thousands of people. It also intends to cut wages and benefits
… On [Tepper’s] desk sit three plastic pigs. He jokes that
he rolls them for guidance on difficult trades. If all three snouts
point down, in the eating position, it's a signal to buy. "The media
says that hedge funds are the new masters of the universe," he
chuckles. "We're just a bunch of schmucks."” (Wall Street
Journal, Sep 30, 2006)
Many funds that call themselves a "Hedge Fund" are in fact a "USIP." See also USIP.
: n. in the US, a single family,
multi-family, condo or other dwelling, owned by a bank and
occupied by dreamers.
: n. (iTulip 2002) 1. a housing market condition characterized by prices
that rise far more quickly than incomes (see article Yes. It's a Housing Bubble);
a belief by the herd that a product assembled from wood, steel and
glass sitting on a pile of dirt can rise in value faster than the
incomes of the occupants who must pay for it; 3. a government funded
public works program comprised of tax breaks, low interest rates, and
unregulated lending, which provided more than 40% of new private sector
employment following the recession produced by the collapse of the 1996
- 2000 stock market bubble; a modern version of the Works Progress
Administration (WPA) 1935-1943 'New Deal' program that employed 8
million following the collapse of the 1920s stock market bubble.
housing bubble end n. (Janszen December 2004) the process of a housing market seizing up at the end of a boom period (see article Housing Bubbles are not Like Stock Market Bubbles).
housing bubble correction:
n. (Janszen 2005) a seven step process that typically lasts five to
seven years in the case of a normal post WWII housing bust that follows
a housing boom, but is likely to be a ten to fifteen year process after
the end of the three year 2002 to 2005 US housing bubble that followed
the 1996 to 2002 housing boom (see article Housing Bubble Correction).
: n. (Janszen 2006) 1. to an economist, an increase in the general or "all
goods" price level resulting from an oversupply of money; 2. to a
government statistician, a political football thrown onto the field as
producer and consumer price indexes, continuously reformulated and
subject to interpretations invented to suit various constituencies over
time, such as the under-reporting of home price inflation via an equivalent
rent formula when home prices are rising and rents are falling, in
order to hide the fact of a housing bubble that is needed to keep the
economy from falling into recession (see housing bubble); 3. to the person on the street,
rapidly rising prices of non-traded goods and services, especially
insurance, education, and health care, resulting from an excess of
cheap credit and the inappropriate use of credit to purchase
Ka-Poom Theory : n. (Janszen 1999) a
hypothesis that explains how the Bubble
Cycle ends, with a period of disinflation follwed by a period of
inflation. See article iTulip Retrospective.
: n. a mortgage loan typically pushed on desperate or unsuspecting
borrowers by unscrupulous lenders. The lender convinces the
borrower to lie about their income so that the borrower can qualify for
a loan that allows them to acquire property they cannot afford,
in order for
the lender to earn a commission and the bank or mortgage company to
enter the loan as an asset on their balance sheet. If the borrower is
make payments, the borrower may not only lose the home to the bank in
foreclosure, but is also liable for making a misrepresentation on the
loan application, a felony in many states (see also, suicide loan and Deathbed Loan).
loss fear : n. (iTulip 2001) 1. the human instinct that drives markets; 2. a common misconception that markets are driven
by fear and greed, when in fact investors are motivated two flavors of loss fear: fear of losing money and
fear of losing out on the opportunity to make money.
: n. (iTulip 1999) a market condition characterized by a predominance of participants who foresee
ever rising prices even though prices are well above historic peak
levels while at the same time foreseeing either minimal or declining
risk even though risk levels are exploding.
: n. an economic depression characterized by wide disparities in
household wealth, debt, income and risk such that two "classes" of
household result: a low savings rate majority class that funds spending out of
temporarily increased credit, which is vulnerable to
insolvency in a recession, and a high savings rate minority
class that funds spending out
of temporarily greatly increased positive cash flow from financial speculation income, which
is not vulnerable to insolvency. The modern depression condition
results from government policies–monetary, tax, and
regulatory–intended to produce an economic recovery following a
collapse of a previous asset bubble, itself the result of the
unintended consequence of interventionist monetary and fiascal policy that
unevenly distributed credit and risk in the economy. The conditions of
wealth, debt, income, and risk inequality are antecedents to a major
economic crisis leading to a social crisis that will be resolved, in a
a redistribution of wealth and debt relief by inflation. See article The Modern Depression.
monetary brand : n. (Janszen 2004) 1. a concept invented to explain the excess value assigned to the bonar by foreign investors, with brand applied the the dollar as to beers
made by Shlitz in the 1970s and early 1980s, and Budweiser
thereafter–notably both are very bad beers (see "Late Great American Dollar"). 2. a measure of
popularity not value, implying that the popularity of a brand–beer or
monetary–can turn on a dime.
monthly payment consumer : n. (iTulip 2006)
a new kind of consumer last seen in the late 1920s when installment
credit was invented to allow the middle class to afford new products
which resulted from the wave of government financed WWI military
technology working its way into consumer products, such as radio and
refrigeration. Sustained low interest rates starting in the mid 1990s,
and accelerating in the early 2000s as a result of post stock bubble
collapse Fed reflation policy, created the Monthly Payment Consumer.
This consumer's behavior accounts for the cost of purchases not in
terms of the total price but as a monthly payment in portion of monthly
income. After several years of “No Money Down!” and
“Zero Interest for Six Months!” financing, not to mention
interest-only and negative amortization mortgages, consumers changed
their behavior, stopped saving, and became used to the idea that credit
is almost free and in nearly infinite supply. The monthly cost of a
home that went for $1 million in 2005 purchased with a $3.3% ARM
carried the same monthly cost as a $500,000 home in 1995 purchased with
a 6.6% fixed rate mortgage. The two homes are equally affordable, but
the two prices apply to the same house with the 100% increase in price
separated by only five to ten years' time and representing no
equivalent 100% increase in value (utility). The price inflation was
the result of low interest rates provided by the Fed. Capital gains
income earned by speculators who made money flipping houses during the
period of rapid price inflation–tax free up to $500,000 for a
married couple every two years!–contributed significantly to
consumption during the period.
interest rates also allowed car companies to sell $30,000 cars in
monthly payments that used to apply to much less expensive cars.
In fact, everything from flat panel TVs to washing machines used to
fill those $1 million homes became more affordable on a monthly payment
basis when the money lent to consumers cost them nothing or next to
nothing. When the 0% monthly rate on a new credit card jumped to
$14% after the "introductory rate period" ended, homeowners merely
refinanced their homes, took cash out of their inflated home
price–spuriously counted by banks as an increase in "home
equity"–and used the resulting cash to paid off the credit cards.
The result is putting cars, furniture, consumer electronics and other
rapidly depreciating assets on 15 and 30 year mortgages. Aside from the
horrifically bad household finance that this behavior represents, this
process was inflationary, supporting ever higher goods prices.
This is one of the ways that sustained low interest rates have fueled
inflation. This is not a U.S.-only phenomenon. As The Economist
pointed out near the top of the global housing bubble in mid 2005,
housing price inflation had hit 18 major economies, including South
Africa, Hong Kong, Spain, France, New Zealand, Demark, China, Italy,
Belgium, Ireland, Britain, Canada, Singapore and The Netherlands; and
anywhere you have a housing bubble you also have the monthly payment consumer.
: n. 1: a sucker with a track record of naivety, ignorance, or just
plain stupidity, hence a scam artist's preferred customer; 2: one who
has proven his vulnerability is more likely to fall for a subsequent,
properly constructed scam than the average person in the telephone
directory. For example, a classic follow up fraud is to approach
someone who has been defrauded and sell him services to "recover"
previous losses. The smartest investors and traders learn from
someone else's mistakes, which is good, because nobody lives long
enough to make all the mistakes himself. Many people seem to learn only
from their own mistakes. Some poor, lost souls don't even learn
the hard way. They become "reloaders," two-time losers, or even serial
realtor : n. A liar.
risk pollution : n.
(iTulip 2006) the result of an ongoing externalization of risk for
profit by manufacturers of creative financial products, especially
credit derivatives, in the manner of chemical companies manufacturing
dioxin and other environmental pollutants in the 1950s and 1960s. The
resulting financial risk, now buried throughout the global financial
system, is concentrating in vulnerable areas of the system where they
will wreck havoc when their concentration reaches a critical level, and
will ooze out of the balance sheets of banks and other institutions
when market conditions occur that were not anticipated in the risk
models used in making of the products, which models were developed by
quants to convince management of the products' safety, at the pleasure
of sales people, all of whom will have moved on to new jobs long before
the birds start to fall from the sky (see article Risk Pollution.
sheeple n: (iTulip 1999) 1. individual investors
who make investment decisions based on the observed actions of the
other members of the herd; 2. sheep-like as a: unable to make rational
investment decisions based on personal observations that lead to
actions that contradict the actions of the herd b: uncritical of
information inputs from those who seek to profit, such as financial
services companies c: in for a big surprise.
state lottery :
n. a regressive tax imposed by the state on those of its citizens it
has failed to provide a basic education in the laws of
probability. Usage: "You don't see many Harvard
graduates waiting in line to buy lottery tickets." Related
quotation: "I never play the lottery. I figure I have about the
same chance of winning whether I play or not." - Fran Liebowitz
stock broker : n. a liar.
suicide loan : n. a mortgage
loan, such as an Option ARM, typically pushed on desperate or
unsuspecting borrowers by unscrupulous lenders that allows the borrower
to acquire property they cannot afford in order for the lender to make a
commission and the bank or mortgage company to enter the loan as an asset on their balance sheet. The economics of the loan under various likely future interest rate changes are so complex that no one, let alone the borrower, can predict the probability of default. See also, Liar Loan and Deathbed Loan.
US dollar :
n. the US dollar was backed
by gold until the collapse of the 1944 Bretton Woods Agreements
in 1971. After that the United States "suspended" convertibility from
dollars to gold–as it turned out, forever.
was rising and U.S. Gold reserves were falling, both as a result of the
ever increasing trade deficits which the U.S. continued to run with the
rest of the world. Shortly after President Kennedy was Inaugurated in
January 1961, and to combat this situation, newly-appointed
Undersecretary of the Treasury Robert Roosa suggested that the U.S. and
Europe should pool their Gold resources to prevent the private market
price of Gold from exceeding the mandated rate of $US 35 per ounce.
Acting on this suggestion, the Central Banks of the U.S., Britain, West
Germany, France, Switzerland, Italy, Belgium, the Netherlands, and
Luxembourg set up the "London Gold Pool" in early 1961.
Pool came unstuck when the French, under Charles de Gaulle, reneged and
began to send the Dollars earned by exporting to the U.S. back and
demanding Gold rather than Treasury debt paper in return. Under the
terms of the Bretton Woods Agreement signed in 1944, France was legally
entitled to do this. The drain on U.S. Gold became acute, and the
London Gold Pool folded in April 1968. But the demand for U.S. Gold did
"By the end of the 1960s, the U.S. faced the stark
choice of eliminating their trade deficits or revaluing the Dollar
downwards against Gold to reflect the actual situation. President Nixon
decided to do neither. Instead, he repudiated the international
obligation of the U.S. to redeem its Dollar in Gold just as President
Roosevelt has repudiated the domestic obligation in 1933. On August 15,
1971, Mr Nixon closed the "Gold Window". The last link between Gold and
the Dollar was gone. The result was inevitable. In February 1973, the
world's currencies "floated" like turds in a bucket. By the end of 1974, Gold had soared from
$35 to $195 an ounce." (From The Privateer)
The dollar then became the US bonar. See also bonar.
US trade deficit financing:
n. The US economy is funded primarily by its trade deficit. The US
abandoned the fractional gold reserve dollar and launched the US
Treasury dollar standard in 1971. Four years later, in 1975, the US
began to run large and growing
trade deficits because foreign businesses that sell goods
to the US have to turn the dollars they earn over to their central bank
in exchange for local currency, which the central banks then have to
use purchase US Treasury bills in order to prevent the
local currency from appreciating. This process will continue, the US
trade deficit and accumulated foreign dollar holdings growing, the US
consuming more and more of the world's economic surplus until,
eventually, it absorbs 100% of it. This is why the trade deficit has
only grown and never declined year after year since 1975, except during
recessions. (See also dollar debt hot potato.)
n. (Janszen 2006) 1. acronym for Unregulated Speculative Investment
Pool, a term created for iTulip readers to
distinguish between traditional hedge funds and the newer breed of
"hedge funds" that are in fact not hedge funds at all. Hedge
funds do still exist, but many of the funds that are referred to as
hedge funds are in fact USIPs. 2. the modern equivalent of the
Investment Trust, popular in the 1920s, with respect to exclusivity,
lack of transparency, lack of regulation, dependence on leverage, and
systemic risks posed.
have seen security prices soar out of sight of earnings, brokers' loans
swell till they absorb a third of the banking resources of the country,
and the blind pools of ancient days return and multiply by endless
crossing and pyramiding as the investment trusts of today. Banks merge
and emerge in chains, trailing trusts and holding companies, while
industrial corporations pay dividends not by producing goods but by
buying each others' stocks and by borrowing and lending everybody's
money in the market. But of all these things can anyone say with surety
what they signify, whether they are safe and sound, or what they are
leading to? We do not even know, or cannot agree, whether inflation
exists, what it means, or how it shall be measured.
Business Week - September 7, 1929
Detail: A hedge fund gets its
name from the strategy of taking a long position in one asset and a
position in another that has a negative value correlation. As a
result, the downside risk of losses from a decline in the value of the
long position is limited or "hedged," thus the term "hedge fund." The
upside potential of the long position is also limited by the "hedge"
position, because when one is going up in value the other is going
down. How can you make money, you might ask, if one is usually
losing value while the other is gaining, won't they just cancel each
other out? The way hedge funds make money is off the fact that, if the
positions–and there may be many more than two involved–are
correctly modeled and the value of the long position goes the way the
hedge fund manager believes is probable, the value of the long position
rises more than the value of the hedge, and the difference is a
A USIP, on the other hand, is rarely truly
hedged. That's because the investors in these funds are looking to make
lots of money, not modest spreads on the difference between long and
short positions. USIPs are, in fact, merely long.
Period. USIPs can have high returns than hedge funds, but at the
price of higher risk. That's the good USIPs. Bad USIPs are
the worst of both worlds, high risk and low returns. Not only are
they long and un-hedged, but they may also be using lots of leverage,
that is, money borrowed from banks, using the funds' capital as
collateral. Thus when they fund manager bets the wrong way...
boom! See also hedge fund.
n. (iTulip) 1. slang: Wall Street.
Wally Bucks :
n. (iTulip) 1. Bonar denominated securities manufactured by Wally