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| Quote for this Market:
"Anybody who plays the stock market not as an insider is like a man
buying cows in the moonlight." - Daniel Drew, 19th century speculator | |
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| "Are we all still talking about the housing bubble? Stick a fork in it!" June 20, 2007 (iTulip) This from an iTulip letter writer today. Can you blame her? iTulip readers started to read about the housing bubble here August 2002 so they can be forgiven for losing patience reading coverage of the whole predictable ugly debacle five years later. While chronicling the decline makes good doomer press, it's too late now for readers to do much about it. more... | |
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| Greenspan vs Greenspan June 14, 2007 (iTulip) Most investors are comfortable considering asset bubbles as excesses of stupid investors, greedy CEOs, and over-paid bankers. After a bubble is over, a few appointed sacrificial lambs are slaughtered, such as Goldman Sachs analyst Abby Joseph Cohen after the stock bubble and National Association of Realtors Chief Economist David Lereah after the housing bubble. Few are as keen to explore the idea that an asset bubble is a kind of racket start to finish. more... | |
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| California Foreclosures Reach $2.8 billion in May June 11, 2007 (iTulip) The loan value of foreclosed homes returned to lender at auction, the measure of foreclosure activity that we have been tracking with FR since September 2006, increased from $420 million per month in September 2006 to over $2.8 billion in May 2007. more... | |
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| Turkeys fall back to earth June 7, 2007 (iTulip) Don't forget, it started with real estate An old expression reappeared during the 1990s stock market bubble to explain how Internet and telecommunications companies with no apparent prospects, and run by children, were able to go public and then see their stock prices shoot up: "If the wind blows hard enough, even turkeys fly." A gale force wind of money has circulated the planet for the past few years, putting everything from large public companies to large empty office buildings to flight. As inflation increases globally, the Wall Street backed American Association for the Prevention of Cruelty to Flying Turkeys has been lobbying the Fed for if not a rate cut at least forbearance on hikes. But recently the bond market started telling the Fed that time is running out, and stock market investors are taking notice. more... | |
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 The Con Before the StormMay 30, 2007 (iTulip) The stock and credit markets are finally topping out. Have institutions pulled out as retail investors keep piling in? That's what happened last time, before the stock bubble burst in 2000. We start off today's News with a curious piece by our old nemesis JJ Cramer in New York Magazine, Cramer vs. Cramer. It's long, six pages: two parts self-flagellation, one part bragging, and three parts justification. In sum, he says the reason he, an industry insider, takes the time to give away the hard earned secrets of Wall Street to his viewers for free is because he's insecure and needs to constantly prove that he's right. While the show teaches his viewers how to get rich picking stocks, for him–already rich from his hedge fund and needing no additional income–it's therapy to feed his know-it-all, look at me, Ma, neuroses. He concludes by appealing to his critics for pity: "For the people who still can’t stand me, anything I do, or what I claim to stand for, I can offer only one thing. Despite the fact that wherever I go I get asked for my autograph, and if I stop for too long I end up getting my picture taken with a dozen strangers, I remain completely and utterly repulsive to myself." more... | |
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| Greenspan's lame China warning May 25, 2007 (The Independent) The former Federal Reserve chairman Alan Greenspan says China's stock market is heading for a crash, threatening to ruin millions of middle-class investors. In old-style Communist China, the stock market was a potent symbol of evil capitalism and the rise to power of Mao Zedong's hard-line Communists in 1949 brought an end to share-owning capitalism in China. Stock ownership was a capital offence. These days, the middle class in the world's fourth-largest economy has gone equities-crazy. First-time investors, ranging from taxi drivers to Buddhist monks, pensioners to students to cash-rich entrepreneurs, are engaged in a frenzy of share buying that has seen prices rise 50 per cent this year and prompted fears of a speculative bubble. The former US Federal Reserve chairman Alan Greenspan's warning on Tuesday that the bubble might burst was therefore a potential disaster for millions of Chinese - particularly as market setbacks following his speech suggest the prophecy could be self-fulfilling. AntiSpin: Alan Who? asked Chinese investors when they heard ex-Fed Chairman Alan Greenspan's warning that stocks in China face a "dramatic contraction.' The CSI 300 Index closed down only 0.5 percent. Yawn. more... | |
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 Are indexes really higher, or is it the investors who are high?May 22, 2007 (iTulip) Gasoline and S&P 500 make new highs, China diversifies into Wally Bucks, REITs cave... finally On my way back to Boston from NYC, while standing beside my fast, gas guzzling, politically incorrect Infiniti FX, I filled the tank with Premium. For the first time I watch This Sale tick past $70. That was last week. This week filling the tank will cost more than $75. Gas made not only a nominal high but reached an inflation-adjusted (real) peak price as well. The S&P 500 made new nominal highs, but not priced in euros. The S&P 500 hit a peak of 974 euros in 2000 and trades around 780 euros now. more... | |
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 Cat rescued from tree, DOW surges 100 points Boom or Poom? May 17, 2007 (iTulip) Any excuse will do as markets continue to move on the expectation that global central banks don't have the cojones to withdraw liquidity, that is, to increase the cost of debt in our highly leveraged global financial system, so the flow of money to finance deals will continue unabated. Like the IPO mania of 1999, this disease has infected not a few hundred board rooms of dot coms and telco companies, which industries represent a few percent of the US economy, but thousands of board rooms, representing just about every public company in every market. We have yet to speak to a CEO or senior exec of a public company that won't confide the giddy hope, bordering on conviction, that their company is next in line to receive a proposal for marriage from a larger company, an LBO from a private equity firm or hedge fund, or some other source of capital that will result in a personal financial windfall. These expectations have infected DOW and S&P investors in these companies as well. With so many betting that the stock in the companies they own is likely to be over-bid in a take-over, why sell? Here's how our hero JJ Cramer puts it. more... | |
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 Bulls Rush Back In Where Angels Fear to TreadMay 11, 2007 (iTulip) After a one day breather, back they come. Bond Market Holds the Reins Of Stocks' Run May 11, 2007 (Justin Lahart - Wall Street Journal) Most investors like to rely on quaint stock-market measures like price-to-earnings and price-to-book ratios, or profit growth to make judgments about where stocks are headed. But those fundamentals don't seem to matter much right now. The bond market is in control of your stock portfolio. Reasonable people can argue, and they do, over whether the stock market is sort of cheap or sort of expensive. Yet stocks have been screaming higher. Even after yesterday's setback, the Dow Jones Industrial Average has gained 5% over the past month. Why? In these days of debt-fueled buyouts and corporate share buybacks, the stock market's connection to the debt market has become increasingly tight. AntiSpin: Justin Lahart, who's been ripping the cover off the ball one column after another for months, has the best answer to our question posed yesterday about why the markets are not discounting the way they used to. Much as consumer confidence is no longer a measure of consumers' future employment and wage expectations but is instead a measure of consumers' expectations of future access to credit, the stock market is now an indicator of the market's expectations of future access to credit to finance new deals. more... | |
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 The Running (Away) of the BullsMay 10, 2007 (iTulip) Call today The Running (Away) of the Bulls. If you are a bull, you can blame today's market action on long term bear Richard Russell who just threw in the towel to join you. Just kidding. Stocks Retreat After Weak Retail Sales May 10, 2007 (Madlen Read, AP Business Writer) Stocks Decline After Disappointing Retail Reports, Widening Trade Deficit Wall Street retreated sharply Thursday, slicing more than 100 points off the Dow Jones industrials after weak sales at many of the nation's major retailers heightened concerns about consumer spending. Companies including Wal-Mart Stores Inc., J.C. Penney Co. and Federated Department Stores Inc. said business fell in April, hurt by rising gasoline prices. Though many retailer stocks fared decently Thursday, the reports raised worries that retail sales data from the Commerce Department Friday will suggest that the economy is slower than previously thought. AntiSpin: Retailers disappoint but don't blame the weather? What next? Honest reporting of inflation and unemployment data? No, the cause is the lag time between the housing price declines and a reduction in consumer spending. Time's up! And time to pull out the iTulip January 2005 housing bubble correction prediction to see where we're at in the housing bubble collapse process. We called a housing top in June 2005, so by our own estimates we're now just about two years into it. The prediction says that after two years, we enter Step C–consumers take a long vacation. more... |
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| Guest Commentary Comments on "Liquidity Boom and Looming Crisis" June 21, 2007 by John Craig (Centre for Policy and Development Systems, Queensland) - June 18, 2007 John Craig's commentary on Henry Liu's analysis of the potential for a global liquidity crisis is mainly based on study of the different ways Western and East Asian societies have developed, and the implications that this has for their economic, financial and monetary systems. John has generously provided his thought provoking commentary, from the perspective of an economic policy professional based in Australia, for iTulip readers. more... | ||||
 Weekly CommentaryAre You a Doomer? June 16, 2007 Looking for a comprehensive and well researched debunking of doomer thinking? Look no further than this presentation by Gary Alexander, a self-described life long and 18 years ago reformed professional doomer. (Thank you iTulip member Sapiens for finding it.) Alexander goes into his personal 50 plus year personal adventures in doomerism, as chronicled by the books that appeared during his career, starting with the 1957 nuclear doomsday book "On the Beach" by Nevil Shute and ending with the economic devastation envisioned by James Dale Davidson's and Lord William Rees-Mogg's “The Great Reckoning” (1990). If you have doomers among your friends or family members, or if you suspect yourself as one, read on. more... | ||||
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 Guest CommentaryThis Time It’s Value Traps June 14, 2007 by John Rubino Most financial bubbles are pretty easy to spot: An asset class climbs way beyond what old-fashioned valuation measures used to define as reasonable, market participants start acting like idiots, and pundits rationalize the madness with learned “new era” theories. Think late-90s tech stocks or California houses in 2005 or today’s Shanghai stock market. This kind of bubble announces itself loudly, making it easy to ridicule and/or bet against. But today’s U.S. stock market is a different, trickier, far more dangerous kind of bubble, because the stocks that are wildly overvalued actually look pretty cheap by traditional measures: Banks and brokerage houses at 12 times earnings, homebuilders at 1.5 times book, retailers at 1 times sales. In terms of historical trading ranges, there seems to be nothing here to get excited about. more... | ||||
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 Janszen's Quick CommentJune 13, 2007 Greenspan's Conundrum is now Bernanke's Un-Conundrum, stago the Fed's Surprise Recent bond yield increases didn't only surprise the markets. They surprised the Fed, too. Why? What are these guys smoking? The long term result of the unwinding of the conundrum will be persistent U.S. stagflation. more... | ||||
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CommentaryJune 2007  A Distilled Markets and Macroeconomic Letter Transparency Snapshot The Markets Stocks - Short Term - High Risk The large commercial investors are still buying this market, which may continue to push prices higher. This could change at any time. Margin debt is at record levels, the VIX is very low, and the economy is slowing. Stocks - Medium Term - Elevated Risk I believe that the risk is the market averages may have quite low returns for some time or potentially flat/negative returns when inflation is taken into account. Bonds - Inverted yields pointing towards recession? The yield curve is less inverted. Yields are pushing higher in the longer duration bonds. This should put additional pressure on housing if these rates stay at higher levels. Short term yields are down today (5/31/07). Gold Gold is has moved up a bit with GLD at 65.5 (5/31/07). more... | ||||
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 Econotech Equity Markets Flying Without Instruments Into a Non-Linear Storm? June 7, 2007 Two Potentially Critical Blind Spots For Global Equity Investors June 7, 2007 (Econotech FHPN)--At the risk of writing too frequently, I think the current investment environment merits more rapid updates than I usually do. I would like to make two key points that I think are not as widely understood as need to be right now. First, at certain critical inflection points, there is not a linear, one-to-one relationship between rising interest rates and rising market risk. Rather at some point, rising interest rates might more rapidly move global markets downward; I used the analogy of cracked ice (investor psychology) giving way in my June 4 article. For example, if interest rates continue to rise, especially with the 10-year bond yield now over 5%, things may get rather more risky rather more quickly than overly complacent global financial markets still currently expect, again especially due to the fact that global markets are so highly dependent in the 2002-07 cycle on very leveraged m&a and lbo deals and emerging market debt, and because of the weak state of the mortgage market. more... | ||||
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 Janszen's Quick Comment June 1, 2007 Groundhog day, every day, in the housing market Economists' reactions to the latest housing market news makes me feel like Bill Murray in the 1993 movie Groundhog Day In case you never saw the movie, Murray plays a weather man who is sent to cover a story in Punxatawney about a weather forecasting groundhog, which he refers to as a "rat," for a fourth year in a row. Classic Bill Murray sarcasm conveys his frustration about having to cover the cutesy story again. His producer and love interest is played by Andie MacDowell. On awaking the next day, and each morning thereafter, he finds that it's Groundhog Day again, and again, and again. He finds himself doomed to spend eternity in the same place, seeing the same people do the same thing every day. He experiences the same events over and over. Everything happens the same way. The waitress at the local diner has the same conversation with Murray and spills a cup of coffee at the exact same moment each day. To Bill, the repetition is maddening, but to the waitress and other people in his day the events are new each time. Here's the trailer. (more...) | ||||
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. Fueling the FIRE Economy: Part IIIImpact of Disappearing Fictitious Value The fictitious value of today's asset bubbles are tomorrow's negative wealth effects from the collapse of those bubbles. The question is how much, how fast, and to what effect? by Eric Janszen May 30, 2007 How will the current asset bubbles end? There are several possibilities, but two stand out: one, reflation fails and Ka-Poom circa our 1999 model occurs or, two, current asset bubbles collapse followed by reflation which effectively creates new asset bubbles just as the housing bubble formed after the stock market bubbles collapsed. Which of these two scenarios is more likely to occur? If we learned anything from our 1999 Ka-Poom Theory prediction it is this: do not underestimate the willingness and ability of governments to prolong asset bubbles, and to cultivate new ones after the previous ones end. more ($ subscription)... | ||||
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 Specialist InterviewMartin Mayer, Banking Expert May 7, 2007 Eric Janszen interviews banking expert Martin Mayer on risks facing the US economy, banking system, and derivatives markets. Derivatives
markets guarantee a winner for every loser, but they will over time
concentrate the losses in vulnerable sectors. Nature obeys Mayer's
Third Law, which holds that risk-shifting instruments will tend to
shift risks onto those less able to bear them, because them as got want
to keep and hedge while them as ain't got want to get and speculate.
The logic behind margin requirements in stock markets and capital
requirements in banking also holds in the derivatives markets.
Permitting highly leveraged institutions to hold private parties behind
closed doors is the political version of selling volatility: the
predictable likely gains will one day be overwhelmed by an equally
predictable disastrous loss. - Martin Mayer Janszen: What is the greatest risk facing the Federal Reserve and the US banking system today? Mayer: The behavior of credit derivatives in a persistently inflationary environment. The Fed is going to have to keep raising interest rates longer than the markets currently expect. It's not the same kind of inflation Volcker was dealing with, not yet anyway. But it's very real. more ($ subscription)... | ||||
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 Say
Hello To "Lendron"by Aaron Krowne - April 24, 2007 Most readers are no doubt familiar by this time with the "subprime lending implosion" shaking out in the mortgage lending sector. This event resulted in a large number of major companies focused on this activity going defunct (i.e. bankrupt or preemptively shut down, such as Ownit and MLN) or otherwise disappearing (e.g., being acquired by larger financial entities in "fire sales," such as the sale of Option One to Cerberus a few days ago for less than half of the approximately $2 billion it was rumored they were seeking last year). I've been tracking this breakdown over at the Mortgage Lender Implode-O-Meter—at least, as meticulously as possible given the chaos reigning.  What
is slightly less well-known is that the breakdown has already spread
from subprime to other sorts of marginal lending, and mortgage lending
in general, including 'Alt-A', prime second liens–which back
home
equity extractions–and any sort of high-LTV loan (loan
amounts in
excess of 90-95% of the property's appraised value, which itself is
often inflated. more... | ||||
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 To: CLIENTS & FRIENDS Subject: COMMENTARY – April 2007 "There is a
very important difference between being a theoretical contrarian and
dealing with it in practical terms." - Michael Steinhardt Summary • During the first part of the quarter markets touched new highs and exuberance continued; until of course, investors woke up during the last week of February and gains quickly evaporated as risk was “re-priced.” • The quarter’s headlines were dominated by record earnings; Private Equity–deal after deal, each one topping the prior; the unwinding of the Yen carry-trade, and most recently, the subprime debacle. • Despite the bullish defense which set in at the end of February, we have a tough time convincing ourselves that the lows have yet been seen, especially after experiencing eight straight months of a near-20% exponential move from the July bottom. • We are positioning portfolios defensively. However, we are maintaining a moderate exposure to Global Equities, should they continue to rally on positive economic news. We believe that the US dollar will continue to weaken relative to other major currencies, and that the Fed will have to lower interest rates due to further mortgage woes, which could put further pressure on the dollar relative to other major currencies. more... | ||||
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| May 2007: "A typical down cycle [for residential real estate] is five to seven years," says Eric Janszen, co-author of "America's Bubble Economy" (Wiley, 2006), one of a recent crop of bubble books and far from the gloomiest and doomiest. | |
 January 2007: "The
farther behind you get over time, the harder it is to catch up,"
said Eric Janszen, who chronicled the rise and fall of the dot-coms
during the Internet bubble on his Web site iTulip.com. | |
 | November 2006: Barron's Preview of America's Bubble Economy in interview with co-author Eric Janszen |
 November 2006: Money
Matters host Gary
Goldberg
interviews Eric Janszen about the
new book America's
Bubble Economy. | |
 November
2006:Financial Sense
host Jim
Paplava interviews Eric Janszen
about the
new book America's
Bubble Economy.
While
most ignore the warning signs, those who move
can position themselves for the financial chance
of the decade. | |
| October
2006: "Janszen ultimately advised
readers to
dump tech stocks in the weeks before the bubble burst." | |
 March
2006:
"The site iTulip.com, which was restarted this week
after a three-year
hiatus, does not hesitate to claim credit for accurately predicting
that the bubble would pop. It even got the timing right." | |
 March
2006:
"Run, don't walk, to iTulip.
In case you missed it the first time around, iTulip predicted and then
chronicled the dot-com bust with acumen and wit. Now it's back, skewering hedge
funds and other current excesses." | |
 March 2006:
"iTulip.com is a Web site that appeared in the late '90s that
warned of the dangers of the tech stock bubble. When the
market finally crashed, iTulip thought its work was
done and went dark. Now, the
site is back..." | |
 March
1999: "...the place to go for
a contrary view of the markets." More press... | |
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Random WalkDistribution of Income Gains by Income Bracket
Gold, DJIA and Inflation
S&P vs Interest Rates - 1860 to 2020
Favorites
from the ArchiveLinks to iTulip.com's Most Read
Ka-Poom Theory
No New Era!
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The Bubble Cycle is Replacing the Business Cycle
Debtor Nations Dream of Deflation
Ka-Poom Theory Revisited
Inflation is Dead! Long Live Inflation!
The Three Desperados
The Big Bet
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