November 7, 2008, iTulip

November 06, 2008 (Peter Foster, Financial Post)

As Barack Obama climbs that steep learning curve on the economy, let’s hope aides of shielded him from the latest issue of Harper’s. A series of articles on “How to Save Capitalism” in the latest edition of the magazine invites as much skepticism as would, say, a series on “How to Save Communism” in The Wall Street Journal. Still, at least it amounts to some kind of acknowledgment that capitalism is here to stay, even if Harper’s ideas of salvation would be toxic.

The reflexive liberal reaction to the current financial crisis has been to recommend lots of new regulations without considering either whether these regulations are now necessary, or bothering to reflect on why regulatory regimes have failed so conspicuously in the past.

In its introduction, the magazine displays its misapprehension of the issue at hand by suggesting that “capitalists” have done a bad job of meeting their “responsibility” to save capitalism. However, as my colleague Terence Corcoran noted on this page earlier this week, capitalists are often the very last people who should be relied upon to defend capitalism. Neither is it the job of “eminent financiers” to “protect us from economic shocks.” Meanwhile the “masters of our economy” identified by the magazine are not capitalists but politicians and bureaucrats, thus what has arguably been undermined is not the case for capitalism, but the case for “economic security.”

Such a way of thinking, however, is beyond most of Harper’s contributors, with the sole exception of Eric Janszen, a businessman, who identifies the key role of the government in promoting bubbles, and is the single correspondent who even acknowledges the existence of Fannie Mae and Freddie Mac. Mr. Janszen wants to end subsidies to industrial dinosaurs such as the auto sector, and recommends the greater use of public-private partnerships! How did this guy get in here?  More …

October 30, 2008, iTulip

Central bank says it will cut rates as needed to boost economy

Last update: 4:52 p.m. EDT Oct. 30, 2009

WASHINGTON (MarketWatch) — The Federal Reserve on Wednesday slashed overnight interest rates and left the door open for more cuts — all part of an effort to return confidence to investors so that a cratered economy doesn’t crater further.

AntiSpin: Note the date, one year in the future. Zero percent is where we are headed and likely sooner than a year from now. Then what? Would you believe a government issued debit card?  More …

October 28, 2008, iTulip

By Adaora Udoji, John Hockenberry, Lisa Nett

Guest: Eric Janszen

Looking for work will be a challenging prospect in the coming months as the nation grapples with a wilting economy. Eric Janszen, president of iTulip Inc. and a former venture capitalist, joins The Takeaway to discuss the plight and repercussions of unemployment.  More …

October 10, 2008, iTulip

Something is afoot that, so far, skirts the ken of our most sprawling macro-economic theories. Like the ultimate exogeneity or game-changing black swan, the best evidence of a dawning paradigm is that few things make sense through the old glasses. As T. S. Eliot remarked of great poetry (and I paraphrase), its arrival is felt before its impact is understood. In this instance, we will regret mistaking a lack of understanding for a lack of arrival.  More …

October 2, 2008, iTulip

October 1, 2008 (Bloomberg News)

Former U.S. Treasury Secretary Paul O’Neill said the $700 billion bank-rescue proposal under negotiation in Washington is “crazy,” with potentially “awful” consequences for the world’s largest economy.

“Doesn’t this seem like lunacy to you?” said O’Neill, who was President George W. Bush’s first Treasury chief, from 2001 to 2002, in a telephone interview today. “The consequences of it are unbelievably bad in terms of public intrusion into the private sector.”

“Is anybody thinking there?” asked O’Neill, who also served as deputy budget director in the Ford administration. “It’s too late, it’s not going to make any difference, and it’s aggravating as hell when there’s a better idea and you can’t even get it in play,” he said, recognizing little success so far in pitching his own proposal.

AntiSpin: “Is anybody thinking there?” Is that a rhetorical question? Of course they’re not thinking. They’re the US Congress. So now we get the worst of both worlds. Government interference in markets and a Depression because this plan can’t possibly work. We like the King plan. It gets money into the hands of small businesses.  More …

“I work in Credit Department at BoA (Senior Level Credit Analysist Boa Bldg 3rd fl, Char, NC). We just received memo indicating that all BoA credit cards are being closed as of 10/1. Credit score and income do not matter, all accounts are closed as of 10/1.” Executive VP Bank of America

“This is true, but not as bad as he/she says. We are closing accounts, but only ones with credit scores under 750. We will reopen cards within a year as long as crisis lessens.” - J.mcmanus / VP Credit Dept BOA

iReport Sept. 28, 2008

AntiSpin: We do not have independent confirmation but if true the event is significant – the number of credit card holders with scores under 750 is 60% percent of the population.  More …

Subject: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.  More …

September 19, 2008, iTulip

The financial crisis is over. The economic crisis has begun.

by Finster

The “solution” reverberating from Washington to Wall Street, amid the celebratory atmosphere in the financial markets, must be put in perspective. It represents yet another massive wealth transfer from the United States to far flung corners of the globe.  More …

September 18, 2008, iTulip

April 2006 in “Risk Pollution: Financial Markets Polluted with Risk” I compared the era of unregulated lending to the period of the unregulated chemical industry. The latter polluted the environment with chemical toxins and the former with toxic debt. The article contains the first use of the word “toxic” that you will find on the internet in connection with mortgage and other debt.

In that article I made the following forecast:

In truth, no one knows who will be left holding the bag when defaults on loans made using these innovations occur. But we can be fairly certain it won’t be the institutions that made the money selling them. Most likely, it will be the same folks that paid for the Super Fund projects that cleaned up after the chemical industry — you and I.

And here it is, two years later, a credit toxins Superfund paid for by you and I.  More …

January 5, 2009, iTulip

Here’s the formula. Take one part debt bubble from 1% interest rates and financial engineering, two parts hubris and self-delusion, add a recession and a credit crunch two years later and what do you get? A wave of bankruptcies and unemployment.

Crystal, china maker Waterford Wedgwood collapses
January 5, 2008 (Jane Wardell, AP Business Writer)

Waterford Wedgwood files for bankruptcy protection after failing to find a buyer

Wedgwood has been an iconic name in British pottery for 250 years, after its founder Josiah Wedgwood opened the first factory in Stoke-on-Trent, central England, in 1759. It began making bone china in the 19th century.  More …

January 2, 2009, iTulip

2008? Let’s just say the year did not go exactly as planned for most, but much as we expected. So much happened that if we tried to say it in words we’d need 33,000. We use 33 pictures instead to cover the year and make our 2009 forecast on the markets and economy.

The Fed’s reputation for mastery over the economy via carefully crafted monetary policy grew for decades since the hard nosed Paul Volcker Fed rescued the institution from the ignominious tenure of George Burns under the thumb of the Nixon administration. It came apart in 2008 as the Bernanke Fed tried this and tried that when one circuit after another blew in the US credit markets and banking system. The Greenspan Fed was managed for 18 years by decisions guided in principle, but not practice, that markets know best. In practice, under the Greenspan Fed the most knowing markets are those of an economy and government run by banks. The accumulation of error and fraud over that period then fell on Bernanke’s shoulders. The rest, as they say, is history.  More …

December 23, 2008, iTulip
Dear iTulip,

I may find myself near the end of a lease and needing a different car (new or used) in 2009 and since a car can be a sizable investment I am looking for some good “strategery.” I agree with EJ’s “pay cash” mantra so will be trying to keep the cost under about $10,000. My preference is a SUV or Jeep style vehicle.

Any ideas of what companies might be most likely to have a fire sale? Timing?

Regards,

snip3r

Dear sn1p3r,

The Great American FIRE Economy Sale asset price deflation began in 2006 when the housing market rolled over.  Asset price deflation spilled over into the Productive Economy in 2007, creating the recession we forecast. 2008 marked the start of debt deflation in the US, and the Debt Deflation Bear Market we forecast Dec. 27, 2007. The Consumer Goods Fire Sale of 2009 will follow on the FIRE Economy Sale in inflated assets that began in 2007. When it comes to cars specifically, the Consumer Goods Fire Sale will last for years.  More …

December 19, 2008, iTulip

The global economy is devolving with astonishing speed. Today the Institute of International Finance (IIF) issued the following alarm: worst global recession since the 1950s.

Global economy to contract in ’severe’ 2009 recession: banking group

WASHINGTON (AFP) — The global economy likely will contract next year for the first time in decades in a “severe” recession as the credit crunch bites, an international banking group said.

The Institute of International Finance (IIF), the Washington-based association representing more than 375 of the world’s major banks and financial institutions, projected the world economy would shrink 0.4 percent in 2009, after 2.0 percent growth this year.

Shall we look for Thomas Friedman’s new book titled “The World is Flattened” in 2009?   More …

December 16, 2008, iTulip

by Eric Janszen

US consumer swan song means cheap now, cheaper later, then expensive — it’s all about supply; there’s never just one financial fraud, so check your docs; Duh-flation: Monetary policy is political not mechanistic; Rate cut follies: Fed cuts the dollar

Early next year expect a Great American Consumer Fire Sale to follow on the heels of the Great American FIRE Economy fire sale of financial assets that began in 2006. While the FIRE Economy fire sale was on for houses, stocks, and all bonds but US Treasury bonds, with particularly heavy depreciation in securitized debt, The Consumer Economy Fire Sale starting in Q1 2009 will be familiar to anyone who lived through the 1980 to 1983 recessions when the Volcker Fed slammed the economy in a three years of contraction with rate hikes that created double digit unemployment.

The major difference between the 1980 to 1983 recessions and the one that started in Q4 2007 as iTulip alone forecast in Oct. 2006: the Fed created the 1980 to 1983 recessions on purpose. This one is running on its own, out of control, with no apparent obstructions – fresh sources of credit, cash, or income — to brake the fall.  More …

December 13, 2008, iTulip

Our Fed Flow of Funds chart-fest gives you the data behind the ugly headlines

Close your eyes and daydream with me. Imagine the waning days of the New Era in 2000, of eToys and pets.com, of Jim Cramer pushing Cisco at $77, of Abbey Joseph Cohen needling her hapless Goldman clients into hanging on in the NASDAQ until their money evaporated. Recall her portrait of the US economy as a “supertanker� able to power through even the worst financial storm the markets and global economy threw at it. Ah, those were the days.

In light of yesterday’s Flow of Funds report, I propose an alternative simile for the economy — not a supertanker but a C-5 Galaxy transport. Like a 332,500 pound aircraft with a stall speed of 120 MPH, the US economy has a stall speed of $4 of new private sector debt per dollar of GDP growth. As the data below show, the credit-financed US economy, when it is not propelled forward by ever more debt and foreign capital flows, has the glide ratio of a box of rocks.  More …

Transparency Dec. 2008 - Eric Hodges

December 10, 2008, iTulip

A Distilled Markets and Macroeconomic Letter
December 2008

Detail Opinion
The total cost, so far, of the economic bailouts may be as high as $8.5 trillion, not including the $5.2 trillion for the Fannie and Freddie holdings: http://is.gd/aht8 (via Barry Ritholtz).
For perspective, these bailouts are larger, in inflation adjusted Dollars, than the combined total outlays for the: Race to the Moon, Marshall Plan, Louisiana Purchase, New Deal, Vietnam War, Iraq War, Korean War, S&L Crisis, and NASA’s all time budget (http://is.gd/ahwU).These huge additional liabilities to the US debt may endanger the solvency of the country (http://is.gd/ahBI).UN team warns of hard landing for Dollar
“The current strength of the dollar is temporary and the US currency risks (more….)

December 8, 2008, iTulip

First and second person accounts of employment and business conditions

Two weeks ago in Unemployment by industry: Recession or depression? we published our bottom-up, data driven analysis of future unemployment that estimated 10 million job losses in 2009, and identified the industries likely to the affected most and least. Last week one of our members posted a thread entitled “How the Economic Crisis/Recession has Affected Your Job and Your Employerâ€� that so far has elicited over 50 responses from across the US, with a few from the UK and Australia covering a broad range of professions. The comments reveal the speed and breadth of the decline in many industries, but also highlights a few bright spots, such as in disinfrastructure, also known as the Defense Industry.  More …