Well, it's pay back time.  All the folks who laughed at us -- laughed, ha! -- for trying to build a profitable .com that doesn't rely on banner ads for revenue ain't laughing now.  Nope.  Spill your coffee on any doctor's office waiting room table and you'll stain more magazine and newspaper stories than you can read in a month on how stock investors now demand 'net companies that -- gasp -- make money.  (See Profitability Now Matters for Net-Stock Investors - TheStreet.com August 13, 1999)

Geez, what happened?  Well, we predicted that, too.  It's kind of a long story but the net of it is that the era of cheap money is drawing to a close.  I'll try to keep it brief.

In a recent episode of The Simpson's, Homer Simpson was asked by a friend how he was able to afford his palatial home on his nuke plant technician's salary.  He replied, "Don't ask me to explain the economy."  Well, Homer.  Here it is.  The stock market's been living on the same credit card, auto loan, and equity loan money that you've been spending on SUVs, MacMansions and dream kitchens.  It's come from unprecedented money creation by the Fed for close to ten years.  The money supply is now four times what it was ten years ago.  Has GDP grown as fast?  Productivity?  Nope.  So why no inflation with all this extra money floating around?  The answer is that it takes a really big money supply to fuel the deflationary New Era economy of the 1990s, just as in the 1920s.  Global markets increase competition and new technologies raise productivity, reducing both price pressures and costs.  Add to that the need for Asian economies to export their way out of recession and decreased world demand for commodities from the same recession-stymied economies and you got an effective, though I'd argue delicate, balance of deflationary and inflationary forces.  Our prediction was, increase the foreign demand side of the equation as Asian economies recover and you get inflation and higher interest rates to combat them.  Asia is recovering, so inflation is coming, so interest rates are rising.

The lessons of market crashes in 1929 and 1987 in the US and 1989 in Japan is that a sudden increase in interest rates during a stock market bubble will trigger a crash.  Works every time.  So now the Fed has to slowly back off on the money supply to prevent significant inflation from developing but back off veeeery carefully, so as not to crash the stock market.  My sense is that this market will be very volatile to hints of hikes.  It's trading kinda thin, jittery due to events last year at this time, and it's starting to fret about the Y2K capital spending cuts in Q4.  Expect wide swings as rate changes get priced in and out on tiny bits of economic data.  But overall, rates will rise and the market will not.  We felt the first stocks to feel this pinch would be .coms, since these mostly unprofitable companies are so sensitive to borrowing costs.

That's kind of a simplified version, but you didn't come here to read hack economics and stock market prognostications.  You want to know why iTulip.com is gonna shine even as the stock market deflates.  Starting this month, we're going to give you a report card on the iTulip.com business vitals.  This month we start off with the basics, Customer Acquisition, Revenue and Awareness.

iTulip.com Report Card
 

By the end of July, more than 40,000 humans from around the world had visited iTulip.com.  That's an annualized rate of 70,000.  That's down from the 120,000 annual rate we had in April but we had gotten a lot of traffic from CNBC then and didn't expect to keep that up.

Wouldn't you like to know!  But as one recent customer said, the Bogus iTulip.com Stock Certificate might be the Beanie Baby of the 2000s.  The regular checks we get from Barnes & Noble are better than a poke in the eye.  We've been approached by a few companies that want to advertise on iTulip.com and we are mulling over their offers.  Our policy has been not to annoy our visitors with banner ads.  But we may need the bread.  With the market so choppy, we can't follow the part of the biz plan where we play the futures markets.  Samuelson said, "Genius is a rising stock market."  A falling stock market makes everyone stupid, including us.  You need to know how to time rallies in a sideways or a falling market and we're just not smart enough.

Good press on SmartMoney.com.  We are experimenting with banner ads.  We can't see charging actual money for these.  We will look into trading ads with a few sites with similar demographics and hit rates.

We had a Free iTulip.comÙ Bogus Stock Certificate contest in April and we haven't shipped out the free stock certificates to the winners.  We are finally doing this month. 

Also back in April we promised a Y2K editorial and we've been working on it.  But now everyone seems so sick of the topic we're afraid no one will read it. Drop us a note if you'd like us to finish it.

Looks like I've once again said more than anyone wants to know.  Good to see you again.  Don't forget to buy an iTulip.com Bogus Stock Certificate.  They make a great wedding anniversary gift (not really) or buy one for that friend who keeps whining at you about how they missed out on Internet stocks.

Sincerely, 

Arnold Greenspatz 

The Prez 
iTulip.com