Future of iTulip?

[EJ]

Re: Is iTulip and/or EJ Dead?

So long as you are one of the insiders getting key data to trade on in front of the average punter (and/or you are using federal insurance to gamble other people's money) none of the downside risk is yours.

The stock option & trade gains are yours to keep. The over-leveraged company which collapses into bankruptcy doesn't come with clawbacks when things crash. The losses are socialized.

And, better yet, it is a 2-way trade, where the entities being subsidized may use the free or virtually free cash with leverage to trade against other weaker players in the market & acquire more of the market for pennies on the dollar, as others sell out in fear near the bottom & "regulators" hold private conversations with assurances to the people doing God's work.

http://www.itulip.com/video/VZ_IDEA_July_2015.mp4

[Woodsman]

Re: Is iTulip and/or EJ Dead?

"Ka-POOM" & EJ cited

Funny how we're all prodding EJ for more macro research and now the Janszen Scenario is back on the radar.

So how will all of this progress from here? We’ve always liked the Ka-Poom! theory by Erik Janzen which we explained previously like this:

One of the models of the future that I favor is the Ka-Poom theory put out by Erik Janszen of iTulip.com back in 1999.
Basically it states that the end of a bubble era begins with a sharp deflationary event (the ‘Ka’ part of the title), but ends in a highly inflationary blow-off, (the ‘Poom’).

It’s a one-two punch. Down then up.

The reason you get the deflationary portion is simply because bubbles always burst. They are seeking a pin from the moment they are born.

The logic for the inflationary secondary reaction is that the central banks always respond to deflation with more money printing. Ironically, this is a doomed attempt to stem the damage caused by their prior money printing efforts.
They never learn.

So that’s what we’re looking for here at Peak Prosperity: a deflationary crunch savage enough to scare the central banks into opening the monetary spigots even wider. But this next time, we think they’ll seek to goose economic growth by giving money directly to the people as well as non-bank corporations.

And we think that deflationary bust has already begun. Our record-high stock markets simply somehow haven’t gotten the memo yet.

So that’s it: prices first go down (Ka!) and then they rocket back up (Poom!). When it's all over some years down the line, many of the world's fiat currencies (Yen, Euro, Bolivar, Real, and maybe a few Pesos and the Rupee, too) will be damaged or dead.

[santafe2]

Re: Is iTulip and/or EJ Dead?

"Ka-POOM" & EJ cited

I like Chris well enough Woody but he spends way to much time talking about deflation. Lower oil prices may lead to disinflation and general pain in the US oil patch, but overall it's probably good for the US economy.

[seobook]

Re: Is iTulip and/or EJ Dead?

I like Chris well enough Woody but he spends way to much time talking about deflation. Lower oil prices may lead to disinflation and general pain in the US oil patch, but overall it's probably good for the US economy.

The issue isn't so much with the core regular economy, but rather that the financialized casino economy is so huge. It needs low interest rates to have low debt service payment costs to keep allowing debt to be rolled over & at the same time cash flows can't decline much or that starts feeding into bond defaults or debt restructuring. And a huge number of bond funds have some of the lower quality debt in their mix in order to drive up their aggregate yield. If a couple peripheral issues blow up & cause a flight to safety that can blow out the yield spread premium on lower quality bonds. That in turn makes it harder for companies to issue debt & buy back their stock and such. And if that takes away some of the buyers from the stock market and equities tank & bonds are already yielding almost nothing, how do under-funded pension obligation problems ever get fixed?

All the benefits of increased leverage on the way up are a drag on the way down.

"Ka-POOM" & EJ cited

Funny how we're all prodding EJ for more macro research and now the Janszen Scenario is back on the radar.

People still want/need some amount of confirmation from time to time.

Silence is golden if one was following the play book from 2001 or such, but for people who only found the site in 2009 or such & have seen the market race ahead for a half decade after the crash, some might get sucked back into the casino. The longer you don't play the game the greater the perceived loss for not playing, right up until things blow up. And if you get in right before the blow up then it's a double fail (no cushion from buying at the bottom & absorbing losses near the top).

[santafe2]

Re: Is iTulip and/or EJ Dead?

The issue isn't so much with the core regular economy, but rather...how do under-funded pension obligation problems ever get fixed?

You'll notice I cut out all of the discussion between your opening and closing statement. It's always about the core economy. Like all debt, the under funded pensions will be fixed by under paying. There are no obligations. As long as the system is working, they'll be paid. When it's not working...haircuts for everyone. As EJ has eluded to, there may not be any winners when the current system breaks. But if you're not dependent on too many other players, you'll most likely be able to afford what you're going to lose. If you have debt, it may not be great. Here's the lesson: Don't depend on the financial system or a retirement system, they're broken.

[EJ]

Re: Is iTulip and/or EJ Dead?

The issue isn't so much with the core regular economy, but rather that the financialized casino economy is so huge. It needs low interest rates to have low debt service payment costs to keep allowing debt to be rolled over & at the same time cash flows can't decline much or that starts feeding into bond defaults or debt restructuring. And a huge number of bond funds have some of the lower quality debt in their mix in order to drive up their aggregate yield. If a couple peripheral issues blow up & cause a flight to safety that can blow out the yield spread premium on lower quality bonds. That in turn makes it harder for companies to issue debt & buy back their stock and such. And if that takes away some of the buyers from the stock market and equities tank & bonds are already yielding almost nothing, how do under-funded pension obligation problems ever get fixed?

All the benefits of increased leverage on the way up are a drag on the way down.


People still want/need some amount of confirmation from time to time.

Silence is golden if one was following the play book from 2001 or such, but for people who only found the site in 2009 or such & have seen the market race ahead for a half decade after the crash, some might get sucked back into the casino. The longer you don't play the game the greater the perceived loss for not playing, right up until things blow up. And if you get in right before the blow up then it's a double fail (no cushion from buying at the bottom & absorbing losses near the top).

https://vimeo.com/106988086

[Chris Coles]

Re: Is iTulip and/or EJ Dead?

https://vimeo.com/106988086

Which brings me right back to the point I have been pressing for more than two decades; without a broad carpet of grass roots prosperity based upon the investment of equity capital; rather than debt; her aiming point remains constantly out of her reach.

[Polish_Silver]

the casino economy

The issue isn't so much with the core regular economy, but rather that the financialized casino economy is so huge. It needs low interest rates to have low debt service payment costs . . .

Silence is golden if one was following the play book from 2001 or such, but for people who only found the site in 2009 or such & have seen the market race ahead for a half decade after the crash, some might get sucked back into the casino. . . .).

Is there a way to measure the size of the casino economy? Perhaps the aggregate debt?

Are debt to income ratios continually increasing?

I have read the corporate profits are large. If that is true, the market only reflects the strength of corporate earnings.
However, would the large profits be sustainable if interest rates were higher?

And why is inflation so low when rates are low? Because debt is being repaid?

[Chris Coles]

Re: the casino economy

I have read the corporate profits are large. If that is true, the market only reflects the strength of corporate earnings.
However, would the large profits be sustainable if interest rates were higher?

If we take the concept of a "market" to its full potential; those profits are so large due to the lack of competition between these global MNE's (the title given to multinational companies is Multi-National Entities).

Venture Capitalism combined with M&A has dramatically reduced competition by drawing any potential competitor into being purchased by the MNE.

The underlying problem is a deeply uncompetitive economy fringed around too big to fail banks lending ever more debt and central banking with every intent to do their utmost to keep the ball rolling in their favour.

[don]

Re: the casino economy

It's called monopoly capitalism not because of the concentration of Big Oil, or the Media, or Big Healthcare. It's called monopoly capitalism because of the concentration of capital.

[vt]

Re: the casino economy

It's really oligarchy with both political parties feeding off the oligarchs.

Let's not kid ourselves. The Democrats with full acquiescence of mayors of big cities, developers, the real estate lobby, and thousands of quick rich Americans took on way too much debt causing a financial system breakdown.

The Republicans in cahoots with the bankers, mortgage sharks, Wall Street, and others did there part to help the disaster proceed.

It's never free, fairly regulated markets. It's always crony capitalism/socialism with corrupt government and oligarchs that feed off the public trough. You see the same thing with communist, socialist, fascists, crony capitalists, etc. They are all criminal.

It either far too risky crony capital or excessive taxation and choking regulation. Pick your poison.

[ER59]

Re: the casino economy

It's never free, fairly regulated markets. It's always crony capitalism/socialism with corrupt government and oligarchs that feed off the public trough. You see the same thing with communist, socialist, fascists, crony capitalists, etc. They are all criminal.
.

+1

[Thailandnotes]

Re: the casino economy

For some time now pundits, and to some extent politicians, have been trumpeting the mountains of cash US corporations have sitting on the sidelines just waiting for ripe opportunity and that, in one fell swoop, could seemingly restore the economy. However, an article this week questions where the cash has actually coming from, and whether it’s as readily deployable as has been suggested.

According to MarketWatch:

“American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression. You’d think someone might have noticed something amiss. After all, we were simultaneously being told that companies (a) had more money than they know what to do with; (b) had even more money coming in due to a surge in profits; yet (c) they have been out in the bond market borrowing as fast as they can.

http://finance.yahoo.com/news/pf_article_110218.html

[dcarrigg]

Re: the casino economy

--dupe--

[dcarrigg]

Re: the casino economy

or some time now pundits, and to some extent politicians, have been trumpeting the mountains of cash US corporations have sitting on the sidelines just waiting for ripe opportunity and that, in one fell swoop, could seemingly restore the economy. However, an article this week questions where the cash has actually coming from, and whether it’s as readily deployable as has been suggested.

According to MarketWatch:

“American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression. You’d think someone might have noticed something amiss. After all, we were simultaneously being told that companies (a) had more money than they know what to do with; (b) had even more money coming in due to a surge in profits; yet (c) they have been out in the bond market borrowing as fast as they can.

http://finance.yahoo.com/news/pf_article_110218.html

I've been on this one for a little while. It's all a lot of gambling on consolidation and buy-outs.

You have any idea how much Verizon's in the hole? They owe $120 Billion. Greece owes something like $400 Billion to put it in perspective. They used 4.4 of it to pick up AOL. They used about $60 Billion of it to complete the deal to buy out Vodaphone's V shares. The rest went somewheres. They doubled their VC arm's play money. They're making some local investments. Still, look at this D/E chart:



EBITDA to debt bounces up in the 2.3 range or so. The way it seems to me they're banking on it is planning on a 10% revenue boost in the short term (~3 years) that carries out over 10 years. If they get whacked on the revenue side at any time over the next decade, they're in for a ride.

UPS is in a similar boat. Iron Mountain, Ford, Avis-Budget, Pitney-Bowes, Colgate-Palmolive, Clorox...lots of them.

The thing with the dividend behemoths is that they cannot turn on a dime. Lots of buy-backs at market highs--or at least market mids by cape, q, or whatever. Lots of bonds outstanding. Lots of leverage. A lot that can unwind pretty good if things turn south. A lot of risk in the bonds, especially in the out years. M&A can blow up your spot at any moment, and you have no control over it. And the M&A machine is at fever pitch. We're talking about $150B/qtr 5 years ago to $700B/qtr now. Everyone's having a ball at the beach. Who knows who'll get caught naked when the tide goes out.

And that's not even counting the corporate junk bonds. That'll be like the Bay of Fundy.