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iTulip, Inc.
The Contrary Market View of the Markets
Predicting your economic future since 1998
Eric Janszen
Founder and President
iTulip, Inc.
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History
Bill Griffeth, CNBC
Founded: 1998
Visitors: 7,000,000
Members: 2,200
Economic and Financial Markets
Macro Trends
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What is iTulip?
 March 2006: “ 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."
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What is iTulip?
 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: Profit When It Pops (Wiley, 2006), one
of a recent crop of bubble books and far from
the gloomiest and doomiest.”
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Other iTulip Firsts
Money
Matters
Finance
Award
Housing Bubble
August 2002: “Yes. It’s a Housing bubble.”
January 2004: “Will end by seizing up.”
January 2005: “Will Last 10+ Years.”
June 2005: “It’s a top.”
All-Assets-Up Global Credit Bubble
 June 2006: “All assets positively correlated,
driven by excess global liquidity.”
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The Model
Ka-Poom Theory of Bubble Cycles
Developed for Osborn Capital, LLC in 1999 to
time stock sales, re-investment of proceeds
Application
Spring 2000: Exit tech stocks and purchase
US Treasury Bonds
Sell Cisco @ $68, buy 10 year Treasuries 6.51%
Summer 2001: Purchase Precious Metals
Buy gold @ $270, silver $4.25, platinum $452
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Ka-Poom Theory V1.0 (1999)
US Foreign and
domestic debt repudation
Monetize
Debt
1. Bubble formation
Inflation
2. Bubble collapse
and disinflation
Classic vicious circle
Insufficient
by the economy
3.
Domesticinflation
reflationdriven
to protect
Domestic
Savings
(rate cuts,currency
tax cuts,depreciation
dollar depreciation)
Expectations
4. Repatriation of dollar denominated
assets
of Future
Inflation
5. Global central bank cooperation to
support
the US dollar fails
Buy
on
Credit
Consume
6. Declining dollar, high
inflation, rising
Now
interest rates, slowing economy
7. Go to Step 3
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Ka-Poom Theory V1.0 (1999)
1999 Prediction
 2000: Crash followed by negative wealth
effect disinflation
 2001: Fed will aggressively cut rates to
prevent a Japanese 1990s deflation
 CPI inflation bottoms ~ 0% Q3 2001
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Ka-Poom Theory V1.0 (1999)
What actually happened?

2000: Q2 crash followed by disinflation
Ka-Poom Actuals vs Forecast

2001: Fed did not permit the CPI inflation to turn
negative (no deflation…
well, not
Fed Funds
CPImuch)
8% CPI inflation bottomed @ -1.3% September 2001
6%
Reflation
Disinflation
4%
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09 /20/0 5
06 /30/05
03 /22/05
12/14/04
09 /21/04
06 /30/04
01/0 9/03
12/13/01
10/0 3/01
08 /22/01
05 /17/01
03 /20/0 1
01/0 4/01
-2%
03 /21/00
0%
11/18/9 9
2%
Ka-Poom Theory
1999 Prediction (cont’d)
 2001: Dollar depreciation part of reflation policy
 2003 -4: Foreign private investors repatriate
dollars
 Inflation peaks at 20%
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Ka-Poom Theory V1.0 (1999)
Inflation - 1978 to 2008
What we did CPI-U
not expect
1. Housing bubble
Non-Traded
Traded
Kept economy
going, so no rapid
exit by foreign investors
1000% Monetary
2.
Total
Price-insensitive
Inflation
purchasers of US debt
600%
(Oil exporters, China, UK)
800%
400%
800%
Education
Healthcare
Insurance
Filled in for private investors
3. 200%
“China factor” influence
CPI 300%
on traded100%
goods prices Consumer
27%
0%
and CPI accounting
Electronics
Inflation
“contained” 1988
1978
1998
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2008
Ka-Poom Theory V2.0 (2004)
Ka-Poom disinflation-reflation cycle
1. Bubble formation
2. Bubble collapse and disinflation
3. Domestic reflation policies for
economic recovery
4. Cooperative currency depreciation
props up US dollar
5. Go to Step 1
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Ka-Poom Theory (either case)
 What happens in gold terms?
US Dollar
Depreciation
Global
Depreciation
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Now What?
There is a bubble in everything…
all asset classes… globally.”
- Jeremy Grantham, April 2007
Reversion to the Mean
 Triggered by random event
 No one knows what or when
 The usual suspects
 War or terrorist attack
 Revelation of fraud (GSEs)
 Name your pin
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Then What?
Disinflation Phase - Risk Adjustments
 Within asset classes
Stocks
Bonds
Gold
14,000
 From most risky to least
12,000
Crisis
10,000
Crisis
 Purchasing power vs yield
8,000
6,000
Crisis
 Liquidity
vs value
Crisis
4,000
2,000
 0Local vs remote
1st 2nd 3rd 4th 5th 6th 7th 8th
 Lowest economic
andQtrpolitical
riskQtr
Qtr Qtr Qtr
Qtr Qtr
 Among asset classes
 Among geographies
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9th 10th
Qtr Qtr
What happens to gold?
Previous asset price reversion periods
Reflation
 Capital flight to political safety
Funds Rate
 Dollar rises, Fed
gold
falls
Deficit % GDP
7.00%
 US6.00%
Government policy fights disinflation
6%
5.00%
Rate 5.25%
cuts, gov’t spending, $5%depreciation
4.25%
 Coordinated global central
bank policy
3.25%
3.00% 3%
2.25%
 But
unlike the 2001 version…
2.00%
4.00%
1.00%
0.00%
1st Qtr
2nd Qtr
3rd Qtr
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4th Qtr
After Disinflation?
What’s different this time?
 Not in 2001 “Kansas” anymore
 Oil is at $60 not $20
 Global inflation is high not low
 US is at war not “peace”
 US running huge fiscal deficit vs surplus
 Dollar is weak not strong
 Euro has never been stress-tested
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Two Ka-Poom Scenarios
#1: The Last Ka-Poom: Reflation Fails
 US-centric
currency
crisis
Senator
Paul Sarbanes:
"... is
it your intention
that the
report of this
should
that
 1997/1998
stylehearing
currency
crisis,be
except
Greenspan
recommends
a return to the gold
in major
currencies
standard!?"
 Dissolution ofCrisis
global monetary system
Greenspan:
"I've
recommending
that for
 Sound
far been
fetched?
Greenspan was
years, there's
nothing
new
It
nervous
enough
lastabout
time tothat.
propose…
would probably mean there is only one vote in
the FOMC [Federal Open Market Committee]
for that, but it is mine."
- Senate Committee Hearing, Sept. 1997
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Two Ka-Poom Scenarios
#2: New Ka-Poom Cycle: Relfation Succeeds
“We are too dependent on imported oil from

The
Next
Bubble
troubled parts of the world, so the question
 how
Developed
by markets
was,
would we
craft something that would
give usEncouraged
energy security
as soon as
…
by government
taxpossible?
and
we had presentations from terrific scientists on
monetary policy
progress that's been made in technology and a
 Alternative
Energy
and Infrastructure
number
of alternative
sources
of energy —
everything from solar to wind to energy to
batteries and clean coal.
-Treasury Secretary Henry Paulson
Feb. 2007
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How to Make an Asset Bubble
Five Steps
1. Start with an asset that was already inflating
before the last bubble collapsed (e.g., Housing
during the stock market bubble)
2. Talk it up (e.g., “Ownership Society”)
3. Create tax incentives (e.g., 1997 Tax Relief Act)
4. Deregulate or don’t regulate (e.g., creative
mortgage products, such as liar loans, cite the
benefits of “free markets” and “innovation”)
5. Add money
(Also, take credit for “booming economy”)
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The Tea Leaves
Hard Assets: The Fourth Currency
1. Disinflation period when gold declines
25%+ during rush to liquidity (ala Feb.
2007 and Spring 2006)
2. If continues, asymmetric economic
impact causes unexpected change in
pricing relationships (outside “model”)
3. Hits currency and credit derivatives
4. Capital seeks safety from chaos while
global central banks cope
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iTulip Select
The Investment Thesis for the Next Cycle
Specialist Interviews:
Jim Rogers
Martin Mayer
Dr. Jamie Galbraith
James Scurlock
Commentaries
Book Reviews
Portfolio Modeling
ShadowFed
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