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Potential Impact of Macroeconomic Shock

Discussion in 'TSLA Investor Discussions' started by justdoit, Aug 2, 2014.

  1. justdoit

    justdoit Member

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    The ER letter mentioned a possible "macroeconomic shock" and so did Elon on the call. I wonder if they're being cautious about the overall condition of the markets and are bracing themselves for a possible "shock" in the near future. Anyone have thoughts on this?
     
  2. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    I think the past 15 years has demonstrated that unpredictable events can cause crashes, and largely undiagnosed systemic problems can quickly snowball into crisis.

    My best guess is that Tesla has contingency plans, but they are also giving investors fair warning that a massive economic shock could change the time to plan completion significantly.
     
  3. Auzie

    Auzie Tree Hugger Member

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    Macroeconomic shock is a very fitting term. I expect to be very shocked when it happens. Speaking from experience.:crying:

    Tesla will be shocked by fall in demand. Investors will be shocked by huge losses.

    The worst thing about macroeconomic downturn is that is difficult to see it coming. It is hard to distinguish between small market corrections and big ones. It is hard to see which correction will trigger sudden downward spiral, from which few can come out unharmed.

    The best Tesla can do is to expand to different parts of the world and to have healthy balance sheet.

    Demand in various parts of the world may be affected to differing degrees, helping Tesla smooth out the downward spikes in the negatively affected areas.

    Leveraged businesses are more at risk in the downturn. Too much debt may become huge liability with falling revenues. Preparation for bad times needs to happen when times are good.

    People living in areas prone to avalanches trigger the avalanche in a controlled manner from time to time. Controlled avalanche does less damage than the uncontrolled one. As time goes by, our collective knowledge grows and seeps into economic policies and regulations. Eventually we may have a socio-economic mechanisms in place which will prevent or reduce downward spirals.

    Until such time, investors need to diversify or they risk being shocked.:scared:
     
  4. chickensevil

    chickensevil Active Member

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    Well yeah! If people stop having the cash to spend on new cars we could see this heavily impacting any car company but certainly a startup would take the hit harder.
     
  5. ggies07

    ggies07 Active Member

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    Yeah well, I don't think our country has learned from the financial meltdown, so we'll see......
     
  6. Auzie

    Auzie Tree Hugger Member

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    #6 Auzie, Aug 2, 2014
    Last edited: Aug 2, 2014
    It may seem that way, I am confident that the learning is seeping through, slowly.

    Not learning is not an option in our evolutionary world. Our options are to either learn and adapt or to perish.
     
  7. austinEV

    austinEV Active Member

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    I figure Tesla's international expansion has always been about 2 things: 1) insulation against a stock downturn, and 2) organic advertisement for the gen 3.

    For 1), if you accept Teslas line that they have no demand problem in north america, as I do, then why expand at all? It is a huge waste of resources and they could have had more impressive EPS for a few quarters. While I think that there are untapped markets in NA, there is a real limit in people who will consider a $100k car, and those people are disproportionately affected by a stock downturn. While you can argue about when such a thing might happen, it approaches 100% certainty that this bull market won't run all the way to 2017 when the gen 3 starts. So it is smart, prudent work to diversify into other markets, which might not be affected as much by some local disturbance or be broad enough that it wouldn't matter when the downturn comes.

    And 2) just makes it so there will be lines around the block to reserve Gen 3, which is nice. Basically they put there advertising budget into superchargers and service centers.
     
  8. AlMc

    AlMc 'Senior Moments' member

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    Macroeconomic events: Tesla, nor any single company, can control macroeconomic events. TM can try to plan for a 'rainy day' but they are not usually predictable. I would prefer TM concentrate on the things they have 'some' control over: vehicles they produce; quality control; increasing battery production (basically removing barriers to production); additional needed features.
     
  9. sundaymorning

    sundaymorning Member

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    #9 sundaymorning, Aug 2, 2014
    Last edited: Aug 2, 2014
    I have had the pleasure of watching many of Elon's interviews and CC the past several years. I can tell you with confidence that Elon has mentioned many times (in 2012) that tesla will be able to meet demand in 2013 of delivering 25,000 model S if no economic recessions or catastrophe such as earthquakes, tsunami, war, etc. occurs.

    If I remember correctly, one of the reasons why Tesla did a capital raise in 2013 as the stock was rising above $90s was to hedge their position against possible future catastrophes. When Elon made those statements, I take it as him being conservative and honest, because there is no way any company can meet quotas under a severe economic catastrophe or recession, hence you should always consider that risk whenever you invest in stocks, gold, real estate, etc..

    Look at what the severe winter storms did to the eastern part of the US earlier this year, it practically slowed down production, service, housing and GDP for weeks. As a result of the winter vortex (as I think it was called...), the Feds and economists were unable to make a logical read on unemployment, housing or GDP data. However, as it turned out, that particular "climate change" catastrophe only slowed our economy down by 1q and the US is considered to be in good shape currently, especially with last Quarter's GDP data, in which we beat estimate by a whole %. China is also beating estimates, so do the math.

    If Elon expected 25k deliveries under normal economic conditions, and we ended up delivering 35k for 2013, then would it be reasonable to expect a better than expected projection of 60-70k for 2014, and 100k in 2015 if the economy remains the same? As an investor I would expect so..

    With the current complications of world macroeconomic events, it would be virtually almost impossible to pinpoint when an economic catastrophe or recession could occur, hence, this is noise and language you should ignore IMO. But for caution, you should always follow world news and invest conservatively because a sinkhole may engulf Tesla's gigafactory within 24 hours of it being completed, I give that probability a .0000000000001% chance of happening. How I derived that number is basically a guess.. in short, IMO you should invest conservatively, if you're afraid of macro or micro economic catastrophe, buy the stock, hold long and ride it out (that's if you're confident the company will sustain long term), otherwise, you can be wiped out if you own options if catastrophe drags out..

    By reading news feeds from various sources and comments from this community, I hope the information we give/receive will allow us to make informed choices, good luck to all.
     
  10. Auzie

    Auzie Tree Hugger Member

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    Plan for a rainy day may include developing infrastructure (service centers and superchargers) all across the world now when times are good.

    Infrastructure in place at least takes the cost of it out of the equation if the need arises to redistribute sales across the globe.
     
  11. AlMc

    AlMc 'Senior Moments' member

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    Yep. Just trying to point out that while we may all worry about macro events 'we' can't control them. So, we should all mitigate our risks as best we can (and so should TM) BUT since we have no control over them we should not waste too much time on them and concentrate on our 'spheres of influence'.
     
  12. sundaymorning

    sundaymorning Member

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    This reminds me of a Buddhist philosophy: If worrying does no use, then there's no use worrying.
     
  13. Auzie

    Auzie Tree Hugger Member

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    Nothing to do with worry, just planning for a rainy day.

    Now it is raining $$$ from US treasury, good time to spend on R&D, work on autonomous driving car or other improvements.

    Hopefully by the time this $$$ rain stops we will see a lot of infrastructure in place, new models and great tech improvements to Tesla cars.

    Tesla team :cool: seems to be doing all the right things.
     
  14. chickensevil

    chickensevil Active Member

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    I think you have your years wrong... We have 25K in 2013, 35k in 2014, and somewhere north of 60k for 2015.
     
  15. tftf

    tftf Member

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    #15 tftf, Aug 4, 2014
    Last edited: Aug 4, 2014
    Most stock market downturns can be foreseen. The exact timing is just harder to predict.

    There are five major indicators the current bull market cycle could be soon (2014-2015) over:

    - Shiller P/E nearing 30

    - Total Market Cap / US GDP above 120%

    - No major correction on US markets for a long period:

    "The S&P500 has now gone nearly 800 days since a correction of more than 10 percent - the "meaningful" level for many analysts."

    - Money outflows in bad credit risks (China, USA) growing in mid-2014, more shadow banking crumblings in China

    - FED exit from easy money and moving (rising) interest rates by 2015-2016

    You will see within 18 months (end of 2015) how right or wrong I was.

    As I wrote above, the exact timing of a downturn is hard to predict and there may parabolic moves at the end of a bull cycle, for example the Shiller P/E rose up to 40 back in 2000 to use an extreme example (but in this case, the subsequent fall will be even harder).

    PS: That was a single post. I will not reply to this topic or anywhere else.
     
  16. TSLAopt

    TSLAopt Active Member

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    oh TFTF, you're back!...such a mysterious fellow indeed
     
  17. Auzie

    Auzie Tree Hugger Member

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    Thanks for listing these indicators. There are many indicators that we can watch, but exact timing is critical to investing.

    If I had your confidence in predicting market downturn, I would not be posting as well, I would be setting up my positions and bets for the coming downturn.:wink:
     
  18. DaveT

    DaveT Searcher of green pastures

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    Yes, a mysterious fellow indeed.
     
  19. sundaymorning

    sundaymorning Member

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    again, it's ultra difficult to determine a downturn in the economy, despite the Shiller rising, other factors play a major role in market conditions. One of the reasons the market pulled back during the days of post year 2,000 is because of the Sept. 11th attack, which then led us into a war the bleed billions out of our economy per month, then the housing bubble crisis... Which was why we fell hard, the Shiller itself is a gage that people can look at, but then again all other factors such as jobs, consumer sentiment, new market products/invention/discovery, interest rate, war, and most importantly government policies all play major roles in creating or postponing a major recession.

    The Shiller could have risen to the 50s and beyond, but if we had no sept11 attack, a war, or housing bubble, or Bush then our economy may have been just fine. There are signs, but keep in mind that economic signs can be very deceiving and mixed. For example, unemployment may decrease but new jobs also decreased, so how would an economist digest that kind of info, well they would have to wait a little longer to see what happens with GDP, manufacturing, etc. tons of things can contribute to a recession or a thriving economy. If the game was that easy, everyone with half a brain will succeed at it, which is why investing is so compelling.
     

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