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Tesla Investor's General Macroeconomic / Market Discussion

Discussion in 'TSLA Investor Discussions' started by FluxCap, Apr 7, 2014.

  1. Unpilot

    Unpilot Active Member

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    All the while promising the people that will be hurt the most that they are going back to work!

    The new riches to be found in clean renewable energy with all the associated growth and cash gets tossed aside.

    It reminds me of watching my dog eat.
    No thought for tomorrow.
     
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  2. dmunjal

    dmunjal Member

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    You have made some keen observations but unfortunately your conclusion is wrong. The boom/bust cycle has nothing to do with which party is in power. It is completely related to what the Fed is doing with interest rate and quantitative easing.

    The cycle began with in the late 90s with several crises (LTCM, Asian Financial Crisis, etc.) which forced the Fed to lower interest rates more than needed to protect the economy. This along with Cllinton tax reform pushed investors to use that easy money to drive up stock prices. Mostly Nasdaq shares. At some point, the Fed attempts to "remove the punch bowl" and raises rates to a point which causes a bust. This what we saw in 2001.

    The cycle begins again with the dotcom bust and 9/11 which forces the Fed to attempt to stimulate the economy again by lowering rates (to 1%) and keeping them too low for too long. This along with deregulation in the derivative market, a housing bubble was created and again the Fed attempted to deflate the bubble in the 2006 which ended in another bust.

    The Fed responded to this bust in 2009 by lowering rates to 0% and injecting $4T in QE to stimulate the economy. This time, it creates the Everything Bubble which artificially raised the prices of all assets (stocks, bonds, housing and maybe even Bitcoin). We don't know what will happen when the Fed raises rates to a point which will eventually kill the bubble.

    History doesn't always repeat buy it does rhyme.
     
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  3. theschnell

    theschnell Member

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    I agree the Fed contributes to these cycles, but also giving tax cuts when going to war (Bush jr) and giving tax cuts while increasing military spending and infrastructure spending (Trump), and in both cases having increasing budget deficits during periods of higher tax revenues (or what would be higher tax revenues if not for the tax cuts) makes no sense, and no one has ever been able to convince me otherwise. When the economy is doing well, at minimum budget deficits should flat line, but ideally they should reduce. We didn’t see that with Bush and we’re not seeing it now... Why have increasing budget deficits when we already have a frothy asset market and we’re at full employment? It’s just straight dumb in my opinion.

    The Fed is trying to reduce the spike in the punch bowl slowly, but as usual the republicans are working against them at exactly the wrong time.
     
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  4. dmunjal

    dmunjal Member

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    I can only agree that fiscal policy can exacerbate monetary policy. But the effect is smaller than you think. Fiscal policy works with billions while monetary policy works in the trillions.

    You can't fight the Fed.
     
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  5. theschnell

    theschnell Member

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  6. dmunjal

    dmunjal Member

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    #2186 dmunjal, Jun 25, 2018
    Last edited: Jun 25, 2018
    The Fed's balance sheet is $4.5T and at it's peak in 2012, QE was $85B a month. Fiscal policy during the crisis was much smaller. However, the real effect of monetary policy is the indirect one. ZIRP and QE encourage artificial borrowing and with fractional reserve lending and derivatives, this amounts to over $70T (and quadrillions in derivatives) in overall debt. This overwhelms anything fiscal policy can accomplish. Going up or down. It's not even close. It's just done behind the scenes and never publicly discussed like fiscal policy is.
     
  7. ggr

    ggr Roadster R80 537, SigS P85 29, M3P 80k

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  8. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Reagan did the same thing too: cut taxes, increase spending, increase borrowing when the economy was already booming. Borrow-and-spend policies.

    Keynes advised countercyclical policy -- deficits during the bust and surpluses during the boom -- but for some reason you can never get a government to run a surplus during the boom, with the exceptions of Dwight D Eisenhower and Bill Clinton, who actually did, much to their credit.
     
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  9. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    #2190 neroden, Jun 25, 2018
    Last edited: Jun 25, 2018
    Evidence from history is that fiscal policy is FAR stronger than monetary policy. Ask any serious macroeconomist. The Fed actually can't counteract a sufficiently large fiscal policy, though they sometimes try. (A sufficiently extreme fiscal contraction policy certainly can't be countered by the Fed because the Fed can't lower interest rates significantly below 0%. On the other side, a very large fiscal expansion policy will swamp any efforts by the Fed to raise interest rates, as private lending will undercut the Fed rates.)

    (Historical examples of the Fed trying to counteract fiscal policy are mostly of a Republican-led Fed trying to counteract pro-growth fiscal policy during a depression, which is sort of nasty.)

    Oh, and you CAN fight the Fed, if you're big enough. Soros fought the Bank of England and won, remember?

    Why is fiscal policy stronger than monetary policy?

    Answer #1: because monetary policy is mere *loans* -- they increase people's supply of cash without increasing their wealth, and due to the interest charges, often decrease household wealth. Fiscal policy is *payments for services*, which increases people's wealth *and* their supply of cash. This is a critical difference: this is why monetary policy can walk the country into a household-debt trap, while fiscal policy cannot.

    Answer #2: monetary policy has a bad transmission channel: the Fed lends to the banks, who probably just sit on the money (this is what happened in 2009) or lend it to their buddies. Fiscal policy goes directly to pay workers, with a much more immediate economic result. (Of course, if the fiscal policy is tax cuts for billionaires or sweetheart contracts for Lockheed Martin executives, it's not nearly as effective as it is if it's health care or public services or direct payments -- such as G W Bush did -- for all Americans.)
     
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  10. dmunjal

    dmunjal Member

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    Most economists (including Krugman and Bernanke) would disagree.

    Helicopter money - Wikipedia
     
  11. theschnell

    theschnell Member

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    I appreciate your efforts, but personally I feel like a low volume thread like this should stay in tact, or that we should at least get a warning first.

    High volume threads like market action or general market, agree that is no place for politics.

    Hard to talk Macro without delving into politics to some degree, and I felt we were pretty cordial about it. Maybe I’m blinded by my own opinions...
     
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  12. ggr

    ggr Roadster R80 537, SigS P85 29, M3P 80k

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    I believe I've made it clear before, but I'll simply state my criteria again. If it has relevance to Tesla/TSLA, it's welcome in this pinned thread. So, for example, talk about tariffs, which may increase or decrease Tesla sales in Europe or China, or decrease competition in the US, great. If it is about taxation, pre-1980 wars, which president spent how much, etc, it goes to the market politics thread where people can decide whether to read the thread or not. The point is to (try to) make it so that people who are here to read about investing in Tesla can focus on the main threads. Of course they're also welcome to read the other threads too, but hopefully separating out the themes makes it easier to digest.

    In the spirit of @ValueAnalyst, if this posting gets more downvotes than upvotes, I'll happily stop moderating this thread. --ggr
     
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  13. EinSV

    EinSV Active Member

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  14. Intl Professor

    Intl Professor Active Member

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    #2195 Intl Professor, Jun 26, 2018
    Last edited: Jun 26, 2018
    Yes. I almost posted this yesterday. But I posteth too mush, er, much. Can't wait to check with my local econ guru, but he's dealing with a serious health problem now. The bottom line of the article does have one caveat: it is a predictor, but event predicted can be soon or two years later, if I remember correctly. Very important concept well explained. Thanks for posting.

    Edit: It looks like one of Prigogine's bifurcation points. You'll be on either side of the line, but its location in time is undetermined. That could be said about any prediction so probably BFO and thus useless.
     
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  15. sundaymorning

    sundaymorning Active Member

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  16. Starno

    Starno Active Member

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    Little macro market projection :

    I think we will see a big market growth toward the end of the year, after the US mid-term elections. That will last around 1,5-3 quarters.

    It will also probably be the last big " spur ", and by the end of this one, we'll probably achieve the peak of this cycle. Then we'll trade sideways for a little while and then crash.


    Of course, bearing a black swan type of events (trade war, euro zone tensions amplifying,...).

    Just my opinion.
     
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  17. bdy0627

    bdy0627 Active Member

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    I'm hearing whispers of a high likelihood of a looming correction this summer. Any thoughts on that?
     
  18. Intl Professor

    Intl Professor Active Member

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    See what Trump does, or broadcasts with a tweet, about reaction to Chinese/Eu/Canadian counter tariffs. I think the Chinese will stand firm so the emperor has a chance to take off some more clothes, or is he already naked for all to see? US Chamber of Commerce is on it. They need to get Congress on board. Hard to do in an election year and the Reeps are probably scared excrementless already, or they should be. Trump's counting on tough immigration policy leading to the midterms may well backfire. Crude implementation of a policy with little planning for human reaction to actual scenes on TV can have power. What is it they say in the Bible, "Those who live by TV shall die by TV?" In physics it is called the sword of electrons.
     
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  19. Unpilot

    Unpilot Active Member

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    Do you think that the empty vessel he appears to be ....is actually worse?
    Perhaps all that is needed is the proper ...um...steerage?

    The need to remove the sack of orange Cheetos is not necessary if the creepy crawly's (Stephen Miller/Session's)are removed.
    Then steer the empty vessel to more human and lasting results.
     

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