Tesla Investor's General Macroeconomic / Market Discussion

[dmunjal]

• Yes. This is the mechanism. Again, are you alleging that traders are getting margin-called? Convince me of this

I'm sure some are getting margin calls but that's not all of what's going on today. Interest rates rising affects the amount of total leverage they can safely hold. Of course, it will get ratcheted down as rates rise.

If the Fed lowers rates to create a "Wealth Effect" as they have admitted to doing. Why wouldn't raising rates cause the reverse?

It's all about liquidity.

 

[dmunjal]

I think your getting annoyed with this person and they clearly aren't listening. Save yourself the aggravation. You said it yourself, it is demoralizing having these kind of conversations.

No reason to get annoyed. I thought we're having a very productive conversation.

If the tariff situation is resolved in favor of the US while rates keep going up as liquidity declines and the market still crashes, then I will be proven correct.

 

[neroden]

No reason to get annoyed. I thought we're having a very productive conversation.

If the tariff situation is resolved in favor of the US while rates keep going up as liquidity declines and the market still crashes, then I will be proven correct.

Unfortunately we won't see that scenario, because the tariff situation is *definitely* not going to be resolved before 2020. Remember, we have "Tariff Man" as President. :eyeroll: Imposing "national security" tariffs against Canadian steel. Apparently going on rants in the White House about how he wants more tariffs and he doesn't care what countries or products they're tariffs on.

I guess if erratic, destructive tariffs continue to be imposed at random, and Fed rates go down, then if the market rises, you'll be proven correct. That's a more plausible scenario.

 

[dmunjal]

Unfortunately we won't see that scenario, because the tariff situation is *definitely* not going to be resolved before 2020. Remember, we have "Tariff Man" as President. :eyeroll:

I guess if erratic, destructive tariffs continue to be imposed at random, Fed rates go down, and the market rises, you'll be proven correct. That's more plausible.

I think that the current market climate has forced Trump's hand. He can't be as aggressive as he wants with China anymore and will be forced to accept a deal in the 90 day window that has been created.

 

[neroden]

I think that the current market climate has forced Trump's hand. He can't be as aggressive as he wants with China anymore and will be forced to accept a deal in the 90 day window that has been created.

If his advisors manage to talk him into doing that, it'll just make him angry and he'll instead put tariffs on someone else, I don't know, the UK or Australia or something. Really, watch his behavior. The man is a spoiled toddler.

 

[dmunjal]

If his advisors manage to talk him into doing that, it'll just make him angry and he'll instead put tariffs on someone else, I don't know, the UK or Australia or something. Really, watch his behavior. The man is a spoiled toddler.

I can't disagree with his errant behavior but the stock market is really all he has to hang his hat on. I don't like the man but like Kim Jong Un, you can't just ascribe "crazy" as the only reason for his behavior. Self preservation will kick in at some point. I think only Steve Bannon would tell him to keep fighting China. And he's gone.

 

[neroden]

So, like I said, if he stops fighting China, he'll decide to start a tariff war with Australia, or the UK, or Mexico again, or Canada again, or India, or something. It wasn't just China, remember: he tarriffed everyone. And there were retaliatory tariffs from Mexico, Canada, and the EU.

Trump *really loves tariffs*; he's been ranting about how great they are for over 40 years; he's going to demand them. And his advisors will let it happen to distract him from obsessing about his stupid wall, which will never get funded.

 

[dmunjal]

Here's another example of what happens when we reach the end of the credit cycle.

This has nothing to do with tariffs and everything to do with interest rates.

US Credit Market Dries Up

“Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market”

 

[mongo]

Here's another example of what happens when we reach the end of the credit cycle.

This has nothing to do with tariffs and everything to do with interest rates.

US Credit Market Dries Up

“Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market”

Isn't it the case that corps are buying back nearly a trillion dollars of their own stock? If they are that flush with cash, why take out loans?

 

[dmunjal]

Isn't it the case that corps are buying back nearly a trillion dollars of their own stock? If they are that flush with cash, why take out loans?

Ask Apple who has $300B in cash but still took out a loan to buy back stock. It's because interest rates were so low it made sense.

And they weren't the only ones.

 

[mongo]

Ask Apple who has $300B in cash but still took out a loan to buy back stock. It's because interest rates were so low it made sense.

And they weren't the only ones.

That seems like a case of atypical behavior caused by crazy low rates vs increasing rates reducing normal action.
(Now I've got used car ads stuck in my head: come on down to Uncle Sam's bond emporium, rates so low they're crazy)

 

[anthonyj]

Lol. China has been abusing us for far too long. About time we have a president that’s trying to fix that. Trump is a little crazy with Twitter though.

 

[ggr]

Ask Apple who has $300B in cash but still took out a loan to buy back stock. It's because interest rates were so low it made sense.

And they weren't the only ones.

At the time, most of Apple's capital was offshore, and until TrumpTax, couldn't be brought back to the US without paying lots of tax.

 

[dmunjal]

At the time, most of Apple's capital was offshore, and until TrumpTax, couldn't be brought back to the US without paying lots of tax.

True. But why have buybacks slowed down in December? Tax rates are still the same. But interest rates aren't.

Stock Buybacks Diminish, Leaving the Market With Less Fuel

 

[EVNow]

Lol. China has been abusing us for far too long. About time we have a president that’s trying to fix that. Trump is a little crazy with Twitter though.

But you can’t make good deals without a smart strategy and game plan.

 

[dmunjal]

But you can’t make good deals without a smart strategy and game plan.

How do you know that it's not going to work already? Looks like there is a 90 day window of negotiations going on. He deserves no credit for trying when even Elon Musk said that Obama didn't even bother?

I work in the tech industry and I've seen first hand how China steals intellectual property.

 

[neroden]

Lol. China has been abusing us for far too long. About time we have a president that’s trying to fix that. Trump is a little crazy with Twitter though.

He's not really trying to fix it and he hasn't accomplished anything.

We now have tariffs against Canada (?!?!) and China has restored its tarriffs against the US to... exactly what they were when Trump started his tariff war.

I'm actually in favor of well-thought-out tariffs, but NOTHING Trump has done has been well thought out.

 

[neroden]

How do you know that it's not going to work already? Looks like there is a 90 day window of negotiations going on. He deserves no credit for trying when even Elon Musk said that Obama didn't even bother?

I work in the tech industry and I've seen first hand how China steals intellectual property.

Like the US did in the 19th century when the US became the leading power in the world. Face it, China's not going to change that. EVER. They're doing what works. The US made the curious choice to stop doing what works and go for private royalist-style monopolies ("intellectual property"), and it's been harming the US economy. China will not shoot themselves in the foot just because the US did so or because the US wants China to have the same limp.

 

[neroden]

Here's another example of what happens when we reach the end of the credit cycle.

This has nothing to do with tariffs and everything to do with interest rates.

US Credit Market Dries Up

“Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market”

This indicates a lack of credit *demand*, which has little to do with interest rates and everything to do with lack of business expansion opportunities.

The high-yield market does not operate the same way as the "investment grade" market. I remember when "high-yield" bonds yielded 15%, 20%, more, and when companies thought there was a potential for business expansion, they issued them.

Companies do actually do rate arbitrage on low-yield bonds, issuing 2% bonds in order to buy back stock. High-yield bonds simply don't work that way.

A drying up of the high-yield bond market *is* indicative of "market sentiment" taking a serious downturn, and is interesting.

It is NOT, however, due to Fed interest rates, because, as I say, there have been plenty of exuberant periods when companies happily issued 24% high-yield bonds.

It is what they call a "risk off" market. A lot of companies had a sudden cut in their profit margins and cash flows because of the tariffs. They and other companies are now hoarding cash in order to deal with future random acts of God the President.

 

[EVNow]

How do you know that it's not going to work already? Looks like there is a 90 day window of negotiations going on. He deserves no credit for trying when even Elon Musk said that Obama didn't even bother?

I work in the tech industry and I've seen first hand how China steals intellectual property.

No credit for trying something purely for political reasons.

Don't get me started on how US has stolen whole countries.

BTW, is the handle your real name ? Sounds Indian.