Tesla Investor's General Macroeconomic / Market Discussion

[sundaymorning]

Dow, Nasdaq and S&P at new highs. The Nekkei is at 15 year high, Greece has settled. Feds aren't raising rates, EU $1 trillion bailout along with Japan QE. Oil looking to stabilize with numerous refineries on strike. Looking bullish to me...

Fresh in, China factory expands in February, first time in four months!

http://www.cnbc.com/id/102452885

 

[sundaymorning]

Oil is quietly up 3.5% and Brent is up 5.5% today after Saudis observe an uptick in demand and Chinese economy expands in February. This is online with earlier predictions that 1st Q is normally weak and 2nd Q grows steadily. This prediction is of course based on historicals and bars any interference of unpredictable circumstances... US oil inventories continues to rise, maybe bc of a strong dollar?

 

[Auzie]

Yellen: Rate rise unlikely

Janet Yellen semiannual report to Congress:

Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.

Report major points

The unemployment rate now stands at 5.7

employment rose 260,000 in January.

long-term unemployment has declined substantially

Consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices.

housing construction continues to lag

longer-term interest rates in the United States and other advanced economies have moved down significantly since the middle of last year; the declines have reflected, at least in part, disappointing foreign growth and changes in monetary policy abroad

Another notable development has been the plunge in oil prices. The bulk of this decline appears to reflect increased global supply rather than weaker global demand. While the drop in oil prices will have negative effects on energy producers and will probably result in job losses in this sector, causing hardship for affected workers and their families, it will likely be a significant overall plus, on net, for our economy.

Foreign economic developments, however, could pose risks to the outlook for U.S. economic growth.

In China, economic growth could slow more than anticipated as policymakers address financial vulnerabilities

In the euro area, recovery remains slow, and inflation has fallen to very low levels; although highly accommodative monetary policy should help boost economic growth and inflation there, downside risks to economic activity in the region remain.

We could see economic activity respond to the policy stimulus now being provided by foreign central banks more strongly than we currently anticipate, and the recent decline in world oil prices could boost overall global economic growth more than we expect.

The Committee expects inflation to decline further in the near term before rising gradually toward 2 percent

wage growth is still sluggish, and inflation remains well below our longer-run objective.

Great job US Fed, in managing recovery. The US house seems to in order, all threats seem to be outside threats. Pesky foreign sluggish economies need to pull up their socks.

 

[sundaymorning]

Janet Yellen semiannual report to Congress:



Report major points



Great job US Fed, in managing recovery. The US house seems to in order, all threats seem to be outside threats. Pesky foreign sluggish economies need to pull up their socks.

Apple rumor helped this morning but it appears we were unable to build on that momentum because oil was largely down, US jobless weekly rate up, and consumer sentiment down a bit. However, the US economy remains in positive territory.. we'll see what happens next week.

 

[Auzie]

Interesting predictions by Morgan Stanley CEO

Here is what James Gorman, MS CEO has to say on the future:

Gorman said recent events including the oil price crash, the Ukraine crisis and the emergence of ISIL in the Middle East showed that "anyone who thinks they know the future is misguided or worse."

With that caveat issued, he then made a few predictions however: they included that the US Federal Reserve will begin raising short term interest rates by July, that oil will be back above $US70 a barrel by December, and that the US, currently the "best risk-adjusted market in the world" - will maintain a 3 per cent-plus growth rate this year.

I agree with the first statement, not so sure about the second one.

 

[Robert.Boston]

Here is what James Gorman, MS CEO has to say on the future:

I agree with the first statement, not so sure about the second one.

With my Fed-watcher tinfoil hat on, I agree that a mid-summer rate increase is likely based on parsing what Dr. Yellin has been saying. With my energy economist hat, I also agree with the oil price prediction, based on how inventories and rig counts are declining.

 

[jhm]

Fuel Gauge Report from AAA

Gas prices are going back up.

The crude price, I believe is the barrel price of crude divided by 42 gallons per barrel. Notice that the national retail price is always about $1.00 to $1.30 above the crude price per barrel. This spread reflects the costs of refining, distributing and marketing gas plus taxes. Taken together this retail to crude spread represents the infrastructure cost of gasoline, about $1/gal, what consumers must pay for gasoline to be conveniently located where they need it. Drivers pay about $500 per year per car for this service. And it is additive to the cost of crude. So even if crude were just $0.01/gal, gasoline would still cost more than $1/gal, just to bring it to the retail market.

This is critical to understand for EV economics. Getting 3 to 4 miles per $0.12 kWh is comparable to $0.75 to $1.00 per gallon. Thus, even if crude oil were free, gasoline would still be more expensive than the electricity to power an EV.

Of course, there are also infrastructure costs for charging. We may spend $1000 for at home charging installation. But this is still far cheaper in the long run than paying $500 per year per car to refiners and gas stations just to cover the infrastructure of convenient gas.

So no matter how cheap oil gets, EVs are always cheaper to power.

 

[ev-enthusiast]

EZB purchase program starts next Monday, March 9th, ends September 2016

Mario Draghi:
The Europäische Zentralbank (EZB) is starting to buy government bonds on a large scale in order to avert the risk of deflation in the euro zone.
The EZB is buying government bonds and other securities each month valued at 60 billion euros until September 2016.

 

[Johan]

Here is what James Gorman, MS CEO has to say on the future:

I agree with the first statement, not so sure about the second one.

His first statement kind of invalidates the second one, doesn't it? "It's impossible to predict the future, and if you try you're a fool. Now let me predict the future..."

 

[yesla]

I think it was tool to infer that he did not take himself too seriously...

 

[FluxCap]

Looking like market tried to punish a good weekly jobless claims report to pressure Fed into not raising rates in the morning hours of this session. A rather weak attempt, and I suspect a bounce back up with force on Monday AM. Too many green shoots in this market with lots of cash looking for a home. Made a few bets accordingly.

 

[FluxCap]

Rough few days for the S&P, NASDAQ and TSLA. I'm convinced much of the recent downward pressure on TSLA is macro-related. We need a green market day soon, or macro bears are going to start salivating and talking "the big correction" again.

The stock market is on track for a sharply lower open as futures on the S&P 500 trade 17 points below fair value. Index futures have retreated throughout the night in a move that coincided with continued dollar strength that has the Dollar Index (98.38, +0.79) trading at a new 12-year high. The Index has inched away from its best level of the morning, but is still up 3.2% for the month and higher by 8.5% since the end of 2014.

The continued strength has been problematic for the earnings outlook among U.S. multinational companies while also putting a squeeze on overseas entities that conduct their dealings in dollars.

 

[Lump]

At the beginning of 2014 I began lowering risks in my portfolio since I felt we were in the late innings of the USA bull market, later in the summer I turned bearish & sold many long held positions, I typically don't sit on cash very long but found my self with ~40% in cash with an itchy trigger finger, the only Microeconomic trade I found comfortable making was buying WisdomTree Europe Hedged Equity ETF (HEDJ) http://www.wisdomtree.com/etfs/fund-details.aspx?etfid=73

Currency trading & predictions are not my strong suit but HEDJ has performed well over the past 3-6 months & should continue in this environment.

 

[Auzie]

At the beginning of 2014 I began lowering risks in my portfolio since I felt we were in the late innings of the USA bull market, later in the summer I turned bearish & sold many long held positions, I typically don't sit on cash very long but found my self with ~40% in cash with an itchy trigger finger, the only Microeconomic trade I found comfortable making was buying WisdomTree Europe Hedged Equity ETF (HEDJ) http://www.wisdomtree.com/etfs/fund-details.aspx?etfid=73

Currency trading & predictions are not my strong suit but HEDJ has performed well over the past 3-6 months & should continue in this environment.

I am curious about the bearish macroeconomic signals that you see.

 

[Lump]

I am curious about the bearish macroeconomic signals that you see.

Hey Auzie, last night I decided to not participate in the investment threads for awhile...good luck.

 

[Auzie]

Hey Auzie, last night I decided to not participate in the investment threads for awhile...good luck.

I will miss your input. I appreciate bearish input and seek it to balance and keep in check my current overly optimistic outlook.

My portfolio has a good chance to be decimated in a potential market downturn. That makes me a bit paranoid about looking for bearish signals.

We all participate in and contribute to shaping the underlying market sentiment. Not hearing different voices increases the risk of not sensing the change in market sentiment
Good luck to you as well, sitting on cash and in funds is not a bad place to be, it might turn out to be better than chasing sp waves:smile:

 

[kenliles]

I will miss your input. I appreciate bearish input and seek it to balance and keep in check my current overly optimistic outlook.

My portfolio has a good chance to be decimated in a potential market downturn. That makes me a bit paranoid about looking for bearish signals.

We all participate in and contribute to shaping the underlying market sentiment. Not hearing different voices increases the risk of not sensing the change in market sentiment
Good luck to you as well, sitting on cash and in funds is not a bad place to be, it might turn out to be better than chasing sp waves:smile:

Ditto. We need all the Bear balance we can get. I'm largely in cash right now due to an anticipated market correction. I think TSLA is a bit dangerous right now for the very reason it has, on its own, a good price point here. But with the market conditions I'm at very minimal levels in all stocks, especially high flyers like TSLA. Historically, when the Fed begins raising interest rates the market corrects 10+% (13/16 odds). On top of that the high dollar, more oil downside imo, and general world low growth, etc. It's just a very risky time for the markets imo, making it doubly frustrating to be under invested in TSLA at these prices...

 

[Auzie]

Ditto. We need all the Bear balance we can get. I'm largely in cash right now due to an anticipated market correction. I think TSLA is a bit dangerous right now for the very reason it has, on its own, a good price point here. But with the market conditions I'm at very minimal levels in all stocks, especially high flyers like TSLA. Historically, when the Fed begins raising interest rates the market corrects 10+% (13/16 odds). On top of that the high dollar, more oil downside imo, and general world low growth, etc. It's just a very risky time for the markets imo, making it doubly frustrating to be under invested in TSLA at these prices...

I have some hopes that Fed will refrain a bit longer with rate hikes. If they don't, strong(er) $ may become a drag on US economy and that is likely to flow into market correction. My dilemma is how big is that correction likely to be if it happens and at what point is it worthwhile to make moves. 10% correction is not so threatening.

Tesla is as dangerous as ever:smile: thrilling

 

[jhm]

Infrastructure cost of gasoline

While we're considering the possibility that oil could decline further, I'd like to share something on the infrastructural cost of gasoline. Acxording to the EIA (Factors Affecting Gasoline Prices - Energy Explained, Your Guide To Understanding Energy - Energy Information Administration) in 2013 the average retail price of gasoline in the US was $3.51/gallon. 68% of this was due to the price of crude oil which obviously varies with the oil market. However, refining, retailing and taxes accounted for 9%, 11% and 12% respectively, and these costs do not substantially vary with the price of oil. These are the infrastructural costs of gasoline that consumers pay for the convince of filling up at the gas station of their choice. This infrastructure cost is about $1.12/gal. So even if crude where were free and delivered to refineries at no cost, the retail price of gasoline would still be about $1.12/gal.

Given a price of electricity at $.12/kWh, average EV efficiency of 3.5 mile/kWh and average gas vehicle efficiency 22.5 mpg, EVs reach fuel cost parity with gasoline at about $0.77/gal.

Thus, EV parity gas prices are well below the infrastructural cost of gasoline. EVs will always be cheaper to power than gas vehicles no matter how low the price of oil may go.

As a handy little model for gas prices, it is convenient to remember that there are 42 gallons to the barrel. So roughly we get:

Gas ~ 1.12 + Crude/42

So even with oil as low as $10/bbl, gas will be about $1.36/gal.

So the average family is spending about $500 to $600 per year per vehicle just for the convenience of gasoline infrastructure. EV infrastructure is much lower, so in the long run EV infrastructure wins regardless the price of oil.

 

[kenliles]

I have some hopes that Fed will refrain a bit longer with rate hikes. If they don't, strong(er) $ may become a drag on US economy and that is likely to flow into market correction. My dilemma is how big is that correction likely to be if it happens and at what point is it worthwhile to make moves. 10% correction is not so threatening.

Tesla is as dangerous as ever:smile: thrilling

True enough! Due to US economic strength and still positive yield curve, I think a market correction of 10-15% is a reasonable expectation. Given TSLA is already beaten down pretty good, I would expect it to match (rather than amplify it). If we get the correction while TSLA is down, I'm planning on something like a $180ish support level. I'll be holding my core position thru that and adding on the way down in measured increments. No doubt, none of this will take place!

While we're considering the possibility that oil could decline further, I'd like to share something on the infrastructural cost of gasoline. Acxording to the EIA (Factors Affecting Gasoline Prices - Energy Explained, Your Guide To Understanding Energy - Energy Information Administration) in 2013 the average retail price of gasoline in the US was $3.51/gallon. 68% of this was due to the price of crude oil which obviously varies with the oil market. However, refining, retailing and taxes accounted for 9%, 11% and 12% respectively, and these costs do not substantially vary with the price of oil. These are the infrastructural costs of gasoline that consumers pay for the convince of filling up at the gas station of their choice. This infrastructure cost is about $1.12/gal. So even if crude where were free and delivered to refineries at no cost, the retail price of gasoline would still be about $1.12/gal.

Given a price of electricity at $.12/kWh, average EV efficiency of 3.5 mile/kWh and average gas vehicle efficiency 22.5 mpg, EVs reach fuel cost parity with gasoline at about $0.77/gal.

Thus, EV parity gas prices are well below the infrastructural cost of gasoline. EVs will always be cheaper to power than gas vehicles no matter how low the price of oil may go.

As a handy little model for gas prices, it is convenient to remember that there are 42 gallons to the barrel. So roughly we get:

Gas ~ 1.12 + Crude/42

So even with oil as low as $10/bbl, gas will be about $1.36/gal.

So the average family is spending about $500 to $600 per year per vehicle just for the convenience of gasoline infrastructure. EV infrastructure is much lower, so in the long run EV infrastructure wins regardless the price of oil.

Nice reminder post jhm. I've been trying convince associates of this fact for a long time now. Markets don't seem to get this. In addition, with Solar-Storage, the EV fuel infrastructure continues to get cheaper over time (including on a relative basis)-- Thx