Tesla Investor's General Macroeconomic / Market Discussion

[austinEV]

Word heat-map for latest Fed statement:

They took out calendar references for timing of rate hike, so market sees this as essentially unchanged.

Hah. I for one wish "unemployment rate" was bigger than "inflation". Maybe the concept was worded differently in different mentions.

 

[Robert.Boston]

Hah. I for one wish "unemployment rate" was bigger than "inflation". Maybe the concept was worded differently in different mentions.

The Fed has a legal mandate about inflation, not so much for employment.

 

[FluxCap]

An interesting read re: Yellen's comments today:

Behavioral Macro | The Federal Reserve, on Avalanche Patrol

 

[kenliles]

An interesting read re: Yellen's comments today:

Behavioral Macro | The Federal Reserve, on Avalanche Patrol

great post Flux

 

[FluxCap]

Thanks. Here's another indicator I'm intrigued by lately. It's far from scientific, but I find it interesting nonetheless:

Fear Greed Index - Investor Sentiment - CNNMoney

 

[AlMc]

So, what is the thought about the effect that the Conservative party win will have on the market and TSLA specifically? Sterling rising
Jobs report for US?

 

[Gerasimental]

So, what is the thought about the effect that the Conservative party win will have on the market and TSLA specifically? Sterling rising
Jobs report for US?

I imagine next to no effect on TSLA. Rise in Sterling is probably due to de-risking of uncertainty over prolonged coalition negotiations and or even new elections more than anything else. Indices up because UK is so heavily banking-focused and a Conservative win is good for banks. Whether it's good for aggregate demand is unclear, but likely not. It doesn't bode well for investment in 21st century infrastructure though which might be bad for Tesla in the long run, but not for TSLA.

I'm too confused about the dynamics between economic performance and market fear of rate hikes in the US to really understand the effect of today's NFPs.
I actually hope this puts a damper on the QE-exuberance in equities as I'm worried about the blow when rates finally do rise, as we know that stocks like TSLA will be disproportionately hit by a sudden flight out of equities.

 

[Robert.Boston]

I've been watching this election keenly because my company has plans for renewable energy sales in the UK. Interestingly, in stark contrast to the U.S., the environment is not a party-line issue in Britain—there is broad support in all parties for reductions of CO2 and decreased reliance on fossil fuels. So I expect no policy changes on environmental issues coming out of this election.

The really good piece of news for Tesla is the sharp increase in the £/$, which should help GM on sales in the UK and/or allow Tesla not to take price increases there. The other macro piece I worry about from this election is the dominating win in Scotland by the SNP, which won 56 of 59 Scottish seats in Parliament. This sweep lays the groundwork for another referendum on Scottish independence, which I think would hurt both Scotland and the three other UK nations.

Jobs report was almost exactly in line with consensus forecasts, so I don't think we'll see much reaction on Wall St today to it.

- - - Updated - - -

I'm too confused about the dynamics between economic performance and market fear of rate hikes in the US to really understand the effect of today's NFPs.
I actually hope this puts a damper on the QE-exuberance in equities as I'm worried about the blow when rates finally do rise, as we know that stocks like TSLA will be disproportionately hit by a sudden flight out of equities.

Interesting POV. (What's "NFP"?)

I'm going to challenge your last statement a bit. Personally, I am more equity-heavy than I would like to be because bonds have such crappy yields and substantial risk of capital depreciation once rates start to rise. The money I would have in bonds is instead in dividend-bearing equities in companies I like, giving me income and upside. If bond yields rise, I will likely rebalance out of these conservative stock holdings towards bonds, but it won't change my holdings of growth/speculative stocks like TSLA. That's one man's POV; I'm not sure if it can be generalized.

 

[Gerasimental]

Interesting POV. (What's "NFP"?)

I'm going to challenge your last statement a bit. Personally, I am more equity-heavy than I would like to be because bonds have such crappy yields and substantial risk of capital depreciation once rates start to rise. The money I would have in bonds is instead in dividend-bearing equities in companies I like, giving me income and upside. If bond yields rise, I will likely rebalance out of these conservative stock holdings towards bonds, but it won't change my holdings of growth/speculative stocks like TSLA. That's one man's POV; I'm not sure if it can be generalized.

Nonfarm Payrolls, sorry.
Good point that risk-averse investors who just don't see the point in bonds right now are likely to be focused more on div-yielding, safe stocks rather than growth stocks. Nevertheless I think that money flowing out of stocks in general will have a strong knock-on effect on TSLA, which seems to have a beta of 2-3.

About the SNP: They had said during the campaign that they would not pursue a new referendum in this parliament if they ended up forming a coalition with Labour. I don't know if today's result will change that stance but their sweep of Scotland is more extreme than even they expected, so admittedly anything could happen here. Look out for very strong statements coming from Cameron about Scotland and the broader nature of the Union in the coming few days.

 

[AlMc]

This looks like a busy week ahead for 'macros'. hmmmmm..... May be a little rocky for the markets (TSLA) this week. Good week for short term options IF you can call it right. I bought a couple puts at the end of the trading Friday just in case.

 

[ev-enthusiast]

European Central Bank decided to adapt their pace of bond buying to the expected trading volume during the next months, buying more during May and June and less during July and August.

From the Financial Times (english): European Central Bank steps up pace of bond buying

Benoît Cœuré, an executive board member of the ECB, said the central bank would front-load some of its €60bn a month bond-buying programme due over the summer into May and June, due to low liquidity later in the season. He also said purchases could be backloaded into September, when liquidity traditionally picked up.

Same information from german Handelsblatt: Draghi greift bei Staatsanleihen noch einmal zu

German DAX reacting positively, currently up about 2% (DAX live cam in Frankfurt).

 

[AlMc]

How are some of you 'macro people' with more experience than I interpreting the rise in housing starts and the feeble increases income as it would apply to TSLA? Seems to me the effect on the FED would be to hold off on allowing interest rates to rise, possibly even into 2016?

 

[Robert.Boston]

How are some of you 'macro people' with more experience than I interpreting the rise in housing starts and the feeble increases income as it would apply to TSLA? Seems to me the effect on the FED would be to hold off on allowing interest rates to rise, possibly even into 2016?

I agree; inflation remains below target in the U.S., income and GDP growth is tepid. I don't see any rate increase this summer.

 

[ev-enthusiast]

FOMC will release their latest minutes later today (link to Bloomberg Economic Calendar).

Reminder: Next Monday is Memorial Day, markets are closed.
Maybe there is only thin trading volume this week ahead of the holiday.

 

[FluxCap]

FOMC minutes are out. Here's what the market thinks:

 

[Auzie]

IMF considering renminbi inclusion in Special Drawing Rights

In June, IMF is likely to decide to include the Chinese renminbi in its SDR

Special Drawing Rights is an international reserve asset, formed by the IMF.

Current SDR basket:

USD 41.9%
EU 37.4%
Pound Sterling (GBP) 11.3%
Yen 9.4%


People's Bank of China deserves some credit for the reform policies which seem to lead to renminbi improving its stature amongst the world currencies, both as an investable currency and as a storage currency.

My personal basket, if I was after safe currencies, would include USD, Yen and GBP. For the moment Euro seems to me a bit like a house of cards (currency only, not the underlying economy).

 

[Auzie]

Greek tragedy

Reuters: Greece will not make June IMF repayment as it does not have the money

June instalments are 1.6b euros. Greece does not have that money, nor the money to pay wages and pensions and other bills.

Some pics of destroyed factories in Greece

The responsibility for this disastrous out of control outcome is disputable and a matter of opinion.

It seems indisputable that the Greek people are far worse off now then before joining the Union, and the Union seems to be worse off for having to deal with the Greek problem. The leadership inability and lack of effectiveness are on display for the world to see, undermining the stability of the rest of the Union.

I think we are seeing one of those tragic cases of 'It must get worse (for Greece at leats) before it gets better'.

The question worth pondering is: What went wrong, how could it get so far and so out of control?

 

[Cobos]

I'm not so sure that the rest of the union is worse off because of the economic problems in southern Europe generally and Greece particularily. The German economy is very dependent on their expert industry. The fact that times are fairly good in Germany imply that their currency should be very strong. That again hurts their export industry. But the markets looks at all the member states of the Euro and due to problems in Greece f.inst. the Euro is a lot weaker than it would have been if it was the deutsche mark. The end result is Germany in spite of higher wages and higher costs can compete away industry in the southern states.
So at least as long as Greece doesn't default or cause a crash in the German banks Germany will profit from a weak Euro to prop up their export industries.

Cobos

 

[Auzie]

Cobos I agree with your post above describing how Germany benefits from weak Euro. Strong economies in Euro zone benefit from low currency that does not match their underlying economy.

The way that Union suffers from Greek crisis is the public display of their ineffectiveness to deal with it. Put it simply, because of Greek crisis and all events leading up to it, many people think less of such leaders and of the Union that they lead. These happenings undermine European Union to a degree, imo. Something must be wrong when the whole country is destroyed. Whether it was destroyed or was simply helped to destroy itself is now irrelevant. What kind of a Union breeds something like that inside itself? Can it happen again?

Times are good and this crisis may be too small to trigger spreading out to other countries. A cycle of good times bad times will predictably run its course, bad times will come again and I am just not sure how the Union will hold when that happens.

 

[ev-enthusiast]

Europe rallies after hints of tentative Greece deal (link).
Form CNBC:

European stock markets turned sharply higher Wednesday after hints that Greece may have edge closer to finalizing a deal with its euro zone creditors.
The pan-European Stoxx 600 index climbed to trade over 1.2 percent higher with all major bourses rallying over 1 percent after news that euro zone lenders have started to compile a "staff level accord" with Greece, or an agreement that is close to being finalized.

Update:
Deal with Greece still in negociation.
Today there is a meeting of G7 finance ministers in Germany (city of Dresden) to prepare G7 summit that will take place in about two weeks.
Maybe we get some clarification after today's meeting.