Tesla Investor's General Macroeconomic / Market Discussion

[ev-enthusiast]

Greek Prime Minister Alexis Tsipras currently in Germany in talks with German Chancellor Angela Merkel and French President Francois Hollande about Geek's economy.
Merkel and Holland agree on lowering primary budget surplus target for Greece, this would help Greece to recover its economy:

Greek Prime Minister Alexis Tsipras agreed in a telephone conversation with German Chancellor Angela Merkel and French President Francois Hollande on the need for an immediate solution involving a lower primary budget surplus target for Greece, a Greek official said in a Reuters report.

(CNBC link, via German news outlet n-tv: link (google translate))

Athens has to pay 300 million euro to the International Monetary Fund this Friday.

 

[Renaud]

Greek Prime Minister Alexis Tsipras currently in Germany in talks with German Chancellor Angela Merkel and French President Francois Hollande about Geek's economy.
Merkel and Holland agree on lowering primary budget surplus target for Greece, this would help Greece to recover its economy:

(CNBC link, via German news outlet n-tv: link (google translate))

Athens has to pay 300 million euro to the International Monetary Fund this Friday.

And now Syriza rejects the deal that was proposed. The Greek people is suffering a lot already, and that is not going to help...
Danaides barrel at its best.

 

[The Blue Owl]

I wonder why the markets are so placid when it comes to the possibility of a Grexit. Is it that investors don't think it's gonna happen, or that they are not that concerned with the consequences if it does?

Time for a deal is running out fast. Personally, I think it is more likely than not that Greece will abandon the Euro and go into default. Maybe I'm wrong, and everything will be all right, but I don't like the idea of walking into a discontinuity this big. The consequences are unpredictable.

Anyone else following the events in Europe? What's your take?

 

[AudubonB]

Heh. A lot of market watchers are viewing both the equity and especially the bond & currency markets as being full-frontal concentrating on little other than the Grexit. Put another way, you could make the case that the running total of markets' value lost over worries about Greece has far surpassed the entire Greek debt: everyone would have been better off had all market participants chucked in, say, three-four months ago 50% of the losses otherwise undergone in the subsequent period to a Pay For Greece hat: Athens would be off the hook and all others would be better off than they are now.

Except for recent gold traders.

Ain't hindsight wunnerful?

 

[Johan]

Heh. A lot of market watchers are viewing both the equity and especially the bond & currency markets as being full-frontal concentrating on little other than the Grexit. Put another way, you could make the case that the running total of markets' value lost over worries about Greece has far surpassed the entire Greek debt: everyone would have been better off had all market participants chucked in, say, three-four months ago 50% of the losses otherwise undergone in the subsequent period to a Pay For Greece hat: Athens would be off the hook and all others would be better off than they are now.

Except for recent gold traders.

Ain't hindsight wunnerful?

This is insightful. However, you are forgetting that the financial industry does not think this way. They are greedy and players: the want to make money on the way up and on the way down! So the "value" of the loss will be bigger than the Greek debt - the sentiment is amplified because they all want to buy at the bottom and thus get ahead. If the financial industry collaborated in order to keep the economies growing steadily and without fluctuations it would also mean that no-one could ever in the future win a bigger piece of the pie (at the expense of someone else), because all companies/nations/funds/fortunes would grow the same rate their relative size would never change. It's not really important for an individual what his fortune or income is in absolute terms, it's only important how big it is compared to others (since this determines the actual value: buying power, influence) and if you can increase the actual values of money.

 

[The Blue Owl]

This is insightful. However, you are forgetting that the financial industry does not think this way. They are greedy and players: the want to make money on the way up and on the way down! So the "value" of the loss will be bigger than the Greek debt - the sentiment is amplified because they all want to buy at the bottom and thus get ahead. If the financial industry collaborated in order to keep the economies growing steadily and without fluctuations it would also mean that no-one could ever in the future win a bigger piece of the pie (at the expense of someone else), because all companies/nations/funds/fortunes would grow the same rate their relative size would never change. It's not really important for an individual what his fortune or income is in absolute terms, it's only important how big it is compared to others (since this determines the actual value: buying power, influence) and if you can increase the actual values of money.

This was an issue for the Eurozone governments to fix, though, not the financial industry. For all the moral hazard talk from Germany et. al., they collectively decided that it only applied to Greece, but not to Greece's creditors, who presumably bear no responsibility for knowingly lending to an insolvent country. The creditors must be made whole, the mantra goes, although they know full well that strangulating a drowning man won't save him, and when he dies, so will his debt payments.

They are betting that there will be no contagion from a default, but interest rates for sovereign bonds from Italy, Spain, and Portugal are rising again. If the policy makers are wrong on this one, the tremors from the falling dominoes could exceed the 2008 crisis.

 

[FluxCap]

One thought is that "Grexit freakout" has been so overdone now even the regular bears I watch are covering their shorts. Greece is a pretty small blip in the global economy, and people are still joking that Apple could bail out the country with spare cash and barely even notice.

Apple Could Make Money by Bailing Out Greece - Bloomberg View

Or, this could be the beginning of Eurozone armageddon. But I think most sophisticated traders are now saying "meh, whatever happens happens and we'll go on trading either way."

 

[Johan]

This was an issue for the Eurozone governments to fix, though, not the financial industry. For all the moral hazard talk from Germany et. al., they collectively decided that it only applied to Greece, but not to Greece's creditors, who presumably bear no responsibility for knowingly lending to an insolvent country. The creditors must be made whole, the mantra goes, although they know full well that strangulating a drowning man won't save him, and when he dies, so will his debt payments.

They are betting that there will be no contagion from a default, but interest rates for sovereign bonds from Italy, Spain, and Portugal are already rising again. If the policy makers are wrong on this one, the tremors from the falling dominoes could exceed the 2008 crisis.

Yeah this is all very true, so here they are in a way taking a collective bet without competing internally. But in broader sense they are now gambling against China, the US, all the new economies for a bigger piece of the pie (by having their pie and eating it too, no pun intended).

- - - Updated - - -

But I think most sophisticated traders are now saying "meh, whatever happens happens and we'll go on trading either way."

Exactly what I was trying to say above.

 

[AudubonB]

This is insightful. However, you are forgetting that the financial industry does not think this way.

Well, thanks but it wasn't really that insightful...it was hindsightful™®

 

[sahanim]

This is insightful. However, you are forgetting that the financial industry does not think this way. They are greedy and players: the want to make money on the way up and on the way down! So the "value" of the loss will be bigger than the Greek debt - the sentiment is amplified because they all want to buy at the bottom and thus get ahead. If the financial industry collaborated in order to keep the economies growing steadily and without fluctuations it would also mean that no-one could ever in the future win a bigger piece of the pie (at the expense of someone else), because all companies/nations/funds/fortunes would grow the same rate their relative size would never change. It's not really important for an individual what his fortune or income is in absolute terms, it's only important how big it is compared to others (since this determines the actual value: buying power, influence) and if you can increase the actual values of money.

Thats where the government kicks in. You're basically describing the policies set by Bank of Canada with its 2-4 percent inflation targets. Low risk, low reward. but heck do we have a stable economy.

All 6 of the major banks win(albeit equally) at the end of the day. Great for long-term investments.

 

[Auzie]

Greece, game point of view

Game constraints:

High stakes for both sides.

Not reaching a deal leaves both parties worse off, at least they think so, and at least in the short term. They negotiate from that position.

Parties have conflicting interests and both parties must swallow unacceptable terms from their point of view in order to reach a deal. The parties are focused on negotiating less swallowing for themselves at the expense of pushing the other party to swallow more.

(Huh I am glad to be a spectator only, but this experience is somewhat similar to watching gladiators slaughter each other. The games we play say a lot about us.)

There is high uncertainty of outcomes if Greece defaults. Failure to agree may trigger a chain of uncontrollable, unpredictable events, a bit of chaos.

The party with less to lose has the upper hand in negotiations.

From purely economic point of view, Greece would likely be better off outside of Euro zone. Independence and local currency would allow it to steer its own ship and likely recover after few or several years. For as long as there is unfavourable remote control interference in steering Greek economy, Greece is likely to limp like a wounded animal and to keep bleeding to uncertain outcome.

If Greeks were willing to accept Grexit, that would give them an upper hand in negotiations. The deep desire of Greek people to stay in the Union undermines this economic imperative.

(How not surprising, emotions push people to work against self interest and lead to a degree of self destruction)

Grexit and recovery after several years scares EU leaders most. If Greece proves to be better off outside of the Union, others might decide to follow.

Grexit might shine a light on the Union's inadequacy and weaknesses, perhaps leading to changes. Union, like any other entity, is fighting to preserve itself the way it is. Change upsets the power order, many current power brokers are likely to lose out with the changes, so they are likely to do everything in their power to preserve the status quo.

I would not be surprised if both parties lose that little control that they have of the situation and Greece exits in an uncontrolled way.

For Tesla, a drop of sales in a tumultuous post Grexit EU market is a possibility. Once the tumult is settled, business as usual.

 

[drinkerofkoolaid]

If Greece defaults/leaves the EU, Greece pays almost none of its current debt, Greece suffers, and the IFM, ECB lose significant face and power.

If Greece defaults or exists the Euro Zone, I think Russia or China would step in and loan or give Greece the money, and as a result Greece would enter the "Asian Zone". There are a lot of strategicly signifiant assets in Greece and it would give China a presence in the heart of Europe. Greek Orthodox Church and Russian Orthodox Church have a lot in common.

I hope I'm right. If I'm wrong, I think Greece might have big problems for the next 10-20 years. I have doubts a Grexit will have a significant spillover effect into the EU in the immediate future, aside from losing political face. If a Grexit happens, it will make the IMF and ECB look terrible.

 

[FluxCap]

One thought is that "Grexit freakout" has been so overdone now even the regular bears I watch are covering their shorts. Greece is a pretty small blip in the global economy, and people are still joking that Apple could bail out the country with spare cash and barely even notice.

Apple Could Make Money by Bailing Out Greece - Bloomberg View

Or, this could be the beginning of Eurozone armageddon. But I think most sophisticated traders are now saying "meh, whatever happens happens and we'll go on trading either way."

OK so now markets are beginning to freak out about Grexit again...a bit more than last time maybe. If Greek banks don't open on Monday, I would say we have the beginnings of a mini-crisis on our hands. Gold and Bitcoin are already trading up on the news out of Greece as relative safe havens for Greeks, though $USD is hypothetically just as safe-ish. Tomorrow is going to be quite a day in macro markets.

 

[Blip]

China market is down 7-8 % today. Does not seem to affect pre-market.

 

[CALGARYARSENAL]

China market is down 7-8 % today. Does not seem to affect pre-market.

Chinese are profit taking so they can buy their Model S.....LOL

 

[ev-enthusiast]

Looks like in Europe there is currently not enough cooperation between creditor and borrower to aggree on a valid compromise to put Greek dept and economy back on track.

During Saturday's meeting, the finance ministers rejected Greece's request for a one-month bailout extension.
Greece is due to pay the International Monetary Fund 1.5 billion euros Monday and without a deal this weekend risks missing that payment.

link: CNBC live blog

 

[austinEV]

What is the mood? Do we think that the greek referendum will be a "no"? Do we think we will have a grexit-fueled market correction? Or is this a tempest in a teapot since the greek economy is small? Or is the size irrelevant and it will cause an uncertainty contagion?

I think Greece *should* leave the Euro, but don't have a guess if they will or if that causes market turmoil. I would have sold my Tesla holdings already if I wasn't wanting to hold for the delivery numbers.

 

[FluxCap]

On a day when Greece literally closed its banks to prevent a full-on run on the bank, I think the market reaction is quite muted, all things considered. Much less spillover negative movement in US market indices than I thought, actually.

I am now trying to determine if I have the stones to BTFD on this (buy the ****ing dip) or not.

To be honest I'd love to nab some calls a bit cheaper than here, but apparently the market does not want me to get super-bargain-cheap TSLA, yet.

 

[The Blue Owl]

On a day when Greece literally closed its banks to prevent a full-on run on the bank, I think the market reaction is quite muted, all things considered. Much less spillover negative movement in US market indices than I thought, actually.

I am now trying to determine if I have the stones to BTFD on this (buy the ****ing dip) or not.

To be honest I'd love to nab some calls a bit cheaper than here, but apparently the market does not want me to get super-bargain-cheap TSLA, yet.

I'm thinking the U.S. market's reaction is more muted than Europe's in part because people over here have always been more skeptical of the Europeans' ability to save Greece, so the Greek "bank holiday" (there's a nice euphemism if I ever heard one) didn't come as such a huge surprise. There's also no direct exposure to Greek debt, so traders may even see the U.S. as a haven right now (Puerto Rico notwithstanding). Finally, as I think you've said in the past, the market is somewhat desensitized/fatigued by all the drama about the Drahma.

On the other hand, the fat lady has yet to break out in song. We're looking at another week of cooking over medium heat until we have a clear finale, either with Grexit from the Euro, maybe even the EU, or anticlimactic capitulation and acceptance of more austerity. I, for one, won't be buying calls just yet (but good luck to those who do).

 

[AudubonB]

The Euro is holding its own against the USD quite nicely: EURUSD=X: Summary for EUR/USD- Yahoo! Finance It appears there is something of a glitch in that chart, and that the currency is only at the level of the past several days, and not

up the 1.7% or so that the chart indicates.

But any flight to safety is, at present, confined to the equities markets and not away from the Euro.