Tesla Investor's General Macroeconomic / Market Discussion

[Johann Koeber]

This is my opinion in the Grexit:

The greek economy is not competitive. One way to solve this would be to let them exit the Euro, devaluate their currency and become competitive. The greeks would have to buy more domestic products, imports would get expensive. This way they could improve their economy and who knows, maybe one day ....

The other problem is the greek mentality. Tax evasion is widespread, the government doesn't really have the means to collect the taxes they should. And the public sector is just too inflated.

Many say the greeks cheated their way into the eurozone. We should let them go.

The turmoil this would create for the other members of the eurozone is nothing compared to the news coverage this theme is getting. Greece is a small economy. As soon as there is other news, people will forget this episode.

 

[Auzie]

Haves and Have-nots

The Greek vs EU standoff attracts attention, perhaps disproportionate, as it plays out the archetypal game dynamics.

The standoff mistakenly gets overlayed with national identities and gets represented as a standoff between Greeks and Germans. In my view, the national identities are just coincidental to the underlying standoff between the Haves and the Have-nots.

Haves and Have-nots decided to form a Union. They decided to have a common purse (currency) but they failed to open a joint bank account (common fiscal system). Haves would have their own bank account and Have-nots would have a separate one. Both Haves and Have-nots put their incomes into the same purse (capital market in the EU zone).

Have-nots were overjoyed as suddenly they got access to cheap money, and plenty of it, the purse was overflowing (influx of Haves capital).

This capital influx in early EU years was flowing from Haves to Have-nots due to an imbalance in the common purse (capital market). Have-nots had higher inflation than Haves but the common interest rate across both regions made capital appear cheaper in Have-nots regions, thus creating the capital flow to Have-nots that was disproportionate to their economic activities and capabilities.

Have-nots jumped at cheap money (who wouldn't), over borrowed, invested a lot in real estate, creating bubbles. Have-nots were disincentivised to properly allocate borrowed capital, failed to invest in economic activities and work hard for a living, as there was cheap money abound, the common purse was always full to draw from.

After the inevitable bursting of the misallocated investment bubbles, Have-nots found themselves burdened with debt. Haves demand their money back into their account, with interest. Have-nots had no way of repaying, the debt burden was too high, their bubble burst and the economic activity destroyed.

Have-nots are now disabled with a common purse as they are denied the access to the purse and have no control of it. They are at the mercy of Haves who now dictate the terms of the purse operation. These terms are harsh and suppress any Have-nots economic activity, preventing recovery and debt repayment.

Have-nots are in the flashlight, scrutinized by the World. Their every flaw is examined under the microscope, they are called ugly names and they are mercilessly blamed for their unfortunate fate.

Haves are on their High Moral Horse, circling around Have-nots who are on their knees. Haves preach their 'Haves High Moral Values' to Have-nots and to the World.

The final outcome is uncertain, but there is a high certainty of a very bad outcome for all involved.

The Architects of the flawed Union between Haves and Have-nots built the structure that is a trap for its inhabitants.

It is such a shame as the European Union is a dream and an aspiration of most European citizens. Such great dream deserved much more thought, work and better structure supporting its citizens, than what it got.

 

[AlMc]

Excellent down to earth analysis, as usual, Auzie..Thanks

 

[The Blue Owl]

This article, written 4 years ago to the day, offers a brilliant analysis of the situation in Greece and the structural strains in the Eurozone. What's amazing is that it might have been just as well written yesterday. Highly recommended reading for those who want a refresher.

Once Greece goes...

 

[kenliles]

Excellent down to earth analysis, as usual, Auzie..Thanks

Agree.
Excellent job Auzie. Thank You

 

[FluxCap]

Thanks for nice post, Auzie, and GREAT article link, Familial. Great reads, both.

I particularly like the concluding paragraph:

The fact is, though, that they are going to have to continue to do that, if the euro is going to continue to exist in its current form. Germany has to put the broader European interest on the same level as its own national interest, or the euro is toast. This, if you think about it from a broad historical perspective, is quite a reversal. During the 20th century, the greatest danger to European stability was Germany’s sense of its special destiny. During the 21st century, the greatest danger to European stability is Germany’s reluctance to accept its special destiny. If the German taxpayer manages, however grudgingly, to accept that it’s her duty to shoulder the burden, the euro will muddle through. But it won’t be pretty.

 

[The Blue Owl]

I particularly like the concluding paragraph:

Agreed. That's why I thought the article is really worth reading.

Many believe that once the Greek problem is contained, things will be peachy again. As in, yeah the Greeks may have to suffer for years, but the "responsible" Europeans (i.e., everybody else) will be fine. That may be so in the short to medium term, but the article explains very clearly what the root of the problem is, namely the imbalance between Germany and the rest of Europe, and I don't see that being addressed at all. There will have to be reform, in which the Germans will have to let go of big parts of the current arrangement that suits them so well, or this will likely happen again.

Also, it will be interesting to watch how the other debtor countries in the Eurozone will respond if Greece defaults, brings back the drahma, and succeeds in restarting its economy. I'm actually not sure what the creditor governments fear more: a Greek default, or a Greek recovery that happens on Greece's own terms.

 

[atang]

This article, written 4 years ago to the day, offers a brilliant analysis of the situation in Greece and the structural strains in the Eurozone. What's amazing is that it might have been just as well written yesterday. Highly recommended reading for those who want a refresher.

Once Greece goes...

Thank you so much for this article VERY enlightening. Something to add, it is my understanding that Ms Merkle is a physicist by training?That is so strange. In USA lawyers become politicians and put in charge. In China technical experts are put in charge? Well don't know where I'm going with this, just seems so crazy. My observation is that Germany has succeeded in dominating Europe. Just with a different kind of Blitzkrieg, one that is slower but more binding and ultimately more suicidal for Germany per this article. Crazy when you think it out. Of course I could be wrong! Love German people, visited many times in my life, good friends there and the BEER forgettaboutit! :smile:

 

[FluxCap]

In US economic news this morning from Econoday:

Push back that rate hike, at least that will be the reaction to June's softer-than-expected employment report where nonfarm payroll growth came in at 223,000 vs Econoday expectations for 230,000 and include downward revisions totaling 60,000 to the two prior months (May revised to 254,000 from 280,000 and April to 187,000 from 221,000). Softness in payroll growth combines with softness in wage pressures with average hourly earnings unchanged in the month and the year-on-year rate moving down to 2.0 percent from 2.3 percent.

 

[Robert.Boston]

From Tesla's perspective, the weak jobs report is good news. The Fed is now surely not going to raise interest rates this year, which will help keep the dollar from going yet higher against other currencies. Tesla's bottom line is improved by a weaker dollar.

 

[MikeC]

So Greece voted no. Does that throw cold water on the momentum of TSLA?

 

[Johann Koeber]

So Greece voted no. Does that throw cold water on the momentum of TSLA?

No.

There might be short term psychological effects, but it has no economic influence for TSLA.

 

[AlMc]

I think the market as a whole will drop some on the 'uncertainty'. Personally, if TSLA drops I will be adding to some intermediate term positions (Sept). We will need Flux, Aussie and RobertB to chime in with more analysis.

 

[FluxCap]

So Greece voted no. Does that throw cold water on the momentum of TSLA?

Only if the NASDAQ doesn't like it, and this only temporarily I think, unless the market suspects further breakup of European Union countries, or of the Euro itself.

Tesla is a juggernaut at this point, limited only by its ability to give the people more ridiculously awesome product. Barring global economic collapse, that momentum cannot be stopped for long, I think.

 

[Johan]

So Greece voted no. Does that throw cold water on the momentum of TSLA?

Believe me the market doesn't care AT ALL? Why you ask: See, if Greece fails it won't even be noticeable in the global or EU economy, the Greece economy is so small. There will be no short term effects. Long term yes there will be important political effects but these won't be priced in until the can be better estimated. They want the retail investors to think it will be a big issue short-term, so that there's fear and then they can buy the dip. Amirite?

 

[AlMc]

No.

There might be short term psychological effects, but it has no economic influence for TSLA.

Johann, German friends of yours...what are their feelings? Greece brought this on themselves, let them hit bottom? or We should loan more money?

 

[Johan]

Johann, German friends of yours...what are their feelings? Greece brought this on themselves, let them hit bottom? or We should loan more money?

You need to read Auzies post on this. It's spot on. The "haves" are right now looking down on the "have-nots" with moral indignation, wishing for their failure. Not acknowledging their own part in creating the situation that has been building up for years and years due to the Eurozone monetary policy constantly being run according to the best interest pf the economic motor of Europe: Germany.

The rhetoric is easy: "They brought it on themselves". "It's immoral to borrow money and not pay it back, it's theft!" "Why should we work hard to the age of 69 to pay for people in Greece with publiyjobs to retire at 55?"

(Also I know you'l were really asking Johann, not me, Alan)

 

[AlMc]

You need to read Auzies post on this. It's spot on. The "haves" are right now looking down on the "have-nots" with moral indignation, wishing for their failure. Not acknowledging their own part in creating the situation that has been building up for years and years due to the Eurozone monetary policy constantly being run according to the best interest pf the economic motor of Europe: Germany.

The rhetoric is easy: "They brought it on themselves". "It's immoral to borrow money and not pay it back, it's theft!" "Why should we work hard to the age of 69 to pay for people in Greece with publiyjobs to retire at 55?"

Thanks Johan. I did read the Auzzie post which gave a great overview of the macro problem. I was just wondering how TMC members who are part of the euro zone, and their friends, felt on a more personal level.

 

[Johann Koeber]

Johann, German friends of yours...what are their feelings? Greece brought this on themselves, let them hit bottom? or We should loan more money?

My German friends (and many economists) are at a loss about the near future.

Part of the problem is the differences in culture in the different parts of the EU. If one country cannot or does not collect taxes, it cannot expect the others to keep picking up the tab. There need to be rules and all union members need to play by the rules.

If Greece does not like the rules, they must leave.

 

[Johan]

My German friends (and many economists) are at a loss about the near future.

Part of the problem is the differences in culture in the different parts of the EU. If one country cannot or does not collect taxes, it cannot expect the others to keep picking up the tab. There need to be rules and all union members need to play by the rules.

If Greece does not like the rules, they must leave.

See? I nailed the sentiment pretty much, right?