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Tesla Investor's General Macroeconomic / Market Discussion
- Thread starter FluxCap
- Start date
Gerardf
Active Member
I live in The Netherlands. Here the VAT was increased, pension age increased (in steps to 70 in some years) and many taxes increased and care for elderly seriously limited, while already 'loaning' 18B to Greece.
We are already told by politicians that we should loan (read give) yet another 5B to Greece, should we follow the IMF suggestions of last weekeend to bail out Greece once more.
In my private network the sentiment is exactly the same as Johann states. This is where it stops, no more loans to Greece.
Also many seem to have the opinion Greece leaving the Euro was / is going to happen sooner or later anyway, and has already been priced in.
Initially the AEX in NL dropped 2.2%, now already recovered in 1 1/2 hour to -/- 1,2%. Seems to confirm that.
It seems that it has become unsustainable for Greece to stay in the Euro zone. Greece leaving seems to be just a matter of time, now or in not so distant future.
Here are 2 possible scenarios of how Greece leaving might unfold:
Scenario 1. Both Greece and EU negotiators wish for Greece to stay in the Euro zone.
Negotiations fail, an agreement is not reached, Greece does not get a bailout.
Greece runs out of money (already has). Greece has the options to either appropriate and exhaust in bank deposits (unpopular, risky, unsustainable) or to start printing its own currency (likely).
Newly minted Greek currency is likely to deflate rapidly, leading to high inflation, shortage of goods (empty shops), citizens stocking necessities, depression, turmoil.
A new economy is likely to emerge on the back of cheap labour and more competitive Greece. It is difficult to say how long that might take. The time span depends on overall economic outlook in the Euro region and in the rets of the world.
EU will suffer monetary losses when Greece stops servicing its debt. Euro will likely weaken against $US.
Money markets may start betting against next weak link in Euro zone (Portugal?), pushing up borrowing costs. Next weak link may find it harder to service its debt due to raising borrowing costs. If in the meantime (several years) Greece starts to recover, next weak link might find it more attractive to go bankrupt than to keep servicing its debt. Next weak link might leave Euro zone.
Scenario 2: Both Greece and EU negotiators wish for Greece to stay in the Euro zone.
Negotiations are successful, an agreement is reached, Greece gets a bailout.
The proverbial Can is kicked down the road. In a not so distant future, Scenario 1 is revisited.
These developments are not favourable for Tesla sales in Europe.
Further weakening of the Euro against $US is likely to happen. Weak Euro puts downward pressure on Tesla European revenue.
The effects may not be large, but they are unfavourable. Hopefully, there will be more favourable forces, like new model X, then Model 3 release and perhaps some other innovations, to offset unfavourable effects.
Here are 2 possible scenarios of how Greece leaving might unfold:
Scenario 1. Both Greece and EU negotiators wish for Greece to stay in the Euro zone.
Negotiations fail, an agreement is not reached, Greece does not get a bailout.
Greece runs out of money (already has). Greece has the options to either appropriate and exhaust in bank deposits (unpopular, risky, unsustainable) or to start printing its own currency (likely).
Newly minted Greek currency is likely to deflate rapidly, leading to high inflation, shortage of goods (empty shops), citizens stocking necessities, depression, turmoil.
A new economy is likely to emerge on the back of cheap labour and more competitive Greece. It is difficult to say how long that might take. The time span depends on overall economic outlook in the Euro region and in the rets of the world.
EU will suffer monetary losses when Greece stops servicing its debt. Euro will likely weaken against $US.
Money markets may start betting against next weak link in Euro zone (Portugal?), pushing up borrowing costs. Next weak link may find it harder to service its debt due to raising borrowing costs. If in the meantime (several years) Greece starts to recover, next weak link might find it more attractive to go bankrupt than to keep servicing its debt. Next weak link might leave Euro zone.
Scenario 2: Both Greece and EU negotiators wish for Greece to stay in the Euro zone.
Negotiations are successful, an agreement is reached, Greece gets a bailout.
The proverbial Can is kicked down the road. In a not so distant future, Scenario 1 is revisited.
These developments are not favourable for Tesla sales in Europe.
Further weakening of the Euro against $US is likely to happen. Weak Euro puts downward pressure on Tesla European revenue.
The effects may not be large, but they are unfavourable. Hopefully, there will be more favourable forces, like new model X, then Model 3 release and perhaps some other innovations, to offset unfavourable effects.
Clearly the stock market has yawned at the Greek vote, both collectively and as it applies to TSLA. Hardly surprising -- Greece is only 2% of the Eurozone economy.
Tesla sells primarily to top-quintile consumers, and I don't see much coming out of this debacle that will affect them directly. Indirectly, and regardless of how this plays out, Greek bondholders and creditors, including the other EU member states, are going to lose ~€200 B in wealth, which will likely trim growth in the EU over the next few years slightly and, more importantly for Tesla, cause governments to reconsider discretionary spending like EV supports.
The biggest direct impact to Tesla is through the €/$ exchange rate, a problem faced by all exporters. A year ago, the € stood at about $1.36; today it's about $1.10, a decline of about 20%. Tesla must accept lower gross margin from EU sales, raise its prices, or some combination of the two. Needless to say, a 20% price rise has real impacts on the quantity demanded.
Tesla sells primarily to top-quintile consumers, and I don't see much coming out of this debacle that will affect them directly. Indirectly, and regardless of how this plays out, Greek bondholders and creditors, including the other EU member states, are going to lose ~€200 B in wealth, which will likely trim growth in the EU over the next few years slightly and, more importantly for Tesla, cause governments to reconsider discretionary spending like EV supports.
The biggest direct impact to Tesla is through the €/$ exchange rate, a problem faced by all exporters. A year ago, the € stood at about $1.36; today it's about $1.10, a decline of about 20%. Tesla must accept lower gross margin from EU sales, raise its prices, or some combination of the two. Needless to say, a 20% price rise has real impacts on the quantity demanded.
To me, the issue was never the real long term prospects of Greece itself (sales in Greece for instance), but purely the risk that this would set off a general market downturn, in which TSLA would get tangled at least a little bit.
The reason the market appears to be yawning, to me at least: The risk is appropriately with Greek bondholders. they know who they are, so do we. It isn't like mortgage backed securities that were a new thing. The size is small compared to the Euro economy. And most importantly, there is relatively little risk of a bank run and Greek crisis *because the bank run and crisis have already happened*. Greeks have been slowly running on the banks for years so that deposits are very low. Greece is already in crisis mode and has been for years. There is only the end left: Either leave the Euro, which will fleece bondholders and disrupt *Greece* or refinance drastically, on Greece' terms and fleece bondholders a little less.
Regardless, this is pretty distant from US markets, and pretty contained. My feelings anyway.
The reason the market appears to be yawning, to me at least: The risk is appropriately with Greek bondholders. they know who they are, so do we. It isn't like mortgage backed securities that were a new thing. The size is small compared to the Euro economy. And most importantly, there is relatively little risk of a bank run and Greek crisis *because the bank run and crisis have already happened*. Greeks have been slowly running on the banks for years so that deposits are very low. Greece is already in crisis mode and has been for years. There is only the end left: Either leave the Euro, which will fleece bondholders and disrupt *Greece* or refinance drastically, on Greece' terms and fleece bondholders a little less.
Regardless, this is pretty distant from US markets, and pretty contained. My feelings anyway.
Johann Koeber
Happy Owner
I agree with everything you said, Robert.
My feeling is that the 200B are lost already.
It is just the accounting question open: when do you show the loss in the books?
- or am I way off?
I think you're exactly on point. If I held Greek bonds in my portfolio, in my head I'd be writing them down by 80%. But the better question is, if I were the auditor of a bank holding those bonds, when would I require that the bank write down the asset? The answer to that is way above my paygrade. The good news is that the ownership of these bonds is pretty widely distributed--though it wouldn't surprise me if a few smaller funds and investment companies, having bet heavily on Greek bonds, will themselves go bankrupt. C'est la vie.
I haven't looked into this in much depth, but my understanding that most of the Greek debt is held by the EU and IMF. The last few years have been a succession of loans given to bail out many of the banks that made poor lending decisions to get them off the hook. Very little of the Billions that have gone to Greece have stayed in Greece - they have been shuffled around as an accounting to shift the burden of Greek debt from the private to public sector (I could be off on this, and would appreciate better, more interested parties correcting me if I'm wrong). A haircut is warranted, but how Greece gets its house in order with a not even 3rd world tax system, over generous pensions and sketchy rule of law is beyond me. This goes past the classic "Tragedy of the Commons" to a tragedy of the commoners. Banks and affluent Greeks have had years to wash their hands of the problems, reshuffle their assets and leave it to political posturing. All that is left is to sit back and watch the suffering to come. It's a bit (reverse hyperbole) criminal.
Hmm, interesting that you say that. There are numerous historic examples of various countries in trouble, getting generous debt write-offs granted by other countries. This debt forgiveness let these countries rebuild and grow.
Regarding Greece creditors getting a haircut, that already happened in 2012 and look how it worked out...It is extremely hard for Greece to get out of the hole it is. Staying within the Eurozone makes their eventual recovery harder due to a lack of control over their currency, interest rates and unfavourable interference from Eurolords.
Yawning might be a short term response. Long term (years), the developments seem unfavourable. I am starting to wonder (mildly worry) about macroeconomic winds.
China's bubble is burst, it's economy is slowing down. Consequently, Australia is heading to recession. Not that we matter that much, but another small negative force gets added to the overall picture.
The US seems to be healthy at the moment, but too much drag from the rest of the world is not helpful. I worry a bit about elections in 2016 in the US, who gets to be in charge.
Greek debt structure is quite interesting. Few years ago, the debt was restructured and shifted from private creditors to other EU governments and their banks.
Interesting Bloomberg article outlines Who Hurts Most if Greece Defaults
Some small EU countries hold a lot of debt in relation to their GDP size
These small countries are likely to be hurt disproportionally with the default.
Greece certainly managed to dig a dip hole for themselves, and they will reap the consequences. It is unfortunate that young generations that were not part of heavy borrowing, must bear the brunt of the difficulties on the road to recovery.
Regarding tax avoidance, that is largely a consequence of Greek economy being structured around small private businesses, no large corporations. The cash economy is quite difficult to control anywhere in the world, Greece is not as a special case as it is made to be in regard to its failure to adequately tax cash economy.
No one comes out looking pretty from this mess. EU leadership and economic incompetence are nothing to boast about. Another worrying consequence of the Greek default is a likely rising cost of debt for other heavily leveraged EU countries. These countries may be caught in a similar dynamics as Greece, unable to set and control their economic environments to promote growth. EU might start eroding away at its periphery, where the weak links are.
My view is that Tesla better hurry up with Model 3, as some macroeconomic developments point to worsening economic conditions in some parts of the world. It might be difficult to sell high volumes of the luxury cars into worsening markets.
That is just my view, I could be totally off.
Well, I re-shorted ASHR before tonight's China session, and it's looking like a good trade so far. The Chinese govt thinks that mass trading halts and begging people not to sell is somehow good for the confidence of novice retail investors who plowed their life savings into stocks on margin, are getting margin calls they can't pay, and have no idea what hit them.
Honestly, while I'm pleased with my trade I am very displeased with what this reveals about the progress, or lack thereof, in the government's willingness or competence in creating a true market economy in China. They lost a lot of credibility in the last few days with these knee-jerk moves propping up what is clearly a parabolic bubble market.
I do not think they will be able to stem the bleeding unless they suddenly nationalize the entire market and decide who gets what. And that would be the end of Chinese markets for a decade.
So, I'm short.
Made 132% on my Chinese A-Shares short, but it's a bitter pill given that US equities have decided China's market crush matters for our markets.
While I think that this could continue to be an historic moment for the Chinese people that is more 1929 than 2007, I think US markets are facing no such headwinds. Some good morning thoughts from JPM's trading crew:
While I think that this could continue to be an historic moment for the Chinese people that is more 1929 than 2007, I think US markets are facing no such headwinds. Some good morning thoughts from JPM's trading crew:
ev-enthusiast
Active Member
ev-enthusiast
Active Member
Looks like Greek government delivered the much needed list now including valid numbers via email just some minutes ago.
The previous lists did not contain some items that are now included in the list and previous lists did not contain figures to run calculations that are now possible on the new list.
Tsipras (Prime Minister Greece): "An important moment in history for the future of Europe and #democracy." (link: Tsipras).
Do not know how China is doing, does anybody else have information on China?
Update:
Greek public television confirmed email including new list was sent to Jeroen Dijsselbloem (chief of Eurogroup) at 21:30 MESZ.
Update 2:
Jeroen Dijsselbloem (chief of Eurogroup) confirmed that he has received the new list, working now with this new list.
The previous lists did not contain some items that are now included in the list and previous lists did not contain figures to run calculations that are now possible on the new list.
Tsipras (Prime Minister Greece): "An important moment in history for the future of Europe and #democracy." (link: Tsipras).
Do not know how China is doing, does anybody else have information on China?
Update:
Greek public television confirmed email including new list was sent to Jeroen Dijsselbloem (chief of Eurogroup) at 21:30 MESZ.
Update 2:
Jeroen Dijsselbloem (chief of Eurogroup) confirmed that he has received the new list, working now with this new list.
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Johann Koeber
Happy Owner
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
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Seems like a very reasonable proposal from Greece might be met with a reasonable response from the IMF and EU...some of the moderates are coming out with quotes about some debt relief in response to Greece's proposal (along with some needed. Humanitarian aid). It would be helpful to get this done in a diplomatic and systematic (rather than catestrophic) manner and may also help Chinese markets to continue to stabilize.
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