Tesla Investor's General Macroeconomic / Market Discussion

[Johan]

DOW UP 10.21 IN A STRONG RALLY - NYTimes.com

Excellent post Palmer!

I remember that day too. I was 2 years old and had just mastered eating with a fork.

 

[Auzie]

I remember that day too. I was 2 years old and had just mastered eating with a fork.

You were not the only baby then

Lookie lookie who was also a baby then

This baby grows erratically

Keep the fingers crossed* that red and blue lines do not cross soon

*When all else fails we can always revert back to superstition

 

[Drax7]

DOW UP 10.21 IN A STRONG RALLY - NYTimes.com

too funny

 

[Lump]

CHina's devaluation & movements in their Yuan should be monitored more closely then the fluctuations in their equity markets, this past Wed. Rich Ross had a segment on CNBC that showed interesting correlations between the Yawn & the S&P 500, crude oil & the Transports, he provides pretty good TA on the S&P 500 as well.

http://video.cnbc.com/gallery/?video=3000474795

Some predict People's Bank of China will devalue the Yuan as much as 15%.

 

[Auzie]

.......................

Some predict People's Bank of China will devalue the Yuan as much as 15%.

Poetic justice


Market forces are forcing the hand of People's Bank of China

 

[jhm]

The biggest recent news in the world of energy has been the announcement out of Saudi Arabia that the kingdom is contemplating floating to the public Aramco.

First, the immensity of that organization, plus its immediate effects within its business sector of Energy Producers, staggers the imagination and beggars all comparisons.

For those of you who aren't familiar, Aramco owns all Saudi oil production, refining and marketing. If you're interested in learning details, it's best to go to more complete references but I'll write a few below.

* Aramco's oil reserves are something like 260 billion barrels - far greater than the combined reserves of Exxon, Chevron, Rosneft and Petrochina. Greater than every US producer combined. Its oil fields also are the lowest cost to produce on the planet.

* Its refining capacity is about 4.1mm bpd - twice Petrochina's, thrice Rosneft's, two-thirds that of Exxon's - but I didn't look into how much of Exxon's capacity is under its control versus that fraction that it owns (the latter is of course a lower number).

* Its yearly revenue is around $360 billion.

* A first estimate of its market capitalization is $2.5 trillion. That would make it four times as large as current champ, Apple.

Okay, so numbingly immense numbers all around. What does it mean?

My take on this is that the Saudis are conceding exactly what the alternative energy crowd - to which most on this forum belong - has been expostulating. The assets of Aramco are likely to become stranded - unusable - and the means to convert them into usable wealth will not be to develop and sell them over time, but rather to monetize them now. Selling shares would give the House of Saud some fraction of that $2.5 trillion (it's doubtful they would release 100% of the shares). Jam today rather than perhaps jam tomorrow.

Further support for this thesis is the timing. As we all know, crude prices are presently about $100/bbl less than they were at their recent peak and at the lowest in twelve years. Absolutely not the time to sell off....unless one's long-term view is similar to the stranded-assets thesis.

Yes, I think the Saudis are recognizing the end of demand for oil, but I think other more immediate factors are coming into play. First Saudia Arabia is running a deficit that could bankrupt the kingdom in about 5 years unless the price.of oil recovers. So an Aramco IPO capitalizes oil assets. The second thing is that the royal family may even be contemplating an end to its rule. Whatever the motives, it could be cool to see how the market actually values Aramco.

 

[Causalien]

Yes, I think the Saudis are recognizing the end of demand for oil, but I think other more immediate factors are coming into play. First Saudia Arabia is running a deficit that could bankrupt the kingdom in about 5 years unless the price.of oil recovers. So an Aramco IPO capitalizes oil assets. The second thing is that the royal family may even be contemplating an end to its rule. Whatever the motives, it could be cool to see how the market actually values Aramco.

Something tells me that the Saudi's financials are in more dire situation than that. People always accuse China of falsifying their numbers yet trust the Saudis absolutely when it comes to their financial report. When in reality, it is in Saudi's best interest to falsify their foreign reserve numbers and also their cost to produce oil.

The one suspicion that led me down this road is the fact that they have to start borrowing money this year when the reserve still have 5 years to go. Why is it floating Aramco now instead of in 3 years. If you look at a comparable economy like Norway, the behaviors are completely different. Perhaps Saudis using some type of forward FX transactions to hide the extend.

For China, everyone expect them to be fudging their number, so the most likely conclusion on that is they are not. Or it has been discounted so much that it doesn't matter anymore. That is a reason why it is suffering from a huge sell off from a less than 10% gdp growth, we are discounting probably 7% of GDP number as false growth.

It would be interesting to start exploring the house of card that might be the Saudis financials. Maybe it is the next great big short.

 

[Johan]

Something tells me that the Saudi's financials are in more dire situation than that. People always accuse China of falsifying their numbers yet trust the Saudis absolutely when it comes to their financial report. When in reality, it is in Saudi's best interest to falsify their foreign reserve numbers and also their cost to produce oil.

The one suspicion that led me down this road is the fact that they have to start borrowing money this year when the reserve still have 5 years to go. Why is it floating Aramco now instead of in 3 years. If you look at a comparable economy like Norway, the behaviors are completely different. Perhaps Saudis using some type of forward FX transactions to hide the extend.

For China, everyone expect them to be fudging their number, so the most likely conclusion on that is they are not. Or it has been discounted so much that it doesn't matter anymore. That is a reason why it is suffering from a huge sell off from a less than 10% gdp growth, we are discounting probably 7% of GDP number as false growth.

It would be interesting to start exploring the house of card that might be the Saudis financials. Maybe it is the next great big short.

How would you go about shorting it though, as long as Aramco isn't taken public?

 

[Causalien]

How would you go about shorting it though, as long as Aramco isn't taken public?

They have a stock market that represent the other 45% of gdp. The best bet is most likey from shorting the Ryiad.

And just as I thought. There are no financials nor proof if reserve reports from geologists I can find. I wonder if they'll retract the idea of going public as that will open their finances for the whole world to see.

 

[Johan]

They have a stock market that represent the other 45% of gdp. The best bet is most likey from shorting the Ryiad.

And just as I thought. There are no financials nor proof if reserve reports from geologists I can find. I wonder if they'll retract the idea of going public as that will open their finances for the whole world to see.

Remember that within OPEC it's been a long tradition to over report or over estimate one's reserves (or at least withhold any doubts as to how large they actually are) since over the years the countries in OPEC have on the one hand agreed to throttle production to uphold prices yet they all individually have wanted to sell as much as possible while prices are high. They've made agreements saying basically "we'll all produce x billion barrels this year, which is y % of all the oil we have collectively in the ground, so every producer can go ahead and extract y % of their reserves". In this scenario it makes sense that most would exaggerate their reserves.

 

[Curt Renz]

Many stock market advisers and investors have moved into full bearish mode. That’s not what normally happens when still so near long-term tops in the popular market averages. Those averages have actually been in rolling corrections for over a year. That’s a hidden form of a bear market in which the correction is more in time than price. Hence the growth in bearish feelings without technically being in a bear market.

A high level of bearish opinions usually presents buying opportunities to those who are alert. In the meantime there has been money to be made by those on the right sides of the seesaws. Those have mainly been the big institutions and especially hedge funds who prefer to take advantage of high volatility rather than slow boring rides upward. They’re better at manipulating the former rather than the latter. Now some of their analysts have been advising the public to get out and not buy back on dips. Guess who’s likely accumulating positions bought from those who have been scared. Meanwhile, the financial media have been loving such appeals to fear as they improve ratings. The time may be soon upon us for the cool headed to look for bargains such as shares of Tesla Motors among others.

 

[Julian Cox]

The biggest recent news in the world of energy has been the announcement out of Saudi Arabia that the kingdom is contemplating floating to the public Aramco.

First, the immensity of that organization, plus its immediate effects within its business sector of Energy Producers, staggers the imagination and beggars all comparisons.

For those of you who aren't familiar, Aramco owns all Saudi oil production, refining and marketing. If you're interested in learning details, it's best to go to more complete references but I'll write a few below.

* Aramco's oil reserves are something like 260 billion barrels - far greater than the combined reserves of Exxon, Chevron, Rosneft and Petrochina. Greater than every US producer combined. Its oil fields also are the lowest cost to produce on the planet.

* Its refining capacity is about 4.1mm bpd - twice Petrochina's, thrice Rosneft's, two-thirds that of Exxon's - but I didn't look into how much of Exxon's capacity is under its control versus that fraction that it owns (the latter is of course a lower number).

* Its yearly revenue is around $360 billion.

* A first estimate of its market capitalization is $2.5 trillion. That would make it four times as large as current champ, Apple.

Okay, so numbingly immense numbers all around. What does it mean?

My take on this is that the Saudis are conceding exactly what the alternative energy crowd - to which most on this forum belong - has been expostulating. The assets of Aramco are likely to become stranded - unusable - and the means to convert them into usable wealth will not be to develop and sell them over time, but rather to monetize them now. Selling shares would give the House of Saud some fraction of that $2.5 trillion (it's doubtful they would release 100% of the shares). Jam today rather than perhaps jam tomorrow.

Further support for this thesis is the timing. As we all know, crude prices are presently about $100/bbl less than they were at their recent peak and at the lowest in twelve years. Absolutely not the time to sell off....unless one's long-term view is similar to the stranded-assets thesis.

Saudi's contemplating cashing out of oil. Fascinating. Thank you for this, had not seen it elsewhere.

 

[larmor]

Saudi's contemplating cashing out of oil. Fascinating. Thank you for this, had not seen it elsewhere.

agree... wow...

 

[theschnell]

Ok folks, in the Short-term thread there has been some talk of possible recession. I just don't see it at all, but would like input from others as to the risks they are seeing that I am missing. The reason I see a recession as a low risk at this point is that things are still positive for the average american. For examples, 1) Low oil prices put a significant amount of gas money back into people's pockets so they can spend on other things. 2) Still low interest rates and still expanding credit put more money in people's pocket to keep spending. I am just not seeing where a recession would come from in America as long as those two things continue, even if the rest of the world is still on the edge of deflation. I think a decently strong american economy pulls everyone else (except China in the short-term perhaps) from the edge of the deflationary cliff.

What risks am I overlooking?

 

[dmunjal]

Ok folks, in the Short-term thread there has been some talk of possible recession. I just don't see it at all, but would like input from others as to the risks they are seeing that I am missing. The reason I see a recession as a low risk at this point is that things are still positive for the average american. For examples, 1) Low oil prices put a significant amount of gas money back into people's pockets so they can spend on other things. 2) Still low interest rates and still expanding credit put more money in people's pocket to keep spending. I am just not seeing where a recession would come from in America as long as those two things continue, even if the rest of the world is still on the edge of deflation. I think a decently strong american economy pulls everyone else (except China in the short-term perhaps) from the edge of the deflationary cliff.

What risks am I overlooking?

I believe we are in a recession right now. All indicators are pointing to a slowdown. The question is how deep and how long. I don't think it's as bad as 2008 unless we start seeing big defaults that cause margin calls and credit compression.

We've had a credit expansion cycle and that is reversing. Will the Fed step in with more QE or NIRP is another variable.

Edit: I want to add that lower gas prices and lower interest rates don't matter as much as you think. The reason is that other things like healthcare, education, and rent are increasing faster than gas is going down. They are also much bigger in total dollars. As for interest rates, it doesn't matter how low they are if you can't qualify or you don't want to take on more debt. Unfortunately, many are in that situation right now.

 

[ggr]

I believe we are in a recession right now. All indicators are pointing to a slowdown. The question is how deep and how long. I don't think it's as bad as 2008 unless we start seeing big defaults that cause margin calls and credit compression.

We've had a credit expansion cycle and that is reversing. Will the Fed step in with more QE or NIRP is another variable.

I disagree. It's a very localized data point, but I live in a not-terribly-affluent neighborhood, and just since last november have seen lots and lots of renovations and landscaping action suddenly pop up. People around here are spending like crazy.

 

[dmunjal]

I disagree. It's a very localized data point, but I live in a not-terribly-affluent neighborhood, and just since last november have seen lots and lots of renovations and landscaping action suddenly pop up. People around here are spending like crazy.

I live in Silicon Valley so I see that, too. But I have to remind myself that the rest of the country is not like this.

Please see my edit on my previous response, too.

 

[theschnell]

I believe we are in a recession right now. 1) All indicators are pointing to a slowdown. The question is how deep and how long. I don't think it's as bad as 2008 unless we start seeing big defaults that cause margin calls and credit compression.

2) We've had a credit expansion cycle and that is reversing. Will the Fed step in with more QE or NIRP is another variable.

Edit: I want to add that lower gas prices and lower interest rates don't matter as much as you think. The reason is that other things like healthcare, 3) education, and rent are increasing faster than gas is going down. They are also much bigger in total dollars. As for interest rates, it doesn't matter how low they are if you can't qualify or you don't want to take on more debt. Unfortunately, many are in that situation right now.

1) Such as? Not disagreeing with you, I'm just unaware.

2) Again, not disagreeing with you, but would like some data.

3) Good point here.

 

[jesselivenomore]

1) Such as? Not disagreeing with you, I'm just unaware.

2) Again, not disagreeing with you, but would like some data.

3) Good point here.

1) Manufacturing is already in a recession. The risk is manufacturing and oil and gas industry drags the rest of the economy into recession.

Empire State weakens to recession-era lows - MarketWatch

2) What data? The fed plans to tighten 4 times this year after years of QE. That is the definition of credit expansion reversing.

 

[dha]

We are absolutely not in a recession, based on the most common definition, which is two consecutive quarters of GDP decline.

The US economy is still growing and fundamentally sound with a few areas that could use improvement.

We may or may not be entering a bear market, which is a separate issue.