Tesla Investor's General Macroeconomic / Market Discussion

[Auzie]

so what

Macroeconomic situation is quite significant to investors.

My portfolio shrank substantially under previous US administration. It is performing far better under the current administration.


It is also mentioned somewhere in the study, that this partizan effect on economy is not widely known.

As I can not vote in US 2016 elections, the least I can do is contribute my little bit to spread the awareness of these findings.

 

[Robert.Boston]

As I can not vote in US 2016 elections, the least I can do is contribute my little bit to spread the awareness of these findings.

We're now in a "one dollar, one vote" regime in the US, so your political contributions can swing the dial as much as mine.

 

[Auzie]

We're now in a "one dollar, one vote" regime in the US, so your political contributions can swing the dial as much as mine.

Interesting perspective, I forgot about that.

Luckily the world is becoming more prosperous place and that makes money less relevant.

One day we may even get 'Elon Musk' type politicians, who are sufficiently rich to be able to play the game without compromising altruistic motives.

 

[Thumper]

Great wealth allows those who wish to practice altruism a nice opportunity to do so. It also allows people who are interested in promoting their own power an opportunity to do that. Look at the Kochs. Wealth doesn't seem to alter people's general inclinations, it just facilitates their pursuit of them.

 

[Auzie]

Great wealth allows those who wish to practice altruism a nice opportunity to do so. It also allows people who are interested in promoting their own power an opportunity to do that. Look at the Kochs. Wealth doesn't seem to alter people's general inclinations, it just facilitates their pursuit of them.

That may be true description of past and current state.

However we recently got some great power equalizers, like internet, global instantaneous connectivity through various devices, data and knowledge at fingertips almost equally available to all, classes on any subject online, etc etc

Money as power instrument is becoming less relevant and less valued.

Our connected world is becoming rapidly transparent. That transparency facilitates true democratic promotion of values such as altruism over economic and other types of power.

 

[Mario Kadastik]

Except for information overload. Which is a real problem and makes it almost impossible to discern FUD from truth in many fields unless you become an expert in it. And the higher the overload, the shallower people become in their regular data acquisitions meaning that it'll be easier to sway them to some extent. It's not as simple as great data access might imply

 

[Auzie]

Except for information overload. Which is a real problem and makes it almost impossible to discern FUD from truth in many fields unless you become an expert in it. And the higher the overload, the shallower people become in their regular data acquisitions meaning that it'll be easier to sway them to some extent. It's not as simple as great data access might imply

There is certainly information overload. I tend to disagree that people are becoming shallower due to the overload, on the contrary, I think that we are all progressing as we learn to use the available data in more efficient ways.

People on these threads seem to be doing fine in discerning FUD from truth. Scrutiny from other posters is raising the bar for each individual poster.

 

[Auzie]

How long will good times last

Interesting article in The Economist, How long will the expansion last?

Some extracts:

-the recovery remains the weakest since the second world war;

-business expansions don't die of old age like people, they are killed by an unpredictable shock, according to Bob Hill from Stanford. The next recession will come out of the blue, just like all of its predecessors (BH);

-recessions are becoming rarer. Economists credit the improvements to structural factors such as companies better control of stocks and modest inflation. Federal Reserve can kill off expansion by hiking interest rates.

-current inflation is lower than Fed target of 2%, suggesting (JPMorgan) that there is more room for expansion to run, at least 2 more years. The economy is operating 5% below its potential. The previous 3 expansions have ended around 3 years after unemployment fell to its natural rate, around 5%+.

-previous cycles may be a poor guide to how long the current one lasts.

 

[FluxCap]

Good info there, thanks Auzie.

 

[FluxCap]

Of interest today:

 

[uselesslogin]

The first stock investment I made was in an S&P 500 index fund when it was at 1,400 in 2000. Breaking 2,000 I feel like finally the market is moving again. There is a part of me that says, hey its been almost 20 years, why don't we get all crazy like we did in the 90s?

Don't worry, I'm fully prepared for another recession or drop or whatever, I mean that is what I am used to at this point.

 

[Auzie]

The first stock investment I made was in an S&P 500 index fund when it was at 1,400 in 2000. Breaking 2,000 I feel like finally the market is moving again. There is a part of me that says, hey its been almost 20 years, why don't we get all crazy like we did in the 90s?

Don't worry, I'm fully prepared for another recession or drop or whatever, I mean that is what I am used to at this point.

I think market never stopped being crazy

I am curious how do you prepare for a downturn

 

[green1]

-business expansions don't die of old age like people, they are killed by an unpredictable shock, according to Bob Hill from Stanford. The next recession will come out of the blue, just like all of its predecessors (BH);
-recessions are becoming rarer. Economists credit the improvements to structural factors such as companies better control of stocks and modest inflation. Federal Reserve can kill off expansion by hiking interest rates.

What scares me is the combination of these two statements. Expansion can be killed by hiking interest rates, and of course the reverse is true as well, Recessions are killed by lowering interest rates.
The problem is when the interest rates are already at insanely low levels (like now) and if a recession "comes out of the blue"... what do you do?

 

[Robert.Boston]

It's only recently that monetary policy has been the primary policy tool for managing the economy. For most of the 20th century, fiscal policy was the preferred tool. The difficulty is convincing a majority of both houses of Congress that increasing the debt to avoid a recession is worthwhile. Apparently, most believe the only good reason to go into debt is to wage foreign wars.

 

[kenliles]

It's only recently that monetary policy has been the primary policy tool for managing the economy. For most of the 20th century, fiscal policy was the preferred tool. The difficulty is convincing a majority of both houses of Congress that increasing the debt to avoid a recession is worthwhile. Apparently, most believe the only good reason to go into debt is to wage foreign wars.

+++++100000

 

[green1]

Actually it's even worse than that, during good times governments spend quite freely, during a recession they tighten their belts and try to stop spending (the opposite of what a government SHOULD do)

 

[Auzie]

What scares me is the combination of these two statements. Expansion can be killed by hiking interest rates, and of course the reverse is true as well, Recessions are killed by lowering interest rates.
The problem is when the interest rates are already at insanely low levels (like now) and if a recession "comes out of the blue"... what do you do?

1. Learn about market dynamics as much as you can
2. Watch market and world politics all the time
3. Be ready to sell some or all holdings if you see downturn on the horizon
4. Take some profits every year. This also helps to minimize tax.
5. Diversify. Diversification reduces losses in the downturn.
6. Avoid or reduce holdings in leveraged businesses

 

[uselesslogin]

I think market never stopped being crazy

I am curious how do you prepare for a downturn

OK I'll be more specific. The S&P traded at a PE of 33 in 1999. Now it is at a PE of 20. It would be awesome if we shot back up to 33.

As far as preparing for a downturn I am really not prepared. I only prepare mentally:
1) First, I know that it is normal and can happen and I should not be surprised if and when it happens.
2) I am prepared to reduce expenses so that I can put more money into stocks during a downturn and I might even take on some extra debt to make that happen if the market is down to historically low PE levels.

Now, if my portfolio continues to grow as fast as it has for the last 18 months I will start getting more defensive and holding fewer individual stocks and more index funds. If it keeps going even further I might even start buying some bonds.

 

[gym7rjm]

Bitcoin is my hedge against government mucking up the economy or the USD failing

 

[FluxCap]

It's only recently that monetary policy has been the primary policy tool for managing the economy. For most of the 20th century, fiscal policy was the preferred tool. The difficulty is convincing a majority of both houses of Congress that increasing the debt to avoid a recession is worthwhile. Apparently, most believe the only good reason to go into debt is to wage foreign wars.

Robert sums it up well - fiscal stimulus (government spending on domestic economic development) has saved economies in our situation throughout recorded history, but when a country has no backbone to spend on the public, central banks act because they have little choice. It's almost as if...he was an economist at the Fed or something. Nah, couldn't be. ;-)

It seems clear that our Congress has largely ceased spending taxpayer dollars in the public interest, so 2009's Recovery Act (which I helped implement) is all the fiscal stimulus we are going to get for the foreseeable future. I personally expect QE will go on until employment is extremely robust, which I believe will only happen if:

1) The solar electric economy arrives in force, and creates a new US manufacturing boom, or
2) China decides to cut us off in some way, or
3) Congress hugs it out and passes sweeping New Deal-like fiscal stimulus / jobs programs for Millennials etc.

I don't see 1, 2 or 3 happening anytime soon, so I predict QE will go on for quite awhile longer. Which, in theory, should continue to increase the value of assets like stocks and real estate. In theory.