Tesla Investor's General Macroeconomic / Market Discussion

[kenliles]

But isn't a major part of the reason that the longer term bonds are in less demand due to the expectation that interest rates will rise?

Right--
But Long term bond demand is INCREASING (lower yields) concurrent with Short term bond demand DECREASING (higher yields) resulting in flatter curve.

Bond market says:
Fed rate expected increases will raise short term rates- but the economic outlook will not carry outward in time. (IOW Bond holders on balance moving bond-terms out from shorter to longer to lock in against uncertainty risk).
The Bond market expressing:
'we think the economic risks ahead are NET MORE than the Fed will raise rates'.
This is why I have been on Yellow alert (posted a while back) and now have moved to Orange-Hard Watch.

Update Note: Just this morning Yield Spread (10 Year - 2 Year) just dropped again from .93 to .87 (with zero inverted and under 1 a cautionary tale), continuing the trend
ALL of this produced from a DROP in 10-year Yield from 2.21 to 2.15 indicating even MORE demand for Long dated Bonds (money moving out the curve);

Note on related: I've noticed a dangerous trend on the forum lately (not from everyone, but just a Net observation) - tendency to a myopic view (especially as TSLA moves to ATH). Focusing only on TSLA as if it's running isolated and on it's own volition. This is a dangerous investment profile.

Tesla has deserved every bit of it's gains on it's own (I think I expressed to several via PM months ago TSLA should be $300+)- so I'm not saying it isn't deserving- valuations are very reasonable given it's projected growth -
However, much of what has driven that SP growth recently has NOT been isolated to Tesla. There's been a massive Equities rotation into Technology-Hybrid stocks. We all know what they are- Apple, Amazon, Alphabet, FB- even NVDA and also TSLA. Largely at the expense of other sectors. This is good for TSLA to be viewed this way- but I believe the larger point is being missed.

There is currently a squeeze going on in the macro market (not a TSLA squeeze !). Capital investment is looking for a place to go - 'safe growth' - Long dated bonds included. I think this rotation is some early indication of Equity market rollover reflecting a return to some conformance with Bond markets- The 2 markets have completely diverged in recent months/years in expected economic forecast and they must re-align.
Bottom line- we are in a very unusual cross-current in the markets right now- with unprecedented Fed policy (balance sheet and low rates)- Not to mention the historic Politic-Social effects. Fed rates now have moved to 1%- with anemic growth of (maybe) 2% we're not so far from flat-lining on that front.

Anyway- many aren't really wanting this message as TSLA continues do so great (hitting $350 as I type)--
BUT please look past just what's happening at Tesla - it's a big investment world out there-

glad we have this macro thread !! - thanks to Flux

 

[kenliles]

expanding skills gap- (also related to being at 'full' (pseudo) employment)- strong contributing factor effecting growth in general-
It's good Tesla has a strong natural draw for talent-

 

[Intl Professor]

Right--
But Long term bond demand is INCREASING (lower yields) concurrent with Short term bond demand DECREASING (higher yields) resulting in flatter curve.
View attachment 230057

Bond market says:
Fed rate expected increases will raise short term rates- but the economic outlook will not carry outward in time. (IOW Bond holders on balance moving bond-terms out from shorter to longer to lock in against uncertainty risk).
The Bond market expressing:
'we think the economic risks ahead are NET MORE than the Fed will raise rates'.
This is why I have been on Yellow alert (posted a while back) and now have moved to Orange-Hard Watch.

Update Note: Just this morning Yield Spread (10 Year - 2 Year) just dropped again from .93 to .87 (with zero inverted and under 1 a cautionary tale), continuing the trend
ALL of this produced from a DROP in 10-year Yield from 2.21 to 2.15 indicating even MORE demand for Long dated Bonds (money moving out the curve);
View attachment 230056


Note on related: I've noticed a dangerous trend on the forum lately (not from everyone, but just a Net observation) - tendency to a myopic view (especially as TSLA moves to ATH). Focusing only on TSLA as if it's running isolated and on it's own volition. This is a dangerous investment profile.

Tesla has deserved every bit of it's gains on it's own (I think I expressed to several via PM months ago TSLA should be $300+)- so I'm not saying it isn't deserving- valuations are very reasonable given it's projected growth -
However, much of what has driven that SP growth recently has NOT been isolated to Tesla. There's been a massive Equities rotation into Technology-Hybrid stocks. We all know what they are- Apple, Amazon, Alphabet, FB- even NVDA and also TSLA. Largely at the expense of other sectors. This is good for TSLA to be viewed this way- but I believe the larger point is being missed.

There is currently a squeeze going on in the macro market (not a TSLA squeeze !). Capital investment is looking for a place to go - 'safe growth' - Long dated bonds included. I think this rotation is some early indication of Equity market rollover reflecting a return to some conformance with Bond markets- The 2 markets have completely diverged in recent months/years in expected economic forecast and they must re-align.
Bottom line- we are in a very unusual cross-current in the markets right now- with unprecedented Fed policy (balance sheet and low rates)- Not to mention the historic Politic-Social effects. Fed rates now have moved to 1%- with anemic growth of (maybe) 2% we're not so far from flat-lining on that front.

Anyway- many aren't really wanting this message as TSLA continues do so great (hitting $350 as I type)--
BUT please look past just what's happening at Tesla - it's a big investment world out there-

glad we have this macro thread !! - thanks to Flux

This is brilliant. I would add by way of interpretation, but only as in the form of an accelerant to the technologic trend, the Donald's move for climate change. Business is not as stupid as mere developers with tax advantages.

 

[MitchJi]

Four big events that are prompting investors to sell stocks and buy bonds and gold
Short term.

 

[FluxCap]

Legendary stock valuation Professor Damodaran of NYU is out with his latest "Musing on Markets" (which I highly recommend following via his blog or signing up via e-mail list), which has some interesting takes on the macro environment. Here's the article link, with a few highlights below:

Musings on Markets: A Tale of Two Markets: Politics and Investing!

The first half of 2017 delivered some good news and some bad news on this front. The good news is that notwithstanding rumors of Fed tightening, treasury bond rates dropped from 2.45% on January 1, 2017 to 2.21% on June 1, 2017, and S&P 500 companies reported much stronger earnings for the first quarter, up almost 17% from the first quarter of 2016. The bad news is that it seems a near certainty that Fed will hike the Fed Funds rate soon (though its impact on longer term rates is debatable) and that there is preliminary evidence that companies have slowed the pace of stock buybacks. The bottom line, and this may disappoint those of you who were expecting a decisive market timing forecast, is that stocks are richly priced, relative to history, but not relative to alternative investments today. Paraphrasing Dickens, we could be on the verge of a sharp surge in stock prices or a sharp correction, entering an extended bull market or on the brink of a bear market, at the cusp of an economic boom or on the precipice of a bust. I will leave it to others who are much better than me at market timing to make these calls and continue to muddle along with my stock picking.

 

[kenliles]

Legendary stock valuation Professor Damodaran of NYU is out with his latest "Musing on Markets" (which I highly recommend following via his blog or signing up via e-mail list), which has some interesting takes on the macro environment. Here's the article link, with a few highlights below:

Musings on Markets: A Tale of Two Markets: Politics and Investing!

That's an excellent report - thanks Flux;
I really like the data driven core of the analysis- with application of non-historical context. Very well done-
I agree with his bottom line- It's currently easy to talk yourself on or off the cliff;
I think we are exactly in that crossroad area currently as well. Going to be a tricky path over the coming months- can't afford to not be strongly invested - can't afford to apply risk-leverage devoid of potential macro corrections

 

[kenliles]

Some additional data points- with updates just out
from Jan2016
US Equity fund outflows (even including ETFs)-
with continuing Bond Fund inflows

Non-US residents - sharply flowing out of US since election

1Yr out the Market expects higher interest rates - especially US- in all but 2 economies

More food for your macro-thoughts---

 

[kenliles]

Showing highly correlated Volatility between Equity and Bond markets to Significant historical events;
concurrently showing Fed Fund rates
to present a picture of where we are currently relative to this historical context

 

[kenliles]

Pound extends sharp fall after betting odds show Labour's Corbyn favorite to be prime minister

"
The British pound fell sharply following an exit poll that said Prime Minister Theresa May's Conservative party was on track to lose its majority in the British Parliament, ceding big gains to Jeremy Corbyn's Labour party.

Meanwhile, betting exchange Betfair said Corbyn had become the favorite to become the U.K. prime minister, according to Reuters.

Cable (GBP/USD) fell from $1.295 to a multi-months low of $1.2692 on Friday morning Asia time.

While Conservatives are set to remain the largest party in the British parliament, a total of 326 seats are required for a majority. If the BBC/SKY/ITV joint exit poll proves correct, the Conservatives would have 314 seats, Labour 266, Liberal Democrats 14, Scottish National Party 34 and other 22.
"

 

[GoTslaGo]

Pound extends sharp fall after betting odds show Labour's Corbyn favorite to be prime minister

"
The British pound fell sharply following an exit poll that said Prime Minister Theresa May's Conservative party was on track to lose its majority in the British Parliament, ceding big gains to Jeremy Corbyn's Labour party.

Meanwhile, betting exchange Betfair said Corbyn had become the favorite to become the U.K. prime minister, according to Reuters.

Cable (GBP/USD) fell from $1.295 to a multi-months low of $1.2692 on Friday morning Asia time.

While Conservatives are set to remain the largest party in the British parliament, a total of 326 seats are required for a majority. If the BBC/SKY/ITV joint exit poll proves correct, the Conservatives would have 314 seats, Labour 266, Liberal Democrats 14, Scottish National Party 34 and other 22.
"

To quote the Economist (who backed the Liberal Democrats), in the "Leaders" post:

"Mr Corbyn poses as a radical but is the most conservative--and the most dangerous--candidate of the lot. He wants to take the railways, water and postal service back into public ownership. He would resurrect collective pay-bargaining and raise the minimum wage to the point where 60% of young workers' salaries are set by the state. His tax plan takes aim at high earners and firms, who would behave in ways his costings ignore. University would be free, as it was until the 1990s--a vast subsidy for the middle class and a blow to the poor, more of whom have enrolled since tuition fees helped create more places."

Also:

"No economic liberal, Mr. Corbyn does not much value personal freedom either. An avowed human-rights campaigner, he has embraced left-wing tyrants such as Hugo Chavez and Fidel Castro (a "champion of social justice"), who locked up opponents and muzzled the press. Mr. Corbyn has spent a career claiming to stand up for the oppressed while backing the oppressors."

Interesting times...

 

[SwTslaGrl]

Pruitt leaves after a few hours U.S. Environment Chief Exits G-7 Climate Talks in Italy Early

 

[GoTslaGo]

Pruitt leaves after a few hours U.S. Environment Chief Exits G-7 Climate Talks in Italy Early

Surprised he went in the first place.

 

[MitchJi]

http://www.investors.com/news/cboe-volatility-index-hits-lowest-since-1993-why-you-should-worry/
Fear Gauge Flashed Extreme Bullishness Just Before Tech Selloff
6/09/2017

The CBOE Volatility Index, the market's fear gauge, tumbled to its lowest level since 1993 on Friday, triggering a big sell-off in leading tech stocks.

The Volatility Index estimates expected volatility based on S&P 500 option prices. Commonly known by its ticker, the VIX highlights intense fear or complacency in the market. Low VIX readings are a sign that investors are especially bullish. Excessively bullish readings are often marked by at least short-term market tops.

The VIX fell to 9.37 intraday, quickly followed by an abrupt and powerful selloff in the Nasdaq and leading tech stocks. Apple (AAPL), a Dow industrials component, fell 3.9%, closing just above its 50-day moving average after sinking as low as 146.02. Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL) are all down more than 3% while Nvidia (NVDA) has lost 6.5%.

The VIX has rebounded for a double-digit percentage gain in afternoon action before closing up 5.6% to 10.73.

 

[FluxCap]

Some food for thought links this choppy morning:

Emotional Adjustments

IB Traders Insight | Interactive Brokers

Why the Fed Should Rethink Its 2%/Year No-Lookback Inflation Target

 

[FluxCap]

Some food for thought links this choppy morning:

Emotional Adjustments

IB Traders Insight | Interactive Brokers

Why the Fed Should Rethink Its 2%/Year No-Lookback Inflation Target

 

[neroden]

It will be reminiscent of Dean screaming incoherently.

Something which never happened. The networks took a recording of Dean trying to yell (very coherently) over a very loud crowd and digitally edited out the crowd noise to make a fake recording. You really *are* a sucker for fake news. Wake up.

It's extremely dangerous as an investor to get suckered by fake news.

 

[Reciprocity]

Something which never happened. The networks took a recording of Dean trying to yell (very coherently) over a very loud crowd and digitally edited out the crowd noise to make a fake recording. You really *are* a sucker for fake news. Wake up.

Oh you sure got me with that sick burn, if only we lived in a world with Journalists who were actually honest and focused on the facts. Whats odd is that you searched out a post of mine from 3 weeks ago just to disagree with and comment on one little throwaway sentence. Sad really. So I retract what I said about Dean, he is clearly sane and would never scream incoherently. Here I will put the whole quote for you, just in case you missed the other very accurate content:

You guys are like a golf ball in the high grass... Lost. This whole Trump Russia thing is a red herring but it's funny because it really is distracting the Dems from actually taking about real issues, not that there ideas on real issues are good.

What exactly is Russia doing to poor Jared kushner, who is a Democrat btw. Are they going to make him convince Trump to do something or to tell them his master plan?

There will be no impeachment, no end to this rediculous investigation because they never really end. I think they are still investigating Benghazi. And the Dems will have squandered a chance to actually talk about substance and put forth a real plan for a better future and instead they will trot out fake native American, Elizabeth Warren to scream that she is a nasty women, which is true. It will be reminiscent of Dean screaming incoherently. What a hot mess. And they can't even beat Trump, that is sad? You guys better start getting your stuff squared away and get on topic or you will lose another 1,000 seats, if there are even 1,000 left to lose.

 

[neroden]

There is currently a squeeze going on in the macro market (not a TSLA squeeze !). Capital investment is looking for a place to go - 'safe growth' - Long dated bonds included.

I was saying that TSLA is perceived (correctly) by a certain portion of the market as a safer growth stock than (for instance) banks or oil & gas. Does this fit in with your thesis?

I'm fully prepared for TSLA to stagnate for years or drop back to $290, because I think the alternative investments available to me would do worse.

 

[neroden]

Whats odd is that you searched out a post of mine from 3 weeks ago

I've been out of town for almost three weeks, I was just catching up. If you know my posting history, you'll know I do this.

I like you, your heart seems to be in the right place, and you've said some really interesting stuff. My warning is that you really do seem to be prone to falling for false news stories. You already recognize how commonly they are distorted, so I advise you to be more careful about this -- it's a risk which you have to watch out for, because bad information leads to bad decisions.

Friendly advice.

(You should note that I am no fan of the national-level Democratic leadership, who have done some idiotic things. The party platform is pretty darn good but have they lifted a finger to implement it? Not really, and this two-facedness has been going on since Bill Clinton.)

 

[ItsNotAboutTheMoney]

To quote the Economist (who backed the Liberal Democrats), in the "Leaders" post:

"Mr Corbyn poses as a radical but is the most conservative--and the most dangerous--candidate of the lot. He wants to take the railways, water and postal service back into public ownership. He would resurrect collective pay-bargaining and raise the minimum wage to the point where 60% of young workers' salaries are set by the state. His tax plan takes aim at high earners and firms, who would behave in ways his costings ignore. University would be free, as it was until the 1990s--a vast subsidy for the middle class and a blow to the poor, more of whom have enrolled since tuition fees helped create more places."

That's an opinion piece that's not worth quoting. So much twisting in that single paragraph.