Tesla Investor's General Macroeconomic / Market Discussion

[jhm]

So if the Saudis are engaging in economic warfare. Might the US government respond by placing a tariff on oil from OPEC, say, tax anything below $100/bbl. It would protect NA oil prices and reduce the deficit. Might this have some tactical value?

 

[Curt Renz]

No matter what happens tomorrow, I think we are seeing the return of swings and volatility to a market used to the complacency of QE's effect on rates.

With the dropping price of oil, overall deflation may be a concern. Other macroeconomic news was not too good today. I would not be surprised if these inspire the FOMC at its October 28-29 meetings to maintain quantitative easing and delay the expected dates for any raises in interest rate targets.

 

[Causalien]

With the dropping price of oil, overall deflation may be a concern. Other macroeconomic news was not too good today. I would not be surprised if these inspire the FOMC at its October 28-29 meetings to maintain quantitative easing and delay the expected dates for any raises in interest rate targets.

Oil going down is bad for the market. Was this always there? I seem to remember a time when oil going down leads to stock market rallies. For tech companies driving down transportation and production costs is a big boom.

 

[FluxCap]

I would not be surprised if these inspire the FOMC at its October 28-29 meetings to maintain quantitative easing and delay the expected dates for any raises in interest rate targets.

Really? I honestly think it would take a massive shift in FOMC member sentiment to deviate from the taper of quantitative easing that has been telegraphed relentlessly for most of the last year. I do however think they will use stronger language about their desire to keep forward interest rate expectations low. The question I have is: without QE, will the market believe that the Fed in fact has the power it suggests to control rates?

On Friday morning, Fed Chair Janet Yellen Speaks at 8:35am EST, before market open. I am positive the market will be listening closely to her comments for directional clues, as I know I surely will.

 

[FluxCap]

With the dropping price of oil, overall deflation may be a concern.

I emphatically agree with this and am concerned about deflation as well, as well as the Fed's ability to curtail it in a liquidity trap.

 

[drinkerofkoolaid]

Maybe this is a bit of a stretch, but there are a few things no-one is really talking about.

In addition to Oil falling to $80, Samsung's profit fell by 60%, Ford reported a loss due to recalls, and GM will also likely report a loss/miss expectations due to the recalls. All of the above are technically good for Tesla Motors, but bad for the economy in the short term.

1) Samsung needs a new source of profit. Perhaps Samsung will focus a lot of its resources on battery production?

2) GM and Ford faltering due to the recalls, and slowing demand for ICE vehicles means they will have a much harder time investing in a product that can compete with Tesla. Maybe this is what Elon meant when he said he is glad some companies are beginning to show interest in his offer to license Tesla's patents for free, and he HOPES they will be able to produce products that can compete with Tesla?

Anyone think it's likely the US government will introduce a tax on imported oil to stop the supply glut?

 

[Curt Renz]

Oil going down is bad for the market. Was this always there? I seem to remember a time when oil going down leads to stock market rallies. For tech companies driving down transportation and production costs is a big boom.

My comments were related to the FOMC. They are not supposed to be concerned about the stock market. Their dual mandate from Congress is to support the economy (mainly employment) and overall price stability. Nevertheless, what they decide can affect the stock market.

 

[justthateasy]

Anyone think it's likely the US government will introduce a tax on imported oil to stop the supply glut?

With the current political atmosphere and how corporatized (meaning how much industries like big oil have bought off our politicians) our government is, new taxes [in general] isn't anything politicians would dare to discuss, and that's politicians on both sides of the aisle. Republicans won't do it because they'll be cut off from the gravy train of their donors and Democrats won't do it because they don't have the political courage to stand up to Republicans.

 

[jhm]

The front page story on the Wall Street Journal basically made the claim that oil is simply in a glut: more supply than demand. Saudi Arabia is simply unwilling to cut its production. This runs counter to the narrative that Saudi Arabia is engaging in economic warfare. Other countries like Venezuela base their government budget on $120/bbl, and Angola on $98. So they are headed for a world of hurt. I'm not sure what to believe about all this. But it is plausible that the Saudis are simply trying to cover their domestic spending and are willing to take a lower price for oil to keep their status quo going.

This is something to consider. We hope for a day when demand for oil will perpetually recede. Gluts like this will litter the way. Are we there yet?

 

[Intl Professor]

Sould be unlikely

...Anyone think it's likely the US government will introduce a tax on imported oil to stop the supply glut?....

I think that unlikely because it is probably against WTO rules. This might be the best time to impose a carbon tax on domestic production, if it is to be done at all. It might also be a good time for California to pass an oil depletion tax as we are the only oil producing state which does not have one. But I think this unlikely to happen as well.

 

[drinkerofkoolaid]

The "glut" is basically caused by price fixing. Wouldn't a tax to counter a price war aimed at killing competition and harming the US economy be possible, a good idea, and easy to amass support for?

 

[FluxCap]

The front page story on the Wall Street Journal basically made the claim that oil is simply in a glut: more supply than demand. Saudi Arabia is simply unwilling to cut its production. This runs counter to the narrative that Saudi Arabia is engaging in economic warfare.

With respect jhm, I don't think you understand completely - the data actually reinforces the fact that Saudi Arabia is bankrolling price fixing or "dumping" to attack competition and potentially bankrupt them. Their sovereign wealth is so massive they can literally sustain sub-$80/barrel oil for years, taking losses in the trillions, and still have enough to jack up the prices later once competition has been eliminated. Otherwise they would simply decrease production to meet current demand.

Edit: guys take overtly political discussion out of the short-term thread please.

 

[AlMc]

With respect jhm, I don't think you understand completely - the data actually reinforces the fact that Saudi Arabia is bankrolling price fixing or "dumping" to attack competition and potentially bankrupt them. Their sovereign wealth is so massive they can literally sustain sub-$80/barrel oil for years, taking losses in the trillions, and still have enough to jack up the prices later once competition has been eliminated. Otherwise they would simply decrease production to meet current demand.

Edit: guys take overtly political discussion out of the short-term thread please.

Robert will move it soon I am sure.

Back to short term: I am long term bull but I do believe in being defensive short term. How are you all going to 'play' this short term? Currently, I am accumulating cash and I am concerned through Q3ER. I did add a few LEAPS today but may sit on the sidelines for awhile.

 

[FluxCap]

FluxCap, it's not my intent to politicize this. I honestly do not know who to believe on this. Kindly point me to data. Thanks in advance.

Final comment directed at political comments above, not oil price discussion. No prob.

Economy of Saudi Arabia - Wikipedia, the free encyclopedia

They have trillions to play with. To put it simply, this is classic "dumping" or "flooding the market." This strategy is ruthlessly effective when one has the capital to outlast one's competition. US fracking producers, particularly the ones who borrowed massively to finance their production facilities, will literally start going bankrupt with oil under $80/barrel as their cost to produce it, let alone sell it, is above that. They die, Saudis raise prices again having weathered a storm of their making, and the Saudis both profit and increase their control over the global oil trade. They did it before in 1986 and are doing it again. Make sense?

Or, listen to the talking heads say this evening what I said this morning:

How Stock market Volatility Is Affecting Oil: Video - Bloomberg

Crude: Why Demand for Oil Is Soft as Brent Tumbles: Video - Bloomberg

Finally, to bring this post back around to the intent of this thread:

I have no idea how the market will react to cheap oil with regards to TSLA's share price, but I theorize 2 things based on recent past:

1) Cheap oil subjects the world economy to vicious macroeconomic shocks and reminds world markets of vulnerability to oil fluctuations, potentially putting upward pressure on "alternative energy" stocks, into which TSLA is sometimes lumped. This is the medium to long-term view.
2) Cheap oil potentially lowers the price of perceived "alternative energy" stocks as traders believe all the solar and electric vehicle buyers are focused exclusively on price of electric vs. gasoline alternatives. This has been widely refuted, but traders still think this and thus drive down solars and possibly TSLA. This is the short-term view.

I am holding my TSLA shares for the long haul, but I have no idea what the next days and weeks will bring given these macro shocks we are seeing, derived more from oil than ebola in my opinion.

 

[Chickenlittle]

The front page story on the Wall Street Journal basically made the claim that oil is simply in a glut: more supply than demand. Saudi Arabia is simply unwilling to cut its production. This runs counter to the narrative that Saudi Arabia is engaging in economic warfare. Other countries like Venezuela base their government budget on $120/bbl, and Angola on $98. So they are headed for a world of hurt. I'm not sure what to believe about all this. But it is plausible that the Saudis are simply trying to cover their domestic spending and are willing to take a lower price for oil to keep their status quo going.

This is something to consider. We hope for a day when demand for oil will perpetually recede. Gluts like this will litter the way. Are we there yet?

Expect gov to raise gas tax if oil stays down

 

[chickensevil]

Expect gov to raise gas tax if oil stays down

That won't help US production though, and won't fix the shock this will have on our economy, unless I am missing something? The gas tax is on all gas not just import... Or so I thought.

Or are you implying that they would raise the taxes just because they finally can without much pushback since now people are used to 3.80+ per gallon... And the price has dropped almost back into the 2$ range.

 

[Curt Renz]

Just moved a bunch of posts to Politics - Quarantine Thread

Thank you, Doug. Of course in the context of short term stock price movements, I would not count discussion of Saudi Arabian oil policy as overtly "political". Even some American political policy, particularly in the case of Federal Reserve Board decisions, I would count as relevant to the stock market. However, I can see that posts expressing American political party biases, as seen far too often nowadays on internet message boards, belong in threads designated for political discussions.

 

[MikeC]

Maybe we need an 'Oil Prices and TSLA' thread.

Seems like a complex relationship as cheaper gas could theoretically affect demand for EVs, but at the same time Tesla's ultimate mission is to devalue oil due to lack of demand. If the EV revolution occurs the way we think it will, oil surplus could be a recurring theme in the future.

 

[InTheShadows]

Maybe we need an 'Oil Prices and TSLA' thread.

Seems like a complex relationship as cheaper gas could theoretically affect demand for EVs, but at the same time Tesla's ultimate mission is to devalue oil due to lack of demand. If the EV revolution occurs the way we think it will, oil surplus could be a recurring theme in the future.

IMO current tesla buyers do not care if gas is $2/gal or $5/gal. They buy the car either for the environmental benefits because it's the right thing to do, for the status symbol, for the performance, or some mixture of these. When the Model 3 comes out then I think we will see demand effected by gas prices.

 

[Robert.Boston]

So if the Saudis are engaging in economic warfare. Might the US government respond by placing a tariff on oil from OPEC, say, tax anything below $100/bbl. It would protect NA oil prices and reduce the deficit. Might this have some tactical value?

How is lowering the price of a product we buy a lot of "warfare"? Remember, the US still imports about 5 million barrels/day, so a $10 drop in crude prices reduces our trade deficit by over $18 billion.

The nefarious interpretation is that OPEC wants to price oil just below the point where developing good alternatives isn't sensible. But options like tapping shale oil? That option will always be there, and likely we'll have better tech to do it in a decade than we do today. So, let OPEC sell us cheap oil now and we'll use our more costly oil later. It's true that low oil prices will (marginally) reduce the adoption rate of EVs, but I don't believe that the Saudis think that EVs will be anything more than fringe for a long time.

There have been ideas about a tax on oil that varies inversely with oil prices. While a generally good idea, it has to be designed carefully to avoid perverse side effects. E.g., if the tax is "$1 for every $1 below $100/bbl", then you can bet that the supply chain (production, shipping) will manage to keep the delivered price at or above $100.