Tesla Investor's General Macroeconomic / Market Discussion

[Intl Professor]

I don't know if Robert Shiller is a relevant commentator on this, but in a recent NYT piece he says we are in a bubble, but usually a crash needs warning in the press first. Then he gets into history. FWIW.

Mass Psychology Supports the Pricey Stock Market

I agree the recent Fed action is not yet threatening. Depends on Yellen remaining as Fed chair, or someone like her, as inflation is nowhere in sight. The big change will be selling of assets, but a close buddy--a rather distinguished economist, thinks the way they want to do it is reasonable. Tim Duy is the guy to watch.

Tim Duy's Fed Watch

I agree the political scene is crazy and Trump is as scary as Kim.

 

[kenliles]

I agree the political scene is crazy and Trump is as scary as Kim.

Except of course- T- really does have nukes at hand- and a lot more;
Interesting how Mr MAGA isolates US to be compared with NK and Syria

It'll be important to keep close watch on Fed rate of hikes- and rate of QT; so far a good job of slow and steady; one more raise and we'll be approaching limit of what GDP growth and inflation can support without effecting equities. Roughly I'd put that cap around 2%- but it should be approached with caution Imo.

I haven't updated in a while- still on Yellow Alert macro-ville ; Yield curve was headed to more problems but recently recovered a bit and other indicators continue to hover.

Speaking of Bubble-gum. Here's a small one that will have to correct soon- either markets will cool or buy-backs need to pick up soon;
we are currently way out there on a a de-correlated limb

frankly it would be healthier long term if we had a market correction soon (5-10% or so) imo.

 

[ValueAnalyst]

Except of course- T- really does have nukes at hand- and a lot more;
Interesting how Mr MAGA isolates US to be compared with NK and Syria

It'll be important to keep close watch on Fed rate of hikes- and rate of QT; so far a good job of slow and steady; one more raise and we'll be approaching limit of what GDP growth and inflation can support without effecting equities. Roughly I'd put that cap around 2%- but it should be approached with caution Imo.

I haven't updated in a while- still on Yellow Alert macro-ville ; Yield curve was headed to more problems but recently recovered a bit and other indicators continue to hover.

Speaking of Bubble-gum. Here's a small one that will have to correct soon- either markets will cool or buy-backs need to pick up soon;
we are currently way out there on a a de-correlated limb
View attachment 248907

frankly it would be healthier long term if we had a market correction soon (5-10% or so) imo.

Buybacks are such a small percentage of total market cap and total trading volume that I'm not sure how insightful this correlation is.

 

[Intl Professor]

I'm too much of a fanbois to be objective and with no dry powder, toothless anyway. But in that correction I believe, hope, Tesla will be a hedge as the future for it looks so bright. Or, at least, it will be a bell weather for recovery.

Thoughts?

 

[austinEV]

Yep -- zero-ish interest rates force everyone to seek returns in other asset classes so everything is pricey. But maybe that will be the norm for the foreseeable future, since inflation is nowhere to be found. Either way, the market being overdue for a correction is my main investment concern right now. If it weren't for this, our unstable political environment and my semi-advanced age I would be tempted to go full @TrendTrader007 right now.

I take heart in the saying that Markets climb a wall of worry. The time to be afraid is when people start saying, well I guess the bull run is just different this time and Trump has some magic that keeps things going.

 

[kenliles]

Buybacks are such a small percentage of total market cap and total trading volume that I'm not sure how insightful this correlation is.

Yes- it must be cast into the whole picture as a pixel data point- by itself, means little
Of course- with predicting macro moves of the market- that is true for virtually all metrics in varying degrees. Yield curve is one on the other end of the spectrum that has excellent predictive as a single metric- but even that must be well supplemented with many other data-pixels

I'm too much of a fanbois to be objective and with no dry powder, toothless anyway. But in that correction I believe, hope, Tesla will be a hedge as the future for it looks so bright. Or, at least, it will be a bell weather for recovery.

Thoughts?

It depends on the type of correction- but Tesla will in general NOT be a hedge for most broad corrections- as they are induced by fear of the future.
In addition, Tesla is one of the small group of Equites that have driven current equity profits- they will be first to get pulled imo.

Not to be misunderstood- Tesla will be just fine (sales, revenue, profits, growth etc.), but a correcting macro market will (normally) lower high P/Es first and foremost.

My advice is count on experiencing the correction while holding TSLA.
It's impossible to accurately time, and given Tesla's current actual growth state, I would advise a very strong long-hold position throughout.
I use stock to hold core position, and lever up in corrective pull backs by converting to DITM LEAPS in stages. This provides a 'full-in' position, but with some moist powder for advantaging such corrections... I'm currently 2/3 stock and 1/3 DITM LEAPS in Core hold position. I very nearly converted another 1/3 at $340 but my trigger level was at $330 then.
my 2c

 

[Intl Professor]

Yes- it must be cast into the whole picture as a pixel data point- by itself, means little
Of course- with predicting macro moves of the market- that is true for virtually all metrics in varying degrees. Yield curve is one on the other end of the spectrum that has excellent predictive as a single metric- but even that must be well supplemented with many other data-pixels



It depends on the type of correction- but Tesla will in general NOT be a hedge for most broad corrections- as they are induced by fear of the future.
In addition, Tesla is one of the small group of Equites that have driven current equity profits- they will be first to get pulled imo.

Not to be misunderstood- Tesla will be just fine (sales, revenue, profits, growth etc.), but a correcting macro market will (normally) lower high P/Es first and foremost.

My advice is count on experiencing the correction while holding TSLA.
It's impossible to accurately time, and given Tesla's current actual growth state, I would advise a very strong long-hold position throughout.
I use stock to hold core position, and lever up in corrective pull backs by converting to DITM LEAPS in stages. This provides a 'full-in' position, but with some moist powder for advantaging such corrections... I'm currently 2/3 stock and 1/3 DITM LEAPS in Core hold position. I very nearly converted another 1/3 at $340 but my trigger level was at $330 then.
my 2c

Thanks. I've been long only since 2010, but last purchases a smidge at $250 over a year ago and $340 recently. Ten shares due to SCTY conversion at $663! I bought SCTY at high!!!

 

[kenliles]

Thanks. I've been long only since 2010, but last purchases a smidge at $250 over a year ago and $340 recently. Ten shares due to SCTY purchase at $663! I bought SCTY at high!!!

Hold those shares good-buddy !
Speaking of SCTY, I increased my TSLA common by 25% for free, converting nearly ALL TSLA to SCTY during the arbitrage period pre merger. Yet another gift from the market-of-short-term-thinkers that mis-understand Tesla. The lesson being:
Hold those shares good-buddy !

 

[ValueAnalyst]

In addition, Tesla is one of the small group of Equites that have driven current equity profits- they will be first to get pulled imo.

I would agree with this statement if Tesla was part of S&P 500, but I'm not sure if this statement is true without that piece.

The way I see it playing out: TSLA rises substantially in the next 12 months, becomes part of S&P 500 in 4Q18, then recession & your prediction.

 

[kenliles]

Yes- it must be cast into the whole picture as a pixel data point- by itself, means little

speaking of which- good news:
Leading economic indicators increase 0.4 percent, more than 0.2 percent expected

I would agree with this statement if Tesla was part of S&P 500, but I'm not sure if this statement is true without that piece.

The way I see it playing out: TSLA rises substantially in the next 12 months, becomes part of S&P 500 in 4Q18, then recession & your prediction.

Yes fair point- the drivers have been Apple, Alphabet, Microsoft, Amazon, and Facebook
Tesla has largely been adopted into the same group as well as NVDA - noted this a while back that Tesla finally appropriately shifted investment groups from auto to tech-based tracking. This was to their advantage and will remain so imo.

Re: prediction of correction- just to clarify, I think the market needs a correction in short-medium term to help avoid recessive later-
Agree with your general play-out scenario; but the correction (if it occurs) will allow TSLA finish even higher in 12 months than without it was the point I was actually (poorly)attempting to convey. So my current thoughts- hold all TSLA long positions through any correction- converting dry-moist powder during such; While hard watch for recessionary trends to trigger later. Keep in mind the market will not wait for a recession to occur before pricing it in. So advance data should be used to adjust positions. In addition, sock away a core TSLA that rides through recession, playing macro trade in a different layer... my 2 pennies

 

[EinSV]

Except of course- T- really does have nukes at hand- and a lot more;
Interesting how Mr MAGA isolates US to be compared with NK and Syria

It'll be important to keep close watch on Fed rate of hikes- and rate of QT; so far a good job of slow and steady; one more raise and we'll be approaching limit of what GDP growth and inflation can support without effecting equities. Roughly I'd put that cap around 2%- but it should be approached with caution Imo.

I haven't updated in a while- still on Yellow Alert macro-ville ; Yield curve was headed to more problems but recently recovered a bit and other indicators continue to hover.

Speaking of Bubble-gum. Here's a small one that will have to correct soon- either markets will cool or buy-backs need to pick up soon;
we are currently way out there on a a de-correlated limb
View attachment 248907

frankly it would be healthier long term if we had a market correction soon (5-10% or so) imo.

Interesting chart. I have always been appalled at the typical use of buybacks -- that chart shows what a disservice companies do to long-term shareholders by increasing buybacks when prices are high and decreasing them when prices are low. This pumps up high share prices even higher temporarily but is a massive misallocation of capital in the long run. And don't get me started on the ridiculously high percentage of corporate earnings used for buybacks versus investing in building businesses, creating jobs, etc. Bit of a pet peeve, I will admit.

Back to the chart .... It is possible that SPs are now so high that even usually short-sighted Boards of Directors are not willing to chase them higher. But, another explanation for the recent break in your chart could be that Boards could be responding to criticisms that have been directed at "buy high" share buyback practices by Goldman, Vanguard and others. http://ibd.morningstar.com/article/article.asp?id=774411&CN=brf295,http://ibd.morningstar.com/archive/archive.asp?inputs=days=14;frmtId=12, brf295

 

[Lump]

Oh Oh, Mark Z. & Facebook are starting to regret the made up fake Russian collusion excuse.
Mark Zuckerberg’s Fake News Problem Isn’t Going Away

In early September, Facebook disclosed that it sold $100,000 in political ads during the 2016 election to buyers who it later learned were connected to the Russian government. Richard Burr of North Carolina and Mark Warner of Virginia, the most senior Republican and Democratic members of the Senate Intelligence Committee, have said they’re considering holding a hearing, in which case Zuckerberg could be asked to testify.

Meanwhile, special counsel Robert Mueller has made Facebook a focus of his investigation into collusion between the Russian government and Donald Trump’s campaign. A company official says it’s “in regular contact with members and staff on the Hill” and has “had numerous meetings over the course of many months” with Warner. The company acknowledges that it has turned over records to Mueller, which suggests, first, that the special counsel had a search warrant and, second, that Mueller believes something criminal happened on Zuckerberg’s platform.

 

[neroden]

Is that Bezos' approach as well?

Arguably, yes. He is staying in a bunch of very low margin businesses. He can do a little bit better than the competition in those businesses. Wall Street would *really like it* if Bezos focused on the businesses where he could do a *lot* better than the competition and have high margins; but Bezos doesn't care.

 

[neroden]

We've been in an "everything bubble" for a while. Which doesn't mean it is or is not a bubble.

OK, what this is is that all investment assets are going up in value relative to consumption. This happens when the money accumulates among a small coterie of rich people (chasing investments) while the masses get relatively impoverished (cutting consumption).

It tends to fall apart when most people can't afford to buy anything so the corporations which sell things are suddently found to be worthless, and the assets backed by loans are suddently found to be backed by bad debts. This isn't the only way it can end (there are much worse), just the most common. (Avoiding this entire situation is the goal of Ford's principle "I pay my workers enough to buy my cars".)

An ordinary asset bubble is being complicated by the great technology shift, however. There is a huge incentive for almost everyone to switch to solar / batteries / electric cars. This actually means increased *consumption spending* among the rich, who usually are looking for stock/land/loan type investments. And among the non-rich, solar / batteries / elecrtric cars do save money for the buyers, generally, so loans to them are much less likely to go bad than most. So these industries are booming on their own schedule and will still be growing even during a general market crash. And they are partially rebalancing the otherwise unbalanced consumption vs. investment money balance.

P.S. One implication of this: if the consumption/investment money distribution continues to be out of whack, P/E ratios can remain high (due to money looking for somewhere to go), but earnings will start flatlining at many (*but not all*) companies, so overall rates of return will go down.

 

[dmunjal]

Arguably, yes. He is staying in a bunch of very low margin businesses. He can do a little bit better than the competition in those businesses. Wall Street would *really like it* if Bezos focused on the businesses where he could do a *lot* better than the competition and have high margins; but Bezos doesn't care.

Isn't AWS a high margin business that is vastly better than its competitors? Also, growing very rapidly.

 

[neroden]

Isn't AWS a high margin business that is vastly better than its competitors? Also, growing very rapidly.

Yes. Please read what I wrote again. Slowly this time. You'll get it...

Wall Street analysts would rather Amazon *only* did AWS.

 

[dmunjal]

Yes. Please read what I wrote again. Slowly this time. You'll get it...

Wall Street analysts would rather Amazon *only* did AWS.

Sorry, I didn't get that when I read it. Thanks for the clarification.

 

[MitchJi]

This is frightening:
Jeff Sachs Warns "Nuclear War is a Real Threat" as Trump Threatens to "Totally Destroy" North Korea | Democracy Now!

On Tuesday, President Trump gave his first address to the United Nations General Assembly, boasting about the size of the U.S. military and threatening to "totally destroy" North Korea. "[N]uclear war is a real threat," says Jeffrey Sachs, leading economist and director of the Center for Sustainable Development at Columbia University. "It’s not some idle imagination right now. You have two leaders—both seem unstable—yelling at each other. Both have nuclear arms."

Economist Jeff Sachs: Americans Who Don't Want War with Iran Must Speak Out Now | Democracy Now!

President Trump’s comments at the United Nations General Assembly urging the withdrawal from the Iran nuclear deal sounded familiar to our guest, Jeffrey Sachs. "The last time we had this kind of rhetoric was George W. Bush with the axis of evil," Sachs said. "It was immediately followed by the Iraq War, which was the most disastrous single step of American military action and 'diplomacy,' or anti-diplomacy, in modern times. So this is a setup, again, for war, for conflict. And it is extraordinarily ignorant and dangerous. Iran is in compliance with the agreement that was reached."

 

[MitchJi]

Someone wanted to know why I posted this informative podcast about single payer in the general thread discussion few days ago:
The Bernie Sanders Show by U.S. Senator Bernie Sanders on Apple Podcasts

This is probably a better place to it it, I believe it's it's relevant to investors because our current health care make money for the insurance companies system is costing us over twice as much as any other country pays for worse outcomes. This amounts to over $5k per person per year which is a huge drain on our economy.

 

[neroden]

Someone wanted to know why I posted this informative podcast about single payer in the general thread discussion few days ago:
The Bernie Sanders Show by U.S. Senator Bernie Sanders on Apple Podcasts

This is probably a better place to it it, I believe it's it's relevant to investors because our current health care make money for the insurance companies system is costing us over twice as much as any other country pays for worse outcomes. This amounts to over $5k per person per year which is a huge drain on our economy.

I burn $5k per year on private health insurance which is absolutely terrible (very restricted networks, excludes everything they can get away with), and that's the best deal I can legally get on the market (yes, I did the calculations) -- and this is a state with fairly good regulation. It's basically catastrophe-only. Anyway, I then end up spending twice that in cash on medical expenses every year (many of which don't count towards the deductible, because limited network and limited coverage). People on Medicaid and Medicare both get better insurance coverage than I get in the private market (much bigger network, more services covered, negligible copays and deductibles) for much, much less -- as in, *the government is paying less* to cover them than I am paying for bad private insurance.

We need single payer pretty much immediately, at least for those of us in the wilderness of the individual market.