Tesla Investor's General Macroeconomic / Market Discussion

[The Blue Owl]

Thanks, Auzie and Familial for good reads.

Please, call me Rhino. I decided it's my first name and we're all friends here

I still think we need a New New Deal, but I'm in the minority. Just me and Paul Krugman sittin' alone out in left field, basically. And the ghost of Keynes.

You're not alone in that field. Not that I belong in that group, of course, seeing as I am a layman when it comes to economics, but I do understand your point (which is shared in the article, too) and strongly agree with it.

 

[Auzie]

Good timing by BOJ, thank you Mr. Kuroda

Thanks, Auzie and Familial for good reads.
The greatest fiscal stimulus in our history was the New Deal, and it worked. Period. Though the WPA and CCC were lambasted for hiring the poor and destitute to sweep parks that didn't need sweeping, at least it gave people a job, and these and other public infrastructure projects laid the groundwork for 50 years of American Prosperity. I still think we need a New New Deal, but I'm in the minority. Just me and Paul Krugman sittin' alone out in left field, basically. And the ghost of Keynes.

You're welcome Flux. Reads are good because times are good, good news for now :smile:

There are a couple of even better news below, from Bloomberg.

The first one, Central Bank answer's market prayers, about Bank of Japan's expanding its asset purchase program. Perfect timing, stepping in with stimulus program just as US Fed. Reserve winds down its own program.

That event led to S&P 500 rallies to record highs.

The Standard & Poor’s 500 Index advanced 1.2 percent to 2,018.05 at 4 p.m. in New York, topping its previous all-time closing high of 2,011.36 on Sept. 18. The Dow Jones Industrial Average rallied 195.1 points, or 1.1 percent, to 17,390.52, also an all-time high. The Nasdaq Composite (CCMP) Index surged 1.4 percent to the highest since March 2000.

Energy companies led gains, with Exxon Mobil Corp. and Chevron Corp. each rising 2.4 percent. LinkedIn Corp. soared 13 percent after third-quarter sales exceeded estimates. GoPro Inc. jumped 13 percent after its prediction for fourth-quarter profit surpassed analysts’ projections. Starbucks Corp. fell 2.3 percent after posting disappointing quarterly revenue.

Re. you feeling alone on the left: I think people often try to superimpose moral judgements onto economic policies. That may lead to aligning with less effective policies.

Economy is about what works, not about what is right or wrong, just or unjust. That concept is often very difficult for many people to accept and digest, hence frequent alignment with policies that contain some sort of economic punishment of people that may have in some ways contributed to their misfortunes. 'Leftist' policies may be effective but seem to 'not punish' 'poor personal choices' and thus get branded 'leftist' and get a lot of resistance, unfortunately. Austerity in Europe is a good example of ineffective policy that is accepted due to its 'punishing' effect on 'lazy tax dodgers etc' on EU periphery.

 

[austinEV]

Thanks, Auzie and Familial for good reads.

Personally, I think the "war on fiscal stimulus" is a completely backwards notion, and is in fact very successful attempt to accelerate the already massively unbalanced redistribution of wealth from the poor to the rich at levels not seen since Feudalism was the order of the day. The Fed under Bernanke and Yellen has said repeatedly that they wish Congress had the cojones to undertake fiscal stimulus, because monetary stimulus is a blunt tool that is imprecise and has unproven effectiveness in actual job creation. But the Fed will act if Congress won't, and it has. Which inflates asset prices. Which benefits those who hold the most capital. Which is not working Americans.

The greatest fiscal stimulus in our history was the New Deal, and it worked. Period. Though the WPA and CCC were lambasted for hiring the poor and destitute to sweep parks that didn't need sweeping, at least it gave people a job, and these and other public infrastructure projects laid the groundwork for 50 years of American Prosperity. I still think we need a New New Deal, but I'm in the minority. Just me and Paul Krugman sittin' alone out in left field, basically. And the ghost of Keynes.

You, krugman, Keynes and me.

 

[Robert.Boston]

You, krugman, Keynes and me.

I'm in that camp, too; we need to figure out paths to "equitable growth." The US economy has actually been doing quite well in Q2 and Q3, measured in aggregate, but the grumpy mood of voters about the economy demonstrates that this growth has not been shared equitably across the socioeconomic strata.

Not all "fiscal policy" needs to be higher taxes. Thomas Pikkety makes good arguments for why this growth isn't "trickling down," and his analysis suggests that steps like a sharp increase in the minimum wage would do a lot of good and very little harm -- the added growth from having more people with higher incomes, and thus higher demand, more than offsets the decreased quantity demanded because of price rises. Not all "fiscal policy" needs to be higher taxes. On another front, rationalizing U.S. immigration policy could help a lot of people and increase taxable payrolls.

 

[Auzie]

Did we dodge the bullet?

I'm pretty worried. My spook-meter has gone from 50% scared last week to 75% scared this week about serious macroeconomic problems. We are victims of cheap oil, too much global "austerity" in the face of serious needs for public-sector fiscal stimulus in major economies (including US), and seriously overinflated equity valuations in many areas of the market.

This is a scary chart:

It was just few weeks ago that market sentiment was 'disturbed'.

When market is in such a state, unfortunate negative catalysts can spin it further into descending spiral which can then keep feeding fear into further descend and more and more sell off, until complete uncontrollable crash.

Controlling ebola spread and some good news (good luck) reduced negative catalysts.

I find it very difficult to judge which market correction may turn into avalanche and which one will lead to new highs.

 

[FluxCap]

So Priceline is the latest "momo" stock to get eviscerated by the bots. Down quite a bit, and perception in market cascades to other so-called momo stocks, which is us.

Also, apparently Saudi Aramco decided to rain on the S&P parade by tanking the price of oil further today, and the market still thinks that cheap oil means people won't buy renewable energy, which is wrong but I can't tell the whole market not to think that.

Some links:
SP 500 Declines as Energy Companies Fall Amid Earnings - Bloomberg
U.S. Crude Futures Fall to 3-Year Low on Saudi Price Cut - Bloomberg
Energy & Oil Prices: Natural Gas, Gasoline and Crude Oil - Bloomberg

So yeah, this movement is macro.

 

[ItsNotAboutTheMoney]

Not all "fiscal policy" needs to be higher taxes. Thomas Pikkety makes good arguments for why this growth isn't "trickling down," and his analysis suggests that steps like a sharp increase in the minimum wage would do a lot of good and very little harm -- the added growth from having more people with higher incomes, and thus higher demand, more than offsets the decreased quantity demanded because of price rises. Not all "fiscal policy" needs to be higher taxes. On another front, rationalizing U.S. immigration policy could help a lot of people and increase taxable payrolls.

I highly recommend Thomas Pikkety's TED talk where he explained the basics of his ideas:
Thomas Piketty: New thoughts on capital in the twenty-first century | Talk Video | TED.com

(As a slight aside, on immigration policy, on a more global front, there was another interesting talk about remittances and the inefficiencies:
Dilip Ratha: The hidden force in global economics: sending money home | Talk Video | TED.com)

 

[Words of HABIT]

Oil is up 2.43%, and so is TSLA.
IMO TSLA should be in tune with Oil (average investor thinks so, although Tesla is less of a "green" play than a "wow! great car" play) so based on no new news today, we are simply following the upward trend in oil. Since Oil is 40% off its highs, we can expect a 40% share increase from TSLA when oil resumes its high, without any additional news from TSLA.

 

[Bunky]

I don't expect the price of TSLA to move in concert with the price of oil and I certainly hope it doesn't.

 

[InTheShadows]

Tesla Investor's General Macroeconomic Analysis / Market Discussion Thread

Not sure if this is the best thread for this question. Please move it if it should be elsewhere.

Since I was not into stock market investing during 9/11 I have the following questions to how options would play out.

What happened to the options expiring the following Friday (9/14) during the shutdown.

The crash that came when the market reopened, for the people that wanted to cut their losses and sell everything at the open how did they put their orders in?

Did they do limit orders or market orders?

Also how did the people fair that immediately at market open took a large chunk of their available cash and bought their favorite high volume stock and bought weekly otm puts?

Which would you do first? Sell to cut losses or buy puts to try to hedge/ maximize gains?

This isn't ment as disrespect for what happened that day. I'm just working on disaster plans. I hope nothing like this ever happens again.

 

[FluxCap]

I read an interesting story about a guy who owned puts and went on vacation right before 9/11. He said that in retrospect, even if he had been able to call a friend to sell them for him, on the actual day of the disaster, nobody was thinking about anything but safety and trades would not have happened. I imagine in this era of automated and algo trading there could be a different scenario, but one never knows. Basically the conclusion was, there is no perfect disaster protection.

With stock holdings, I suppose you could put in a stop loss limit order every morning of your life, but that seems cumbersome unless it's automated, and carries risk of executing before you are ready. Plus markets might trip the 10% move "circuit breaker" before your super low stop loss limits would be hit.

SEC.gov | New Measures to Address Market Volatility

An interesting if morbid discussion, but I understand wanting to preserve some semblance of financial security even in a crisis.

I've only ever been truly successful with "disaster protection" by cashing out stocks when I felt impending economic doom, but even that was a slow unwinding decision and not a snap judgement. Personally, I managed to "cash out" before Lehman Brothers because I saw it coming and saved a literal fortune, but I held on way too long through the dot-com bust and lost a bunch in the late 90's as well.

 

[mershaw2001]

Not sure if this is the best thread for this question. Please move it if it should be elsewhere.

Since I was not into stock market investing during 9/11 I have the following questions to how options would play out.

What happened to the options expiring the following Friday (9/14) during the shutdown.

The crash that came when the market reopened, for the people that wanted to cut their losses and sell everything at the open how did they put their orders in?

Did they do limit orders or market orders?

Also how did the people fair that immediately at market open took a large chunk of their available cash and bought their favorite high volume stock and bought weekly otm puts?

Which would you do first? Sell to cut losses or buy puts to try to hedge/ maximize gains?

This isn't ment as disrespect for what happened that day. I'm just working on disaster plans. I hope nothing like this ever happens again.

The puts would be auto executed. Also, you'd sell your shares if you're on margin rather than buy puts so that you don't get a margin call, otherwise you might do the puts to save on capital gains if you're still positive.

 

[Words of HABIT]

I don't expect the price of TSLA to move in concert with the price of oil and I certainly hope it doesn't.

Bunky, Two main reasons behind purchasing an EV are to reduce emissions (greenhouse gases) and to save money on operating a vehicle (electricity is cheaper than gas). In Tesla's case there is a third reason (its the best car, period).
On July 7th, 2014, Kshitij Consulting Services published petrol prices across the World (refer to chart).
This would help explain why Tesla is so popular in Norway where petrol is >250% more expensive as that in the US. Even in Canada we are paying >25% premium over our US neighbours, and Canada has vast oil reserves in the Alberta tar sands which we will soon be piping to the US. Sure there are other factors, such as government incentives and per capita wealth, however don't forget the price of oil. When oil spikes back over its all time high, TSLA will be rewarded. Tesla will also prove to be popular in countries where petrol is >200% more expensive than the US, these include Denmark, Finland, France, Germany, Hong Kong, UK and Sweden to name a few. What if (when) petrol hits $6 gallon in the US?

Petrol Prices across the World - (Sorted by country name)

Country	$ per Ltr 2012	Rs/ ltr	$ per Ltr 2013	Rs/ ltr	$ per Ltr 2014	Rs/ ltr	% Deviation from India, 2013
Australia	$1.45	77.80	$1.37	87.28	$1.42	84.11	8%
Bahrain	$0.27	14.80	$0.27	17.11	$0.26	15.65	-80%
Bangladesh	$1.12	62.00	$1.24	78.72	$1.08	64.09	-18%
Bosnia&Herzegovina	$1.67	93.00	$1.64	104.40	$1.67	99.08	27%
Bhutan	--	--			$0.94	55.54	-29%
Brazil	--	--	$1.22	77.87	$1.33	78.88	1%
Canada	$1.36	73.80	$1.18	75.30	$1.26	74.34	-5%
China	$1.43	72.10	$1.68	106.96	$1.33	78.91	-37%
Czech Republic	$1.96	98.00	$1.80	114.66	$1.67	106.24	36%
Denmark	--	--	$2.23	142.05	$2.35	139.19	78%
Dubai, UAE	$0.48	24.40	$0.44	27.19	$0.47	27.72	-65%
Fiji	--	--	$1.45	92.42	$1.37	81.19	4%
Finland	$2.14	119.00	$2.12	135.20	$2.20	130.32	67%
France	--		$1.97	125.79	$2.08	123.08	57%
Germany	$2.27	113.30	$2.15	136.91	$2.09	123.89	58%
Hongkong	$2.21	108.90	$2.14	136.06	$2.22	131.20	68%
Hungary	$2.14	110.30	$1.79	113.81	$1.82	107.98	38%
India	$1.33	73.00	$1.17	74.45	$1.31	78.20
Indonesia	--	--	$0.90	57.33	$0.94	55.68	-29%
Iran	$0.57	30.20	$0.10	7.70	$0.27	16.26	-79%
Ireland	$2.06	102.80	$2.07	131.78	$2.09	123.89	58%
Israel	$2.11	103.90	$2.12	135.20	$2.23	131.77	69%
Italy	$2.36	118.60	$2.34	148.89	$2.47	146.41	87%
Japan	$1.84	94.30	$1.54	98.41	$1.59	94.10	20%
Jordan	$1.42	78.00	$1.40	88.99	$1.44	85.11	9%
Kenya	$1.42	78.10	$1.24	78.72	$1.32	78.40	0%
Kuwait	$0.23	12.70	$0.30	18.83	$0.25	14.75	-81%
Malaysia	$0.62	34.90	$0.86	54.77	$0.59	35.18	-55%
Mexico	$0.86	46.40	$0.91	58.19	$1.04	61.29	-22%
Mongolia	--	--	$1.40	88.99	$0.92	54.23	-31%
Nepal	$1.46	75.20	$1.26	80.44	$1.38	81.93	5%
Netherland	$2.47	138.10	$2.43	148.89	$2.47	146.41	87%
New Zealand	$1.81	100.20	$1.79	116.38	$1.94	114.62	47%
Nigeria	$0.56	31.30	$1.36	86.43	$0.58	34.51	-56%
Norway	$2.62	130.90	$2.75	175.42	$2.64	156.53	100%
Oman	$0.31	17.20	$0.38	25.52	$0.31	18.43	-76%
Pakistan	$1.13	61.40	$1.05	66.74	$1.09	64.79	-17%
Poland	$1.81	88.10	$1.71	108.67	$1.76	104.46	34%
Qatar	$0.27	14.20	$0.24	15.40	$0.27	15.95	-80%
Romania	$1.66	91.40	$1.64	104.40	$1.91	113.19	45%
Russia	$1.02	50.20	$1.10	70.17	$0.98	57.83	-26%
Saudi Arabia	$0.12	6.90	$0.20	13.20	$0.16	9.48	-88%
Singapore	--	--	$1.65	110.39	$1.80	106.55	36%
South Africa	$1.48	74.60	$1.25	79.58	$1.30	76.94	-2%
Spain	--	--	$1.89	120.65	$1.94	115.04	47%
SriLanka	$1.25	61.70	$1.29	82.15	$1.30	77.25	-1%
Sweden	$2.25	112.40	$2.11	134.35	$2.12	125.39	60%
Switzerland	--	--	$1.88	119.80	$1.97	116.75	49%
Thailand	$1.39	71.10	$1.21	77.01	$1.51	89.38	14%
Turkey	$2.72	143.80	$2.35	149.75	$2.40	142.23	82%
UK	$2.12	116.50	$2.08	132.63	$2.18	129.27	65%
USA	$1.02	55.90	$0.86	54.77	$0.97	57.42	-27%
Vietnam	--	--	$1.20	76.16	$1.20	70.98	-9%

 

[Johan]

Bunky, Two main reasons behind purchasing an EV are to reduce emissions (greenhouse gases) and to save money on operating a vehicle (electricity is cheaper than gas). In Tesla's case there is a third reason (its the best car, period).
On July 7th, 2014, Kshitij Consulting Services published petrol prices across the World (refer to chart)...

This is cool data. You should really check out this site:

Bloomberg Gas Price Ranking

There's "Paying at the pump" but there's also "Pain at the pump" i.e. adjusted for purchasing power. If you do that, Norway doesn't come out all that bad. Norway is ranked #52 in unaffordability, the worst countries are Pakistan, India, Phillipines, Nigeria and a bit lower comes for example Thailand and Turkey. Those are countries where EVs really have an advantage!

 

[tftf]

?..too much global "austerity" in the face of serious needs for public-sector fiscal stimulus in major economies (including US), and seriously overinflated equity valuations in many areas of the market.

I don't agree on the stimulus part.

The two are linked in my opinion, equity valuations are (already) very high as of late 2014 because of stimulus and artifically low interest rates (ZIRP by major central banks) since late 2008.

There's a major (not the only one, but a central one) reason the US stock markets had so many good years since 2009, same for the Japanese stock markets since 2013: QE (and to a lesser extent the aforementioned ZIRP).

However, company fundamentals didn't get better. This is the real scary chart in my opinion:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/11/QE socgen profits.jpg

Once QE ends, this multiple expansion will be questioned and return to the mean in my opinion. As one can see in the linked chart, operating earnings didn't get much better since 2011 for most publicly traded companies.

We have asset inflation because of QE, not because of austerity.

The current bull cycle may soon be over for most Western stock markets (2015-2016) based on historic averages, unless there's even more QE coming...and more QE will result in additional long-term issues such as asset bubbles and public debt levels exploding (Japan is the first victim, other industrialized countries will follow).

 

[FluxCap]

Since I'm not sure you understand the difference between fiscal and monetary stimulus, I'll assume you just wrote a rather long post to agree with my month-old note that QE has inflated equity valuations while providing only a modest boost to employment.

Conversely, the American Recovery and Reinvestment Act of 2009 provided a significant, sustained boost to employment and had a more minimal effect on equities. This is fiscal stimulus.

Yellen and Bernanke said time and again that they would prefer if Congress acted to provide additional fiscal stimulus because monetary stimulus is a more imprecise, blunt tool. But if Congress would not act, then the Fed would. And they did, so here we are.

 

[tftf]

Since I'm not sure you understand the difference between fiscal and monetary stimulus, I'll assume you just wrote a rather long post to agree with my month-old note that QE has inflated equity valuations while providing only a modest boost to employment.

I understand the difference, fiscal stimulus nasty side-effects will only manifest themselves longer-term. What I focused on in my above comment are shorter-term effects on stock markets and asset prices because of the monetary stimulus.

But fiscal stimulus is as dangerous because in boom phases elected politicians will never really try to accumulate reserves/surpluses - on the other hand they will spend like drunken sailors in downturns to appease their voters and lobby groups. These are one-eyed Keynesians, they only apply these policies in recessions or downturns. There are few to none two-eyed Keynesians in the real world.

Distortion in labour markets and uncompetitive sectors as well as rising public debt are some of the nasty side-effects of fiscal stimulus.

As I noted above, Japan will (most likely) be the first example, a nation state sovereign currency showcase of the ultimate outcome of endless fiscal stimulus, QE and ZIRP policies.

The horrible results in that endgame? Either a public debt bubble and/or a currency implosion.

Then the rest of the developed world will wake up, because many countries (including the US) are just 1-3 decades "behind" Japan.

Or to make a concrete example: Tesla can probably add a zero to its Japanese car sticker prices in JPY in a few years. Unless other major central banks retaliate before...which will result in major currency wars. Not a pretty outcome either (more trade tensions).

 

[FluxCap]

Wild, baseless certitudes about the future are not something I wish to engage with.

 

[jhm]

Let's break down this supposed correlation between Tesla and the price of oil.

Near-term demand: the price of oil adds to the TCO of rival ICE vehicles. So as the price of oil increases Tesla's products look more attractive than alternative ICE. Thus, demand is correlated with oil price. However, current demand exceeds supply, and excess unmet demand is of little value to Tesla at this point. Thus, the price of oild must fall quite a bit to create a demand constraint on Tesla. I think Tesla has ample safety with oil above $50 barrel. Demand is based more on performance than full efficiency. I suspect most buyers would still be interest in Tesla even if oil was at parity with electricity, so even $25 per barrel would not induce performance buyers to reject a Tesla. So near-term demand is not critically threatened by low oil prices, nor would sales increase if oil were to jump to $150 a barrel. Being supply constrained means that Tesla's sales are uncorrelated with the price of oil.

Near-term Supply: the price of oil adds to the cost of producing and distributing Tesla's products. A reduction in oil prices should reduce transportation cost. So battery cells shipped from Japan cost less, other inputs shipped to Fremont cost less, plastic and other petroleum products used in production cost less, and shipping finish goods to customers around the globe cost less. So an oil price reduction has a deflationary impact on the cost of goods sold, which improves profitability.

Long-term Impact: if Tesla is successful in disrupting the dominance of ICE in the automotive industry, this will lead to a reduction in demand for oil. When EVs crush oil demand, the success of Tesla will correspond to a decline in oil. Thus, long-term Tesla and the price of oil may actually come to be negatively correlated.

In sum, my view is that currect low oil prices are benficial for Tesla, increasing profitability with no loss of sales, and we should not expect oil and Tesla to be positively correlated now or in the future. In market participants want to believe there is a positive correlation and trade accordingly, they do so to their own peril. Long-term Tesla investors should be prepared to invest contrary to such an uncritical view.

 

[tftf]

We should see the monetary policy results quite soon, the fiscal policy fallout will just take longer. I don't think my comment is baseless, it's rather a question of when not if, both for...

- monetary side-effects (stock market will correct when QE and ZIRP run out)

- fiscal side-effects (public debt bubble and currency wars, Japan is most likely the first nation and currency issuer to jump over the cliff)

I just couldn't add dozens of links to various sources in my post above (I have done so on SA). The P/E multiple extensions, debt/GDP, demographics and other statistics show the catalyzers and hard numbers for these scenarios already.