Tesla Investor's General Macroeconomic / Market Discussion

[dmunjal]

My thoughts are this:

The rise of the stock market generally corresponds to strong corporate earnings and outlook, and corporate earnings and outlook are driven by a combination of consumer (the majority of spending in the US) and government spending.

So the question I have been asking myself in the past few days is whether the consumer base as a whole is getting enough money to spend back in goods and services. Additionally, I am wondering whether such spending is driven by debt levels which may become unsustainable.

I think it's the latter.

The Center for Microeconomic Data - FEDERAL RESERVE BANK of NEW YORK

 

[neroden]

Tesla is relatively recession resistant for two reasons. First, their products are targeted at the high end of the market, and due to rampant inequality, the high end still has money (for now). Second, their products actually have payback -- they save people money. Not so much for a low-mileage Model X buyer, but definitely for a taxi firm or for a corporate purchaser of Powerpacks. Such products continue to be purchased (often with financing) when people don't have consumption income, for obvious reasons.

My view based on the 19th century history is that we can't get a 1930s style recession until the great energy transition is over, because the energy transition will employ a lot of people and keep transferrring money away from the incumbents to the masses. After the transition is over, unfortunately, this redistributive effect disappears. By then we *really need* to have reestablished New Deal policies or it will all go to hell -- if 99% of people can't afford to buy anything, eventually the corporations stop making money and then the 1% lose all their money too.

 

[Intl Professor]

Given today's selloff I think the SEC should really bear down and study algo bot market dynamics! Not likely, but this is getting suspicious. Like 2007-9 complete disconnect between money economy and real economy. Overlaid, of course, is possibility now Pelosi must be appeased or Ryan must yield concerning the debt ceiling deal on a promise he could make and, of course, rat about later.

I don't trust the SEC. They are in bed with the industry. The FED will likely have some valuable ex post insight later.

 

[hobbes]

I found this (from my point of view of someone with little financial background) a good compact explanation of the basic macro driving forces at play in the ongoing market correction: Why is the Dow down today? Do the experts agree?

 

[Intl Professor]

Standard Keynesian Explanation for Markets Recent Fall

I'm definitely not an expert and must admit my thought inflation fears were exaggerated was in error. I focussed only on monetary policy since the Fed has been clear it will be gradual in any increases and the new guy will be very cautious because of the recent fragility of the market. The error of such thinking is corrected in some links below by journalists who remind us traditional Keynesian thinking stresses the virtue of deficits in economic recession (pump priming) while exercising fiscal restraint and debt repayment in time of plenty. I've complained here and on other threads about the disconnect between the money economy and the real economy. My own thinking focussed only on monetary policy and not fiscal policy in today's context. Duh!

If one focusses on the real economy increase in government spending at relatively full employment is clearly inflationary.

Even some in the Senate think Rand Paul was grandstanding. Progressives should give him a break. For a fairly balanced summary of arguments by people who are either involved or qualified experts about fiscal influences on stocks, see

Republicans Learn to Love Deficit Spending They Once Loathed

Warning, it does flag concern for entitlement reform. Ryan wants it, McConnell is opposed to it in 2018, most likely because it is an election year.

Paul Krugman triggered my concern for government stimulation now. Warning: he really rants here so if you dislike his stuff or Keynes in principle, forget reading it. As a nobel laureate, hobbes, he is an expert.

Opinion | Fraudulence of the Fiscal Hawks

Sincerely hope for a rebound today, but the future still looks rocky.

 

[Intl Professor]

Bipartisanship and Negotiation Tactics

Notwithstanding my mea culpa above, from a political perspective I think we should applaud a sign of bipartisanship in the recent budget deal. It seems a clear example of successful negotiating tactics urged by Harvard Business School expert Deepak Malhotra who stresses the importance of "exit ramps" and changing the frame of debate which is advocated also by Berkeley's George Lakoff. Of course their work is consistent with older studies by Roger Fisher and William Ury.

Further discussion should be on Market Politics thread.

 

[dmunjal]

Standard Keynesian Explanation for Markets Recent Fall

I'm definitely not an expert and must admit my thought inflation fears were exaggerated was in error. I focussed only on monetary policy since the Fed has been clear it will be gradual in any increases and the new guy will be very cautious because of the recent fragility of the market. The error of such thinking is corrected in some links below by journalists who remind us traditional Keynesian thinking stresses the virtue of deficits in economic recession (pump priming) while exercising fiscal restraint and debt repayment in time of plenty. I've complained here and on other threads about the disconnect between the money economy and the real economy. My own thinking focussed only on monetary policy and not fiscal policy in today's context. Duh!

If one focusses on the real economy increase in government spending at relatively full employment is clearly inflationary.

Even some in the Senate think Rand Paul was grandstanding. Progressives should give him a break. For a fairly balanced summary of arguments by people who are either involved or qualified experts about fiscal influences on stocks, see

Republicans Learn to Love Deficit Spending They Once Loathed

Warning, it does flag concern for entitlement reform. Ryan wants it, McConnell is opposed to it in 2018, most likely because it is an election year.

Paul Krugman triggered my concern for government stimulation now. Warning: he really rants here so if you dislike his stuff or Keynes in principle, forget reading it. As a nobel laureate, hobbes, he is an expert.

Opinion | Fraudulence of the Fiscal Hawks

Sincerely hope for a rebound today, but the future still looks rocky.

Do people still believe in Keynesianism? I thought it was thoroughly refuted after 18 years of deficit spending and no debt repayments after two business cycles already. I can't believe Krugman is still pushing for more spending. Wait until interest rates hit 5% and the Treasury has to pay $1T in interest annually. That's more than defense or SS or Medicare, I believe.

 

[Intl Professor]

Maybe I misread Krugman's recent op ed, but he was interested in priming the pump in recovery from the Great Recession. What struck me is by some standards he has become a deficit hawk now. That's why I changed my mind about the inflationary effects of increasing debt load after the economy shows increasing strength. Neroden, as in so many other areas, could better correlate the connection with deficit spending and history alongside economic recoveries, etc., than I.

I could also be wrong about this, but I think there are a lot of Keynesian economics professionals, perhaps a super majority. Jhm is a econometrician (ststistics on finance?) and could offer an authoritative response. For years Krugman himself is acid in critique of his colleagues who worried about inflation in the recovery which is why so many conservatives hate his guts. From his and my perspective Obama made a huge mistake by buying into the austerity analogy to household debt. I do not generate my own currency and hold all debt in it like the government. On this cf, above or elsewhere, jpcarioca who was much clearer on debt, ownership, and helpful in reminding us of pension funding.

 

[landis]

Do people still believe in Keynesianism? I thought it was thoroughly refuted after 18 years of deficit spending and no debt repayments after two business cycles already.

Hardly.
Was that the true purpose of the Bush era tax cuts. ;-)

 

[dmunjal]

Maybe I misread Krugman's recent op ed, but he was interested in priming the pump in recovery from the Great Recession. What struck me is by some standards he has become a deficit hawk now. That's why I changed my mind about the inflationary effects of increasing debt load after the economy shows increasing strength. Neroden, as in so many other areas, could better correlate the connection with deficit spending and history alongside economic recoveries, etc., than I.

I could also be wrong about this, but I think there are a lot of Keynesian economics professionals, perhaps a super majority. Jhm is a econometrician (ststistics on finance?) and could offer an authoritative response. For years Krugman himself is acid in critique of his colleagues who worried about inflation in the recovery which is why so many conservatives hate his guts. From his and my perspective Obama made a huge mistake by buying into the austerity analogy to household debt. I do not generate my own currency and hold all debt in it like the government. On this cf, above or elsewhere, jpcarioca who was much clearer on debt, ownership, and helpful in reminding us of pension funding.

Krugman is a hack and a shill for the Democrats. He was against Bernie during the primary even though he was for the same policies.

He also called for spending right before the election only to reverse his opinion when Trump won.

 

[dmunjal]

Hardly.
Was that the true purpose of the Bush era tax cuts. ;-)

Not sure of your point. Both parties practice Keynesianism. Just to different lobbies.

 

[Intl Professor]

I think I understand what you said but you may not have meant the only thing Keynesians deal with is spending and relation to gnp. The system (Krugman has a different name for it) may be more complicated than that and deal with more issues. More is beyond my competence.

 

[landis]

Not sure of your point. Both parties practice Keynesianism. Just to different lobbies.

I thought the point was obvious, obviously.

In 2001 just when US was in a position to actually turn the corner on the debt, those in power chose to do tax cuts for 'no good reason' (other than for political pay backs.)
That is when I lost any remaining faith in Alan Greenspan.

... the country was on the way to paying down its debt. Clinton is correct that Greenspan, at a pivotal moment, testified that the 2001 tax cuts were acceptable. His testimony was widely perceived as an endorsement of the tax cuts and received significant press coverage. But Greenspan never suggested that "we didn't really need to pay down the debt." Rather, he clearly said that continuing deficits were not good and that the federal government should practice fiscal discipline.

I am sure there are better quotes but Alan doesn't deserve my looking for them.

At the time, it came across to me as a pretty lame "there are worse things to do with the money..."

 

[dmunjal]

I thought the point was obvious, obviously.

In 2001 just when US was in a position to actually turn the corner on the debt, those in power chose to do tax cuts for 'no good reason' (other than for political pay backs.)
That is when I lost any remaining faith in Alan Greenspan.



I am sure there are better quotes but Alan doesn't deserve my looking for them.

At the time, it came across to me as a pretty lame "there are worse things to do with the money..."

I lived through the 90s in Silicon Valley. The Clinton boom was just as fake as the housing boom of the early 2000s. Most of the federal revenue came from capital appreciation of dot-com companies that had no right to exist. That plus the spending restraint shown by a Republican Congress allowed a few months of a budgetary fiscal surplus. And only because of the shell game played with the SS fund. The fact is that the debt grew every year of Clinton's presidency and the bubble was eventually going to pop causing a recession and fiscal deficits. The fact that it happened under Bush doesn't change that fact. Of course, the tax cuts were a mistake but they didn't cause the the massive deficits we saw under his presidency. It was his spending on war, Medicare Part D, and a host of other things. Not to mention 9/11. Bush was no fiscal conservative but tax revenues actually increased after the tax cuts were put in place.

Here are some sources to support what I just said:

Bill Clinton Legacy of Myththology and Surplus.

No, Bill Clinton Didn't Balance the Budget

GOP strategist Christie: Tax revenues rose after Bush tax cuts in 2001 and 2003

After Bush Tax Cuts, Payments By Wealthy Actually Increased

The real problem is Washington is not the tax cuts but the bipartisan addiction to spending on the warfare and welfare state. Yesterday's budget agreement was more of the same.

 

[Intl Professor]

Getting to Yes by Governing Responsibly

The real problem is Washington is not the tax cuts but the bipartisan addiction to spending on the warfare and welfare state. Yesterday's budget agreement was more of the same.

I think I agree with 70% of your statement and would change bipartisan to partisan to read en toto: "The real problem in Washington is partisan addiction to taxes along with spending on the warfare and welfare state. Yesterday's budget agreement was more of the same."

Our founders were concerned about faction and the one thing I hope for is a return to compromise in Congress that can lead to such deals in the first place. A process issue. McConnel and Schumer followed the suggestions of Lakoff, Fry and others who talk about getting to yes. You start on wanting to get an agreement on something, in this case government spending for their two tribes, and postpone to another time consideration of DACA which all want to address but it has become a political football. By this "reframing," Lakoff's term, they get an end run around Trump and put pressure on Ryan and the rest of the House. (Competition between branches is always rife.) The actual resulting legislation is the usual sausage since we don't have Solons with the wisdom of Solomon (if you remember the Biblical tale). One nice piece is that several popular programs like Chip will not be up for grabs with the next debt ceiling slowdown. (Typo, I meant showdown.) Another is hope for a better VA.

If I'm right about the glimmer of sanity emerging in this sniff of bipartisanship, I hope for a reframing of the immigration debate and DACA into legislation soon which deals only with how one gets citizenship. No mention effort to stop immigration, or we will end up like Japan with an aging population or Germany until the recent flood from the Middle East and Africa, and no debate on DACA except in this narrower issue with wider implications. Focussing on how to get citizenship rather than rights for a narrow group is supposedly confirmed by polls showing 70% approval. Haven't seen a recent poll, but I wouldn't be surprised if an even greater percentage will approve of the compromise just done on the budget. If they don't handle this next issue of DACA in a sensitive, if not sneaky way, it won't happen. So I will continue to be apprehensive about our future. The same, of course, if the real problems of the VA are not handled well.

Governing responsibly is an empty wish, but sometimes it doesn't hurt doing some market research. I would go for looking at smoking out anything with 70% plus popular approval, such as you do with your initial framing of the issue. Barring that, as I said in another thread, perhaps both parties should always start with the Constitution's Preamble, not how to game the process set up by the founders. It was designed to tame factions but has devolved into a struggle for power only and civic virtue be damned. At least 70% of us want more civic virtue.

If this hopium for bipartisanship flowers, when we get to the authorization debate and the details of actual spending, there might be progress on taming carbon so critical to investors in Tesla and others. After all, what is the preamble to Tesla?

Edit: Maybe we could start by sponsoring an amendment adding to the Constitution's preamble list, "a sustainable future?" We are the people.

 

[dmunjal]

Getting to Yes by Governing Responsibly


I think I agree with 70% of your statement and would change bipartisan to partisan to read en toto: "The real problem in Washington is partisan addiction to taxes along with spending on the warfare and welfare state. Yesterday's budget agreement was more of the same."

Our founders were concerned about faction and the one thing I hope for is a return to compromise in Congress that can lead to such deals in the first place. A process issue. McConnel and Schumer followed the suggestions of Lakoff, Fry and others who talk about getting to yes. You start on wanting to get an agreement on something, in this case government spending for their two tribes, and postpone to another time consideration of DACA which all want to address but it has become a political football. By this "reframing," Lakoff's term, they get an end run around Trump and put pressure on Ryan and the rest of the House. (Competition between branches is always rife.) The actual resulting legislation is the usual sausage since we don't have Solons with the wisdom of Solomon (if you remember the Biblical tale). One nice piece is that several popular programs like Chip will not be up for grabs with the next debt ceiling slowdown. (Typo, I meant showdown.) Another is hope for a better VA.

If I'm right about the glimmer of sanity emerging in this sniff of bipartisanship, I hope for a reframing of the immigration debate and DACA into legislation soon which deals only with how one gets citizenship. No mention effort to stop immigration, or we will end up like Japan with an aging population or Germany until the recent flood from the Middle East and Africa, and no debate on DACA except in this narrower issue with wider implications. Focussing on how to get citizenship rather than rights for a narrow group is supposedly confirmed by polls showing 70% approval. Haven't seen a recent poll, but I wouldn't be surprised if an even greater percentage will approve of the compromise just done on the budget. If they don't handle this next issue of DACA in a sensitive, if not sneaky way, it won't happen. So I will continue to be apprehensive about our future. The same, of course, if the real problems of the VA are not handled well.

Governing responsibly is an empty wish, but sometimes it doesn't hurt doing some market research. I would go for looking at smoking out anything with 70% plus popular approval, such as you do with your initial framing of the issue. Barring that, as I said in another thread, perhaps both parties should always start with the Constitution's Preamble, not how to game the process set up by the founders. It was designed to tame factions but has devolved into a struggle for power only and civic virtue be damned. At least 70% of us want more civic virtue.

If this hopium for bipartisanship flowers, when we get to the authorization debate and the details of actual spending, there might be progress on taming carbon so critical to investors in Tesla and others. After all, what is the preamble to Tesla?

Edit: Maybe we could start by sponsoring an amendment adding to the Constitution's preamble list, "a sustainable future?" We are the people.

Getting to Yes by Governing Responsibly



I think I agree with 70% of your statement and would change bipartisan to partisan to read en toto: "The real problem in Washington is partisan addiction to taxes along with spending on the warfare and welfare state. Yesterday's budget agreement was more of the same."

Our founders were concerned about faction and the one thing I hope for is a return to compromise in Congress that can lead to such deals in the first place. A process issue. McConnel and Schumer followed the suggestions of Lakoff, Fry and others who talk about getting to yes. You start on wanting to get an agreement on something, in this case government spending for their two tribes, and postpone to another time consideration of DACA which all want to address but it has become a political football. By this "reframing," Lakoff's term, they get an end run around Trump and put pressure on Ryan and the rest of the House. (Competition between branches is always rife.) The actual resulting legislation is the usual sausage since we don't have Solons with the wisdom of Solomon (if you remember the Biblical tale). One nice piece is that several popular programs like Chip will not be up for grabs with the next debt ceiling slowdown. (Typo, I meant showdown.) Another is hope for a better VA.

If I'm right about the glimmer of sanity emerging in this sniff of bipartisanship, I hope for a reframing of the immigration debate and DACA into legislation soon which deals only with how one gets citizenship. No mention effort to stop immigration, or we will end up like Japan with an aging population or Germany until the recent flood from the Middle East and Africa, and no debate on DACA except in this narrower issue with wider implications. Focussing on how to get citizenship rather than rights for a narrow group is supposedly confirmed by polls showing 70% approval. Haven't seen a recent poll, but I wouldn't be surprised if an even greater percentage will approve of the compromise just done on the budget. If they don't handle this next issue of DACA in a sensitive, if not sneaky way, it won't happen. So I will continue to be apprehensive about our future. The same, of course, if the real problems of the VA are not handled well.

Governing responsibly is an empty wish, but sometimes it doesn't hurt doing some market research. I would go for looking at smoking out anything with 70% plus popular approval, such as you do with your initial framing of the issue. Barring that, as I said in another thread, perhaps both parties should always start with the Constitution's Preamble, not how to game the process set up by the founders. It was designed to tame factions but has devolved into a struggle for power only and civic virtue be damned. At least 70% of us want more civic virtue.

If this hopium for bipartisanship flowers, when we get to the authorization debate and the details of actual spending, there might be progress on taming carbon so critical to investors in Tesla and others. After all, what is the preamble to Tesla?

Edit: Maybe we could start by sponsoring an amendment adding to the Constitution's preamble list, "a sustainable future?" We are the people.

How difficult is it to govern responsibly when our creditors can finance endless amounts of debt? I would like to see what kind of compromises would have to be made when rates go back to 5% and we can't do that anymore.

 

[Intl Professor]

If that's inevitable, why not make those compromises now or compete in suggestions as to how we can prepare for it? I think that's your lament. I think you and I with some suggestions from others here, could do a better job than Congress in short time. Maybe only an intellectual exercise but I'd feel better doing something useful.

I have more to say with some positive framing to start that process or a suggestion for Schumer/McConnell if they want to do another Houdini. However, my wife issued the cease and desist order for frolicking with TMC. She just said, "night, night."

 

[dmunjal]

If that's inevitable, why not make those compromises now or compete in suggestions as to how we can prepare for it? I think that's your lament. I think you and I with some suggestions from others here, could do a better job than Congress in short time. Maybe only an intellectual exercise but I'd feel better doing something useful.

I have more to say with some positive framing to start that process or a suggestion for Schumer/McConnell if they want to do another Houdini. However, my wife issued the cease and desist order for frolicking with TMC. She just said, "night, night."

The only person in Congress who is suggesting these compromises is Rand Paul. I think the real problem is that Americans are used to the perks that come from government. Entitlements were supposed to be self-funding but they cost close to $2T in the budget. Raising taxes on everyone to pay for it isn't going to do it and no one wants to cut benefits. Same goes for the military. The only way this is going to get resolved is through a fiscal crisis or a currency crisis. Both are headed our way.

 

[Intl Professor]

I made one of my lame brain jokes in response to Paul's filibuster which the mods immediately moved to the Market Politics thread. They are really good!! It took me two days (lame brain) to realize this could be construed as a knock on Paul when in fact what I meant by something like "and the bladder wars begin" to include Pelosi's record version of the filibuster in the House the day before. And, as Rachel Maddow pointed out she reportedly stood for eight hours in four inch heels. My take was, "what great control she has," I can't take a two hour drive without depends!

I think you are right about Paul, and I think I complimented him above for reminding us about inflation when I pivoted on concern about debt because of a vicious op ed by Krugman. In another slap Krugman allayed my fears of inflation as we move into a higher inflation environment the Fed has more tools which are better understood, increasing interest rates. In a near zero interest environment, what is a mother to do to counter deflation? I think we were pretty lucky with Bernanke and Yellen. It took the Germans some time to wake up, but if I remember rightly, the Italian Bank regulator started the process in Europe.

You are also right a high interest environment is tricky and costly to the general economy plus threatening to those on pension, where I am totally dependent without selling stock. I want to talk about pension reform from my selfish perspective in a bit, to illustrate how a bipartisan solution can be made now which might work better than the meat axe approach you rightly note will come inevitably.

My wife is eating her breakfast now and about to give me the hook again.

 

[dmunjal]

Here's a good summary of my concerns.

Rising Debt + Rising Rates