Tesla Investor's General Macroeconomic / Market Discussion

[MitchJi]

Interesting sideline
Buffett's Berkshire sells entire stake in General Electric

Buffett has embraced the financial sector, which many believe is poised for growth after years of historically low interest rates and extra regulation. In June, Berkshire announced it would convert warrants it has in Bank of America to 700 million common shares, which will make it the bank's biggest shareholder once that conversion is complete.

Omaha, Nebraska-based Berkshire also raised its stake in General Motors by 20 percent in the second quarter, to 60 million shares. The automaker's shares are up 1.8 percent this year after battling a proxy contest by activist hedge fund Greenlight Capital, run by David Einhorn. GM shareholders voted overwhelmingly in support of the company in June, a defeat for Einhorn. Greenlight reported it held 59.7 million shares of GM at the end of June

Berkshire's GE holdings were just 0.12 percent of the outstanding shares. GE shares are down nearly 20 percent this year.

 

[FluxCap]

North Korea Backs Off Threat to Hit Guam

And there we go, like clockwork.

 

[FluxCap]

Pivoting a bit back to the ongoing Russia/Trump administration investigations and Russia's persistent and very well concealed information warfare being waged against the US population, I wanted to share a fascinating and in-depth dive into the subject from the Senate testimony of Clint Watts, a Foreign Policy Research Institute fellow:

Clint Watts' Testimony: Russia’s Info War on the U.S. Started in 2014

 

[The Blue Owl]

Pivoting a bit back to the ongoing Russia/Trump administration investigations and Russia's persistent and very well concealed information warfare being waged against the US population, I wanted to share a fascinating and in-depth dive into the subject from the Senate testimony of Clint Watts, a Foreign Policy Research Institute fellow:

Clint Watts' Testimony: Russia’s Info War on the U.S. Started in 2014

I find this deeply disturbing. We are under relentless, asymmetric attack, designed to trigger an autoimmune reaction at the level of the entire Western society in order to have it self-destruct. It's been extremely effective, with the U.S. population racked by distrust, the U.K. breaking away from Europe, with talk of Scotland possibly breaking away from the U.K., with Hungary and Poland rushing head-first towards replacing Western European governing principles with "illiberal democracy", etc. The worst is that there is very little awareness that this is going on, and I don't see anything on the horizon that may stem this tide.

 

[kenliles]

Looks like another backdown of Trump-threat. We'll know in a month or so about 2018 payments- hopefully another potential crisis averted...

Trump to pay key Obamacare subsidy in August

Interesting related- meanwhile the country moves in the other direction--
An astonishing change in how Americans think about government-run health care

 

[Curt Renz]

Merck CEO quits Trump
Merck CEO Quits Trump Advisory Council in ‘Stand Against Intolerance and Extremism’

Then Under-Armour CEO quits Trump
Under Armour CEO adds his name to those leaving Trump's manufacturing council

Now Intel CEO quits Trump
The exodus is on: Intel CEO becomes third to quit Trump's manufacturing council in less than a day


I'll note Elon was in front of all this
(even if for different reasons- I suspect his leadership was not lost on these gentlemen)


View attachment 241613

Then they all quit. Trump essentially responded by saying, "You can't quit; you're fired!"

Don't be surprised if Trump soon fires himself.

 

[kenliles]

Don't be surprised if Trump soon fires himself.

It may be in effect, he already has

 

[Curt Renz]

It may be in effect, he already has

That appears to be the case. The nation's top CEO's turning their backs on him sets the stage. The Joint Chiefs of Staff rebuked him to the degree that they could. Our Republican Illinois governor today chastised Trump by name. The vice president has been recalled a day early from his Latin American tour.

Meanwhile, most Republican congressmen have been surprisingly quiet. Perhaps they've been meeting together, and could decide to send a delegation to the White House to advise resignation as they did with Nixon.

 

[DragonWatch]

Pivoting a bit back to the ongoing Russia/Trump administration investigations and Russia's persistent and very well concealed information warfare being waged against the US population, I wanted to share a fascinating and in-depth dive into the subject from the Senate testimony of Clint Watts, a Foreign Policy Research Institute fellow:

Clint Watts' Testimony: Russia’s Info War on the U.S. Started in 2014

This article is intense and spot on tactically speaking. However, we the people have been on the road of self fulfilling proficiency since President Johnson tried to right things. Nixon adopted the southern strategy, and many others picked up the plan to include economist. During my army officer career, I kept hearing the south shall rise again. I always ignored them and walked away assuming they were just Elitest nut jobs, apparently I underestimated them.

I have more skin in the game than most when it comes to this country, my bloodline basically started the King Phillips War ~ my relatives were racist and in my opinion deserved their karma deaths. The son that did the initial killing and his father, the one that told his son to kill, were both killed in retaliation. The mother/wife was rapped, scalped and eventually died, but the accounts of the story do not explain how I came into being.

You and I can blame the Russians or we can blame ourselves. It takes more guts to blame and fix ourselves.

Having recently reread "Animal Farm," I have come to the conclusion that the only difference between us (USA) and the Soviet Union (now Russia), England, France, North Korea is corruption ~ nothing more, nothing less. Here closer to home, we are faced with two Constitutional documents. One is a living, breathing document that adapts to an ever changing world around us; the other while sorta based on the Constitution is actually more Federalist Papers oriented and does not in any way tolerate change (sound familiar).

Economics are very much in the hands of Congress. It is easier to wash your hands and blame the auto pilot than take responsibilities for your actions. The tax thing is again one of those two Constitutions I mentioned above. President Lincoln started the taxes debate, again a living document process. Today the tax debate is led by the Federalist Papers, and Religious side, not totally by the rich.

There are two Constitutions; which do you choose to live within? We need some form of government ~ for good or bad, just not corruption.

The Russians are a clear and present danger as the article points out, but I see little being done to prepare ourselves against another attack. The article points out that businesses are targets too. Well, if you know me, I have been trying to get that across for years ~ a piece of cake for the Russians to piggyback off the snort brothers, fossil fuel, and auto industry to attack anyone.

That is why I say seek the truth; breath light into your (my) soul. That is why I refuse to read hate oriented analysts on Tesla ~ I do not need to feed off their hate. I look at the entire field of "I am right Analysts," and choose the center somewhere. I also watch how fast Tesla reacts to adversity. I look at the entire vision. Compare Superchargers to other automakers half baked effort to help their customers charge their car. Compare Gigafactory's ~ what no one else has one? Damn I look around the battle field of stocks and no one fits who and what I am, but Tesla.

Good luck to finding your way forward.

 

[DragonWatch]

Can someone here help me? I heard at some point in my many years, that we (USA) pay the Federal Reserve 5% for every dollar (5 cents on the dollar) created. This was apart of the law creating the Federal Reserve as I recall. It was not necessarily apart of taking us off the gold standard.

When I tried to research it once before on my own I got caught up in some nut job stuff:-(

Thanks

 

[GoTslaGo]

Can someone here help me? I heard at some point in my many years, that we (USA) pay the Federal Reserve 5% for every dollar (5 cents on the dollar) created. This was apart of the law creating the Federal Reserve as I recall. It was not necessarily apart of taking us off the gold standard.

When I tried to research it once before on my own I got caught up in some nut job stuff:-(

Thanks

According to this article that is correct. More for more expensive notes.

How Much Does it Cost to Manufacture U.S. Paper Money?

 

[adiggs]

Can someone here help me? I heard at some point in my many years, that we (USA) pay the Federal Reserve 5% for every dollar (5 cents on the dollar) created. This was apart of the law creating the Federal Reserve as I recall. It was not necessarily apart of taking us off the gold standard.

When I tried to research it once before on my own I got caught up in some nut job stuff:-(

Thanks

I haven't heard that, but even if the federal government did so, it's show up in the quarterly / annual earnings report for the federal reserve, and then show up as income for the federal government.

This will probably help with your digging:
https://www.federalreserve.gov/monetarypolicy/files/combinedfinstmt2015.pdf

In 2015, the Federal Reserve was good for about 115B back to the US Government (look for the line around Note 13 in the Income Statement).

Further down in the notes is a comment that the Federal Reserve buys coins (by which I also interpret to mean bills) from the US Mint at face value, in order to satisfy demand for coins from depository institutions.


On balance, I'm thinking no

 

[kenliles]

Much of the equity market (US and Intl) gains have come through ETF inflows. Especially true for 2017; This has been a significant contributor to our current high market P/Es.
This has lead to some speculative articles you may have seen recently that warn of ETF bubble bursting and creating a dramatic market correction.

As equity buying has cycled back into positive territory in 2017, we are approaching a cross over with 5 year rolling average. Outside of geo-political macros, this should continue it's momentum through the cross-over
(this is a measure of investor sentiment and momentum- fairly accurate in it's predictive).

At some point the market will correct (economic cycle, high P/E corrective, recession, etc.). Along with Yield curve direction, we were at a critical period in early 2017- whether we would cycle back or continue down in a major correction. That's generally when I started putting out Yellow caution- then advanced to Orange hard watch alerts. When we turned the corner on this and some other data- I was able to reduce back to Yellow watch- we are still in a awkward position on some other fronts- so maintaining Yellow for next months as Fed enters the picture

But I wanted to share this data in case some of you have been reading about ETF bubble dangers effecting markets:
Some of the ETF money-flow is coming at the expense of Mutual Funds and largely in non-US stocks:

The most important question though:
Net how do the inflows establish against historical norms for 'bubble bursting'?
Bubbles are formed and corrected all the time, but major ones can catapult the entire market into more than just corrective- leading to recession etc. TSLA will clearly not escape such an event, even if undamaged long term.

Known major corrective bursting of bubbles form and burst with 1000% gains over 10 years.

Hence- ETFs are NOT a current inducer of market bubble bursting.

geo-political macro conditions may cause corrections at any time and are currently in high risk territory and
There are a number financial macro conditions today showing signs of caution (Yield curve - Fed rates - high P/Es and more)

ETF Bubble-Burst is NOT one of them

kl

 

[MitchJi]

Then they all quit. Trump essentially responded by saying, "You can't quit; you're fired!"

Don't be surprised if Trump soon fires himself.

Completely delusional. That should be grounds for impeachment. Obvious insanity.

 

[DragonWatch]

Thanks for the input

According to this article that is correct. More for more expensive notes.

How Much Does it Cost to Manufacture U.S. Paper Money?

I haven't heard that, but even if the federal government did so, it's show up in the quarterly / annual earnings report for the federal reserve, and then show up as income for the federal government.

This will probably help with your digging:
https://www.federalreserve.gov/monetarypolicy/files/combinedfinstmt2015.pdf

In 2015, the Federal Reserve was good for about 115B back to the US Government (look for the line around Note 13 in the Income Statement).

Further down in the notes is a comment that the Federal Reserve buys coins (by which I also interpret to mean bills) from the US Mint at face value, in order to satisfy demand for coins from depository institutions.

On balance, I'm thinking no

There must be a law within the creation of the Federal Reserve. We went off the gold standard under Nixon if I recall correctly, so increases of money into the market are not reflective of a sudden influx of gold. And, two quotes come to mind as I sift thru this process; first, "it takes money to make money," and second, "money does not grow on trees." Oh, and bankers are not known for just give money away for fun. To the best of my grasp of the Federal Reserve is that they are roughly eleven of the biggest banks, and the spokes persons or committee are not civic minded volunteer (not paid).

Paper money costs of production are very important, but in the age of computers a billion can be added to the market with a few key strokes. Now, if the keystrokes are under two person control, then add in the cost of two humans ~ just like tactical nuclear weapon control. So, what does that cost us? The same as paper & coin money?

While older bills are removed from circulation, we are at the same time carrying less and less of the old paper and metal stuff. The bills in my wallet are collecting dust compared to my debit/credit cards. If you are a cautious of germs, then you should be happy not touching all those dirty bills

 

[DragonWatch]

Completely delusional. That should be grounds for impeachment. Obvious insanity.

I have to keep asking myself if I am not delusional or insane, because to me we should not be here in the first place. To impeach, someone must declare they were wrong, I am not seeing that happening. Do I give up and join what I consider to be insane or do I hang on for dear life hoping someone will rescue me? No, I do not see that happening either. I will try hanging on, I also know no one will rescue me

 

[FluxCap]

Much of the equity market (US and Intl) gains have come through ETF inflows. Especially true for 2017; This has been a significant contributor to our current high market P/Es.
This has lead to some speculative articles you may have seen recently that warn of ETF bubble bursting and creating a dramatic market correction.

As equity buying has cycled back into positive territory in 2017, we are approaching a cross over with 5 year rolling average. Outside of geo-political macros, this should continue it's momentum through the cross-over
(this is a measure of investor sentiment and momentum- fairly accurate in it's predictive).
View attachment 242094

At some point the market will correct (economic cycle, high P/E corrective, recession, etc.). Along with Yield curve direction, we were at a critical period in early 2017- whether we would cycle back or continue down in a major correction. That's generally when I started putting out Yellow caution- then advanced to Orange hard watch alerts. When we turned the corner on this and some other data- I was able to reduce back to Yellow watch- we are still in a awkward position on some other fronts- so maintaining Yellow for next months as Fed enters the picture

But I wanted to share this data in case some of you have been reading about ETF bubble dangers effecting markets:
Some of the ETF money-flow is coming at the expense of Mutual Funds and largely in non-US stocks:
View attachment 242097
View attachment 242098

The most important question though:
Net how do the inflows establish against historical norms for 'bubble bursting'?
Bubbles are formed and corrected all the time, but major ones can catapult the entire market into more than just corrective- leading to recession etc. TSLA will clearly not escape such an event, even if undamaged long term.

Known major corrective bursting of bubbles form and burst with 1000% gains over 10 years.
View attachment 242099

Hence- ETFs are NOT a current inducer of market bubble bursting.

geo-political macro conditions may cause corrections at any time and are currently in high risk territory and
There are a number financial macro conditions today showing signs of caution (Yield curve - Fed rates - high P/Es and more)

ETF Bubble-Burst is NOT one of them

kl

PHENOMENAL write-up here, thank you Ken. Passive indexing's relentless swallowing of the market has been on my radar for some time and I still have more work to do digging into it, but I agree that the Mutual Fund to ETF flows explain away any notions of a "bubble" in this category.

I stil have concerns that many "Lazy Bogleheads" and similar passive investors, having a highly inflated view of their precious market-wide ETFs reducing their risk of losses, and having much more direct access to selling their holdings in a market panic without the firewall of a financial advisor, could magnify a market-wide drop if one occurs. But this concern is not major enough for me to trade on - it's just something that informs portfolio strategy.

 

[FluxCap]

That appears to be the case. The nation's top CEO's turning their backs on him sets the stage. The Joint Chiefs of Staff rebuked him to the degree that they could. Our Republican Illinois governor today chastised Trump by name. The vice president has been recalled a day early from his Latin American tour.

Meanwhile, most Republican congressmen have been surprisingly quiet. Perhaps they've been meeting together, and could decide to send a delegation to the White House to advise resignation as they did with Nixon.

Curt may be right, but I suspect this may not happen until Mueller's Russia investigation concludes, if only because they know Trump would never voluntarily surrender the immunity from certain forms of prosecution the office of the President affords him, forcing them to drag him through full impeachment proceedings.

What concerns me now is that I have read that many of his disaffected, mentally unstable followers now believe that if he is removed, they will have no one left to speak up for their deluded views, and that they should violently rise up against their perceived boogeymen after the fact. This would, naturally, be devastating on many fronts. And connecting the dots, it seems clear that this destabilized state, preying upon the fears of already disaffected segments of the population, was the Russian plan all along.

There is just not a simple or easy way out of this hole. Trump or no Trump, we must confront the pain in the minds of these people and meet it not just with more violence, but with a plan to minimize and discredit the Fox News / Koch / Russian propaganda machinery.

 

[tander]

meet it not just with more violence, but with a plan to minimize and discredit the Fox News / Koch / Russian propaganda machinery.

Did you mean not meet it with more violence?

Recently read this which seems applicable, and exceptionally graceful, said by a minority ER doctor that occasionally (but regularly) has patients request another doctor because of discrimination "You know what gives me hope?" she wrote. "A few get uncomfortable and apologize in the same breath they refuse to let me treat them. You see, it's a hell of a hard thing to maintain that level of hate face-to-face. I used to cycle through disbelief, shame, anger. Now I just show compassion and move on. I figure the best thing I can do is make sure their hate finds no purchase here."Portland doctor Esther Choo responds to racism in the emergency room (Column)

 

[Curt Renz]

Curt may be right, but I suspect this may not happen until Mueller's Russia investigation concludes, if only because they know Trump would never voluntarily surrender the immunity from certain forms of prosecution the office of the President affords him, forcing them to drag him through full impeachment proceedings...

You may be right that we'll have to wait for Mueller. And members of Congress likely have to at least wait until their recess ends after Labor Day before they can effectively meet to develop any plans for ejecting Trump.

Trump may already be talking with Pence to insure a pardon like Ford gave to Nixon. Of course like with Ford, that may guarantee defeat for Pence if he attempts to run for the presidency in 2020.