Tesla Investor's General Macroeconomic / Market Discussion

[Intl Professor]

Oh noble Neroden, or anyone, please play with this from Lenin's theory of imperialism: "capitalism will break at its weakest link." Is Trump the missing link?

There is an old New Yorker cartoon showing two pointy-bearded marxist theoreticians in a dialogue, dare I say dialectic. One says to the other, "I have reduced the whole corpus of dialectical materialism to one simple phrase: 'money talks.'" The two bullies, Trump and Putin, speak this language naturally. Stealing a term from Chomsky, the linguist, it is also the "deep structure" of politics.

 

[neroden]

Well, the macro news should be beating the US stock market up right now, but apparently isn't.

The government shuts down over the weekend unless a stopgap is passed -- they're talking a two-week continuing resolution at the moment. There's a strong contingent demanding that the DREAM Act be passed and ready to shut down the government if it isn't, and there are still Republicans ready to demand their own gimmicks.

The Fed is expected to raise interest rates despite a disinflationary environment, and Trump is appointing know-nothing idiots to fill the empty Fed seats.

The Republican tax scam is now going to conference committee in order to try to come up with *something* which will pass both houses, which means it'll be loaded up like a Christmas tree with giveaways -- and it's still a mess. They're so hell-bent on a tax cut for the ultrarich that they're trying to do this when the government is about to shut down, the debt limit is coming up, and millions of responsible workers are about to get deported.

This is basically unmitigated bad news for most US equities, but the cocaine-fuelled traders on Wall Street, or at least their improvidently programmed robots, don't seem to be paying much attention to it. Yet.

Don't be surprised if Tesla takes a swoon along with everything else in the US market if the government shuts down, or the debt limit is hit, or the tax scam passes, or the tax scam fails to pass, or God forbid Trump attacks some foreign country such as North Korea.

 

[kenliles]

Maybe because the government is already shut down for all but the mega rich. Really what’s the difference at this point

 

[neroden]

You'd be surprised at how much the more boring parts of the government actually do. Routine stuff. Nobody wants to discover that all the National Parks are closed, or that the Social Security Administration isn't answering its phone, etc.

 

[Intl Professor]

Bearing in mind my assumption which some may disagree with, the macro political environment has an impact on the stock market and that means TSLA will vibrate in unknown ways as indicated above, let me ad an "N" of one.

Had lunch today today with my local brain trust. One is a distinguished former professor of economics and whose wife is a retired highest level consultant to the State of California's legislative joint tax force (or committee) on our budget. Two others are former students, one a prominent real estate guy and sometime Democratic fund raiser, the other was a long-time County Supervisor and has constant contacts with all levels of politics in California. He even ran a governor's race at one time. The former students are both more left wing than I and the colleague more conservative in his estimates.

They all agreed with most negative assessments of the tax bill as above. They surprised me about chances for its failure. I hadn't thought too much about it. The conference the tell. If it were a done deal it would have passed immediately, but the more there is delay the sign of trouble. The real estate guy is unworried because his business is mostly with people who are downsizing, so a low limit on say, the mortgage interest tax deduction, may not be negative for his business. Obviously, though not a subject for direct conversation, the Franken delay in timing of resignation, presumably until after Alabama election and static Susan Collins is getting in Maine for her sell out on Obamacare, means the Senate may block the final version of the bill. I think that is a long shot.

There seemed universal agreement Trump's Jerusalem statement is totally useless, except to please Netenyahu and the evangelical right's preoccupation with Jerusalem. The status of Christians in the Middle East is now more precarious.

They guess someone around Trump will be the fall guy and the president himself will be in power though not likely to be re-elected. The politician blames the Democrats more than the Republicans for the current situation we are in, principally because the Dems never play hard ball. (I would say since Lyndon Johnson, and he would probably agree.)

They also mirrored almost exactly my wife's assessment that making America great will make China great. The politician reminded us, based on his travels within China early in its demi-capitalist transformation, that it has been great for at least ten years now, and looking around said in hushed tone: "America is in decline." We share the racist generalization the Chinese have business in their dna.

My former colleague who is 2 years senior to me opined its great to be 85 these days. You can look backward to a great time for you and for your country, but have another five years left to see it all.... (As a marine he once held in his arms an 18 while he bled to death in Korea. His first wife died at an early age of breast cancer; his wife now is in remission from a variety of the disease. He has no children while I have four great grand-daughters with living parents and grandparents. Just a different perspective.)

Reminds me of the gleeful close to the conversation of two aged Italian gals in the opening scene of the movie Marty, "now who else has died?"

 

[neroden]

The US has been in decline since Reagan was elected, if not earlier.

That *could* be just fine. The UK went into decline... and when they elected Clement Atlee, it became one of the nicer places to live in the world. A declining empire can be a pretty nice place to live if it quietly deconstructs its empire and focuses on high equality and high standards of living at home. Nobody would accuse Sweden, Denmark, or Norway of "rising", but they're great places to live.

Unfortunately, too many people seem to instead prefer to destroy the good things we have in the US in an orgy of stupidity, trying to bring back things which are long-gone and for good reason. These people are certainly not a majority, but they're enough to cause trouble and they've been stealing control of the government in undemocratic ways (the most obvious being gerrymandering and the Electoral College, but there are others).

This is not good. Attempts to prop up a declining empire are like King Canute ordering the tide to recede. Countries which have tried this face mess after debilitating mess until they finally accede to reality. (France is one example; they didn't straighten things out until after the Algerian war, and they also needed a de Gaulle dictatorship to rewrite their constitution.)

 

[Sparky]

...
This is not good. Attempts to prop up a declining empire are like King Canute ordering the tide to recede. Countries which have tried this face mess after debilitating mess until they finally accede to reality.

.. IIRC, King Canute was a pretty cool dude and was merely showing the folks who thought he had all these amazing powers that he couldn't make the tide rise or fall. Kind of the opposite. [/Nit-pick mode]

 

[neroden]

.. IIRC, King Canute was a pretty cool dude and was merely showing the folks who thought he had all these amazing powers that he couldn't make the tide rise or fall. Kind of the opposite. [/Nit-pick mode]

Yes, this is correct. Still, Canute was making the same point I was trying to make

 

[Intl Professor]

You both made your point.

 

[Intl Professor]

This was posted on the General Roundtable Thread

A Picture of the Long Case

I am long and will remain long on TSLA for at least two years. (My actual time horizon is 5-10 years but I'm 81.) What I like about Tesla the company is from an engineering standpoint and rational business reasoning, Elon has been right all along as even the likes of Porsche and Audi executives have acknowledged. That is why on the sole fact of the roadster's range I began buying TSLA in 2010.

As a visionary leader he is always impatient and so off on timing. Today's delays have nothing to do with the design of the M3 unlike the MX ramp, in part. (Each had supplier problems but even in the MX case radical changes were implemented eventually.) We know what steps he is taking and will take to implement his vision. Just don't try to time it because the hell is in the implementation! INMunHO TSLA is a countercyclical stock because the energy picture is changing whether the Koch brothers like it or not.

I share concern about the future of the macro economy, especially if the Republican tax plan and related budget becomes law. If Larry Summers is to be believed, we have in the U.S. a deceptively strong economy which is threatened even more by the law's passage. It fails to directly create jobs through needed infrastructure by borrowing to shift the burden of taxes off corporations and the rich. The Europeans and others, namely China, are doing better. Frankly, the Reeps seem to be committing suicide by going consistently against the tide of public opinion except for Wall Street instant gratification. The best outcome would be to lose in Alabama and Collins and McCain to return to reality so the law doesn't pass and then proceed in what is called regular order by working collegially with the Democrats. Don't count on it and as a consistent Democratic voter I don't count on the Dems doing the right thing either. Selecting Hillary was a foreseeable disaster, especially as a perfectly acceptable alternative was available. Sometimes our press takes Trump too seriously when he shocks the Republican leadership by talking about a compromise with the Dems, but then he can't resist a double twit to both sides by withdrawing the gambit, sometimes even before it happens. So brokering a compromise is not what he considers the art of the deal in politics.

Obviously, war may undo any investment philosophy. As a leader Trump is almost the anti-Musk. Stability and success are not the goal; headlines are, although Musk is good at that too. Trump's foreign policies have the effect of making matters worse. Why pick a fight with a tin horn dictator who already has a formidable army and nuclear weapons? And the rest of the world hates him, anyway, and at least two long time loyal allies are much more directly threatened by any change in the status quo? Why enter the religious divides in the Middle East by playing Saudi Arabia against Iran, or gratuitously failing to exempt on national security grounds the symbol of Jerusalem as Israel's capital thus alienating almost all Arabs? And a quid was offered with no quo, as no less than Thomas Friedman has noted.

When you go with the flow of nature, or put another way, from physics first principles as does Musk, problems of implementation are massively less complicated than if your goal is to overturn as many apple carts for the sole pleasure of overturning. The latter is no way to make apple cider. Foreign policy is not them apples. Early on McMaster, Flynn's replacement as National Security Advisor, was widely hailed as qualified and a likely hopeful brake on reckless abandon. He seems to have drunk the proverbial on Iran and N. Korea. That's scary as there are always glitches in international politics in the best of times.

 

[neroden]

The Jerusalem business was extra stupid. I mean, if he wanted to comply with the Congressional law and minimize fallout he could have said that they were moving the embassy to *West* Jerusalem, thus neatly sidestepping the Israeli regime's internationally-condemned occupation of East Jerusalem. But noooo.

The relentless US government hostility towards Iran, which is the US's natural ally in the Middle East, can only be explained by historical anger from the CIA because Iran dared to overthrow the US puppet government some time after the US overthrew Iran's democratically elected government. It is disgraceful behavior on the part of the US government. Obviously Reagan's sellout of US policy to the truly reprehensible Saudi regime in exchange for oil plays into this too. But even if the US kept doing petrodollar politics, Iran would be a better ally than the medieval idiot Saudis. This Middle Eastern "policy" has been running on autopilot since I was a kid, and it's really stupid.

 

[ggr]

Please make an effort to at least pretend to make these postings about "general macroeconomic market discussion". Like, maybe, increase in terrorist attacks might start the market tanking or something. (Moderator hat on.)

 

[neroden]

I apologize; my relentlessly holistic and integrative thinking means I go off-topic basically every conversation... and I usually leave out a few steps.

In my view, the really stupid US foreign policy is causing a deterioration of global credibility of the US government, which risks the raising of trade barriers against the US and a flight away from the dollar, and even risks hyperinflation if the US government reaction to dollar flight is stupid.

 

[Intl Professor]

I apologize; my relentlessly holistic and integrative thinking means I go off-topic basically every conversation... and I usually leave out a few steps.

In my view, the really stupid US foreign policy is causing a deterioration of global credibility of the US government, which risks the raising of trade barriers against the US and a flight away from the dollar, and even risks hyperinflation if the US government reaction to dollar flight is stupid.

Whether it is oil supply, and struggles to control it or its pricing, or siding with one or the other of religious divides in the Middle East, US intervention ultimately threatens both our economy and strategies based on a rational approach to both US policy and thus investing. Lenin was right about revolutions—imperialism makes them possible. (A least the British admired Arab culture and educated its bureaucrats in effective administration of its satrapies, according to Rashid Khalidi in Resurrecting Empire, Western Footprints and America's Perilous Path in the Middle East.) Unfortunately, the boundaries drawn by both the British and French were the worst form of gerrymandering. The terrible consequences were compounded when both Truman and Eisenhower willingly accepted Britain's imperial inheritance as balancer.

We hear a lot about how crony capitalism is bad; so is crony religiosity, especially as similar diversities within our country exist on a massive scale. The dangers include loss of counter-terrorist intelligence provided by our Muslim community, as well as Jewish support for civil rights, even for others similarly afflicted by discrimination. I was so relieved to hear Roy Moore's wife explain last night she and her husband "have many Jewish friends," and, after an almost pregnant pause, "we [even, not said, but implied] have a Jewish lawyer on our defense team." I'm sure she must have black friends, too, but was wise enough to hold her tongue on that one. This is Alabama, after all, but the people may speak out differently today.

We've got a serious problem here.

The founders knew the dangers of foreign entanglement, as Washington's farewell address warned. They also knew the dangers of religious persecution and our own persecution history, so wisely opted for freedom of religion, including no religion. They were unwise on the issue of race for the worst possible reason, the economic advantage of free labor. There is much to be said for Libertarians who eschew foreign involvement, except perhaps commercially. I'm all for free trade in ideas and trade. But we don't need to suppress others to achieve either, and our track record internationally and at home is abysmal.

Whether we like it or not the slide in our reputation internationally is accelerating our economic decline, all in the interest of appealing to an infantile notion of greatness. Trump and Bernie were right in their campaigns, America needs jobs. In office Trump is revealing his soul and that of the Republican Party by policies affecting the poorest of his base negatively, while rewarding the richest. He masquerades as Santa while delivering coal owners, not miners. When his supporters realize that because of further deterioration in their economic situation, and armed with Second Amendment freedoms in mind, we will more closely approach a revolutionary situation that can become violent. Believe me, to borrow a phrase from Trump, I know about revolutions of right or left, and Trump has many more triggers to go accelerating our decline into chaos. We seem to have caught a serious mental contagion brewing since the 70s.

Meanwhile, the trends in technology and the imperatives of energy transition will also demand a totally new approach to income, perhaps a guaranteed income for all which someone has posted here is of concern to Musk. How well are we preparing for that transition? Where are the political leaders on that issue? The intellectual founders calling for attention to that problem are often to be found here at TMC.

By the way, neroden, since he's so young, does not recall as I do the Balfour Declaration of 1917, nor the Sykes-Picot agreement, although he knows a lot about each. Of course he was careful to say in his lifetime. Clever guy.

 

[Intl Professor]

Market action will be interesting tomorrow. Do we consolidate a bit with the Fed meeting? Macro lift from Jones win? First customer deliveries tomorrrow?

More flailing about by an "extinguished" professor

I like neroden's use of the word "emergent" in a recent post describing the properties of the market since I'm a fan of complex adaptive system theories. According to Prigogine you can never know when a bifurcation point will occur. Of course people ascribe "rational" interpretations of why they happen just as we do in politics. But these are ex post, as Hegel warned about the Owl of Minerva. Regarding the Jones win, as with every day, to state the obvious, the market can go one of three ways. This and the following is about as useful as Murphy's law of analysis.

Are we at a bifurcation point where the change in sexual mores is solidly in the direction of repudiation of predation? Or, to state the same from another angle, are we finally fed up with predation by rent seekers? Have Susan Collins and John McCain had enough? When will the Republicans try to win elections by attractive policies and seek funding from the masses rather than the one percent? Will Trump, finally backed into a corner, fire Mueller?

George F. Kennan used to describe the American public like an enormous dinosaur (what we used to call a brontosaurus). You can whack the monster on its tail again and again to no avail, but then when it finally wakes up, the flailing about is a threat to trees. Sometimes even presidents. Bear in mind, the Jones win is due to his qualities but assisted more by the failings of Moore. If you want numbers, the win was by half the votes for write-ins.

More sumptuous pounding of water in a mortar, as Trotsky used to say.

If you want a more professional analysis, see

Republicans Shouldn’t Assume Roy Moore Was An Outlier

What happens to the market as Einstein might say, depends on where you stand. Both Prigogine and the Buddha agree on the ubiquity of fluctuations. In the long run TSLA is up and longs will profit.

 

[N5329K]

When will the Republicans try to win elections by attractive policies and seek funding from the masses rather than the one percent?
When they realize that politicians who vote for class warfare always get it. Note: that realization usually comes too late.
Robin

 

[neroden]

Are we at a bifurcation point where the change in sexual mores is solidly in the direction of repudiation of predation?

In *sexual* mores, yes, absolutely. I can't speak to the rest of the culture yet... but this part, I know about. This is part of the long cascade of social changes known as "women's liberation" which started in the 1820s.

The current step-change is because my birth cohort (or maybe the cohort a few years before it) is the first generation brought up to believe that sex should take place in a context of informed consent and communication.

We, the children of the second-wave feminists, are really the first generation raised entirely after sex segregation was eliminated from the workplace (and therefore from most of the lives of most people) -- sex discrimination in jobs was only banned in 1972. Growing up in a mixed-gender environment, men treating women as fellow human beings, changed the attitudes of men -- bit by bit, it eliminated the social support among most men for the pre-1960s-style "male must prey on female" mating rituals.

These changes are generational: the generation which tries to change the standards can't fully achieve the change they wanted, but their *children* move the next step forward. I remember articles in the 1980s by people who complained that openly communicating and talking about sex was a turn-off -- this sounded crazy to us younger kids, and seems crazier to each subsequent generation.

A culture where sex can only happen if people *don't* talk about is is one which encourages and supports sexual predators.

Another example of this sort of generational change: in the 1980s, there were lots of articles by feminists complaining that their attempts to get men to split the housework and childcare equally had "failed". They had actually succeeded, but they had to wait for the next generation to see the success: even the well-meaning men raised in the 1950s or 1960s couldn't change their habits. But *their children* are trying to split the housework and childcare equally, and men of my age and below are complaining when their bosses at work make it hard for them to spend the time they want to on childcare.)

Another example: for decades certain (not all) feminist groups fought for "rape shield" laws so that rape survivors wouldn't have to have their identity shown in court when they prosecuted the rapists. I always thought this was midguided in the long run. It was based on the idea that there was some sort of shame associated with having been assaulted. Which I guess there was back in the 1950s, for horrible stupid sexist reasons. And in the younger generation, we know *there isn't* -- it's not your fault if you got burglarized, or assaulted, and it's nothing to be embarassed about. But we had to wait until my generation, who was *raised knowing this*, were adults and in positions of power before we simply had survivors saying "I'm happy to give my name, because *I* have nothing to be ashamed of. Now prosecute that monster who assaulted me." And of course people of my generation or younger had to be in positions of sufficient power so that the investigations would happen, the prosecutions would happen, and the juries would convict!

This change is, of course, what led to the massive waves of reports of sexual assaults in the last few years. Can you imagine Taylor Swift's sexual assault lawsuit going forward, and winning, back when the juries were all brought up in the "groping without asking is how you show you're interested and masculine" period? I can't. It's a change which required that the children of the second-wave feminists (and younger people) become the majority. And we are the majority now.

I've often referred to this generational nature of social change with the biblical reference "Moses could not enter the Promised Land". The trailblazers who change our mores and improve our societal standards are never able to fully adopt the new standards; only their children, who internalized the new standards from the day they were born, can adopt them fully.

And then their children typically see one step further -- something about the new standards isn't quite consistent and they want to fix it (like, if men and women are equal, is there really any significant difference between gay and straight people, and why shouldn't people be able to pick their gender)?... and social progress moves on... but again, they won't be able to fully realize their new social standards, only their children will.

Sorry about the long essay! This has nothing to do with the macroeconomy or the markets, it's just a general theory of social change!

 

[neroden]

On broad market matters: I am still disgusted that the Republicans are trying to pass a bill -- which they haven't even decided on the contents of yet -- within a two-week window before they lose their majority to pass it (because they just lost a seat in Alabama and Collins is backing out) -- to take effect less than two weeks later. In order to do so they will have to run roughshod over Senate rules, too.

Even people and companies who support the tax scam bill in principle are starting to panic about the unforseen consequences of such shoddy legislation writing, and it looks so much like a blatant power-grab (which it is) that it's going to backfire politically if they do pass it.

Expect extremely choppy markets in anticipation of the bill -- and if it passes, expect even *choppier* markets. And generally, I would expect the entire situation to be a downward drag on the markets, because it is a truism that *the market doesn't like uncertainty*. This is a huge pile of uncertainty, with nobody knowing what the tax law is going to be in three weeks!

 

[Intl Professor]

The Conference Compromise:

A trickle of information is available from the New York Times, their ignorance of the rest is finessed by recounting the controversies already known.

Republicans Say They Have a Deal on Tax Bill

That trickle is this: "Details on the deal were not immediately available. On Tuesday, Republicans said they were close to agreement on a package that included a cut in the corporate tax rate to 21 percent, from a high of 35 percent today, and reducing the top income tax rate for individuals to 37 percent from 39.6 percent."

 

[Intl Professor]

When will the Republicans try to win elections by attractive policies and seek funding from the masses rather than the one percent?
When they realize that politicians who vote for class warfare always get it. Note: that realization usually comes too late.
Robin

The Reeps tried reform earlier.

In response to the 2012 presidential election, Reince Priebus as head of the Republican National Committee commissioned a study and pushed for policies designed to attract Dem voters, people of color, the young, and women along with a reform of rules to permit a path toward legal status for immigration. Unfortunately that effort at reform was not forthcoming. The 2016 campaign scotched the idea, at least for now. Let us hope for another more successful Republican Party to give Democrats competition in executing policy for the general good.

Both parties need reform. I'm hopeful but not at all certain the Dems have learned their lessons. In any case there is great danger in assuming anything in politics is certain, despite the successful Virginia and Alabama results. The latter is most problematical on the numbers alone, as I said before. Jones' victory margin was half the negative votes for Moore presumably cast by Republican voters for write-in candidates! (I say presumably because I once served as an election official and observed there are sometimes write-ins for Santa Claus and Mickey Mouse.)

What does this have to do with the economy and Tesla? Less about TSLA, I hope and believe, but much about the macroeconomy hinges on tax reform and the subsequent budget talks. BFO.