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Absolutely. This is the Tesla/TSLA & THE INVESTMENT WORLD thread.
And some banter and wordplay.....
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
Absolutely. This is the Tesla/TSLA & THE INVESTMENT WORLD thread.
And some banter and wordplay.....
I have not taken out a SBLOC - although, as I noted, Musk himself did take out an SBLOC, and to my knowledge, no, he did not purchase any protective put contracts. The uproar if he were to purchase any such benefit-if-it-drops options would likely be quite loud. In fact, I’m actually quite surprised to read you suggest put contracts for this scenario, given your prior commentary on “options gambling”, even if phrased in terms of “interest expense”. I included this scenario in my post not for myself, but because I can understand and empathize with those who have taken out SBLOC loans, such as Musk himself.
Side anecdote - I have been advised on multiple occasions to consider purchasing protective puts as an “insurance expense” for my actual TSLA shares (against which I have no loans nor margin, so it would purely be an “insurance expense”). At none of these times did it fit my mood to do so, so to-date I have never purchased any TSLA puts, although in hindsight I believe each of those time were at/near peaks and I would have benefitted quite substantially if I had followed that advice any of those times. But since I prefer to be optimistic and want good things to happen, rather than ever have reasons to hope for less good things, I have only purchase out contracts for *any* stock once, and that was simply as part of a friendly back-and-forth with a friend who had just taken the opposite position.
bkp_duke
Well-Known Member
Disclaimer - I'm not an economist, I'm only writing what I see as an employer and as a TSLA investor, and of course as a consumer.
Posting as a "stream of consciousness", please forgive any typos, etc.
ENERGY INFLATION
Energy is the life-blood of the economy, it permeates everything, and changes in pricing for energy cause flow-through changes to consumers and producers. Gas and electricity obviously go up, and pretty quickly, but things like producing products and providing services have knock-on effects which are not seen for sometimes many months later. As an example, every datacenter we work with has sent us notices of power rate increases. Sometimes per contract, they can't increase our rates, but they are already giving us notice that at the next renewal (sometimes as far out as 2.5 years), that they will substantially increase out power rates. Software vendors are doing the same. Both of these are not small increases, in the range of 10-30%, depending upon the vendor (Europe datacenters are killing us with power rate increases - to the point we are scaling back usage and pushing in newer, more power-efficient gear).
SUPPLY-SIDE PROBLEMS
As others have mentioned here - these are primarily supply-side problems. Energy is up because of the Ukraine/Russia war, and other factors. Product costs in some areas are still high due to shipping problems from the pandemic that are still unwinding (and in some cases there are product gluts and you see prices on things consumers buy like clothing and electronics actually dropping in price).
FOREX PROBLEMS
To compound the problem, there are very large foreign exchange fluctuations going on right now. Being the world's reserve currency, there is a "flight to the Dollar" that has been going on for 4+ months. Holding dollars is considered relatively safe right now, at least compared to every other currency. This is exacerbating inflation outside of the USA, where Japan (Yen), the UK (Pound), and the Eurozone (EUR) are seeing their currencies at multi-decade lows compared to the dollar. The Chinese YUAN is also weaking (even though they peg their currency mainly). Given that oil is priced in dollars, this pushes energy costs up for these countries much more than in the USA.
THE FED
The US Federal Reserve, and other central banks, basically have only one tool in their arsenal, for better or worse - the rate that they loan money to other banks (i.e. the Fed Funds Rate). Combatting supply side problems and energy problems are not well suited to being solved by this "blunt" instrument - one could argue that politicians and policy would be far better suited to sort out things like oil production - but again it is the only thing the Fed has.
The Fed raises rates in order to tap down demand. While increasing supply would be preferable, you want supply and demand balanced and if you can't easily increase supply chains, you can tap down demand so that it matches supply (approximately). You do that by making money itself more expensive (i.e. the cost to borrow for a house, or a car - or if you are a business to borrow to buy equipment). If money is more expensive, you buy less stuff with it, thereby cutting demand, and in theory slowing inflation.
The catch-22 with the above is you run the risk of "Stagflation". Basically, you can tap down demand so much that the price of things keeps going up (inflation), but the economy stops growing.
LABOR MARKET
The core of all of this is the labor market. The CPI, PPI, CPE are all indicators that talking heads bring out as measures of inflation (they are), but what the Fed really wants to see is increased unemployment, as most economists will argue that this is the best indicator of economic growth (low unemployment + high worker productivity = high growth, but too low unemployment leads to wage inflation). When unemployment rates and new first time unemployment filings go up, we'll probably see the Fed step back on their rate increases. The problem with this approach (there is no perfect solution), is that you will cause economic pain to the people most at risk, the lower socioeconomic classes.
Are we there yet? Probably not, and here is why I think that. I mentioned a month or two ago that the labor market really needs to be evaluated by sector, and not as just one big number. We hear that they are tons of job openings and they are hard to fill by the talking heads, but you need to look at what sectors those openings are in: food service, hospitality, etc. - mostly low-paying, low-skilled jobs. Things are not nearly as tight in higher-paying, skilled labor jobs. And here is why I say that - I hire software devs and system administrators - and in the last two job openings I listed, I was hoping to get 2-3 applicants for the job, hire one per position, and expected to pay top-end of the range on salary. I was shocked when I got 30+ applications for each position, some from people WAY over-qualified for the job description. I hired 2 people per position, and paid mid to mid-low on the salary range (with a ramp-up if they work out well in 6 months).
One additional variable that prior recessions have not had - there is still a lot of "free money" (for lack of a better term) in the system from all the COVID stimulus (increased household savings is the number the Fed tracks). Remember when people here were talking about retiring and living off their TSLA earnings? Well, until you see more people like that rejoin the labor force because their portfolios have been crushed, it's going to continue to be a game of chicken between workers and employers on wage rates. The Fed probably won't stop until they flush all that "free money" that was pumped into the system out, at least until they see a crack in the labor market.
TL;DR
So to answer your questions - the EU is going to see a recession, and probably a significant one. The US will as well, but it will probably be milder, just because of our strength in energy production and the US Dollar being the world reserve currency. How long will it last? In the US, probably 6-18 months total, depending upon how quickly the Fed puts the brakes on their rate hikes. In the EU, 18 months to 3 years, and it depends largely on oil prices in that region for the time-frame. Shorter for the EU if the Ukraine/Russia war ends soon, longer if it does not.
Unemployment - if you are skilled labor, you may not get your dream job, but you should do alright, as things do not appear to be grinding to a halt in the labor market anytime soon.
I'm sure I missed something, and someone far smarter than me will point out the holes in my theories, but that's my (limited?) understanding of the driving economic forces right now and where it looks like things are headed.
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Elon can't buy derivatives due to Tesla's rules.
We are in a recession per the definition (2 consecutive quarters of negative GDP) as it is definitive for GDP shrinking, but "typically" for everything else. All leading indicators suggest we had a functioning economy recovering from a worldwide government sponsored multi-quarter shutdown. Lagging indicators suggest the economy is still functioning. The Fed chair seems to only care about lagging indicators (i.e. Y/Y inflation) without taking into account that pesky pandemic recovery induced phenomenon where folks have pent up money to spend thus driving demand until their pockets are empty and credit cards full.
Faster Quantitative Tightening and hiking to 2% would have done the trick, but that remains to be seen...
The good news is that the US economy seems healthier and able to withstand about another 4 months and 1% of rate hikes, which will most likely result in 1 to 2 years of recession. Remember, the Fed looks at lagging indicators, so as folks lose their jobs due to companies not being able to borrow as much, they'll sit back and relish the beginnings of deflation. They can stop this easily by lowering rates and turn it around again, but the roller coaster ride will continue.
The bad news is that other countries economies are not as healthy, stemming from their currencies and the war. Their bottom, as much as I wish it won't happen, will be lower and longer lasting.
Tesla is poised to win as they have no need to borrow money to grow and they sell a product that has greater value than other necessary/fundamental transportation and energy costs.
"
What Is a Recession?
A recession is a significant, widespread, and prolonged downturn in economic activity. A popular rule of thumb is that two consecutive quarters of decline in gross domestic product (GDP) constitute a recession. Recessions typically produce declines in economic output, consumer demand, and employment."
Bet TSLA
Active Member
Recessions are not defined by rules of thumb or definitions from random websites. They are (for the US) defined and declared by the National Bureau of Economic Research. You can go to their website to find out how they do this. See Business Cycle Dating
There's a good explanation with some history here: Are we in a recession or not? You can decide for yourself! - Kevin Drum
A key observation: "The folks who sit on the dating committee are allowed to stare at the numbers until their eyes hurt and then make their own judgments based on whatever heuristic seems best to them."
However, to cut to the chase, NBER has not declared a recession and is unlikely to any time soon. By their various criteria, we haven't even seen any negative growth GDP quarters, not that that's definitive or even considered.
Edit: Even the US Bureau of Economic Analysis (which you cite) tells you so: Recession | U.S. Bureau of Economic Analysis (BEA)
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IMF definition from circa the Great Recession before this term (unfortunately) became politicized (link: IMF):
Edit: the irony of my post claiming a definition for a source that says there is no official definition is not lost on me
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FSDtester#1
"Circle Jerk Old Guard" per cyborgLIS aka "CJOG"
bkp_duke
Well-Known Member
Global Optimization
Maximizing the probability that the future is good. Click to read Global Optimization, by Saxon Lea, a Substack publication with hundreds of readers.
globaloptimization.substack.com
Bottom, green button.
Bet TSLA
Active Member
You must lack any actual knowledge of history. The term "recession" has been politically sensitive since it was invented.
You must lack any actual knowledge of humor. The term "recession" has been funny since you decided to debate it in this thread.
Edit: humour. that's probably lost on you, too.
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It’s a recession when your neighbors lose their jobs.
It’s a depression when you lose yours…
It’s a depression when you lose yours…
Bet TSLA
Active Member
I knew there was a reason I had you ignore.
Artful Dodger
"Neko no me"
Yeah, Tesla Corportate Bylaws prohibit any Officer or Director of the company to purchase derivatives on TSLA stock. Of course that issue was seized upon by TSLAQ cronies, because they can work a free lie (non-public information but scarey-boo).
What they never mention is that this is B.A.U. in Silicon Valley, where top CEOs often don't take a salary, and live off borrowed money. The reality is that the interest rate on margin loans in lower than the marginal tax rate, which for California billionaires happens to be over 50%.
Nice, here's what they say...
"The committee's approach to determining the dates of turning points is retrospective."
Bet TSLA
Active Member
Yes, absolutely. So at best you can guess whether they will say at some point later that we are in a recession now. But you can't come up with a good guess by using random rules of thumb that aren't even the things that they say they use to make the determination.
And, of course, we know what economists say about the future is pretty much always wrong. Since declaring recessions is "predicting the past" you can have much more confidence in their ability to get it right.
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It’s a recession when your neighbors lose their jobs.
It’s a depression when you lose yours…
Recession is actually a good thing for the environment. People have less money to spend to buy new consumer electronics and new endless products humans tend to invent for capitalist society to grow endlessly. It is not that great for the stock market and investors but it has some positive effects for planet Earth.
I think most people here will consider a depression if they actually have to go back to work due to Tsla being in the toilet.It’s a recession when your neighbors lose their jobs.
It’s a depression when you lose yours…
Back in the late 1920s, the term depression was coined to replace panic as some people thought that was too harsh a term. After WW2 the term recession was coined to replace depression as they didn’t want people to connect then current conditions with the 30s. Current conditions in no way resemble 1929-1939 or even panics in the 1950s.
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I'm depressed that I'm recessed, but that's just me...
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