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[Jeor]

I must admit to a bit of schadenfreude about the Tesla stock price carnage going on right now. It's not so much that I dislike Elon Musk (which I do), it's more that this stock has been way overpriced for years. They only recently became profitable and even before then, their market cap was somehow worth more than all the other automakers combined which made no sense.

There will be a bounce when Elon eventually refocuses on it, but I think ultimately it still has a long way down to go. In prior years they were operating in an environment where they just couldn't deliver enough cars for the demand for a Tesla. If they could make one they would always be able to sell it. But now, once they've ramped up production, they're finding the demand has melted away - through a combination of Elon's bad PR, other autos catching up, and plummeting consumer sentiment for a high-priced luxury vehicle in a recessionary environment.

[Deadlines? What Deadlines?]

Tesla Semi launched 3 years late. And it's not clear to me that those are production vehicles or beta testers for Pepsi co.

The 2nd Generation Tesla roadster is 2 years late and counting.

Who the hell knows when Cyber Truck will launch, but since they've shown it, F-150 Lightning, Silverado electric and Hummer EV have all hit the market. You can go into a dealership and buy those vehicles right now. 

No one runs a car company like this. Not a successful one anyway. 

Edited December 28, 2022 by Deadlines? What Deadlines?

[Jeor]

2 hours ago, Deadlines? What Deadlines? said:

Tesla Semi launched 3 years late. And it's not clear to me that those are production vehicles or beta testers for Pepsi co.

The 2nd Generation Tesla roadster is 2 years late and counting.

Who the hell knows when Cyber Truck will launch, but since they've shown it, F-150 Lightning, Silverado electric and Hummer EV have all hit the market. You can go into a dealership and buy those vehicles right now. 

No one runs a car company like this. Not a successful one anyway. 

Elon has always made a habit of overpromising, which was okay when there was no competition. But now Tesla's lack of discipline (or Elon's overly ambitious timelines) are coming up against actual alternatives. They've lost their first-mover advantage, and the brand has lost its "cool" when their CEO is mouthing off all the time. It's going to keep going down in the long run.

[Loge]

There is also the issue of "full self driving." Tesla has been charging for this feature for years, and never delivered.

https://jalopnik.com/elon-musk-promises-full-self-driving-next-year-for-th-1848432496?utm_source=twitter&utm_medium=SocialMarketing&utm_campaign=dlvrit&utm_content=jalopnik

So far they have got away with it, but not much longer, apparently. California has made a law that forbids to advertise cars as fully autonomous unless they really are (Teslas aren't).

https://gizmodo.com/tesla-elon-musk-full-self-driving-autopilot-1849930860

There are also criminal investigations:

https://www.reuters.com/legal/exclusive-tesla-faces-us-criminal-probe-over-self-driving-claims-sources-2022-10-26/

There are also lawsuits from customers. Tesla's defence is ... interesting.

https://www.latimes.com/business/story/2022-12-08/tesla-lawsuit-full-self-driving-technology-failure-not-fraud

Edited December 28, 2022 by Loge

[Paxter]

I’d put Tesla in a similar category to FAANG, crypto and the ARKK stocks as far as pandemic excesses are concerned. The Twitter fiasco is the straw that broke Tesla’s back, but I think a similar drawdown was always on the cards.

These and other securities were benefitting greatly from the era of ultra-loose monetary, in which investors were borrowing money to trade, bonds (and many other stocks) were not offering real positive returns and future cash flows were barely being discounted. Now that this era is over (at least in the short-term), there is no easy path back to previous values. 

Edited December 29, 2022 by Paxter

[Jeor]

It will be interesting to see how some of the older Big Tech companies go in the near future. Microsoft and Apple have weathered the storm better than the others in terms of stock price, and unlike some tech companies, their businesses have decades of being proven profitable cash cows. But Apple is starting to hit 52-week lows and an upcoming recession and lack of new product is not going to be pretty. In this sort of environment I reckon Microsoft is the only tech company that might hold up. The NASDAQ is not going to look pretty in 2023.

[Paxter]

3 hours ago, Jeor said:

It will be interesting to see how some of the older Big Tech companies go in the near future. Microsoft and Apple have weathered the storm better than the others in terms of stock price, and unlike some tech companies, their businesses have decades of being proven profitable cash cows. But Apple is starting to hit 52-week lows and an upcoming recession and lack of new product is not going to be pretty. In this sort of environment I reckon Microsoft is the only tech company that might hold up. The NASDAQ is not going to look pretty in 2023.

Agreed. And given the S&P500 is roughly a third tech, I don’t think the broader US market is going to have much fun either. 

[Jeor]

Do you invest in the US stock market, @Paxter? I know you're in Canada but I wonder if it's easier to do from there.

I've always thought about it, but figured for someone in Australia the exchange rate risk wasn't really an attractive thing. One of my stocks is the Vanguard Global ETF which has a composition of about two-thirds US stocks (and it's top three holdings are Apple, Microsoft and Amazon), so I figure that's the way I get my international diversification.

[Paxter]

Yeah it’s pretty easy here (at least via the Big Six banks) to get direct US deposit and investment accounts. I imagine this occurs via their US subsidiaries.

Personally I don’t have either, though I’ve considered it.

Edited December 29, 2022 by Paxter

[Paxter]

On 12/27/2022 at 12:19 AM, Jeor said:

I'm looking at further trouble for the first half of the year but some sort of recovery in the second half.

I wonder if it could be the opposite- bounce to start the year in the hope of the soft landing, then new lows as the hope dissipates.

Certainly a bad day for the S&P shorts today.

[Jeor]

3 hours ago, Paxter said:

I wonder if it could be the opposite- bounce to start the year in the hope of the soft landing, then new lows as the hope dissipates.

Certainly a bad day for the S&P shorts today.

That's definitely possible. But my theory is based on thinking that any bounce at this time of year will be very short-lived. The Fed will pour cold water on any talk of pausing or easing at this point of time so these "relief rallies" are a bit silly and I expect gains to be given back pretty quickly. Historically the suggestion is that the next bull market in stocks begins when the recession is at its worst, which will probably be late 2023.

Oil is going to be an interesting one to watch. There's a tug of war there between China potentially mounting a comeback (or not), the Russian/Ukraine war stopping to ease supply (or not), and a global recession destroying demand (or not). That's too many unknowns for me, I suspect the oil market is going to be schizophrenic this year.

 

[IheartIheartTesla]

On 11/4/2021 at 7:20 PM, Iskaral Pust said:

I’d suggest that any US citizen should take a look at TreasuryDirect.gov Series I savings bonds right now.  7.5% guaranteed yield (currently) with no risk of default is pretty good.  And many people can make it tax free, e.g. buy for your kid or only redeem it for qualifying education expenses.  Do your own research on whether it’s appropriate for you but it’s an opportunity that probably goes unnoticed.

I know this is an old post, but just wanted to note that I started purchasing Series I bonds last year (a modest start with $50 per paycheck) based mostly on this recommendation. Since its partially pegged to inflation it isnt a bad choice at all (now up to 9% return I believe). On a side note I also have an American Express savings account tethered to market rates that also offers about ~3.3% interest right now that is better than what my primary and local credit union banks are offering.

Unfortunately, my 401k doesnt have the option for Series I so no employee match...meh, whatever. Apart from that I havent messed with my investments much and the 401k is pretty much untouched.

Edited January 7, 2023 by IheartIheartTesla

[Iskaral Pust]

2 hours ago, IheartIheartTesla said:

I know this is an old post, but just wanted to note that I started purchasing Series I bonds last year (a modest start with $50 per paycheck) based mostly on this recommendation. Since its partially pegged to inflation it isnt a bad choice at all (now up to 9% return I believe). On a side note I also have an American Express savings account tethered to market rates that also offers about ~3.3% interest right now that is better than what my primary and local credit union banks are offering.

Unfortunately, my 401k doesnt have the option for Series I so no employee match...meh, whatever. Apart from that I havent messed with my investments much and the 401k is pretty much untouched.

I hope it was a good option for you.  I purchased the max for my wife, son and myself before the end of 2021 (the max allowance is by calendar year), and then again in October 2022 before the latest coupon re-set.  A lot of my colleagues did the same.

The coupon rate will decline with inflation but it’s nice to have such a high yielding safe diversifying asset, with some upside if inflation doesn’t fully normalize all that quickly.

FWIW, 2yr Treasury bonds are now the most appealing opportunity among this circle.  You can buy those directly on TreasuryDirect.gov too at one of the frequent auctions, although I haven’t got around to it yet.  Money market funds have been slow to adjust their yields upward, but you can get ~4.5% by just buying the Treasury bonds directly and they’re exempt from state income tax (just as muni bonds are exempt from federal income tax, but those offer a lower yield and plenty of default risk)

I am not giving investment advice.  Just pointing out simply accessed opportunities that are heavily used by investment professionals that may have gone overlooked.

[Paxter]

12 hours ago, Jeor said:

That's definitely possible. But my theory is based on thinking that any bounce at this time of year will be very short-lived. The Fed will pour cold water on any talk of pausing or easing at this point of time so these "relief rallies" are a bit silly and I expect gains to be given back pretty quickly. Historically the suggestion is that the next bull market in stocks begins when the recession is at its worst, which will probably be late 2023.

Oil is going to be an interesting one to watch. There's a tug of war there between China potentially mounting a comeback (or not), the Russian/Ukraine war stopping to ease supply (or not), and a global recession destroying demand (or not). That's too many unknowns for me, I suspect the oil market is going to be schizophrenic this year.

 

Late 2023 may be too early for the recession (if one occurs) based on the economic data we are seeing at the moment. Unemployment is at historic lows across the world and I wouldn’t expect any follow through to consumption until that changes.

Even investment (usually the most sensitive to interest rate changes) seems quite sticky at the moment, courtesy of government spending. 

Those selling the idea of rolling recessions across different industries may be onto something.

[Wade1865]

Me, when my favorite stock climbs from -54% to -30%  

[Wade1865]

On 12/8/2022 at 12:27 AM, Wade1865 said:

TOTAL [100%]. Higher, -2% to +0.2%.

TOTAL [100%]. Higher, +0.2% to +5%. Prematurely returning above water on all but my most favorite holding. I don't get it, but I suppose the recent positive indicators are strong enough to support this (e.g., employment, amazing; inflation, improving; hike, reasonable). I hedged my bets (if that's the right term) several months ago by moving out of cash, but I'm still waiting (i.e., hoping) for at least a bumpy landing that would see my holdings drop to -15% or worse.

Well done, Uncle Joe; well done. Where do I send the 10% 

***

T [29%]. Higher, +2% to +3%.

MMM [19%]. Higher, -1% to +1%.

KHC [18%]. Higher, +11% to +18%.

AMZN [13%]. Higher, -7% to 0%.

DOW [8%]. Higher, +2% to +18%.

WBD [2%]. Higher, -43% to -30%.

CS [1%]. Higher, -4% to +10%.

CASH [10%]. No change.

[Paxter]

Markets are getting more optimistic about the prospects of a soft landing / Goldilocks scenario. This is the mini-boom I was expecting to see at the end of last year, but perhaps it got killed off by tax loss selling. 

Certainly the odds of a Goldilocks scenario have risen with the last two inflation prints. But it would still be unusual to not see some sort of recession and hit to earnings after a rapid tightening cycle, yield curve inversion and a commodity price shock in '22. 

No hit to earnings is really priced into the S&P right now. So in theory we could still be testing the Oct '22 lows within the next few months.

Edited January 13, 2023 by Paxter

[Jeor]

On 1/13/2023 at 12:58 PM, Paxter said:

Markets are getting more optimistic about the prospects of a soft landing / Goldilocks scenario. This is the mini-boom I was expecting to see at the end of last year, but perhaps it got killed off by tax loss selling. 

Certainly the odds of a Goldilocks scenario have risen with the last two inflation prints. But it would still be unusual to not see some sort of recession and hit to earnings after a rapid tightening cycle, yield curve inversion and a commodity price shock in '22. 

No hit to earnings is really priced into the S&P right now. So in theory we could still be testing the Oct '22 lows within the next few months.

The strong start to the year is not what I was anticipating, though I have enjoyed some of the ride up. I suspect the recessionary risk to stocks is rather low (it might just be a mild recession if inflation is subsiding already, which means the everyday consumer will still keep the economy going), but the real risk to the share market are geopolitical. 

China's reopening - so far is on track, and the Chinese seem to be giving a more conciliatory tone (e.g. loosening the de facto embargos on Australian products). The real wildcard is the US debt ceiling - these crazy Freedom Caucus Republicans are going to shut the government down and potentially run into a first-ever default, which is a bona fide black swan event. It's hard to plan for this because pretty much anything will fall in a market where the US Treasuries are destroyed.

[IheartIheartTesla]

Everyone's from somewhere. so probably.

[Paxter]

20 hours ago, Jeor said:

The strong start to the year is not what I was anticipating, though I have enjoyed some of the ride up. I suspect the recessionary risk to stocks is rather low (it might just be a mild recession if inflation is subsiding already, which means the everyday consumer will still keep the economy going), but the real risk to the share market are geopolitical. 

It all depends on the unemployment rate. If it does climb significantly, I think recession/earnings is still the main market risk, followed by geopolitical as you mention. But that unemployment feels a loooong way off right now.

The US treasury market is an interesting one. In theory it’s one of the world’s most liquid markets, but in practice we’re not sure how it play out given that two of the biggest purchasers (the Fed and the banks) will likely be on the sidelines.