The TSLA Market / Economy

Politics & News
4804

I’m still a bit confused on why people are so confident that the market tanking is going to cause a recession.

Like, a week ago AMZN was making $51 a share in annual profits and trading at $3,242 a share. Now it’s making $51 a share in annual profits and trading at $2,835 a share.

Amazon’s contributions to GDP have not changed, their profitability has not changed, and the business is no better or worse than it was. Their stock dropped 12.6%, but so what in terms of the broader economy?

The stock market crashed in 1987, but we didn’t have a recession. I guess there’s a risk that financial institutions that are behaving too risky go under, which could have knock-off effects on the broader economy. But I don’t think it’s just automatic.

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4805

20 percent pullback from all time highs or w/e isn’t going to cause a recession. A real bear market that overshoots trends on the way down would in part cause one, although the Fed would likely be the more proximate cause in that sort of downturn.

To your example, no, that change isn’t likely to do much right now. On the other hand, this is a market that had been hyper rewarding to growth in recent years. If the market isn’t going to reward growth in the same way, I’d expect companies (especially public ones) to pull back on some growth initiatives that now are less appetizing which would flow through to the real economy.

My WAG is that if the Fed does go and raise rates that we will either see a recession in 6-12 months or we will see the Fed go back to easing and hope like hell the supply chain pressures ease. I just don’t think our system really can take non zero rates going forward without eating a sizeable recession.

4806

I mean I’m talking about a full bear market that overshoots. Amazon makes $51 a share, so say the stock goes back to $750-1,000 a share. Well, the business is still making $51 a share, right? Like are they going to lay off workers? If so, they weren’t optimized to maximize profits before the stock crashed, I guess?

Unless consumer demand drops, I don’t see why a market crash has to cause a recession. Like, the whole point is that the economy and the stock market have decoupled, right?

Can you give me the step by step that you foresee that gets from rates being raised to a recession? I’m still not seeing it.

Like, I can see the housing market pulling back a bit to like pre-pandemic levels plus 10% or so, I can see the stock market crashing. I can see some growth initiatives being less appealing, especially if the money borrowed to fund them is not as cheap. But that feels to me very small and around the edges in terms of the real economy.

Like, the unemployment rate is 3.9%. There are labor shortages. I don’t think a stock market crash should lead to layoffs or a big increase in unemployment. I don’t think it leads to wages being cut, because they’re already too low and workers aren’t just going to give back those gains. Maybe some bonuses don’t get handed out to the upper-middle class and above, and people’s portfolio’s take a hit, so perhaps discretionary spending in the top quartile of households drops? I could see that… Is that enough, though? Maybe.

But I also think a lot of millennials would pounce on the opportunity to buy a house cheaper, invest in the stock market when it crashes, etc. I view the whole thing as a potentially huge transfer of wealth from the Boomers to the Millennials, as well as the destruction of a lot of paper wealth that was never really there.

4808

This week, while pretty bad, was equal to one of many bad days at the onset of COVID. We were hitting the circuit breakers daily by 10:30am for a week straight.

This is to be expected. What is also to be expected, that I don’t think many millennials are prepared for, is a full decade of no return. That can and probably will happen at some point.

4809

VTI / VXUS / VIOV for me, for my stock allocation. I’m continuing to move slowly from bonds into stocks over the next decade or so.

For bonds, cash, and other, I’m all U.S.

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4810

How would 99% of millennials be prepared for this? Like most millennials haven’t made enough money to be prepared for it.

4811

To the extent they are in the market, it’s been massive returns for the past decade. And the ones in crypto expect even more. They’re going to get crushed and sell low.

There are infinity people on bogleheads and FIRE blogs who “retired” in their 30s with like $1 million, expecting never to work again. That’s not going to go well.

4812

I don’t think people still in crypto are going to sell low, but we’ll see. A lot of people will panic and sell low when the market crashes, though.

Yeah they’re going to be in some trouble when that $1M turns into $250K or something, I guess it’ll help with the labor shortage though.

I think there will be a ton of variance, some of those people live extremely within their means, but I’m sure plenty did not allow for this type of possibility.

4813

Leveraged companies currently employ a lot of folks at decent wages. Many of those companies, companies that may not necessarily reflect accurate share price still rely on outside funds to maintain or help throttle them into greener pastures for the future. A good portion of those lesser evil companies will disappear. The good news is that Amazon, Mcdonalds, and Walmart will offer a helping hand in getting folks back to work! …“It’s going to be tough to pay you what you made at your previous job, this market crash is affecting us all.”

If you’re good with vastly eliminating what you may have once enjoyed in your life - a variety of restaurants to choose from, Sam’s comic shop, Larry’s batting cages then I guess it’s mission accomplished! But millenials still need jobs at good wages with decent purchasing power to invest in the market and the covid relief that helped folks live on their own for a while wont happen if the market crashed.

Also, millenials wouldn’t be able to bottom fish the market for life changing gains anyways as we’ve seen to wouldn’t matter anyway.

4814

Huge lol at this post equating companies with multi billion dollar market caps as mom and pops or as providing wages higher than would be paid by other mega corporations.

Companies pay what they have to pay based on what the people who have the skills they need can charge them full stop. They aren’t responsible for creating jobs or helping workers in any way.

You wanna know what’s going to help workers in this country? The collapse of cheap imports.

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4815

OK but the share price has nothing to do with the outside funds unless they’re issuing new shares. So if you’re suggesting that companies are relying on cheap debt to pay their employees, then two things. First of all, I highly doubt many companies are borrowing money to pay employees who supply a negative return on their salary. If you’re suggesting that a company can borrow at say 1-2% interest to hire employees who are +EV by like 3-5%, and if the rate goes up they’ll be unprofitable employees and the company will fold, well, they probably weren’t going to make it anyway because that sounds like a barely profitable business in the best of times.

Are you suggesting that Larry’s Batting Cages are publicly traded? Or that Larry is leveraged to the hilt and will have to fold? I mean, that probably means his business is not doing well and should (and eventually will) go under anyway.

So basically you’re saying the best outcome is to devalue our currency, let inflation run rampant for a while, and save the market… and this increased inflation will provide us with more purchasing power? That’s the opposite of what happens there.

The relief that passed on 3/27/20 wouldn’t have happened if the market had crashed? That happened damn near rock bottom on the crash in 2020.

Some will, some won’t. Some will benefit from housing prices dropping, some will benefit off the stock market crashing while they’re in their working prime and having 30+ years left to make it back.

Like ultimately I’d just say this. If your argument is that the only way we keep our entire economy afloat is by raining low interest money on businesses through an arbitrarily low Fed rate, then we’re already utterly fucked, and it’s just a matter of how… which is pretty much the case, so I’m rooting for the path that I think causes the least broad economic disruption, provides the best path forward for the generations who are the least to blame for this, and follows the fundamentals of the situation.

4816

Yeah like, it’s pretty simple if you’re running a business well.

New Employee Joe Schmo costs you $X dollars per year and makes you $Y per year. If Y > X by a good enough margin, you hire. If you have to take out a loan up front, as long as the rate is below the gap, you hire. But if your business is profitable, it’s a matter of time before you can make that hire anyway.

I don’t know what percentage of employees nationally are paid off of leverage where an increase of a point or two on the Fed rate would make them unprofitable employees, but it’s got to be extremely low.

4817

What’s the plan to pay existing pension obligations in a market crash without tanking state budgets?

Btw, it isn’t just going to be a point or two in a risk off market for the borrowed money driving a lot of todays business transactions

I too think we are in pay the piper scenario at some point, although this could just be a short market hiccup right now anyways, but I don’t see a real bear market where we avoid ripping through the real economy.

4818

Thanks for posting. Watching for the second time now. This is exactly what I needed to understand the reality behind the hype.

Is it just me or do all the NFT pumpers seem like Chino Rheem or one of the scammy angle shoot guys at Commerce? I was expecting something a little more nerdy. Holy crap the dude at 1:11:10 - run far far away.

4819

A large portion of the multi billion dollar companies are currently leveraged and most pay better than their larger 100+ Billion counterparts that pay their employees shit because they’re better positioned to do so and get away with it - and those will be the ones gaurenteed to be left standing.

4821

I think the recent activity is less a function of rates than of people coming to their senses with respect to highly valued, marginally or not at all profitable firms.

@spidercrab doordash down almost 40%, you ever get that short in?

4822

Larry amongst others are leveraged because a lot of them have to be to compete with the likes of business models such as walmart and amazon. Larry didn’t make those rules, Amazon and co did that shit and Larry is one of the few left swinging.

A recession just helps to eradicate Larry and those businesses all the way to At@T.

Boomers won’t be the ones filing open positions at Walmart for a job, it will be the millenials.

4823

A colleague of mine had a theory that makes sense to me. It is that even if everyone anticipates/“knows” that policymakers are going to taper, reduce stimulus, raise rates, etc. in the near future, it’s not reasonable to expect the market to fully price that in until it actually happens.

Why not? Those things are intended to fight inflation by stopping the printing machine from going brrrr. So until the money machine actually stops, the bubbles are not going to pop. People/institutions will be awash in free money and need to find somewhere to park it until the policy actually changes.

4824

I mean, were they going to be insolvent if the market didn’t double in the last 5 years? Five years ago the S&P was at 2,294. Right now it’s 4,397 off a peak of 4,818. Let’s say it crashes to 2,200, which would be a P/E around 12.5. If the market went from 2,294 to 2,200 over these five years, would they be insolvent? If so, then they were playing with fire the whole time.

I think the point was that like Larry’s Batting Cages are not a multi-billion dollar company. Like Korea Telecom has a market cap of about $7 billion and they have 21,000 employees, 16.4M subscribers, and wholly unrelated subsidiaries.

A local business like a batting cage with maybe an arcade or something is worth maybe a few hundred grand to a million. Like I Googled it and found one in NJ for $450K. So we’re talking about being a few orders of magnitude away from a multi-billion dollar business.

Larry’s Batting Cages are competing with Amazon and WalMart?

Like OK, I’ll just give you that batting cages was a bad example, and I obviously picked your worst example to argue against. I’ll take your best example: a local Italian joint competing with national chains.

Why do they need to borrow a ton of money to leverage themselves to compete with Carraba’s or Olive Garden? Like I don’t think those chains are leveraged to buy pasta, I think they’re leveraged to open new locations and expand. If you’re going head to head, your main challenge is that they get cheaper prices on their supplies and ingredients because they’re buying a shit ton of it all in bulk.

So if you’re the owner of the local Italian spot, why do you need to be leveraged to compete with them? Like either you’re finding a way to pay the 20% more for supplies and ingredients and whatnot, and still turn a profit, or you’re not. Borrowing money doesn’t save you there unless you’re solving the problem while leveraged and then de-levering.

And if you need to be leveraged to compete with them, I’m sorry to say it, you’re probably not good at running this imaginary restaurant. Like, if I’m competing with Carraba’s I’m not trying to bring people in because my ravioli is a dollar cheaper even though I pay more for it. If I have to charge $18 instead of $14, that’s fine, my angle is that I’m a local business getting local ingredients and serving better food with better hospitality than the chains. I’m not going to spend a ton on advertising either, I’m local, so I can get away with some cheap mailers with a coupon, word of mouth, maybe a radio spot.

Like, I just tried a Mexican spot around me. They have two locations. I paid $6.50 for a breakfast burrito. I guarantee you they’re paying more for ingredients/supplies than Chipotle, they’re way cheaper, and they tasted way better. They seem to be doing just fine.

A stock market crash is not automatically a recession. Why do Larry, or the Italian restaurant guy, give a flying fuck what happens to Amazon or Tesla or Netflix stock prices? It’s $1.50 to hop in the cage and take 15 swings, it’s $18 for the ravioli, etc. Their supplies and ingredients don’t get more expensive. All they care about is that people locally still have disposable income to spend.

As long as there aren’t massive layoffs, people should have the same amount of disposable income to spend.

But you know what fucks Larry and the Italian restaurant guy? Inflation. If the cost of food and gas goes up, and incomes don’t, now people have less disposable income AND the ingredients and supplies get more expensive. Now they’re actually in trouble.

Show your work. Unemployment is 3.9% and there’s a labor shortage.

4825

2000 style tech burst is definitely in play here

great