There is a bonafide and undeniable bubble in electric vehicles led by Tesla. Tesla is now almost 50% larger than Toyota. Tesla will likely produce less than 1 million cars this year. As of pre-market, they will be the 11th largest market cap company in the U.S. The EV dreamers seem to expect the electric vehicle market to become a winner-take-all situation. That's an odd conclusion given that many global auto companies are national champions offering good jobs and will likely get support from their governments if Tesla begins to dominate. EVs are also likely to become extremely … [Read more...]
What Is Going to Happen to Oil Prices?
Oil prices recently traded at less than $0/barrel. In 2008, prices were over $120/barrel. What is going to happen to prices for oil in the future? Joe Wallace examines the market in The Wall Street Journal, writing: Some think the bust will set in motion a boom, predicting that investment in oil-and-gas production will dry up and propel crude prices back above $100 a barrel. “That funding pressure is going to be massive. It’s going to be really difficult for some of the producers to produce,” said Trevor Woods, chief investment officer of Ohio-based hedge fund Northern Trace Capital. “We … [Read more...]
Gold Price Soars to Nine Year High
Prices for gold have soared over $1,800 an ounce, a range that hasn't been reached in nine years. Neil Hume reports for the Financial Times: Gold prices rose to more than $1,800 an ounce on Wednesday for the first time in nine years as data showed investors had stashed a record $40bn of cash into funds backed by the precious metal during the first half of the year. The commodity, widely favoured by investors as a store of value in times of stress, breached $1,810 during afternoon trading in London, with a gain of more than 1 per cent on the day. Gold has risen about 19 per cent so far … [Read more...]
What Will it Take for the Fed to Pull Back?
The Federal Reserve has been operating an emergency monetary policy filled with new programs, some of which operate on the fringes of its statutory limitations. Bloomberg's Christopher Condon reports on when the Fed might consider pulling back on some of these stimulus programs. He writes: Jerome Powell isn’t “even thinking about thinking about” raising interest rates, but investors still wonder what it would take for the Federal Reserve chair to start taking his foot off the gas. U.S. central bankers dropped some strong hints on the answer to that question this past … [Read more...]
Is This Where Some Managers are Going Wrong on Tesla?
In the last five days, Tesla's market cap has increased as much as the entire Detroit-three auto manufacturers' combined. Here's the most likely theory of where the fund managers who are chasing retail investors into Tesla shares are going wrong. Esha Dey reports for Bloomberg: Still, a lot of big institutional investors now also want a piece of Tesla and the electric vehicle market, he said. “In a Covid-19 pandemic and a dark macro environment, the company just put up a 90,000 delivery number, especially when other automakers are seeing herculean challenges.” Tesla said July 2 it … [Read more...]
Ray Dalio Makes a Scary Prediction for the Economy
Speaking at the Bloomberg Global Asset Owners Forum recently, Ray Dalio sounded the alarm on central bank intervention in economies. Bloomberg reports: “Today the economy and the markets are driven by the central banks and the coordination with the central government,” said Dalio, speaking at the Bloomberg Global Asset Owners Forum on Thursday. As a result, “capital markets are not free markets allocating resources in traditional ways.” The Covid-19 pandemic brought economic activity to a standstill and sent markets spiraling downward in March. The Federal Reserve’s … [Read more...]
What’s Coming in the Next Stimulus Package?
Even though the budget deficit is projected to reach nearly $4 trillion this year, there will be another stimulus package. Balanced budgets and fiscal conservatism fly out the window in an election year. Barron’s reports on what may be in the next package: The U.S. fiscal and monetary response to the coronavirus crisis was extraordinary by historical standards, Ernie Tedeschi, managing director and policy economist for Evercore ISI, told Barron’s readers Tuesday. But the considerable measure was not without its gaps. Historically, “I don’t think we’ve done anything close to the … [Read more...]
Tesla Now the World’s Largest Automaker
Tesla is now the world’s largest automaker as measured by market value. Investors value the company at $205 billion. Tesla is projected to produce about 500,000 cars this year. Toyota Motor, now the second-largest automaker, produces close to 9 million cars annually. In other words, Toyota produces 18X more vehicles than Tesla, but the two companies have the same market value. Why is Tesla worth so much when it produces so little? Despite a global pandemic and a stock market crash in March, we are back to a "fairytales and fantasies" stock market. Tesla isn’t an auto company, it’s a … [Read more...]
What’s Up with the Economy?
Unemployment is running at over 13%, but much of the economic data is coming in better than economists have been forecasting. And the stock market is down only modestly for the year in the face of what looks like a dire economic situation. What’s driving the disconnect? The personal income statistics from the Bureau of Economic Analysis may shed some light. The chart below shows the level of after-tax personal income for the U.S. In most recessions, after-tax income falls or if there isn’t an outright decline, there is a significant slowing in the rate of growth. But not in … [Read more...]
A Plan to “Slay” Apple
Andy Kessler explains in the WSJ's opinion section, how he would go forward in an effort to take down Apple. He writes: When Apple announced last week that it will soon replace Intel processors with its own, I had a flashback to 1993. Morgan Stanley’s technology investment banker Frank Quattrone called me in New York: “John Sculley”—CEO of Apple—“wants to meet with you Friday,” he said. It was Thursday morning. “About what?” I asked. “I don’t know, do your virtual thing.” I booked the 9 p.m. to San Francisco and the redeye home. Meanwhile, I was on the phone all day with the banking team … [Read more...]
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