Elon Talks Economy, Possible Discounting, Demand Issues, Stock Sales, and TSLA on on Twitter Spaces

[Ogre]

Elon was super chatty with investors on a Twitter Spaces conversation today. Jordan (aka The Limiting Factor on YouTube) summed it up super nicely. This was more informative than a typical EOQ earnings call. Musk was more engaging and much more relaxed sounding.

It was long so here is the “Supercut” of the more relevant points.

 

[Ogre]

Here is Rob Mauer’s summary of the same conversation.

 

[Ogre]

My personal take on this is Elon is very concerned about the economy in 2023, but Tesla is well positioned. Their low debt and low manufacturing costs, mean they are in a good place to weather a downturn.

 

[JBee]

My position has been in "productive property" only since the GFC. That means unlike just speculating with property, the property also produces an income. Remember in the GFC that insurers (AiG, HiH etc)played a major roll in accelerating the downturn, because they often also insure the risk for lenders.

Here in Australia the housing industry is tipping over, with lots of builders exiting the industry because housing is no longer affordable and building houses isn't either, because of inflation on materials. Timber price is through the roof, trades are rare, pushing costs even higher. Building approvals are down 6% in October alone.

We are also missing two years of immigration (from Covid lockdowns) to keep the economy growth and jobs ticking over. It's actually surprising how much of our growth was immigration dependant, given our low birth rates. Lending is also being restricted as banks have lost their appetite for lending to an overheated market, which puts even more pressure on owners as their equity is erased.

Interestingly, the increase in pro capita productivity is becoming more and more stratified, and we're currently running purely off large scale mining and agriculture and then services, with virtually zero manufacturing. This is not a good situation for us, as we rely way to heavily on imports for consumer and industrial goods. We also only have two oil refineries left, with Singapore outpricing anyone in the Oceania market. Despite us exporting more oil than we import.

But generally I think the unbridled debt based spending is not sustainable, and it is diluting the economic base in such a way that the liquidity is artificially compressing and expanding markets at a faster pace than they can absorb, leading to even more instability.
It's a bit like a see-saw, where the constant oscillation back and forth increases the depth and height of the market volatility. It seems the fluctuations and side effects are getting worse. The other problem is that markets have never been as connected as they are today, meaning that the sheer mass propagation of uncertainty accelerates and amplifies the reactions. We need some separation and diversity, I imagine everyone can agree that there is a physical limit to globalisation, and we're heading towards that faster than we think.

I think EM has also been highlighting the causes why he is expecting a further downturn, but we can't mention them here. Overall though I'm glad Tesla is in a good position to power through some rough water, let alone that we can still expect to get our Cybertrucks!

 

[Crissa]

Australian's Consumer Debt to Income is nearly entirely tied to the price of houses. Not just new houses, existing stock.

Can't go without a place to live. So...

-Crissa

 

[JBee]

Australian's Consumer Debt to Income is nearly entirely tied to the price of houses. Not just new houses, existing stock.

Can't go without a place to live. So...

-Crissa

Well the prices of housing are sort of ridiculous especially if you compare what you get to a high efficiency German home for same money. Sydney house prices are already at the million dollar mark, and really there's nothing special about the houses or locations there (or floods or fires). Even in huge and lonely WA the prices are dumb and getting close. Houses here are brick and tile, uninsulated walls, many with black roofs because people think it's trendy, despite 40'C summer days.

But consumer debt is only one side of the debt problem, the other bit is national and state. Except here in WA, where we could easily be running a surplus if me managed to get some miners to cough up some royalties for digging up our country and selling it overseas. I'm still holding out for some lithium/nickel processing here in our state for making Tesla batteries, but although we dig out most of it, we haven't figured out how to get someone to finance some manufacturing here. I'm pretty sure locally produced structural packs would be cheaper to make and ship from here completed, instead of raw materials, seeing its a highly automated process.

 

[LoneWolfO6]

My personal take on this is Elon is very concerned about the economy in 2023, but Tesla is well positioned. Their low debt and low manufacturing costs, mean they are in a good place to weather a downturn.

What, next years going to be worse than 2022? ?

 

[Ogre]

What, next years going to be worse than 2022? ?

Well 2022 wasn’t actually a recession if you can believe it. There was a really nasty spike in inflation, then 9 solid months of the fed pissing on the markets with aggressive interest rate hikes. Plus Tesla’s own struggles, and Musk stock sales to pay his taxes and to support a (arguably horrible) Twitter purchase. Job loss wasn’t a huge problem, in fact right now the job market is very healthy.

Next year Musk thinks we’ll have an actual recession where there is job loss and GDP destruction. Add in the fed‘s mayhem and it’s potentially a nasty year.

 

[Crissa]

What, next years going to be worse than 2022? ?

There's going to be snap-back from halting inflation.

But as to what it'll be, no one really knows. We've not has these conditions previously.

I don't expect a recession, but those expecting one will take actions - like laying off thousands and stopping financing - that will precipitate one.

-Crissa

 

[SwampNut]

Lenders have quietly dropped the "one car" rule and are financing sequential purchases without a trade-in. Meaning, people buying a new car with new financing, because they are upside down on the existing car and can't trade it in. They KNOW the people will default--on the OLD loan. So fuck the other lender. This is going to have vast consequences.

Car values have already plummeted. Carvana is clearly shady, headed into the dirt, with $6B in unsecured debt that will just be wiped. They are now WHOLESALING their cars to other dealers, at a big loss.

Car values plummeted earlier this month. Our M3LR went from Carvana offering $46k cash to now worth around $30. IN JUST A MONTH!

Carvana is related to Ugly Duckling/Carmax, whose founder was one of the Keating scumbags. I mean...LOL! And people still gave him billions? WHAT.THE.FUCK

In the next couple months I'll be poised to pay cash for a sport UTV like a RZR, and maybe a pickup, at 70% off. I have a couple things financed at just over 2% and meanwhile am holding CDs at 4.25 and 4.5. I'll take the early hit to buy distressed vehicles for nothing. Profiting from morons makes me giddy.

 

[Ogre]

Lenders have quietly dropped the "one car" rule and are financing sequential purchases without a trade-in. Meaning, people buying a new car with new financing, because they are upside down on the existing car and can't trade it in. They KNOW the people will default--on the OLD loan. So fuck the other lender. This is going to have vast consequences.

I saw the thread on this and it seems too evil to be true.

If it pans out the way they suggested, we’re going to see lots of cars repossessed and deeply discounted as buyers dry up. Lots of damage to banks as their loan portfolios are massively overvalued right now.

Companies with huge lease inventories are going to have a painful couple years if this happens. They had a huge windfall with the past year’s used price inflation. Now they are going to be eating billions in overvalued lease returns. High interest rates are going to eat into this as well as people’s budgets for cars drops due to the rate change.

I guess since the the past few years have been crazy. Why stop now? Buckle up.

 

[LoneWolfO6]

There's going to be snap-back from halting inflation.

But as to what it'll be, no one really knows. We've not has these conditions previously.

I don't expect a recession, but those expecting one will take actions - like laying off thousands and stopping financing - that will precipitate one.

-Crissa

I remember the 70s no one could finance and or had a credit card in their wallet, now credit cards are given everywhere?!

 

[LoneWolfO6]

I saw the thread on this and it seems too evil to be true.

If it pans out the way they suggested, we’re going to see lots of cars repossessed and deeply discounted as buyers dry up. Lots of damage to banks as their loan portfolios are massively overvalued right now.

Companies with huge lease inventories are going to have a painful couple years if this happens. They had a huge windfall with the past year’s used price inflation. Now they are going to be eating billions in overvalued lease returns. High interest rates are going to eat into this as well as people’s budgets for cars drops due to the rate change.

I guess since the the past few years have been crazy. Why stop now? Buckle up.

It will be fine, the feds have given out trillions of dollars the past forty years to greedy people who in the end don’t know how to manage theirs or others money?! Bailouts for everyone.

 

[SwampNut]

I saw the thread on this and it seems too evil to be true.

If it pans out the way they suggested, we’re going to see lots of cars repossessed and deeply discounted as buyers dry up. Lots of damage to banks as their loan portfolios are massively overvalued right now.

Companies with huge lease inventories are going to have a painful couple years if this happens. They had a huge windfall with the past year’s used price inflation. Now they are going to be eating billions in overvalued lease returns. High interest rates are going to eat into this as well as people’s budgets for cars drops due to the rate change.

I guess since the the past few years have been crazy. Why stop now? Buckle up.

I posted this on another forum on 11/3. I cannot believe that the supposed experts took another month to start saying it, and some idiot like me, nowhere near cars and retail, sees it early?

OR--they purposely hid the looming problem. I can say for sure that the Jeep dealer near me was hiding inventory in the back lot (service/fleet) to be able to still claim a shortage when buyers came in.




This is going to be the worst retail holiday season in a long time, and great time to buy a car

Apple has frozen hiring, and stopped manufacturing the iPhone 14 Plus (which I considered retarded anyway).

Target has slowed distribution center hiring/training.

Best Buy has issued a shareholder advisory to reduce expectations.

Mannheim, which tracks and analyzes car sales, says car sales are slowing, inventory is building, prices are down, and expects December to be the slowest in a while. Prices are MSRP now, down from the markups that were common.

The last five years' insanity buying and spending, and over-printing of money, along with free handouts has to come to an end. I think it's now. If retail bombs, that will set off a chain reaction and massive market correction. The stock market has been over-inflated for no reason for many years. Sucks for what I'm still holding, but I should have seen it sooner. I did get into some great debt when interest was 2% and now I'm getting 4+ on no-risk CDs and a little more in some stocks. This is a great time to be in old debt, terrible time to buy new debt.

 

[Ogre]

I posted this on another forum on 11/3. I cannot believe that the supposed experts took another month to start saying it, and some idiot like me, nowhere near cars and retail, sees it early?

I don’t know, saw it a while back. I just recall a Twitter thread which spelled out almost exactly what you said. Saw it on Twitter first, but seems like he’s repeated the core of his Twitter thread in this much longer article as well.

https://www.philstockworld.com/2022...gger-auto-market-disaster-cripple-us-economy/

What this means, he explained, is that once consumers are stuck with a vehicle they paid too much for, they can’t trade it in without putting some money up front to cover the difference of what is owed on it versus what it is worth. At that point, he notes, “Dealer can’t sell consumer a car, Consumer can’t buy a car, And, you guessed it, lender can’t finance a car!”

The lender then knows that most consumers are stuck and waives the open auto stipulation – meaning they allow the consumer to buy the new car with a second loan knowing they already have a first one. But the lender does it because they know that the buyer will default on the old, other car.

Regardless, it’s bad news.