Paul Tudor Jones interview

https://nftrh.com/2021/06/14/ptj-always-a-great-listen/ 

When it comes to inflation, the Fed must consider inequality

https://www.ft.com/content/af4394f1-cc0b-4240-9170-daf5d08ed2b8

When it comes to inflation, the Fed must consider inequality

 The US central bank has misread both the data and its mandate KAREN PETROU Add to myFT Fed chair Jay Powell. The central bank’s data are misleading because they assume the US is the middle-class nation it has ceased to be © Daniel Acker/Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Karen Petrou YESTERDAY 78 Print this page The writer is author of ‘Engine of Inequality: The Fed and the Future of Wealth in America’ Like most central banks, the US Federal Reserve has been forced to ask why more than a decade of ultra-loose monetary policy has had such lacklustre economic results. The answer is that bad data lead to bad policy. The Fed’s data are misleading because they assume the US is the middle-class nation it has ceased to be. Until it uses data that reflect the nation as it is, the Fed will no more get America back to shared prosperity than someone using a map of New Amsterdam will find the pond in Central Park. Its inflation measures have three significant shortcomings. First, they omit costs such as food, energy and housing. Doing so is tidier, but fails to capture what households actually need and thus what they are likely to do as monetary policy changes. The second problem is that Fed data are gross — even if its preferred cost-of-living indices accurately measured the cost of a basic basket of goods and services, they do not tell us whether families have the debt-free purchasing power to afford it. Apparently small inflation in a gross index can easily translate into painful penny-pinching or risky household leverage, each of which has an adverse macroeconomic impact. Finally, the indices do not measure discretionary spending or financial resilience in ways that forecast how price increases actually affect consumption — for whom and in what way. High-wealth households can trim their sails and stay on financial course; the rest of the nation must dip into scant reserves or go without. Much in current monetary policy is premised on what economists call the marginal propensity to consume — the engine of want that powers demand that then promotes employment and growth or, if unduly overheated, sparks inflation. The Fed still assumes that interest rates drive decisions about how to use discretionary income. But income and wealth inequality is such that now only upper-income households have this marginal propensity, and most of them have more than enough already, so their propensity is small even if their margin is large. In sharp contrast, low, moderate and middle-income families do the consuming even though their ability to respond to interest rates is negligible. These households have little capacity to increase or shrink consumption in response to changing rates because most of them live from one pay cheque to the next. By one recent estimate, 64 per cent of American households are either financially vulnerable or just coping. Year on year, the real cost of living in the US has skyrocketed — homes are up more than 12 per cent, a used car is up 21 per cent, and food costs have risen over 2 per cent. The Fed has recognised a few of these cost increases, but chalks them up to “transitory” factors that do not contribute to the sustained inflation it wants to see before it normalises policy. But it is hard to see which structural factors will reverse far enough and fast enough to erase these cost obstacles to family financial security. In the absence of another deep recession, even a glut of semiconductors or lumber will not lead to deep discounts on any of these essential goods bringing them back to 2019 levels, let alone to levels a family with below median wealth can afford without continuing debt. The US central bank has played a direct, if wholly unintended, role in driving income and wealth inequality to astonishing heights. It did so not only by misreading the data, but also by misunderstanding its mandate. The Fed’s governing law requires it to seek full employment measured by those who want to work, achieve price stability based on purchasing power and set “moderate” interest rates. This is a triple mandate, not the “dual” one the Fed frequently cites, and demands more of the Fed than its preferred version: “maximum” employment and “price stability” measured by the central bank’s own gauge. Inflation is already a painful tax on low, moderate and middle-income households. Released at the end of May, the latest official US number showed an annual inflation rate of 3.6 per cent based on April prices. If the Fed permits this tax to go up, it will let the economy run dangerously hot at a time when ultra-low rates, the Fed’s huge asset portfolio and federal government spending are throwing trillions into the economy without any sign of sustained recovery for those who need it the most. This will not end well unless the Fed recognises the profound impact inequality has on the US economy and recalibrates policy quickly to address it.

 

Tesla Is Dead (And Elon Musk Knows It)

https://medium.com/surviving-tomorrow/tesla-is-dead-and-elon-musk-probably-knows-it-2858c86589d0

Tesla Is Dead (And Elon Musk Knows It)

The $600+ billion company is a game-changer, but it won’t exist in 50 years

Jared A. Brock

May 31 · 8 min read

Image credit: Elon Musk as Wario on Saturday Night Live

I will never forget the first time I drove a Tesla Model X. My producer rented one when we met up with a movie star to record narration for a film I was directing. “This better not be tacked onto the film budget,” I griped.

He grinned and tossed me the Tesla-shaped key. “It’s your birthday present.”

I dropped the body to its most ground-hugging setting, set the acceleration to Ludicrous Mode, and roared out of the airport. It was one of the most exhilarating rides of my entire life — almost as fun as the time I drove 150MPH with no plates and no insurance on a toll road as an idiot teenager.

Driving a Tesla X is a pure pleasure, but it doesn’t mean Tesla Inc. will survive.

In fact, forces are aligning that could easily wipe Tesla off the map. Here are seven reasons why Tesla probably won’t exist fifty years from now:

1. It doesn’t make money from selling cars

As professor Scott Galloway recently pointed out, if you subtract Tesla’s Bitcoin ponzi profits and emissions credits, Tesla actually loses money:

“Tesla posts an accounting profit, but in its most recent quarter, it was emissions credits (a regulatory program that rewards auto companies for making electric rather than gas vehicles) and — wait for it — $101 million in bitcoin trading profits that morphed earnings from a miss to a beat. What Tesla did not do last quarter was produce a single one of its two premium cars, the Model S or the Model X.”

Losing money doesn’t seem to worry speculators during peaks of irrational exuberance, but when the rubber meets the road and the stock bubble pops and corporate credit constricts, real investors will want no part in money-burning businesses.

And it won’t take a full market meltdown for Tesla to become a money-losing entity: If the global crypto ponzi bubble pops due to more countries banning or regulating it, or regulators do away with emissions credits, Tesla once again becomes a money-bleeding company.

Image credit: The Martian

2. Elon Musk is too distracted to remain CEO

One thing you’ve got to appreciate about Elon Musk is that he’s voraciously curious and wants to solve some of humanity’s biggest challenges.

But that’s not who you want as CEO of a publicly-traded company.

One of the reasons you don’t see most Fortune 500 CEOs on Joe Rogan and SNL and, you know, running five other companies, is because they’re heads-down focused on running one company. When he ran Disney, Bob Iger woke up at 4:15 AM every day. Apple’s Tim Cook gets up at 3:45 AM and reads 800 emails. Elon Musk also puts in absurd hours — I personally question if sleep deprivation is what rational shareholders are looking for in any CEO — but in Elon’s case, it’s spread across too many projects to be sustainable for decades to come.

3. Elon is already diversifying

Have you ever heard of Dan Schulman?

Me neither.

He’s a former AMEX guy, now the CEO of Paypal.

Elon is brilliant at getting out early and pivoting hard.

He did it with Zip2, and then Paypal, and now he’s putting out feelers to do it with Tesla:

SpaceX.
SolarCity.
Hyperloop.
The Boring Company.
Neuralink.
BTC and DOGE. (Side note: Elon knows he’s the king memer and could easily add $100 billion to his net worth by launching his own altcoin.)

It’s only a matter of time before one of these side hustles takes off and he steps down as Tesla’s CEO, if only because…

4. More regulation and oversight are on the way

Elon once again put Tesla in the crosshairs when he started manipulating the cryptocurrency markets.

Never forget how close he came to getting banned from leading a publicly-traded company by the SEC.

If he keeps up these sorts of shenanigans — and he needs to in order to keep the stock price pumped — it’s only a matter of time before government regulators and progressive politicians renew their efforts to rein him in.

Speaking of lawsuits: There are already rumblings that his SNL Asperger’s announcement should have been disclosed to investors — when the stock tanks, expect to see this admission somewhere in the shareholder lawsuit, whether it’s fair grounds or not.

5. The stock price is wildly overvalued

Cue the angry comments from hodlers. (But please note that I automatically delete comments if the poster doesn’t disclose their TSLA holdings.)

As a sound investment, $TSLA stock is one of the worst picks in the world. As a fun gamble/speculation, it’s one of the best. But, just like Bitcoin, small investors are going to lose hundreds of billions of dollars when the price bubble pops.

Because let’s face it: Tesla is a story stock.

Don’t believe me? Just look at who’s been buying shares:

Image credit: Tulips to Tesla

Tesla stock is clearly being pumped by unsophisticated investors who haven’t done their due diligence regarding the company’s actual long-term worth.

The end result: When thousands of Tesla speculators lose their life savings, many will turn their backs on the company, if not become actively hostile.

What is $TSLA actually worth?

First, we need some context. The price-to-earnings (P/E) ratio is considered the benchmark number for comparing one company’s stock price to another. The ratio is based on the current stock price divided by the trailing 12-month earnings per share. If a stock price is $10/share, and the P/E ratio is 10, it means that company is earning $1 per share. If you buy a $10 share with a P/E of 20, it’ll roughly take you 20 years to break even.

• Warren Buffett likes to buy stocks with a P/E of around 12.
• The S&P 500’s long-term median P/E ratio is around 15.
• The S&P 500’s current P/E ratio is around 44 — nearly triple its century-long average — despite the pandemic and a looming joblessness crisis. (#Bubble)
• Apple’s P/E is typically <30.
• Amazon hovers around 60.

Tesla’s P/E ratio is currently over 600.

That’s $0.99 worth of earnings for every $625 invested. Would you buy a business with an ROI of 0.001584%? Would you acquire a company that will take 600+ years to break even?

Cue the irrational exuberancers: “But Tesla’s future potential is huge!”

No, it’s not, not compared to its current price. To fall in line with the S&P’s historical averages and provide a reasonable rate of real return, Tesla would need to 40X its earnings. To provide a 10% annual return, it would need to 63X its earnings. Well over $2 trillion in annual revenue… 4+X more revenue than the largest revenue-earning company on earth. Not gonna happen.

Objectively, Tesla is wildly overpriced even compared to the overall market bubble. It’s a double bubble — the overall market bubble + the Musk fanboy story stock bubble. Tesla may very well be 13Xs better than the average S&P company right now, but that just means Tesla’s price bubble is that much more inflated once you scrub out all the irrational exuberance.

Tesla’s market cap is currently over $600 billion. If it traded at the same P/E as Amazon — arguably one of the strongest companies on earth — Tesla’s market cap drops to $60 billion. If you compare Tesla to Apple, which is a fair comparison and a far more rational P/E, it means that in reality, Tesla is probably only worth a measly $20 billion.

6. Volkswagen+ will come roaring back

To put things in perspective, Tesla’s market cap is currently higher than Mercedes, BMW, GM, Ferrari, and Ford, plus all the major airlines… combined.

Image credit: The Martian

But does Tesla have more customers, wider distribution, better engineers, deeper pockets, and more political connections than the rest of the auto and airline industries?

Absolutely not.

All his major competitors have deeper capital pools, wider distribution networks, and far more customers. Musk has nowhere near the political power. And the innovation gap is closing rapidly. That’s why Elon is constantly seeking new capital and pulling out all the stops to keep pumping the stock, even going so far as to manipulate people’s psychology through stock splits.

Elon Musk has unquestionably (and rightly) created a Thucydides Trap in the automotive industry, but is Tesla really the Athens that can best Sparta?

The question is almost irrelevant because another company is about to out-Athens Tesla and stuff Elon in his own Thucydides trap:

7. Apple will drop an atomic bomb

When Apple releases an electric car — and you can bet your bottom dollar it will — we can safely assume it will rival Tesla for looks and coolness and will likely beat it on price, too.

Follow the money with me…

• When Apple makes a car play, it could easily pop Tesla’s 600 P/E bubble…
• If Tesla deflates to an Apple-level P/E of 30, Tesla is suddenly only worth $20 billion…
• Which makes it instantly ripe for acquisition by one of the majors, be it Apple, Amazon, BMW, Mercedes, or even an old-school company like GM. (Never forget: Ford once bought Jaguar and Fiat once owned Maserati.)

To be clear, Tesla is an amazing company at a $20 billion valuation, and if Elon can’t keep the $TLSA stock price inflated indefinitely, an acquisition is inevitable. Never mind the bite in Apple’s logo… someone could chomp Tesla whole.

In Conclusion

I adore Tesla. Like Russia and HBO, it punches way above its weight.

I also like Elon, minus his market manipulation. He’s an extremely important person in the carmaking space. I’ll say it loudly: Elon Musk is the best thing to happen to the auto industry since Henry Ford. As a maverick agitator, he awoke the slumbering giants who’d happily relied on fossil fuel combustion for more than a century. We’re better for having him.

But, in the same way that Paypal will continue to lose ground to companies like Wise and Stripe, expect Tesla to lose ground to Volkswagen and Apple and whatever innovators come next. If things play out the way I predict regarding an eventual acquisition, fifty years from now Tesla probably won’t even exist.

In the meantime, don’t buy into the stock hype and endanger your family’s future.

Just rent a Model X for a weekend and enjoy the ride.

CNBC Pro Investors need to ‘HODL’ energy stocks, Fundstrat’s Tom Lee says

https://www.cnbc.com/2021/06/01/investors-need-to-hodl-energy-stocks-fundstrats-tom-lee-says.html 

Fundstrat Global Advisors co-founder Tom Lee is betting big in energy over the long haul, telling CNBC on Tuesday that he expects strong returns in the sector within the next five years.

“I think if investors want to get involved they need to HODL energy, put an allocation there [and] kind of plug their nose, but I think that’s going to deliver a lot to their portfolio,” Lee said in an appearance on “Fast Money.”