Market Update: Tesla Falters

News & Current Events Public News & Current Events
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All of a sudden, Tesla (TSLA), the lead stock of the current massive market rally, is faltering – down nearly $250/share (14.3%) since yesterday’s open:

<img class=“aligncenter wp-image-575209 size-large” src=“https://peakprosperity.com/wp-content/uploads/2021/09/TSLA-7.24.20-1024x629-1.png” alt="“TSLA stock price 7.24.20” width=“1024” height=“629” />

This is important because Tesla embodies the faith, optimism and exuberance that has been required by investors to support stock prices up at their current levels – which by nearly every conventional measure are now more overvalued than at any prior time in history.

As just one example, the chart below shows that the total market cap of US stocks now exceeds US GDP by over 155%, an all-time record:

<img class=“aligncenter size-medium” src=“https://peakprosperity.com/wp-content/uploads/2021/09/EdmeZ5aWoAISdD5.png” alt="“Market Cap/GDP chart” width=“800” height=“507” />

With the stock down nearly $400/share since the all-time high price of $1,800/share hit last week, there are now many recent TSLA investors sitting on painful losses. Especially those who bought call options, which have been purchased by an insanely large number of novice investors in Tesla of late.

Only one thing ends bull markets, and that’s change in sentiment. The sudden painful reversal of a bellwether stock like TSLA, leaving shocked and injured investors in its wake, is exactly the type of trigger that could terminate the mania that’s been driving stocks since April.

In this week’s Market Update video, we interview Jim Bruce, producer of the excellent documentary film Money For Nothing about the Federal Reserve’s role in creating the Great Financial Crisis, and who is now working on a new documentary about Tesla. Given his expertise, few people are better positioned to opine on the market environment we now find ourselves in than Jim.

Whether it’s regarding faith in the Fed or faith in story stocks like Tesla, we’re at the point where to continue the status quo, everyone must believe the hype. But what if the hype is a false promise?

Well, with Tesla stumbling and threatening to take the markets down with it, we may soon find out:

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And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical coronavirus preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

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This is a companion discussion topic for the original entry at https://peakprosperity.com/market-update-tesla-falters/

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Seems to me the biggest story right now is the USD and everything else is just a distraction. Tesla is just a cute story about a guy who is the best used car salesman in the history of the world. He’s completely FOS and one day Tesla will be known for being the most overhyped company and stock in history. People will never hear about the tulip bulb mania ever again because it will be replaced with Tesla. I’ve seen people who are extremely bright have a dumbstruck look on their face when they are talking to someone who has any connection to the company. Btw, I’ve trained astronauts and I’m a physician. The thought of going to Mars is frankly beyond retarded because of basic physiology constraints not to mention the technological constraints yet people sit there thinking Musk is simply brilliant. He is brilliant but his brilliance is all about bullshitting the world.
Anyway, sorry for the rant. I simply can’t stand it when Tesla is even brought up.
Back to my point…There are numerous factors working against the USD, and it’s chart doesn’t look good…

The USD is the most overvalued currency in the world from its status of being the world’s reserve currency. The Fed’s balance sheet is skyrocketing with literally no end in site. Interest rates can never go up given the massive levels of debt at the private level, corporate level, and government level. Even if negative interest rates were viable (they aren’t as that would herald the endgame in short order) the USD would fall massively. Thus, interest rates are stuck near zero. Massive spending programs have already started with the corporate debt buying and the PPP (non)-loans (they are all being forgiven). The U.S. has one of the highest standard of living and there will be ongoing unemployment checks and stimulus checks. There will likely be some sort of bailout to help with people’s rents and mortgages as a huge number of people simply can’t pay. Without rent/mortgage help the real estate market will be crushed. TPTB/Fed have demonstrated for the past 20 years that keeping the stock “markets” elevated is of utmost importance to them. A rising USD hurts stocks. A falling USD provides an easy way to artificially prop up the “markets”…this is what we’ve been seeing but it hasn’t been on many people’s radar. Ongoing trade deficits in a world where globalization is markedly contracting in conjunction with an economy that is 70% service sector based, increasing civil unrest, all in an election year where all politicians want to bestow big $$$ to the populace to buy votes. There’s a high likelihood of a sweep by the Democrats in November who will pursue massive social programs/MMT which can only be paid for by unimaginable amounts of money printing. I have a strong suspicion there will be some form of a student debt jubilee as those monies can never be repaid. Again, lowering the USD and inflation is the most insidious tax and form of wealth transfer. Sure, a small percentage of folks at the top end of things will likely benefit but I’m sure there will be huge tax increases every place one can imagine to try and recapture that inflation wealth that is gained. Anyway, those are my ramblings which are not well articulated. For those who would like a very well articulated and comprehensive argument for a much lower USD I suggest the Lyn Alden interview below. She is fantastic.
https://youtu.be/jJx2LxEB6OA
It’s not random chance that gold, silver, and the miners have gone up big. Negative real interest rates are by far the biggest driving factor for pushing the metals higher, and that’s the environment we are in.
 
Edit:
Forgot to mention a huge portion of the metals market is in the paper markets, and not physical markets. By just about all accounts the paper claims far exceed the actual physical bullion. Also, given the increasing lack of trust in the financial system/markets worldwide physical demand has greatly increased and will continue to increase. This is a game of musical chairs with a lot of people walking in a circle with very few seats to sit in. As prices go up the physical market will get tighter and tighter which will likely cause prices to go up that much more. The paper manipulation shenanigans will be more and more constrained. All of this will likely be a positive feedback loop driving prices higher and higher.

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One of the skills engineers develop over the years is to instinctively use the Pareto Principle (80/20 rule) when diagnosing problems. That is, to consider 80% of the problem is likely to be found in 20% of the potential causes.
When I sort out the 80/20 here I get:

  1. The Fed has been “handling” the economy by blowing bubbles since Greenspan (c. 1987) culminating in the “everything” bubble today.
  2. Most are (and have been) “shocked” “amazed” “astounded” at the size and relentlessness of said bubble for at least 30 years.
  3. Most are (and have been) “shocked” “amazed” “astounded” at failure of stock prices and/or the economy to collapse for at least 30 years. 20 years ago everyone was screaming inflation. Today? Not so much.
    Myself? Fairly sanguine. Probably because I thought 2008 could become the great awaited reset. Yet I soon went all-in for stocks. Why? Three reasons:
    I. There is no viable exit for the Fed nor the politicians. We will not cut spending until inflation forces us, and that is nowhere to be seen.
    II. America’s rapid immigration prevents the political cohesion/unity needed to mount an offensive against entrenched financial power. This is a feature, not a bug.
    III. When the worldwide encomium/markets start to crack, wealth will likely flee first to the USD and blue-chip, dividend-paying stocks. Why? The US has political stability that other nations can only dream of: driven by a superpower military, superpower oil & coal supplies, and is also the breadbasket of the world.
    Regarding Tesla: who cares? That silly stock will come and go. A better proxy for what is gonna happen to the market? Amazon; unlike Telsa, Amazon has real value, yet doesn’t make any money or pay dividends. So we have a long way to fall here, IMO, before blue-chip dividend paying stocks are at risk.
The USD is the most overvalued currency in the world from its status of being the world’s reserve currency. The Fed’s balance sheet is skyrocketing with literally no end in site. Interest rates can never go up given the massive levels of debt at the private level, corporate level, and government level.
The USD may actually be an undervalued currency as PM prices go up. Why? The US has gold reserves. Oil reserves. Coal reserves. Food reserves. Military. Political stability. The fact our interest rates cannot go up may actually become a moderating effect. Sadly, our status quo may go on for decades, or even generations, depending on political stability (see: immigration). Remember, the USSR went on and on for 70 years, and as bad as we are, we are nowhere close to as crazy. Russia, with the best land and best oil reserves, can barely feed itself. I repeat: we can go a long time sans war or political unrest.
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Thank you Adam, New Harbor team, and the commenters above. Very helpful to see your perspectives. I have a question from watching these market updates over the past month:
For a shorter (5-10 year) vs longer (25-30) year investment horizon: If there’s a coming crash and want to re-enter the market at that time, what is the strategy to determine which potential mutual funds, ETFs, bonds, etc to invest in? I haven’t heard this addressed, and seeking resources.
Thanks for your help.

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“Pop.”
Did you hear that?
 
I don’t think the complete economic reset will occur anytime soon - methinks it’ll drag out for a decade or so with all sorts of lingering pain.
But I’m pretty certain that confidence is beginning to wain and the entire stock market is one big confidence game. Once the avalanche starts, the selling will happen so fast that if you blink, you might miss it. HFT’s and the algorithms will always beat the retail investor and they are definitely going to eat up all the RobinHood users like popcorn during the first 15 minutes of a Star Wars premier.
And I believe that’s when the Feds’ printing presses are going to really start spinning. We ain’t seen nothing yet.

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…so, great work getting him here to talk to us.
Again, nice call on your Silver purchase, so happy for you.
Regarding greater fool: I got all out at my personal high (couple of bucks plus or minus) when I guessed the economy was shutting done. Actually, after following the Wuhan story before our Main stream Media caught on is when I got out, so simple to see that China was NOT containing this beast of a Virus. So, since I jumped back in in a BIG way and the profits have seemed to have taken a rocket shot and it too was a low risk call, especially anticipating more money would be spent into our economy, pre-warned by the REPO markets far greater than in 08-09. That to expect large gains was a perfectly rational decision. I haven’t capitulated really, what I have done is looked at history, assessed what was likely to happen and it did. So, a wonderful year for us here at our home and solely motivated by our final project, our home and a base where we find can support us even if we lost our Social Security and that won’t happen. My only fear now is Biden, if elected then Socialism to the extreme will happen and you think we’re bad off now, it gets worse after the election if he is elected. Note: We are in many ways a Socialist country now so do we go off the deep end? I hope not.
My point: I don’t think I’m the greater fool ( didn’t take this personally at all ) here as we all knew what was going to happen and for each individual who works hard at this it wasn’t a stretch to know what the Fed would do and because we were at rock bottom and the only direction up, and in addition all these Folks now coming back to work it wasn’t a surprise that oil would react favorably either as Demand had to recover in a strong way and has, I believe still headed higher unless the Virus shuts everything down again and that won’t happen, I don’t think. So, the market has been frankly well contrived, profitable and helpful as I have a one year plan to button everything up. I will also become more conservative because I’m not greedy, I do believe an accident is very real and that a 50% is plausible so why risk what I have when what I have is enough. Enough anyways to wait and bet on a future market that makes better sense. Then again, it may just be the better decision to let it ride, I simply have no idea yet. Charles recently penned that of all his knowledge that he hasn’t really learned anything (to paraphrase and butchering his quote). That he doesn’t feel like he could even teach this stuff and Charles is genius, modest too but, he says basically the more he knows makes him less qualified. I get the HELL out of this! I spend so much time on this that I feel as though I’m stupid when looking out, seeing a problem that can never be fixed until we blow it all up and yet every day we seem to dig ourselves out. I’m banking on this as I must have one more year to fully implement Barb’s and my plan. It isn’t the money we need it’s getting our home built, once that’s accomplished and one growing season on a larger garden and it’s first year supplying the pantry is what I need. I only pray for an easy year but that won’t happen. Now, all my collective knowledge has been reduced to my gut feeling and I only hope what has served me well my whole life continues for a short while.
Lastly, today was one of your best and is becoming consistently better so thank you for your efforts, it matters.
Peace…BOB
"Off to The Roost, our Home and chores will be done today. I am determined to split 4 cords of wood, cut a rather large Berm so I can collect a large amount of greens for my compost pile. Barb will cut everything else before weeding a bit in the gardens. Topping off the day by filling all the bird feeders because the birds we have on the woodlands edge are some of the most beautiful found in one area. We love it at The Roost, will spend the rest of our lives in front of a wood fireplace and enjoy the food we have grown with talented and wonderful friends.

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Interest rates can never go up, really you talk about the fed printing trillions but interest rates can never go up? QUIT trolling kid.
edit: added an R

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I’m not sure what you mean about the US being a socialist country. Like mine, the UK, it has socialism for the rich and capitalism for the poor. True socialism is something completely different with a great deal more equality.

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Jacl007,
Welcome. Good to see your first post.
Obviously rates can go up, but the little life that is in this left in the economy would come to a screeching halt, money would evaporate with massive deflation making the 1930’s look like a picnic. One day rates may start to rise as foreign money leaves the treasury market. At that point the Fed would either have to choose between letting the whole house of cards fall and popping of the everything bubble (I’ve not seen any evidence they would do that), or keep things propped up by massively buying treasuries that no one else wants (every bit of evidence in the past points towards this type of behavior). That would result in a reinforcing loop of an even lower USD. Take your pick…it’s either a high inflation/hyperinflationary depression or it’s a hyperdeflationary depression. In my mind high inflation would allow for a more drawn out & semi-controlled crash, but I’m very much a self-described amateur when it comes to finance and economics. My expertise is mainly medicine, and lesser so engineering.
I’m always open to others opinions. I write things to bounce off others to hopefully learn something myself, in addition to possibly helping others muddling through the mess the world is in. Sometimes I might be on the mark sometimes I’m not. “Trolling”? GFY

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Since this was mentioned as a future guest topic, I wanted to put my 2 cents in. I hope that you go way beyond talking about just Bitcoin and all of it’s close relatives. They waste coal-sized mountains of energy just to settle a very modest amount of transactions. I don’t want to dismiss this whole investment arena, but I struggle to find the value returned for the energy expended. I prefer projects like https://holochain.org/ which can apply the same security and privacy techniques, but actually do it at scale. We need to own and control our own data and build peer-to-peer alternatives to the monopolies that currently exploit us, but we need to do it in a way that is anti-fragile. Sure we can run some things for convenience in a server farm, but you can’t rely on something that is largely out of your control. You need to be able to run them on your home desktop/smart phone too and with intermittent networks with the flexibility to change how your collaborate with your communities as the situation changes. I’ll stop there, but I’m happy to chat further on the topics if others are interested.

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I have suggested a number of times that PP have guests on to discuss blockchain to no avail. This is a PM site. The only reference found here is crypto as an investment. The revolutionary idea of P2P is beyond the realm on this site.
Thanks for the heads up . Will look into it further.

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For those who would like a very well articulated and comprehensive argument for a much lower USD I suggest the Lyn Alden interview below. She is fantastic.
I've seen this interview, and I heard a very different argument, one for a "relatively" strong USD as a "relative" safe haven. Brent Johnson detailed why at 1:03: 1. US has the deepest global market. 2. Biggest consumer economy; we are the #1 #2 client for everyone else in the world. 3. Everyone must use the $ payment system, US controls world capital flow and we can kick people out on a whim. 4. Rule of law (relative to other nations). 5. Global superpower, we enforce $ hegemony using sea lanes and the US Navy. 7. US global denominated debt is demand for the currency issued - no other contender. $ debt is demand for USD. 8. Other currencies must print to adjust to USD and they take our inflation with no choice. 9. Both agree high quality US stocks will do well along with PM. 10. Expects a full-scale currency crisis, with gold & USD & solid equities on top. Thus, there must be more demand for the USD than any other. And when all sides print together, other currencies must inflate, desperately seeking USD. I'm with Brent, who thinks that the USD (treasuries) and gold are the two assets to hold for the coming contagion. When equities fall, he says buy. He expects a full scale currency crisis, really bad for the world. She agrees, they just differs on details.
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I came across this podcast when I woke up at 5 AM and couldn’t go back to sleep. Good stuff. She talks a little more specifically about the gold and silver markets, and even talks about green energy and Tesla towards the end.
 
https://youtu.be/_2lee_xXCMw

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@dryam2000 The thought of going to Mars is frankly beyond retarded because of basic physiology constraints not to mention the technological constraints yet people sit there thinking Musk is simply brilliant. He is brilliant but his brilliance is all about bullshitting the world.
It's about artificial oxygen environments, dome-shaped above ground, but primarily underground facilities, expanded over decades to become military bases the size of cities. One could say the bigger "brilliance" and especially the bigger "bullshitting the world" comes from the weaponized false narrative broadcast via the corporate legacy media that says (or rather doesn't say anything thus implying that) we haven't been to outer space since Apollo... when strangely we have a bunch of whistleblowers talking about the Deep State's covert military colonization of Mars going all the way back to the 1970's, using the Apollo program as a cover to set up the infrastructure. Just research "Secret Space Program" if you want to go down that rabbit hole...
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I understand, everyone has their own definition. Mine is: almost half of our wages is paid into taxes to be distributed among others who didn’t earn it. When about half our income is taken from us to support the vast social programs in our country then I call that socialism. Rich and poor pay no taxes so they get a chunk of every check we get, that to me is socialism. Getting a check while they sit at home on their collective asses doing nothing for it. Hate that crap. Peace

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RUN, Spot, Run!!