2024 Week 13

Bill Gross is predicting that the yield curve needs to flatten, otherwise the long-term outlook for the economy is not positive. Infact everyone is perplexed by the continued inversion of the yield curve. As Howard Marks says “Being too far ahead of your time is indistinguishable from being wrong”

Fisker is on the road to bankruptcy as the company is delisted from the NYSE and its stock price is going to zero. The outlook for EV manufacturers is consolidation and clearly Tesla and BYD are the winners. Speaking of BYD, I can’t imagine a scenario where BYD is allowed to sell vehicles in the US based on security concerns. Given recent revelations of auto manufacturers selling driver data and the political wrangling around TikTok this isn’t going to happen.

TOPICS

• Fed Rate
• Bankruptcy
• Domestic Recession
• Environment

Fed Rate

OBSERVATION - “Sooner or later it must go positive if the economy is to stay positive.”

• (Seeking Alpha)
  • Bill Gross advises betting on a flattening yield curve
  • Noted that the 10-year Treasury yield is right where it was 20 years ago at 4.2%
  • “Too much supply,” he added. “And real rates at 2% imply a 2.3% breakeven rate against inflation with 10-year nominals at 4.3%.”
  • “If inflation gets to 2.3% by the end of the year (not likely in my book) what can the 4.3% yield do?”
  • “Bet on a flattening of the negative yield curve. Sooner or later it must go positive if the economy is to stay positive.

Bankruptcy

OPINION - Game over

• (Seeking Alpha)
  • Fisker shares to be delisted from NYSE
    • Due to its “abnormally low” price.
    • The stock closed Monday at an all-time low of $0.09.

Domestic Recession

TAKEAWAY - “It’s never smart to rely too heavily on the signal of a single metric”

• (TKer)
  • When two popular recession indicators failed 👎
    • The inverted yield curve
      • Two years ago, the 2s10s yield curve inverted, which emboldened economists who were warning of an impending recession. We’re still waiting for that recession
      • one has to question the value of an indicator that sometimes leads events by two to four years.
        • As Oaktree Capital’s Howard Marks says, “Being too far ahead of your time is indistinguishable from being wrong.“
      • 
    • The falling Leading Economic Index
      • Over the past two years, it too had been signaling a recession that hasn’t come.
    • The recessionary signals we’ve been reading about over the past two years have come amid massive bullish tailwinds like record job openings and excess savings, which have proven to be more reliable leading indicators during the current economic cycle.

Environment

OPINION - Impossible to imagine a scenario where the U.S. allows BYD to sell in America.

• (Brief.News)
  • BYD Overtakes Tesla as Global EV Leader with Record 80.7% Profit Surge
  • Reported a record profit of 30.04 billion yuan in 2023, an 80.7% increase from the previous year.
  • Has expanded into Asian, Latin American, and European markets, focusing on electric and hybrid models.
  • High production volume allows BYD to set competitive prices and maintain market pressure on rivals.