MACROECONOMIC OUTLOOK

US inflation expectations are rising. Fiscal and monetary policy means inflation will further pick up the pace

Photo by maria pagan on Unsplash

Investors are obsessed with inflation. And with good reason.

It’s closely tied to interest rates and has ample implications for the relative valuation of current and future profits.

Shifts in the inflation outlook can cause sector rotations and shifts in Wall Street’s weighing of growth versus value, staples versus cyclical, and domestic versus foreign equities.

Inflation expectations are rising. But they could go up further.

With the reopening of the world economy over the coming six months as a catalyst, investors can face a spike in short term inflation.

The below outlines the key reasons for inflationary pressure being imminent.


MARKET COMMENTARY

Retail investors’ favorite stocks are underperforming the broad indices

Meme by unknown. Creative commons.

Retail investors, overexposed to a narrow basket of highly correlated stocks, could be in for a rough ride.

The time where one could throw a dart at the Russel 2000 or randomly pick amongst the most mentioned tickers on Reddit and make instant profits is over.

It’s only April and yet, 2021’s markets have already offered a lot of action. Amongst the most prominent stories from the financial markets in the first four months of the year is the retail frenzy.

The conditions for retail investors to get excited were optimal. The perfect storm

Steady multiple expansion in the second…


STOCK COMMENTARY

In the three days following the stock exchange listing of Coinbase, the company’s management and PIPE investors have unloaded huge amounts of overpriced shares to retail investors

Photo by Pierre Borthiry on Unsplash

Coinbase ($COIN) is a terrible investment opportunity.

No economic moat. Low entry costs for competitors. Revenue is tied to an underlying asset with large price fluctuations. Uncertainty about the stickiness of customers.

Factors discounting the value of Coinbase are many.

Yet, the company's management has not been shy of contributing to their crypto-mania-fuelled hype.

Efforts that aren’t aligned with the same management and other insiders dumping billions worth of shares as soon as…


MARKET COMMENTARY: TESLA

Elon Musk has a history of making bold unfounded claims and something about the latest delivery numbers just don’t add up

Collage by author. Source graph: Saxo Bank

The 2021 first-quarter delivery numbers of Tesla’s electric vehicles are out.

185.000 EVs were “delivered” (a term Tesla has yet to unambiguously define) to customers across the world in the first three months of the year.

Or at least, so claims the company itself.

As argued below, this number may be inflated due to several causes. From frontloading to repurchasing agreements and a general lack of transparency.

The coming financial statement and the investor call following will be exciting for bulls and bears.

While bulls are hailing Tesla’s ability to beat estimates of a range of analysts, bears point to…


MARKET COMMENTARY

A large share of Tesla vehicles contain batteries of subpar quality, with battery day promises on standby

Collage by author. Background source: Tesla 4680 battery patent

Using subpar Chinese batteries on a large share of vehicles. Failing to deliver on promises of new (4680 cell) batteries.

Fierce — and increasing — competition in the EV space ramping up battery R&D efforts.

Elon Musk and the rest of the Tesla management team have probably had chronic headaches for a long time as their first-mover advantage in the EV market is vanishing like dew in the morning sun.

With the price of Bitcoin about to kick in the door to $60k, Elon Musk fanatics and Tesla cultists alike have been quick to applaud Musk’s decision to allocate equity…


FINANCIAL ANALYSIS GONE WRONG

From the misuse of Monte Carlo simulations to ridiculous assumptions, critics have a hard time keeping a straight face

Collage by author. Underlying graph source: ARK Invest

ARK Invest has put out an eyebrow-raising price target for electric vehicle maker Tesla.

Their fair value estimate, or base case, sees Tesla’s share value at $3.000 in 2025, up around 2.900 percent from the 2020 low (and more than 650 % from Friday's closing price at $654.87).

Price targets landed just in time for retail investors receiving their stimulus checks

Their bull scenario puts a staggering $4.000 price tag on the carmaker. ARK believes there to be a 25 percent chance of that.

But most jaw-dropping, the “bear” scenario, which is quite the ridiculous name considering the price target…


TESLA, ELON MUSK, & CRYPTOCURRENCY

The same market forces that drove Tesla’s share price up will accelerate its downfall

Picture by author

Stocks do not always go up. Once in while however, some stocks appear to be moving in one direction only.

But the higher you climb, the harder you fall. Especially if the underlying business is poor. Here’s where Tesla enters the scene.

Tesla is a legit business. For years they have benefitted from a first-mover position in the market for electric vehicles.

A competitive advantage in battery technology, government subsidies, and a drooling cult-following willing to buy shares and options contracts at almost any price or risk/reward ratio. Willing also to be diluted at insane valuations.

A generous valuation puts…


CRYPTOCURRENCY & ECONOMICS

While retail investors buy into the Bitcoin story, it’s important to remember it’s a speculative asset and should be treated as such

Photo by Bermix Studio on Unsplash

The price of one Bitcoin is back above $40.000.

Enthusiasts have long dreamed of Bitcoin replacing government and central bank-backed currencies. The recent price movement has injected new hope into those believing Bitcoin will one day provide a valid alternative to the current monetary system.

But it’s still merely a pipe dream, despite the uptrend in price.

After an incredible run to all-time highs over the Christmas period, the most prominent cryptocurrency of them all saw an expected…


HOW CHANGES CAN FUEL A FULFILLING LIFE

And why you should do it more often

Meme by author. Source: imgflip

We’ve all heard phrases like “never give in” or “success is measured by the number of times you are knocked down and get up again.”

In sports, in relationships, and business endeavors — especially in entrepreneurship and innovation — these are common. They glorify the fighter and equate work-ethic and success with sticking to plan no matter what.

And these may be perfectly valid in some situations. When starting a new project, we often discover a lot of bumps on the road we hadn’t thought of before getting started. …


CRYPTOCURRENCY & (UN)ETHICAL CORPORATE MANAGEMENT

From screwing investors to customers and the climate, Musk is trying to game everyone

Photo by Dmitry Demidko on Unsplash

Manipulating the Tesla share price. Trying to game the market for cryptocurrencies. Selling customers government-subsidized climate and ESG snake oil.

Elon Musk is on a roll.

The Tesla founder and CEO recently overtook Jeff Bezos as the (estimated) highest net worth individual in the world.

He has a huge following on social media and is extremely popular amongst a part of the general public who appreciate his efforts into memes and behavior uncommon for a prominent CEO.

Large responsibilities come with the job, prominence, and popularity Musk has. He doesn’t seem to care

While all appears like innocent fun on…

Asger Bruhn

I’m an economist doing policy design and analysis. I write about the economy, taxation, innovation and growth, policy design, and financial markets.

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