TheBRRR’s GM

mfw watching markets & news this week…

Because it’s Friday, we will start by mentioning some bizarre news, not necessarily finance-related; just crazy/zany.

In case you miss sports or entertainment news, or have been without TV, the NFL fanbase saw a surge from the Taylor Swift/Travis Kelce relationship, according to Kelce’s mother.

Biden’s dog “Commander” bit a dozen people or so, and has been removed from White House grounds.

In a recent interview, Hillary Clinton described Trump supporters as "cult members" needing "formal deprogramming.” Her comments sparked backlash, with some referencing her "deplorables" remark from 2016.

Back to finance news…

Elon made waves this week. Between redesigning Twitter for a "cleaner" look by scrapping article headlines (and planning to hide counts for replies, retweets, and likes), and then the SEC suing Elon Musk for missing testimony for his Twitter share purchase, and now a price reduction on Tesla models, Musk continues traversing rocky waters.

Broader picture, amidst changes in the U.S. labor market (due to an aging population), inflation remains a persistent risk, challenging the decade-long reliance on near-zero interest rates for economic growth. Stocks are unsure, except for the “Magnificient Seven” in big tech.

Meanwhile, the 30-year U.S. Treasury bond faced a sharp selloff, with the 10-year yield nearing a 16-year high, reminiscent of past financial crises. All partially driven by concerns over the U.S. budget deficit, congressional dysfunction, and the Federal Reserve's inflation stance. The Fed has another fight ahead.

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Market News

Tesla's Response to Misses: Price Cuts

Tesla has again announced price reductions for its popular Model 3 and Model Y cars. This comes on the heels of Tesla's inability to meet its projected Q3 delivery targets, and is at least the 6th price change in a year. While some see this as a sign of dwindling demand, others view it as Tesla's commitment to affordability and market penetration. The price adjustments, coupled with the recent delivery data, stir discussions about Tesla's market strategy and future prospects.

• Price Adjustments: The Model 3 now starts at $38,990, down from $40,240. The Performance variant of the Model 3 has been adjusted to $50,990 from its previous $53,240. Similarly, the Model Y Long Range is now priced at $48,490, a decrease from $50,490, and the Model Y Performance has been reduced to $52,490 from $54,490.

• Delivery Data: In Q3, Tesla reported delivering 435,059 vehicles, falling short of the anticipated 456,722. This deviation is significant as it represents the first time since Q2 2022 that Tesla's deliveries have seen a sequential drop. The company attributed the decline to planned factory downtimes for upgrades, a point highlighted in their recent press release.

• Diverse Opinions: Gordon Johnson from GLJ Research opines that the Q3 delivery miss might be indicative of a broader demand issue. On the contrary, Chamath Palihapitiya, a prominent venture capitalist, applauds Tesla's aggressive pricing strategy, emphasizing its rarity and potential impact in the automotive industry. He points out that few companies offer more value for less, especially for high-ticket items like vehicles.

  Read more and here

Macro News

Work's Hot, Pay's Not: Classic 2023

In September, the U.S. saw a notable increase in job growth, surpassing economists' expectations. (This is partly attributed to the return of education workers after summer.) Despite the Federal Reserve raising interest rates over the past 18 months, the labor market remains “resilient”, suggesting a continued hawkish monetary policy. Contrary to this, a majority of economists predict that the U.S. central bank will refrain from further rate hikes this year.

• Exceeding Predictions: The Labor Department's report indicated a substantial increase of 336,000 jobs in nonfarm payrolls for September, greatly surpassing predictions made by economists, who had anticipated a rise of around 170,000 jobs. The range of estimates varied, between a low of 90,000 and others up to 256,000, making the actual growth even more noteworthy.

• Wage Dynamics and Unemployment: The unemployment landscape remained unchanged, with the rate holding steady at an 18-month peak of 3.8%. On the wage front, there's a nuanced picture. Monthly wage growth has been moderate, but the annual rate stands at 4.2%. This rate surpasses the 3.5% benchmark that economists believe aligns with the Federal Reserve's 2% inflation target.

• Potential Headwinds: Rising U.S. Treasury yields and political turbulence in Washington are among the concerns that impact economic stability. A significant factor is the impending resumption of student loan repayments. As millions of Americans begin repaying loans comes anticipated strain on consumer spending. This can affect various sectors, from housing to entertainment, and have ripple effects on employment trends.

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Today’s Reader Poll

Amid an array of contrasting views, we will ask once more:

Below are the results from Wednesday’s poll, where we asked the same. I wonder if the spread changes at all…

AI Art of The Day

Elon getting his hands dirty, in this case working on Tesla…

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