I don't know nearly enough about the Tesla market to judge, but if what Robin (@RobinWigg) says is true, this is a very useful article. It suggests that an enormous amount of stock market activity, and not just in Tesla, is tied to technical factors.
As a result, because in many cases these technical factors are pro-cyclical, trading in Tesla can be highly self-reinforcing and thus volatility-enhancing. The fact that a large share of Tesla investors seem a little too emotionally about Tesla just adds to the mix.
I spent a big chunk of my trading days on Wall Street designing structured products, and so this was the money quote for me: "It’s incredibly lucrative for investors to put into structured products because it is so volatile.”
Options on volatile assets have a lot of time value, especially the less in-the-money they are, and that makes them great for juicing yields and lowering borrowing costs, but it also means that when things go bad, they go bad in a lot of unexpected places.

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More from @michaelxpettis

24 Nov
I haven't read their report, but if this article correctly summarizes it, I half agree with their 5.5% 2022 GDP growth forecast for China. I've said almost since the beginning of this year that Beijing would probably choose...
a 5.5% GDP growth target in 2022, but whereas they seems to think that this is because deleveraging this year will "lay the foundation for high-quality economic growth" next year, I would argue that it is almost the opposite.
From early this year, because of a partial reversal of last year's contraction in consumption, I expected GDP growth to come in between 6% and 8%, depending on how seriously they took deleveraging (they expected 8.7%).
Read 10 tweets
24 Nov
"Losing money from their property investments, some trust companies are now suffering high liquidity pressure that has in turn prompted them to scale back their immense investments in the real estate sector."
This could be more important than it at first it seems — trusts are major lenders directly and indirectly to the property sector. If they do cut back their exposure substantially, I suspect that regulators will put...
pressure on the banks to make up for it by increasing their support for the sector, even though, ironically, banks often used the trusts as conduits to get around regulatory restrictions on property loans.
Read 8 tweets
23 Nov
Great piece. Although I have a lot more respect for Paul Krugman than Michael Lind does, I agree with what Lind says about trade. Ricardo showed that when businesses move abroad to benefit from comparative advantage, the global economy is better off.
But while lower wages in less developed countries can reflect a form of comparative advantage, this is no longer the case in countries in which the wage gap exceeds the productivity gap. In a Ricardian world, wages keep pace with productivity.
But when wage growth is repressed relative to productivity growth, this is always the result of explicit policy decision, in which case offshoring doesn't allow businesses to benefit from comparative advantage reasons so much as to benefit from mercantilist wage policies.
Read 6 tweets
23 Nov
"Li Keqiang urged local governments to take more action to support small businesses and called for more transfer payments at the grass roots level and for stronger financial support below the county level of government."

scmp.com/economy/china-… via @scmpnews
Li has been calling for similar measures for a while, and I hope this time he is taken more seriously, but for me just as important as these transfers is the way in which they are funded, especially as local government revenues from the property sector are likely to decline.
If these transfers are funded by local governments liquidating land and other assets — something likely to generate strong political opposition — they will be sustainable and will represent the kind of wealth transfers that China needs and that would most benefit rebalancing.
Read 4 tweets
21 Nov
One of the problems I have with discussions by the IMF and the World Bank – and indeed by most economists – about China's economic prospects is that while by now nearly everyone agrees that Chinese growth includes many years...
of "inflated" – or "low quality" – growth, driven by wasted investment in non-productive property and infrastructure, there seems to be no recognition of the future cost of this inflated growth.
The conclusion is always that if Beijing implements the right reforms, while growth will slow a little, it will be high-quality and sustainable. This seems to assume that there will be no adverse consequence or difficult adjustment costs for growth in the future.
Read 9 tweets
21 Nov
I read the very-interesting McKinsey report to which this article refers. Much of the world's "wealth", as McKinsey measures it, consists of the value of real estate, and given China's real estate bubble, which has driven its value...
news.yahoo.com/report-china-n… via @YahooNews
to more than twice that of the US and more than three times that of Europe, it perhaps isn't surprising that Chinese "wealth" now exceeds that of any other country.
Perhaps it will come as no surprise that the last time a country's total wealth exceeded that of the US was in Japan around 1990. It's share of global GDP at the time was roughly the same as China's today, and it was experiencing an even greater real estate bubble.
Read 6 tweets

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