One of the hallmarks of the Dot-Com bust was a large number of companies that had never made money, weren’t expected to make money anytime soon having reached the position they were in through the assumption of debt, and lots of it. This strategy works until it doesn’t, ala the crash in mid-2000 and of course the real estate crash in 2007-2010. Fast forward to the present and Tesla, along with Netflix have both followed the same pattern, no real profits, but a lot of very real debt, despite 15+ years in business for both firms. While I personally like them both the purpose of business is to make a profit. Tesla finds itself in an increasingly precarious position with respect to debt and cash flow, with Netflix not far behind. Both companies are at material risk for becoming poster children for the latest chapter in “you can’t borrow your way to prosperity”.
The Chicago Fed National Activity Index jumped .88 in June to .43 after May was revised sharply lower. A volatile series that covers some 85% of total economic activity, the 3-month moving average increased .6 to .16 indicating more muddle along economic activity.
Existing home sales fell for a 3rd consecutive month in June, down .6% to 5.38 million units annualized. Month’s supply increased to 4.3, still relatively low. The median price advanced 4.5% to $276,900. On a regional basis the South and West both showed notable weakness with a 4th consecutive decline dropping 2.2 and 2.6% respectively.
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