Chip Shortage Update
This past week, Tesla had their earnings call. They showed 90% growth last year while dealing with a chip shortage. While this is great, it is important to note Tesla currently ships out just under 1 million units a year. In comparison, ford ships out ~4 million, and gm ships out almost 7 million a year. With this being said, the chip shortage would affect them less, though, Elon still said it affected them a lot.
Elon in the earnings call compared last year’s chip shortage to what we saw with toilet paper in grocery stores. Every car company was so afraid of them running out that they all placed massive orders. This really constrained the manufacturing, thus causing the problems just like we saw with toilet paper. He did, however, say the chip shortage is easing and they expect to produce 50% more cars this year.
This aligns with my sentiment from last week. With some fear in the markets - resulting in fewer people spending money, this could be the year we finally see prices come back down to earth.
Inflation Rate
Last Wednesday, Jerome Powell talked about the inflation problem and there were a few takeaways from the meeting.
While the January inflation reading has not been released yet, he stated it’s .2-.3% higher as of the meeting, so overall we can expect January’s inflation reading to be around .5%.
Powell is still hesitant about the supply chain
Let’s break that apart.
Recently we have seen oil continue to climb, It is expected that we continue to see high inflation readings in the energy sector. Part of this is due to fear of the conflicts in Russia and Ukraine, if something unfolds there, you will be paying more at the pump in the coming months.
Hearing Powell be afraid of the supply chain and specifically note chips, but then hearing Elon say the problem is easing is a good sign. The best case scenario is we see the supply chain start to ease, we see higher car production numbers, prices decrease, and Powell starts to walk back his rate hikes.
Overall, if you don’t absolutely need a car right now, I would wait. In 6-12 months time, we should see a significant drop in the New and Used car market.
Watch Market
Watches are a great investment during times of uncertainty. They are like functional gold that also goes up in value over time, unlike gold, which was 1800/oz 10 years ago and is 1800/oz as of writing this today.
We haven’t seen a time in the last 10 years as uncertain as right now. There is fear of inflation rates, supply chain issues, and covid continuing to name a few. All these add up to a great watch market.
The big question is when does this climb end? In my opinion, not until the uncertainty starts to settle. As a short-term investment vehicle while the market gets hammered by rate hikes, a watch could be a fantastic opportunity to park some money in.
Nothing in here is financial advice, I watch consume a lot of content to come to my opinions, but they are just my opinions!