Four Days of Free-Fall Mania. Dream goes up in smoke. Passed over by Etsy, Teradyne, and Catalent.
By Wolf Richter for WOLF STREET.
After regular trading hours on Friday, S&P Dow Jones Indices announced which companies would join the S&P 500 Index, and Tesla, tragically, wasn’t on the list. In response in after-hours trading, Tesla shares plunged 7% to $387.
Shares [TSLA] are now down 25% in four days of trading from the after-hours peak on Monday, August 31, in a sort of free-fall mania. Monday was the first day of trading after the stock split, a moment of triumph engraved into the Internet with my Triple-WTF Chart of the Year, showing shares reaching the tip of the spike at $514.74 a share after-hours, after having annihilated my WTF-Chart of the Year of February 4 and my Double-WTF Chart of the Year of July 1 (stock prices via YCharts):
S&P Dow Jones Indices announced in its press release that three companies will be added to the S&P 500 Index (Etsy, Teradyne and Catalent) and three companies would be kicked off (H&R Block, Coty, and Kohl’s). The changes will be effective in the morning of September 21.
Tesla not making it into the S&P 500 is a major tragedy for fans of the stock, for whom that induction was an unquestionable certainty, and one of the rational and indisputable foundations of why the company should be worth three times as much as Toyota, or ten times or whatever, though Tesla has a global market share in the auto industry of less than 1%.
The press release didn’t say why Tesla wasn’t included in the S&P 500. One of the minimum requirements is that a company make a profit on a GAAP basis for four quarters in a row.
Tesla accomplished that by hook or crook with its Q2 earnings report, on stagnating revenues, and $428 million in “regulatory credits,” in the quarter, and $782 million in “regulatory credits” in the first half. Without these “regulatory credits,” Tesla’s GAAP earnings would have been deep in the red both quarters this year.
So surely, for fans of the stock who thought that shares would quintuple over the next three months based on the inclusion in the S&P 500 Index, this is just another minor setback on the way to Mars.
If stocks made a sudden connection to the worst economy in a lifetime, after having been disconnected for months, that would be a disaster, however. Read… Wall Street’s New Meme: Selloff is “Good News for Tech Stocks” after Robinhood Call-Options Traders Are Properly Wiped Out
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Wolf,
You are going to have a Quadruple WTF chart and post soon when Tesla goes back above $1000 a share.
?
The rule is don’t knock Jesus and you don’t belittle Elon’s stock.
I agree, these negative articles seem to actually help the stock. Keep them coming.
Check the latest Consumer Reports slamming the $8000 self- driving option that will be delivered electronically at some point in the ‘future’. Only because their insurance etc. forbids it to they avoid using the word ‘fraud’ To prove fraud you have to prove the guy knew it wouldn’t work. Who knows what Elon believes?
Apart from saying the future op was BS, CR wasn’t too impressed with the existing stuff especially auto- summon or whatever T is calling it. You just don’t know what the car will think is a legal route.
The self-driving in the future hype is essential to Tesla, because as T is being overtaken very quickly by, for one, VW Group ( triple July T’s sales in Germany) it is the last area where it can pretend to have a lead.
So as part of the self driving deal, is Tesla going to replace the motherboard in old cars?
If they don’t, they’re selling snake oil. I don’t care many PhDs they hire, those chips do *NOT* have the compute muscle for self driving.
And if they do, that’s such a massive reliability problem that I don’t even want to think about it. I’d just send the Tesla software engineers some flowers and a condolences card.
How is this a negative article? It’s a FACTUAL article.
Pretty soon that WTF chart will turn into a BTFD chart! (A little tongue and cheek)
The system of the charts: sell the WTF moment, buy the end of the plunge :-]
Tesla has given me a 400% return over the last 12 months. Many others also. Bailed out at $870. For 1, take a look at financials. 2cnd, the competition is considerably more efficient, and lower cost. 3rd, look at hydrogen. Tesla cannot sustain there valuation. The markets see this. I will get back in at $350, a proper valuation.
Wolf,
Do I detect a slight wiff of sarcasm in some of this article?
Or is it just, ”I told ya so?”
And should we ask Musk if he will now buy the NYSE, eh?
Thanks again for all your good work!!
VintageVNvet,
I cannot talk about Tesla shares with a straight face. I just cannot. Please forgive me. No “I told you so,” but I cannot deal with Tesla shares without laughing about the whole spectacle. Just cannot. They fall into the category of “the zoo has gone nuts.”
And I’m a fan of EVs — they’re awesome to drive with max torque at zero RPM, and you don’t need to go to the gas station, you can just plug them in overnight in your garage — and I’m glad Musk put them on the map, and has shaken up the legacy giants, but good lordy, these shares and the hoopla around them…
Wolf,
To shift the focus from Tesla/Elon for a moment (as if that were possible…), the buried lede here is the semi-opaqueness that monumentally important indexes operate under.
Index investing has been a significant boon (a la EVs…), bringing low cost diversification and auto-reinvestment to the masses.
But… it is kinda absurd that key mechanisms of index operation (additions/deletions/etc) are allowed to be a black box of “qualitative stds”.
Ditto the lack of discussion/analysis around latter day pathologies that indexes can become subjected to (cap weight driven overweighting/self fulfilling index momentum trades/etc.)
The indexes have become so important (and more than occasionally distorted) that a lot more peering under the hood is justified.
But if you don’t require that companies adhere to minimum qualitative standards, you end up with opaque cross-funded, cross-owned, triple-hypothecated hyper-leveraged gobbledegook. What Galbraith called “the bezzle” – the hidden frauds and sleights of hand that no one sees until they’re exposed.
That was a big part of what killed the market in 1929. Everything got so crazily interconnected that even a SoftBank breeze could knock down the whole house of cards.
I’m sure when Tesla continues to post quarterly profits they’ll be let in.
What’s the hurry?
“the zoo has gone nuts.” … how about the inmates are in charge of the prison.
Indeed. And this only ONE display within the Zoo..
Go check out the howlers – They’re all getting quite loud as they climb the bars in their red and blue cages, raging and throwing sh!t at each other…
Step back to a minimum safe distance wherever possible.
Say Tesla and I involuntarily think tulip bulbs. Every time.
I hate EVs but I like Tesla, or rather I think I understand. An analogy from the past, GE and IBM. Two different responses to the new electric technology. GE made light bulbs, IBM moved information. Tesla is more than a “carmaker,” Musk is a transportation visionary. Some of his stuff is old school Buck Rogers, and he doesn’t yet have an organization. What is with Gertrude? This guy is the future, or at least the future as we used to see it. His ideas have enough clarity that government is going to take his side. Wouldn’t be surprised if he didn’t figure out a new banking system.
First electric automobile was made in 1881. Elon is some visionary. He stumbled across a Wikipedia page and knew many people are too gullible to do simple web search. You’re a perfect example of the reason for Tesla’s valuation.
i think musk is a cia/deep state cutout…..how else do you explain the insanity?
He’s a very smart guy who figured out how to extract billions of dollars from investors of all kinds :-]
There is a massive financial ponzi scheme occuring in front of our eyes where “investors” are trying to pump up money-losing companies with huge valuations then unload them into the Sp500. Once in the sp500 the ETFs will be forced to buy the shares from the original investors by using mom & pop’s 401k and pension money. Then when the stock implodes it’s only the middle class that loses and the rich investors laugh all the way to the bank.
Wework tried to pull off this trick and failed most spectacularly.
But uber, Lyft, and Tesla are no less bold and obvious in what they’re doing in my opinion.
Yes, that’s the “S&P scheme” I read about a few months ago. That’s why I’m surprised TSLA on S&P 500 didn’t happen.
With WeWork, the scheme is a bit different — it involves closed-door funding, extrapolating to BS valuations for eventual IPO. And SoftBank is usually the master-mind behind those. It’s well-documented by Wolf.
Yep Wework tried to IPO at $40 billion to get themselves into the SP500 and failed spectacularly. They tried and failed but they definitely tried.
Speaking of SoftBank, they are doing what they do best again, but in the broader market this time:
“SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday and Friday, according to people familiar with the matter.”
https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2
Here’s a crazy (or maybe not) theory: Softbank invests Saudi’s money. Saudi Crown Prince MBS has all the reasons to want Trump stay president. The stock market performance is a major factor in re-election chances.
Worth considering/looking into.
Gaming GAAP for a single year is not that big a hurdle.
Oh, look out below!
After the Tesla fanboys and Robinhood youngsters have all weekend to think about this, there may be a massive unload come Monday morning.
I will guarantee you that Tesla stock will not go down on Monday morning.
I will go so far as to bet you that with all of the activity on both the buy and sell side, TSLA will end the day TOTALLY unchanged.
Can I sell a straddle? Expiry Monday.
Another afflicted perma-bull. Guarantee with what— maybe your tremendous track record of managing billions of $$$.
ROTFLMAO
With his ability to look at a calendar :)
Anthony A.,
Hafta wait till Tuesday morning in the US. Monday = Labor Day. Enjoy!!
Damn…this CV19 stuff has me all goofed up, calendar wise. Being retired adds to the confusion (LOL). Plus, around here, I have seen no activities that indicate Monday is Labor Day. Maybe I have been holed up too long.
Thanks for the reminder, though!
Since I retired, I don’t have to know what day it is, unless I need to go to the airport to travel. It’s a great feeling. Puts things in perspective.
Well, it could have something to do with the fact that Labor is pretty much a dead entity in this Country nowadays, that is, if you don’t count Public-Sector Unions.
Anthony, I’ll raise Apple and Keith’s bets and guarantee you that there will be no “unload” whatsoever of Tesla for the next year. In fact, every share of Tesla sold will have a buyer!
P.S. Odds are pretty good that there will actually be more shares of Tesla put onto the market as well.
Well, if you folks are right, I should dip my toe in for a number of shares and hang on for the ride then!
But see, that’s where I have trouble….my career was engineering/business management and risk taking required careful analysis. That’s built in to me. So taking a position in Tesla is like gambling for me and knowing the value is not justifies for the offered price.
There is always seller and buyer… the only question is who is taking the position and when.
The SoftBank guys probably bought the stock, drove it up with millions in options and made hundreds of millions in profits. There are always those massive funds that does this. If you want entertainment just look up the Jim Cramer manipulate market video on YouTube.
But a big fund like that has to be able to get out, and that too changes the market in the other direction.
Wolf,
I agree, they have to get out, but they would be selling and buying in smaller tranches to start with, the calls that they put are inconsequential, they only need to sell their stake, which while might be big to you or I, but in the context of the market, it’s indistinguishable. Look at the daily volumes on TSLA or AAPL, TSLA seem to be running around $20B worth of shares daily, about the same with AAPL.
This is using average volumes, Softbank seems to have spread the dollars around, not just in TSLA or AAPL, but in a whole bunch of stocks. If they sell off over the course of say five days, their output is likely a lot less than a billion a day. May be spread out the trading through multiple channels at smaller volumes, 10K of AAPL for example is $12M, that much volume goes through in minutes. They spread this stuff out over uneven blocks over the course of a day. $100 M is not even noticeable.
Everybody does this, even Buffet, he dumped 100 M shares in Q3, nobody even noticed until the news came out. Daily average $ for WFC is only about $1B; Buffet sold $2.4B out of that thing in that amount of time, and no one had a clue.
I think with the trading volume today, whale moves are not that easy to notice.
MCH,
“I think with the trading volume today, whale moves are not that easy to notice.”
I agree. But then, how could they boost the market going in when they don’t pressure the market leaving? Do you see what I mean?
This whole Softbank thing is just part of the meme. Reality is, if you move markets buying something, you’ll move markets selling it. And maybe that’s what we saw over the past few days. But most likely, that Softbank purchase didn’t move markets noticeably going in, and didn’t move them much going out (if it already did), and Wall Street is just trying to find a story.
Buffett is different. He buys quietly and then gets on CNBC and says what he bought and shares jump because of the hype. Then he sells quietly, and never says anything until he is forced to in his SEC filings.
Buffett sold a huge amount of Wells Fargo, and its shares have been in the shitter since the crash. They’re just 5% above their crash-low. Part of the reason is that Buffett sold every chance he got.
Oops, also forgot to add, have you ever seen the options markets in action?
I sold covered calls before, and sometimes, I would play with the sell price, starting high and going low. Playing with the spread to see if I can get better than the highest bids. Some of the stuff doesn’t have a lot of volumes. But what I’d notice is I would put in a call at below the lowest ask price, still a high relative to the highest bid price.
The second the order gets in, suddenly 20 options at the same price I just put in show up. It doesn’t sell, then I change it a little more, then another 15 or 20 orders gets put in. And the last tranche gets removed, sometimes, someone else then fills in the same vacated pricing level from a moment ago in a second or so.
You just have to know that somewhere, an algo happens to be watching the stock in question, and decided something was weird, so toss in 10 to 20 calls and see what happens. Then some other algos follow along and gets triggered. All the way until their limits get breached, then all of the orders that were behind suddenly collapses and there is a bit of a spread between the sell price you have, and the next sell price. All of a sudden, your ask is in the middle of no man’s land.
It is a scarily repeatable experiment at least from what I’ve seen in a short time frame (say over the course of an hour). That’s assuming the base price of the security doesn’t move too much in that span of time.
This is being noticed by a nobody like me, which means it’s probably some poorly written algo. Imagine what the algos from places like Citadel or Goldman are like. And that’s before you factor in that sometimes they front run orders, and that their advantage is reaction in microseconds.
Wolf,
Responding to your last comment. I think guys at places like Softbank or whatever hedge funds are also doing quiet buys going in. Ask yourself this, how many shares would they have to accumulate to have a $5B position in Apple (which is by the way, way below any reporting threshold). Then they just do it over a period of weeks. $5B position is barely even a rounding error in total. $50M one day, $30M next, you’d get to $5B in no time flat, and for a large mover like a TSLA or AAPL, or AMZN, it is utterly unnoticed by anyone in the market. Especially if they buy through multiple channels, and I would guess that’s how hedge funds do it. And the targets for those moves are obvious, they are all high flyers in tech.
So, pretend you’re a big player, you set up the stage, right? You just bought quietly bought $5B of AAPL, TSLA, whatever. Then (and this next part I don’t quite understand thoroughly) they spike the volume on call options, and they do that all at once. So, a hedge fund drops $10M on call options that are way out of the money, and they do a market buy on those and vacuum up the asks. (for example, did you see that at some points during the summer, there were call hundreds of call options bought into the market for stuff $300 out of the money, with expiration a week away for TSLA, that is just utter lunacy, I saw one day when TSLA was at $1550, then the news came that somebody bought 300 call options expiring the week after at $2000… that is the definition of insane or insider knowledge)
This move is big and noticeable. Somehow this triggers whichever channel they are using to buy shares so that they have enough to cover in case those calls actually come into money. (think of it like a bluff) Basically, it’s a trump like move to get attention, then it becomes a self fulfilling prophecy, because everybody thinks someone know something, and they start to pile in. All of a sudden, the shares have spiked up to enough for that hedge fund to start quietly selling. They do this part again in small volumes relatively speaking, 100s of shares each minute. But they stay under the radar, because CNBC just reported this, and the suckers (retail investors) sees CNBC, and they are already reacting buy buying market, driving things up. The whales now sell, but through multiple channels, and in small increments, their volumes are bigger, but gets masked because the overall volumes are spiking. And usually they’re done before the spike in prices dies down. (after all, it’s only natural if the price spikes, there has to be buyers and sellers… the new buyers = retail (suckers), the sellers are the hedge funds.
Sometimes, they even sell their calls at a profit. Who is left holding the bag? The retail investors or other suckers.
And this year is a perfect catalyst for this kind of shenanigans. First, there is a real trend of digital, it’s all over the media. Then there is this cover of the Robinhood investors, and finally, the artificial events created by Apple and Tesla to split their stocks. Never mind the Fed who is always finding ways to decrease the value of the dollar. All of these are conspiring to drive the prices higher in some way, shape or form. Then, there are all the experts on social media, CNBC, Bloomberg, Fox Business, and they report on these unusual volumes to lure the suckers (us) in.
As you say, you and I buy AAPL, or AMZN, or TSLA, we don’t move anything. We’re even less than rounding error. The difference is these guys can move markets with their call options. You or I can’t afford hundreds of options that are way out of the money that costs $10 million with expiration period days, weeks, or months away, we can’t move markets this way.
In the end it’s all a giant bluff, after all, to a hedge fund that holds billions, what’s a few million in call options, it’s just the cost of doing business.
Last one for the night….
Buffet unloaded 100 M shares of WFC over the course of 2 months. I doubt anyone noticed until it was reported today.
At 45M share average volume daily, 100M shares over the course of 40 trading days is 2.5M shares a day. He barely even broke 5% of volume. If Buffet can move that much quietly without triggering anyone in the media, a hedge fund could probably do something similar. And people watch Buffet all the time.
If you look at history of WFC over the last two months WFC had an unusual spike in volume on July 16th, the high low spread on that day was $1. Hardly a stand out among the other sessions in the same period.
Nobody reported a thing, which goes back to my belief that the news media is only told what they need to report, most of them aren’t able uncover a fire if it was burning right next door to them.
When there is another opportunity for Tesla to join SPX500?
Commity is gathering every month
Does it mean Tesla can join sp 500 next month?
Maybe it’s done by the whale carefully timing his application and then removal of funds from the market in the target security to be manipulated.
Taking advantage of Soros’ principle of ‘reflexivity’, if funds are applied when there is an appetite, even exitement, about the security then demand may ‘take off’ drawing other dumb money into the market so that the whale can unload his holding.
It’s a bit like a fisher man playing a line, working with the energy of the fish.
Or a child on a swing changing body position at the best time to use his weight to accelerate the swing.
It’s all about timing. A risky, but exiting, game.
MCH, you wrote:
“for example, did you see that at some points during the summer, there were call hundreds of call options bought into the market for stuff $300 out of the money, with expiration a week away for TSLA, that is just utter lunacy, I saw one day when TSLA was at $1550, then the news came that somebody bought 300 call options expiring the week after at $2000… that is the definition of insane or insider knowledge)
This move is big and noticeable. Somehow this triggers whichever channel they are using to buy shares so that they have enough to cover in case those calls actually come into money. (think of it like a bluff) Basically, it’s a trump like move to get attention”
This doesn’t make a lot of sense to me. They don’t need to own the shares to cover the calls if the price goes against them- they aren’t selling calls in your scenario- they bought them to juice the stock price. I have seen the theory that the soon to expire and way out of the money calls are being bought in bulk to force the big market makers to buy the stock as hedge against the calls they sold.
The thing is that the delta for out-of-the-money options is usually very low, which means that the number of shares the option seller needs to buy is a small fraction of the calls they have sold. So that by itself is not going to move the market much.
It is more likely an attention-grabbing gambit that makes people (or algorithms) think that someone has insider knowledge. This starts a cascade of people buying into the stock.
@Yancy,
You know, all of this is just guess work from what I read. But you got millionaire rocket scientists at these firms who look at mathematical model and figure out how to earn 10% to 15% in a few months. But when it’s 10 to 15 of a couple billion, we’re talking real money.
The shares is what these hedge funds would sell, the options is only bait. They don’t care about losing a few million dollars buying options. They are selling shares that makes a few hundred million. The rest is the cost of doing business. Like I said, I don’t really understand all the underlying things that go on, there are probably geniuses out there who set this up looking along lines of human behavior, psychology, and then the mathematically model out the various possibilities. Who knows.
But the simple truth is, there is manipulation, and now that is more successful because suddenly there are millions more retail traders there hoping to get a piece of the action. The retail suckers.
Here is a final thought, if the market can be manipulated upwards. It can and will be manipulated downwards too. It just depends on the incentive and who does it first. Wait till that blood bath happens. (I’m sure there are hedge funds who has plans and contingencies in place already for doing that, and those aren’t even the biggest possible players)
Ok, sorry, I misunderstood what you wrote, MCH. I misidentified the call sellers in your comment. My bad.
I always thought that if a share was sold that someone has to buy it.
Of course… what’s your point. You can put a ask at $10 above highest bid, or you can put it $0.01 below highest bid. It depends on what you base is at.
HFT look for spreads that are at fractions of a penny, but the large hedge funds are looking at more than that. If you’re up 20% in a position, and the absolute difference to your base is +$5, what difference does it make if you sell 1000 shares that’s at market.
The only question is one of market depth for the buyers, but then, that’s where all the computing power comes in. You and I may take 10 minutes to decide that there are X # of buy orders for 50,000 shares, and how deep that pool is. But a computer takes a fraction of a second, and before you blink your eye, the trade has happened. All it depends on is how good the guy is who programmed the parameters of the trade.
That’s why you see these hedge funds piling into trade with a ton of daily volumes. No hedge fund is going to trade the pink sheets where the daily volume is at 5,000 shares. Cause at that point, your average retail investor with a buy of 100 shares will move the market.
You can see the big picture in the director’s selling stock options. In affect they are receiving the gift of millions from amateur stock speculators, many who will get burned and lose their dreams of early retirement.
David Stockman had some good articles seven or eight years ago predicting this is where we would be with Fed policy turning Wall Street into a gambling hall.
“Blue Horseshoe loves Annacott Steel.”
Lenert:
“Use the offshore accounts!?”
“I’ll rip their throats out!”
Measured In Years…
“We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” he said. “It will be measured in years.”
Jay Powell
If God wants to destroy human he takes his mind away
To Wolf Richter,
Love your site and insightful comments. A suggestion; whenever you mention a company, where simple and possible, include its ticker symbol.
Thanks and mu best,
Done. Thanks for reminding me. I forget. You can even click on the TSLA I inserted and it takes you to a page on WOLF STREET with Tesla fundamentals, balance sheet items, largest investors, and all kinds of goodies. Try it.
Neat… how dynamic is this? And oh, I just realized, no TSLA market cap? You have one for AAPL.
;-{
Tesla’s stock split screwed up a lot of market-cap calculations until the new number of shares was figured in. On Monday, it was total chaos out there, trying to get a market cap figure on Tesla. Then gradually the new share-count was figured in. This market cap data here is from the SEC site I believe and lags by a couple of days. So check back next week :-]
Honestly, that’s a surprise in this age of non-sense. Tesla didn’t grease the right palms? Or, the S&P folks didn’t own any TSLA shares?
Expect some EM stunts soon.
Yes, the stunts that EM pulls are beyond legendary. I’m honestly on the edge of my seat waiting for what he comes up with to get out of this mess. Nobody will be able to guess. Watching him is better than any “cliffhanger” movie imaginable.
Perhaps he’ll send himself to Mars. I’m rooting for that response.
Tesla never has smelled right to me. I haven’t researched original investors, but I wonder if some are very politically connected and therefore has been able to keep the credits flowing into Tesla. I would have thought maybe that was over at 2016 election, but seems like spice keeps flowing and SEC and Safety Board gives them a pass.
I still think once a hedge fund or pension fund loses billions then the law suits will start flying saying EM mislead investors. Haven’t read Tesla’s SEC filings, but wonder if they speak the truth and EM is the marketing guy not under oath so it’s not enforceable.
If you, Dear Wolf Reader, managed the S&P 500, would *you* have run to add Tesla ?
As with WeWork’s IPO, it is nice to see sanity breaking out; and, it should only break out more widely, speedily, and in our days.
I’m glad I don’t have to make those decisions and then catch the flak afterwards.
EV’s are useful. Their role will no doubt grow. Selling a cachet stock (antiquated equivalent to a meme. it’s French and sexy) in order pile up capitalization does not equate to piling up the stuff and selling the stuff the capital was supposed to be used for. Freaking cars. Since Tsla’s stuff is cars the static 1% share does not meet the grade even at the S&P. Of course the S&P failed to do its job in 2007 with the housing bust and missed the whole thing. Oooooops!
Well, I hope no one overpaid.
On margin.
With the rent check.
It’s been weeks that Tesla fans have been harping about how inclusion in S&P should be the reason to purchase Tesla shares at any price. Now that S&P has snubbed Tesla, they are glad that Tesla is not included in S&P, and that Tesla without S&P will be a much greater company; or even negative coverage of Tesla is a great for the company. These Tesla fans say anything, do anything to pump Tesla. If a company is good, you don’t need so much pumping.
Also, don’t accuse me of this or that, but I find Asians and Indians far bigger fan and active purchasers of Tesla than others. Most of my Asian and Indian coworkers own Tesla shares and love Elon Musk. For some reason, Asians or Indians worship Elon Musk.
In crazy times I always like Charlie Munger’s saying that it’s good to invert the situation. In this case, if people are over paying for big Tech and Tesla, then the stocks are that are the most unlike big Tech are probably where to look. If you believe Hussman’s research one of the few sectors to give you a small positive return over the next 10 years are going to be utility stocks.
Or a co that makes EV ‘s that already knew how to make cars and out sold Tesla about 3 to 1 in Europe in July: the VW Group.
Renault also overtook T. The early adopter advantage is over.
PSA group and French super- major Total are doing a multi- billion Li battery facility
1) SPX daily : the great escape.
2) SPX daily : an impressive buying tail ; the closed is above Feb 19 peak. SPX weekly : a red doji.
3) Today retracement t Sept 2 top was limited.
4) SPX daily : the RSI line from Mar 23 to June 26 was breached.
5) SPX daily : the front line of the cloud (9,26,52), it’s top is bending.
6) T+K lines : T is bending > SPX high. T became a resistance line.
7) If next week SPX will cont it’s decline, Mar 3 high @3136.72 and
Feb 28(L) @2855.84 trading range is the next target.
8) The halftime low on June 15 @ 2965.66 is inside. It’s support.
9) For 56TD til Sept 2 high SPX was up 622.45 points.
10) If Feb 28(L) @2855.84 will be breached : SPX will invade Apr 1-3 island.
What happened to the 5 billion dollar stock offering?
It’s refreshing to see the rating agencies doing their proper job, providing realistic gravity. In 2008 the rating agencies were all helping to boost the fraud toward Mars.
polistra,
Just to clarify: This was decided by “S&P Dow Jones Indices,” which is NOT a ratings agency, but it owns and administers various indices, such as the S&P 500 Index.
“S&P Global Ratings” is the ratings agency you’re thinking about, and it has nothing to do with this.
Can we add “Down Jones” to list with “Brick and Mortal Meltdown” and “Mortgage Baked Securities”? ;-]
Most def ?
IMO, TSLA is a side show in this cycle.
There has to be a fine company out there, like Enron, Worldcom, Lehman or Bear Sterns, to get the ball rolling downhill.
Then, everybody sees that Fed has no clothes or swimming naked in the red ink.
Tucker…?… some here are ‘historically deficient’ in terms of DD…
Great article thanks Wolf. ‘tragically’ classic!
I looked up the average of the four different valuation models some use for valuing the markets (pe10, reversion to mean trend, Q ratio, and Crestmont mean profit adjusted PE10). Average them all you get about 1500 on SP500. Something’s going to spook the market one day and down we will go.
IIRC, I said dow 12K and S&P 1800 back in the early days of this virus event, and although ” that’s my story and I’m sticking with it.” I kinda sorta think you may be more correct than I was then…
Time will tell, eh OS,,, and meanwhile, ”IF”” we can just keep our powder dry, we will have a lot of fun the next few years.
Let’s just say fair value is in this range of 1500 – 1800. It’s hard to know what the purge bottom will be. If you buy at 1500 – 1800 and it goes thru fair value to 750 then you have at least a few weeks of misery in store. Or if it drops to 2000 and you never pull the trigger, then you missed an opportunity.
I try to trigger off Buffet, if he is putting a lot of money to work, to me it’s a buy signal.
During the golden age of postwar capitalism (’47-’73) S&P earnings yields were like 7%. For TSLA to yield 7% at 39 cents EPS, the share price would have to fall to like 4 bucks.
What happened to the Toyota Prius?
I saw retail gasoline prices of $2.15/gallon recently. In California the gasoline tax is high and they buy EV cars to avoid the gas tax.
Elon’s Space X planned to deploy a fleet of communications satellites to provide low cost broadband Internet to remote locations. Tesla was begging another round of stock issuance.
David, the Prius is still being sold along with a few dozen other hybrid cars and trucks. Hybrids are not going away anytime soon and remove the range anxiety of pure electric vehicles.
The California gas tax is very high, well….because it’s California! (some people think California uses different money that the rest of the states.)
And if you live in Southern Louisiana your hybrid is still mobile. Your pure EV isn’t. The utility says ‘weeks’ to ‘rebuild not restore’ and no doubt the time can be expressed in weeks but I’d say double digits. On the plus side, it will happen faster than Puerto Rico.
nick kelly,
If there is no electricity, gas pumps and the payment systems don’t work either. Try to get gas during a large blackout! And before a hurricane hits, when lots of people try to evacuate, gas stations often run out of gas, and people get stuck because their cars have run out of gas and they can’t get any.
People need to quit dragging out this red herring. It’s nonsense. Charge your EV overnight at home every day (which is a lot easier to do than topping off your gas tank every night) and then when a blackout hits, you have a full battery and you have options, same as with a car that has a full tank of gas.
I knew I’d hear from you WR when I referred to no power.
There is already one place in the US mandating generator back up for service station gas pumps. The required power to operate a gas pump can be delivered by the smallest home generator. It would be a good candidate for a battery back up while generator kicks in like hospitals etc.
If you are rural you can have several weeks or months supply in a your own elevated tank which will gravity deliver.
I understand that the power isn’t lost in NA very often for very long ( in the Quebec Ice storm it was out for weeks) but amps are amps and an EV needs lots of them. Here on Van Isle we had a week long outage last year in rural areas but small generators powered wells to fill bathtubs for the toilet and cooking.
On the light side an anecdote: a few years ago I was checking into the River Rock Hotel and casino. The desk said sorry we can’t check you in until power comes back on. It took about a hour or so.
That was the hotel. But the casino never even lost one second on one slot machine. It ran seamlessly on backup thru the outage like it never happened.
Guess casinos and hospitals are priorities.
I will say for NC the Toyota hybrid was a lot better received than pure EV. Probably makes sense for our culture and incomes.
Seems like I read that US automakers didn’t want to invest in hybrid and then have to come back and invest in EV so they are taking the risk that market will accept EV. I think it’s going to be a tough sale because as IC demand goes down fuel prices are going to stay low, but as grid goes more green the electricity gets more expensive.
I guess people have been choosing between battery powered and IC golf carts for years and both are still popular.
Old School,
Just about every automaker has hybrids. We have one too. Toyota has hybrid versions across several vehicle lines, including its SUVs. Hybrids are everywhere, but you might not recognize them since they’re just another powertrain option in that vehicle line.
We are on Heat Wave Flex alert, asked to cut back usage from 3 to 9PM. (they will bill your usage on another tier)
•Don’t charge electric vehicles until the emergency has passed (that would be all weekend).
Many years ago, I was in FL right about this time, the week before Labor Day. A hurricane was coming. I had to drive to 5 or 6 different gas stations to find gas. I didn’t live in FL so I wasn’t really in the know of what to do and didn’t think about it. Flights were cancelled so I was stuck. Luckily I had a rental car and I could drive up north and out of danger. I filled up and was glad the car I had, also had a big tank. I filled it to the brim, every last drop I could get in there. I drove to Georgia to get out of harm’s way along with 1/2 the state’s population it seemed. What would be a 4-5 hour drive normally was a 14 hour drive. I got there running on fumes. Slept in the car for the night, since every hotel and motel was sold out. Then the next day found some gas and drove up to Charlotte where I caught a flight home. It was a wild 36 hours.
Tesla doesn’t have anything to do with SpaceX as a company, I keep hearing lately that people think they are linked. They aren’t, Tesla is a money train for Elon to plow money into his real hobby.
And Space X is a separate structure that might never go public, if it does, it will make a splash. They might spin off Starlink though and take it public.
Isn’t there a limit to those “credits”? It’s been 18 years that Tesla has been allowed to sell these. They’ve basically become a bailout. I understand the “reasoning” behind them, but making them trade-able between companies negates the original intentions.
I had a mini WTF when I read that Etsy had pushed by Coty and Kohl’s.
Yes, sign of the times. They like to add companies that are growing and represent the modern economy. And companies that are on their way to the landfill are routinely tossed out years before they’re ripe for the landfill. That’s one way of keeping the Index high … to toss the losers and add what are hoped to be winners.
What is next possible time for Tesla to join SPX500?
Members of board are meeting once a month.
Correct me if I am wrong.
Is it any chance for Tesla to join SPX500 next month?
There is always HOPE!
The re-balancing is done quarterly. This one is effective in Sep; next one will be effective in December.
When you own Tesla, hope is your only viable strategy.
1. You own Tesla stock. You hope you can offload your crap on someone else.
2. You own a Tesla car? You hope the self driving car will not smash you into incoming traffic.
I cannot understand this equating the car with the stock. A Tesla car is a remarkable bit of engineering. The Tesla stock is a remarkable bit of financial engineering. All the time there are stocks that make fine products, that become over valued. Are Apple products bad products because the stock is overvalued? Tesla is not a self driving car and only the odd moron treats them as such and those crashes get the headlines. If it were really the case that Tesla cars were such death traps the statistical data would not show them to safer than an average car.
MCH,
Regarding your posts about big positions moving or not moving markets. Do you know what a dark pool is? It’s an exchange where transactions happen you will never see. Most large trading houses operate them. Many large positions are traded in dark pools at off market prices. You will/may never see them reflected in daily volumes.
Yep, heard of them, there is some connections with the daily volume stuff, because the shares have to be able to flow in and out freely.
Us retail investors are just at the mercy of the big boys. The only rule is make money when you can. And don’t fret about the rest.
That link I put up under my pseudonym is way old… it’s on Youtube. Cramer denies every bit of it, having ever said it. That’s fine, even if he didn’t, what that video says about market manipulation sounds incredibly real. At the end of the day, it’s all about psychology.
If you think ETFs are in trouble now, wait until the ESG rules & reqs force your pension, 401k, etc. into the same narrow set of ETF products pushed by BlackRock.
Your pension is just their Other People’s Money (OPM) to fool around . . .
On a related note, wait until the long-dated defined term retirement products start pushing your retirement to invest in private equity and venture capital funds. 0.50% fee on the product and then the PE fund charges you 300-400bps of fees per annum.
This is nothing new, skimming was always the plan, check out the taxes, fees and returns now.
And wait until you know who defunds SS through payroll tax cuts forcing the retirement qualifying age to 70. This should give people 8 good years with their walkers, false teeth, and dominoes.
The coming cpi increase for social security is probably going to be zero because everybody knows there is no inflation. Besides nobody needs the extra money, right?
None for those on the national pension here in Australia this adjustment period.
We had negative numbers for the last quarter and last year.
Who is going to defund social security through payroll taxcuts?
The Trump move is a defer, not a defund and it only takes effect from 1 August to the end of the year.
Oh, wasn’t the last ACTUAL payroll tax cut back in the previous Prseident’s administration or was that okay because he was a Democrat?
In the USA I believe that you are able to retire early and collect at a reduced rate.
Here in Australia the Labor government raised the retirement age for the national pension from 65 to 67 and you didn’t hear a peep of complaint from people in the Labor Party.
Not in stages based on your age, but a blanket move based on a cut off date.
There is no early retirement at all. If you can’t work and are under retirement age you have to go on the unemployment system which is pathetic.
So in effect they stole two years of retirement pay from the most vulnerable people in society here. Those with lots of assets and and income don’t rely on the national pension, but the working poor do.
They also took and are taking another two years of income tax from every working person as a result.
IMO a pretty disgusting move the way it was done and implemented.
Don’t forget the cat food and saltines.
Charge your EV overnight at home every day
Yes, because all of America lives in a 4 BR, 2-and-a-half-bath house with garage. In order for me to “re-fuel” my electric vehicle all I have to do is run a 500 foot extension cord from the 22nd floor, down the elevator and across the street to my car which is parked on the side of a busy city street. What could possibly go wrong.
Nice analogy, what about a 5000 mile extension cord, with attending losses? The climate change people are already trying to dump NG, because of Co2? Everything that burns leaves Co2. The notion you can burn coal in Wyoming and it won’t bother you in LA is really dumb. The problem with renewables is amperage, which is what gives a Tesla its zero RPM torque. When I can put a solar panel on the roof of my car and drive around count me a believer.
As an EV owner, 2016 Fiat 500e, it would be nice for you to stop your pseudo-engineering numbers, cherry-picking BS as cover for your ICE addictions. You like the noise, all good Americans do – it announces your author-itah, as the ladies turn their heads to look at THAT car driving by, while you grind through your gears trying to find third.
(if you want to talk about something hopelessly outdated and inefficient, from an engineering standpoint, we could argue about transmissions… Oh wait, EVs dont have one.)
EVs aren’t perfect, but the shitty energy sector infrastructure you describe, which was conceived and built mostly during the Depression, and after WWII, is not to blame.
TSLA’s problem is that is not an EV company anymore, but a tech company, the inside out of Apple, stapled to an EV platform. Self-driving has overshadowed the basic EV and EM’s goals of an affordable EV in every garage.
BTW, Two of the newest stocks on the Nasdaq are…. Chinese EV companies.
“BTW, Two of the newest stocks on the Nasdaq are…. Chinese EV companies.”
So another two companies set to suck money from gullible US investors.
Uncombusted methane is an even worse greenhouse gas than CO2 and our 50 year old cast-iron infrastructure is leaking like a sieve.
In Tacoma, where many homes have no garages nor driveways, cords running across the sidewalk are becoming common. The city now waives permit fees so you can build a charging station on the right-of-way (curb strip).
The vast majority of people in N. America live either in homes with garages or in apartments/condos with a parking garage or designated parking sports. For these cases, charging a car overnight is no big deal.
You are an edge case. And industries don’t make decisions based on edge cases.
Most, if not all, apartment/condo buildings are not equipped to measure individual EV electricity consumption. Yet. If you have a 3-flat will you invest in individual metering, eat the cost, or disallow charging?
Lisa_Hooker,
Sheesh. That’s why electricians have got it made. After-the-fact installation of electrical equipment is what many of them do for a living. It’s funny how people grasp at straws to show that EVs will never work. But they’re working right now.
edmondo,
Then don’t buy an EV, for crying out loud. What’s your problem? If you don’t like to mess with gas stations, don’t buy an ICE vehicle. Use a bicycle or Uber. There are so many options. EVs are one of them.
Tesla is dead!! For the 81632nd time.
Volatitlity is a good thing, especially for the price of options, according to Messrs. Black and Scholes.
Can we get a WTF story on this week’s volatility in treasuries?
lenert,
What volatility? The 10-year yield fluctuated this week in a range of 10 basis points. It just looks like a lot because the yield is near zero. But a 10-basis point range is nada. Look at it on a YTD chart. You can barely see the tiny squiggles this week.
EVs are a super-cool invention; I want one, but they will never replicate or duplicate, as it were, what the combustion engine vehicle achieved in the 20th century in terms of scale and magnitude. This presents as an affordability problem for the have-nots that are still relying on their gas powered engine(s) to get to point B.
TSLA stock is an unremitting pump and dump.
Kasadour,
I don’t understand your concern that EVs as opposed to ICE vehicles present “an affordability problem for the have-nots.” New ICE vehicles in general already present a huge affordability problem. The average transaction price for all vehicles sold in the US in August, including all incentives and rebates and what not, was $35,400.
By comparison, base MSRP prices of just a few vehicles:
Tesla Model 3: $38,000
Chevy Bolt: $37,000
Volkswagen e-Golf: $32,000
Nissan LEAF: $31,600.
There is a flood of EVs coming on the market that will be priced below the ATP in the US, and price points are coming down. EVs are much cheaper to manufacture than ICE vehicles, except for the battery, and battery prices are coming down. In a few years, EVs will be cheaper than comparable ICE vehicles.
By pushing ever more expensive ICE models, the auto industry has years ago priced out the “have-nots.” But there are lots of 2-year-old used vehicles with 35k miles out there at much more affordable prices.
Seems like there’s supposed to be a link here? For me “ICE vehicles in general already present a huge affordability problem.” is underlined but is not a link.
No link there. I underlined for emphasis.
C’mon Wolf,,, average in this case re autos and trucks is terribly skewed by the very excellent sales techniques of the new car biz.
New cars are still available for near $10K, base model providing approximately 100K miles without any major work for 5 years or so.
When ya start looking at what is driving the average so high, look at the bent ones, the rolls ones, the bugatti ones, etc., etc.
Those cars selling for 2 and even now 3 MILLION.
I get the eventual advantages of the EVs, and I might last long enough to have one, but only when and IF the overall live cycle cost AND the carrying capacity AND the range make sense for me, and I suspect most folks older than teen age will do the same.
Not happening at this time for any of the above.
VintageVNvet,
Over $15K is the cheapest little econo box MSRP in the US.
So $15,500 sounds cheap to you. But it’s unaffordable to the 40% of households who make less than $37,000. All their money goes into basics such as housing and food, with very little left over for car purchases. Those are the “have-nots” that Kasadour mentioned, and that’s where the affordability problem is.
In a few years there will be a number of used EVs entering the used car market. It remains to be seen how much they will be discounted because of an impending battery replacement. Not everyone lives urban and considers a vehicle a disposable consumable. Best solution for urban: Uber, Lyft, and rental for longer trips. Best solution for the sticks: ICE for a long time.
Lisa_Hooker,
Don’t decide for other people what their “best solution” is. They can decide on their own. And you decide for yourself what your best solution is. And everyone buys based on that decision. That’s how people do it.
Mr. Richter,
I concur with your findings regarding TSLA not getting picked up for the S&P_500.
In addition to suspected Acctg Fraud (why so may CFOs walked out), if one removes Carbon Credits, TLSA would have persistently reported Losses most Financial Quarters.
I.E., TSLA have yet to have “Operating Profits” from their “Raison d’etre” – Vehicular Sales.
If I were on the Determination Committee, I would Look at TSLA bases on that alone.
Consumer reports just came out with a scathing review of Tesla’s self driving and driver assist features. After much testing they deemed them all unreliable, unsafe and overpriced. So to commemorate this I have now bestowed the Tesla Fan Boys with a new name, “techno muppets.”
I think MCH might be onto something above. If so, it is very disturbing. I was wondering who the constant sellers of TSLA stock was, knowing that the cult won’t sell in case it triggers a plunge. MCH’s theory seems to account for this.
Several huge institutional investors have unloaded TSLA recently, including T Rowe Price which got rid of something like 80% of its stake. With these hot stocks, it doesn’t take much to pull the rug out from under them, especially one where the public float is so thin as Tesla’s.
I don’t have a theory, it’s just what I read from FT, WSJ, and yes… even ZH.
I don’t know how real it is, all I know is that there are levels of market manipulation going on far beyond what I can ever hope to understand, and I know what I can observe, and it makes me wonder about how much I can’t see.
I will tell you one thing though, decades from now, long after we’re all gone. There will be a Federal reserve bank president whose PhD paper was about the market manipulation in the first few decades of the 21st century and it’s effects on the real economy.
“…There will be a Federal reserve bank president whose PhD paper was about the market manipulation in the first few decades of the 21st century and it’s effects on the real economy.”
If that’s not prescient, I don’t know what is. Although, I wouldn’t dare speculate on the role of a Federal Reserve in the future. Should the poor and middle class ever realize they have been stripped of their financial dignity, I imagine things might look differently than they have over the past 70 years.
Report of a Tesla running amok, killing 3 people and injuring 8 other people in China.
If this is true, it could lead to another stock split, …. the reverse one.
Petunia, “The coming cpi increase for social security is probably going to be zero because everybody knows there is no inflation. ”
Correct me if I’m wrong but the way the gubmint measures SS cost of living increases is from the following web site using their cpiw #:
https://www.ssa.gov/oact/STATS/cpiw.html
They supposedly use cpiw to calculate SS increases based on comparing July, Aug, Sep cpiw average to last years J/A/S average. Currently it is running about 1% higher, but not near enough to compensate for health care increases as one example for senior citizens. At least you can look there to get an idea.
So much for SS to cover Jerome’s “2% average inflation” for the next several years!
Somehow I think 50 years from now they will be talking about how this minor, long gone, electric car company, Tesla, was the financial incarnation of the stock market mania of 2020, that is an over valued, over hyped, over leveraged, fake. All of which ended in disaster for all concerned. Tesla, tragedy and farce all rolled into one.
Tesla is just a microcosm of the broader US Ponzi economy. 50 years from now they (if the US still exists) will be talking about the Fed’s insane monetary policies which enabled Tesla, etc. Tesla’s name will be quoted, but Tesla will not be the main event.
It is silly that each of the 3 stocks that will be added to the S+P have a market cap of 390b.
That said the market cap of TSLA has been and is ridiculous . When TSLA traded at 515 in the after market , its market cap = the “COMBINED “ market cap of every other auto company (outside of China based auto companies ) .
I think an EV would work best for a couple (family, group?) where the EV was for around town but there was a ICE for long trips.
Down 20%. Reverse split coming ;)