Nvidia is our double-WTF chart of the year, giving up $512 billion in 10 days.
By Wolf Richter for WOLF STREET.
The Nasdaq dropped by 3.65% today, the S&P 500 by 2.3%, the “worst day since 2022,” as everyone said, but when you really look at it, after the massive melt-up, it was barely a dip. The big bad Nasdaq isn’t even in a “correction” yet, down 7.0% from the July 10 high; and the S&P 500 is down only 4.2% from the July 16 high.
But the massive run-up of the biggest stocks has created incomprehensibly huge numbers in dollar terms, and those trillions were flying by so fast on the way up they were hard to see, and now they’re flying by even faster on the way down.
The Magnificent 7 – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla – dropped 4.8% today and are down 10.4% from their July 10 high. So as a unit, they entered a “correction.” And that’s about it so far. But in dollar terms, in those 10 trading days, the Mag 7 gave up $1.77 trillion in market capitalization, including another $765 billion today, which took them back not to Adam and Eve … but only to June 10. In two weeks, they gave up four weeks of gains.
As per the above chart, it is clear that the Mag 7 got on the Magnificent Escalator and rode it up to Floor 17, and then on July 10 switched over to the Magnificent Elevator to ride up all the way to the moon, but someone got confused and kept pushing the wrong buttons?
The stocks in the Mag 7, from the July 10 peak, in order of the percentage decline:
- Tesla [TSLA]: -18.0% (-$152 billion)
- Nvidia [NVDA]: -15.3% (-$512 billion)
- Meta [META]: -13.7% (-$186 billion)
- Alphabet [GOOG]: -9.5% (-$226 billion)
- Amazon [AMZN]: -9.4% (-$196 billion)
- Microsoft [MSFT]: -8.0% (-$277 billion)
- Apple [AAPL]: -6.2% (-$222 billion)
The big mover du jour of the Mag 7 was Tesla, in terms of the percentage drop. By December 2022, Tesla’s stock had dropped over 70% from the all-time high 15 months earlier, no sweat, and was duly inducted into our pantheon of Imploded Stocks. To qualify, a stock has to drop by over 70% from the all-time high. Eventually, the stock recovered some to where it was down only 40% two weeks ago.
But today, TSLA plunged 12.3%, losing $98 billion in market cap, after Tesla reported earnings, bringing the drop since July 10 to 18.1%.
From its all-time high in November 2021, Tesla is now down 47.8%, and is back where it had first been in December 2020, Musk’s robotaxi-hype notwithstanding (Waymo’s robotaxis are working and taking fares).
Tesla has a problem: Musk’s relentless urge to waste his time on X in order to piss off potential EV buyers and drive them into the arms of other EV makers, which are licking their chops. For example, in California, non-Tesla EV registrations surged by 45% year-over-year in Q2, grabbing nearly half the market, while Tesla registrations plunged by 24% (sales of ICE vehicles fell by 2.1%). This may be fun for Musk, but it’s not fun for Tesla.
The big mover du jour in dollar terms was Nvidia. The stock gave up $208 billion in market cap today (-6.8%), bringing its 10-day decline to $511 billion (-15.3%).
But easy come, easy go. Between late 2022 and July 10, 2024, the stock had risen by about 1,100%, from a stock-split-adjusted $11 to $135. In dollar terms, Nvidia had gained $3 trillion in market cap over this period. These amounts – one company gaining $3 trillion in market cap in two-and-a-half years – are just mind-boggling.
In the Mag 7 stocks, the percentage declines are not the end of the world, as of today. Four of them are down only by single digits from their all-time highs on July 10. But the dollar figures are huge. This matters because they put a big drag on the S&P 500 on the way down, just like they fueled its rise through July 10.
AI mania caused an explosion of orders for Nvidia’s chip systems, revenues and profits, as companies such as Tesla and Meta, and just about everyone else out there swimming in AI-mania, went hog-wild in sending many billions of dollars to Nvidia to build up their AI infrastructure. Is this AI-mania sustainable for Nvidia? Is any mania sustainable?
Everyone is now sitting on the edge of their chair, waiting for Nvidia’s earnings report. But that won’t come for another nailbiter month.
Nvidia is our double-WTF chart of the year. On July 10, it was a $3.3 trillion stock, the most valuable stock in the universe; now it’s a $2.8 trillion stock, still a huge number.
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“The Nasdaq dropped by 3.65% today, the S&P 500 by 2.3%, the “worst day since 2022,” as everyone said, but when you really look at it, after the massive melt-up, it was barely a dip”
This is just sad and who’s to say it won’t just spike back up by next month.I think I have seen this rinse and repeat cycle way too often. If the big bet on rate cut in Sept plays out, market will find that rocket fuel they need to boost to hyperspace.
Looks like Bank of Canada cut rates today and Swiss bank did as well, seems like these central bankers don’t have any stomach to let any proper amount of air to deflate, everyone else is looking at US next, pavlov’s response await..
The BoC has to deal with variable-rate mortgages which make homeowners more rate-sensitive.
The corollary is that the 30YFM insullates US homeowners from higher rates, thereby allowing the Fed to keep them high even as other central banks cut.
The Fed out-hawking other CBs is also good for treasuries and the dollar.
There haven’t been a whole bunch of tech bubbles like this one. Only one: ‘Dot.Com’
How long till rinse and repeat gets everyone even?
Who knows with US borrowing a trillion every 100 days, which was unheard of in 2000-2002. But since Dotcom is the only tech precedent, here is that time line:
It was 15 years before the Nasdaq got even.
People now, do not understand the true market with these companies. This is nothing like a Dotcom bubble and or anything other than a temporary reaction or slight correction. The market for these companies in particular is different. All will recover and climb again. These companies are to big and involved in to many areas of daily life (except Tesla) to not continually gain over time. Google and Amazon will be splitting again in 5 to 7 years. To many people are stuck on outdated reading of data.
and if the rest of the economy implodes, who is going to pay the marketing dollars to google, meta and all of those?
“The market for these companies in particular is different. All will recover and climb again. These companies are to big and involved in to many areas of daily life (except Tesla) to not continually gain over time. ”
In other words… “It’s different this time”.
I guess Cisco is totally different then?
What does Google even do anymore? Docs is useful, gmail is meh. Search is driving people to alternatives now. The innovators cashed out ages ago.
Google owns much of the backbone of internet advertising — stuff you will never see but that makes online advertising work. Google is everywhere beneath the surface in internet advertising.
“There haven’t been a whole bunch of tech bubbles like this one.” Um, paper money technology in France 1720, railroads in the 1800’s (with massive failures, worthless stocks and restructurings), radio in the 1920’s (RCA was the Apple of its day), computers and “nifty fifty” stocks of the 1960’s ….
Paper money, aka the John Law scheme was tech?
You forgot the Florida Land Bust, which in percentage terms dwarfed the GFC housing bust, and the Dutch Tulips Crash and the late 20’s Great Wall Street Crash, etc. etc.
Instead of discussing everything, how about let’s focus. OBVIOUSLY, after reading the GDFA, tech means computer related stocks, with Nvidia being a supplier to computer maker Apple and Meta etc. being computer based ecosystems. Tesla is the only stock not directly comp related, and to quote the author of the article, Tesla doesn’t belong in the Mag 7. There has been only one previous computer- related crash.
A lot of America are invested with 401k’s, and if it falls people will will be angry.
@Formerly Sacramento,
Some people. Depending on what their 401(k) is invested in. When I participated in a 401(k), we were given a list of investment options. Some involved higher risk securities than others.
Also, some of the money flowing out of tech goes into more “boring” stocks. I’m invested in long-term dividend paying companies and most of my stocks were up yesterday despite the market declines.
Wolff
Two different question
1. This AI bubble – how much market valuation was created and how much will disappear
2. Elon – badges government policies – how much did Elon benefit from selling those -energy credits and EV subsidies
Both them good questions…
Just an example. For Q2, Tesla reported that it sold $890 million in “regulator credits” globally to other companies. It seems the majority of it is outside the US. That has always been a big part of its business.
May the financial farce be with you and all the others who are a cut above all those who are a cut below.
Good article.
But how will we know TRUE AI when we see it?
Our own “intelligence collection” is roughly a 6-10 million year “bubble”, as it were, and we have left an awful lot of wreckage on our way to achieving it.
I certainly have no idea…..I have never spoken with the universe…..not even a burning scrub bush….and they are all over hell lately!……what are they saying?
Anybody?
people are way more angry about inflation. most people have 401ks, but the stock market largely benefits the rich, regardless of what the media hypes.
That magnificant elevator might just be an express elevator down…
Today’s Science Lesson is about the Power of Gravity.
I noticed some Dems are calling for a boycott of TSLA. Down more than $30 today. Seems Musk is going to give $45 million a month to a former President, and that ticked off a few people.
“At no point did I say I was donating $45 million a month to Trump. That was a fiction made up by The Wall Street Journal,” Musk told ABC News on a visit to Capitol Hill today.
Actually, I read a transcript of a Trump rally speech, an excerpt, and in it Trump stated he was getting 45M per month from Musk. He wouldn’t lie would he? :-)
Good news article. Overdue.
Do not believe a transcript that you have no idea who transcribed. If you cannot hear it in the speech yourself then it does not exist.
What exactly did he say?
The WSJ said he said… “according to people familiar with the matter.”
Behind paywall:
https://www.wsj.com/politics/elections/elon-musk-has-said-he-is-committing-around-45-million-a-month-to-a-new-pro-trump-super-pac-dda53823
Well Musk said it on twitter… and later in an interview with Jordan Peterson he clarified that he created a PAC that supports Trump. So the WSJ has nothing to do with it.
Indeed.
As the WSJ noted, Musk replied to a tweet bashing the “woke left” that stated, “Elon Musk went from being an Obama voter to pledging $180 million to elect DJT.”
Musk said, “Yeah”.
Wonder how many of these Mag 7 insiders once again cashed out at the top like last time? Jen-hsun would be wise to offload some more while the getting is good. Think even some WS firms are starting to sniff at the BS stench AI is leaking..
A classic pattern is a bubble followed by a huge shakeout (which would reflect this bubble’s WTF dimensions), then consolidations and buyouts, and a few survivors emerge.
Howdy Old Ghost. Leaked, true or false information for a divided country. Lots of folks play both sides …
So where did all that money go? Utilities, Energy, and Healthcare up slightly, but not that much. Gold down this week so far.
Maybe Bitcoin? 😁
A trillion in CD’s? 😩
No, money didn’t go anywhere. It just vanished. That’s what a market does.
There was no ‘money’ to go anywhere. All that happened is that market capitalization has fallen which is the value attributed to the amount of shares times the last selling price of those shares based on the last bids. Very few of those shares ever traded at that price or will.
What do you mean? The money goes from your broker to you when you sell them back your NVDA shares.
Although it goes to your cash account at your broker, so I guess they technically still have your money. But now it’s a liability on their bal sht.
If I sell my share of NVDA, someone buys it for the exact same amount, and the cash stays in NVDA. Multiply by a gazillion to make up a trading day, and cash is shuffled around between traders, and never leaves NVDA shares.
But the amount of the loss today was money that just vanished. What happens is that the marginal trade sets the value for ALL shares of NVDA. And those traded shares cause prices to decline of all non-traded shares. And the money for everyone in NVDA just vanished. It went nowhere. That’s the most fundamental principle of the markets.
“The money goes from your broker to you when you sell them back your NVDA shares.”
That’s a fundamental misunderstanding. The broker normally only brokers the trade between me and the buyers. Even if the broker buys the share from me on their own account, it’s still the same, the broker puts the exact amount of their own cash into NVDA that I get for selling it and the cash stays in NVDA.
There may also be some fees involved, but now they’re tiny.
Wolf,
The fact that you have to explain this is most troubling of all.
And it points up how pretty useless “market cap” is as a metric (except in the negative sense of badly skewing market cap weighted indexes into excessive concentration).
Tiny marginal share price movements get misleadingly translated into hundreds of millions/billions in market cap movements…even though a tiny, tiny percent of shareholders ever buy or sell at any given price.
But those supposed trillions in Mag 7 valuations seduce (ignorant) shareholders into believing in/counting on easily evaporated wealth – a fleeting, frequently phantom wealth effect…which I suspect is the whole point.
If every shareholder who believed Apple was reliably worth 2 trillion plus tried to sell at the same time, they would learn just how far and how fast marker caps can fall. As you point out…see Tesla.
Cas127,
Market cap is NOT “useless.” What kind of BS is this? Market cap = equity value of the company as determined by a market (rather than by six men in a smoke-filled room).
If you want to buy the whole company, you have to offer the potential sellers market cap plus a premium, such as 20% over market cap. The equity value of a company is real: it can change a lot from day to day, and you can convert market cap into cash by selling the whole company, and someone else then buys the whole company. An entire industry has built up around selling/buying entire companies at market cap plus a premium, from Buffett and Goldman Sachs on down.
The price of gold plunged 50% starting in 2011 and then recovered. So the price of gold is “useless” because it changes? You people have a screw loose. I should just delete this BS instead of wasting my time on it.
I might not have understood OP’s comment correctly. Thanks for clarifying Wolf.
Goes Poof!, until you cover your short position
Wolf Richter…….
Providing Titanic passengers the very best deck chair advice one can find on the internet.
Fair Dinkum……
As THE GREAT Rob Kirby once roared: “The entire monetary system is no good. It is sick and failing”.
Enjoy your shares, stop losses and credit default swaps.
You’ll find in the end of ends, when the curtain to this entire sh*t show is pulled back, they will be worth sweet f**k all.
Get a life and enjoy it.
Look ye for truth and beauty, not profit amidst an ocean of filth and deceit……the “thing of beauty” you idolise as “The Market”.
“Get a life and enjoy it.”
Good general advice.
I’ve been doing it for a long time, it works great, and I love it.
T-Bills went up some (rates dropped)
Actually to buy a public co, it’s market cap less cash plus debt.
No, that’s not the price they pay, that’s the “enterprise value,” which is what the acquiring company tells its shareholders it’s getting for the price it’s paying.
The price it’s paying to selling stockholders is market cap (stock price times outstanding shares) plus the premium. When you buy the shares, everything else comes with it, including cash and debt, because you’re buying the entire company, not just its assets. It’s all included in the share price.
They move a little bit with big rate moves, but with such short duration the pull to par is strong.
MW: Surf’s Up!!! Stocks see worst wipeout since 2022. Here’s what might happen next.
Strong take from weak, rich take from poor. Soon their will be Granny’s living out on the streets. The squeeze is on, all Granny’s for themselves.
Home toad –
Surely you have something to offer, besides sadness and depression…
I wish well for all, I’m but the delivery toad.
The price of everything going up on everything for those on a fixed income is devastating, rent, food, healthcare, insurance to name a few.
Our most vulnerable, “grandparents”
So when I say the squeeze is on, smile and give a “big hug” too those who need it. You’ll find these “grannys” at Walmart, in the dog food isle, or hanging by the ramen noodles.
Home toad: dog food is not cheap! Compare the price per pound of a good brand to hamburg!
The dogs are happy that the Granny’s aren’t buying up all their food…noted AA
Oh my. 2022. All the way back like less than 2 years. (Which month in 2022, I’m not sure, so probably less than 24 months if I were to guess without looking). We sure showed all those bulls didn’t we. I can’t handle all this good news. If home prices drop all the way back to 2022 levels I’m going to wet myself. I’m so glad we’ve been so prudent. That Nasdaq drop is just insane isn’t it. Almost twice the very routine daily increases we’ve seen so many times in the last few years. Twice I tell ya, twice as much of those daily increases! Now we just need it to drop 50 more times look this and we’ll look smart so we can look down on the speculators, grifters, and money changers. I need a longer right arm so it’s easier to pat myself on the back. (No offense to your Beach Dude, I’m making fun of myself more than I am of you.)
Well folks, you do live in the matrix. Quit trying to believe its real – that’s your first mistake.
My mistake folks is I live in the matrix … it’s real.
I have no idea what that is but wolf thumping on Tesla was funny.
I was wondering if tesla will remain in the mag 7 if it loses 70% … The magnificent 6.
That doesn’t mean the matrix can’t be a great place to live!
Lots of inverse ETF’s out there shorting Nvidia. There is money to be made on the way up AND the way down. Haven’t found and inverse ETF for Supermicro though. When this market comes unglued in earnest, SQQQ is the best place to be. It pays a 6% dividend as well.
That’s all just betting on stocks the same as betting on horses.
Check out SOXS
Careful. Take a look at the 5-year chart of SQQQ. It lost 99% of its value over those 5 years. This is for day-traders only. The ETF eats itself up in front of your eyes if you buy-and-hold.
Wolf,
It seems like it would make more sense to buy call options in SOXS/SQQQ than hold the underlying. If you have a low volatility environment they are fairly cheap. In a high volatility environment, probably not the best time to initiate a short position anyway.
Best part is not having to put that much money up, and asymmetric risk/reward.
Druckenmiller has given some interesting talks about how setting up asymmetric risk/reward in uncertain environments was the key to his success (which is how he made the massive profits on the short of the British pound).
What do you see when you look at things through that lens?
I just sold some of the SOXS calls yesterday and today. Still have some left.
Loaded up on OTM Mag 7 puts for Jun ’25, Jan ’26. This is my asymmetric play.
Of note, the longer term calls on levereged short ETFs are very expensive. Puts are better for longer term I think.
+1. I learnt this the hard way.
Foolish as I was then in early 2022, I bought SRTY and SQQQ thinking they were inverse and not reset daily.
It was good timing and I made money but held too long to see a significant portion of returns eaten by day to day volatility.
It should only be used for day trading (which in my book means never)
Excellent advice, Wolf. I would extend it to any of the levered ETFs. For example, look at YINN (3x China bull) and YANG (3x China bear), or BOIL (3x natural gas bull) and KOLD (3x natural gas bear).
Over time they are guaranteed to lose money. They can be OK for short term trades (a couple of weeks at most), but if you try to hold them, you’ll get skinned. This is especially true of any ETF that holds futures contracts as opposed to a physical asset).
“Excellent advice, Wolf.”
It was the furthest thing in the world from advice. I don’t give advice. I was just rambling on about looking at charts.
I wish I could find a way to short myself, then I’d actually make some damn money. I’m too risk averse to mess with what seems like gimmicky behavior of stocks. A damn prude outright to be honest. If I’ve learned anything in the last bunch of years, it’s that trying use logic and be prudent has been foolish. I’ll know for the future that it pays to be a greedy gambling hype-eating blind follower. Learn from me kids, don’t go to school, you don’t want to be like me. Shoot blindly and wildly with no protection and Uncle Sam & Co. will make sure things come out all right. Never pull out, always hodle’em. Otherwise you’ll be like me, readin’um and weepin. I’m a loser. I’m using a damn Ouija Board to make my financial decision in the future.
Awesome rant. ;-) Read a book on technical analysis 40 years ago and at the time they proved the only thing that worked for trading was the 200 day moving average lol.
That’s when I started thinking about demographics and exponential growth series… and bacterial population analogues…
Market hype has a lot of similarities, ie when it’s too good to be true, reexamine your assumptions.
Me too Cupcake. I finally just threw in the towel thinking that I was smarter than people moving trillions, and gave my money to a “wealth advisor”. He’s made me wealthy.
Ok, Cupcake gets my vote for Comment of the Year
You first sentence woke my dog up from all the laughing.
It doesn’t appear that some people are comprehending valuation of stocks and the stock markets. There are about 7,000 stocks of companies that are traded in the US stock markets. When a buyer purchases a share of stock from a seller of that share, then the money paid for that share by the buyer simply goes to the seller less transaction fees. The money never goes into an account like a savings account with real money. The transaction price simply sets the MARGIN PRICE paid for a single stock share. Then, the markets IMPUTE that latest price times all of the outstanding shares of that company’s stock in order to create a MARKET CAPITALIZATION price which would be aggregate value of all of that company’s stock IF traded at the latest MARKET PRICE.
There is NEVER a pool of real money involved with actual market capitalization and transactions are expected by the markets to be between willing sellers and willing buyers. But the price of a stock is only worth what the last highest bidder is willing to pay. And that can change substantially and significantly in seconds.
The problem with stock markets is similar to bank runs when perceived valuations change suddenly and dramatically where a stock perceived to be worth $1,000 a share only gets bids of $100 a share or $1 a share at which time MARKET MAKERS assigned to each stock are forced to contractually step in to buy the excess of share being sold that can’t and won’t clear at current bid prices.
People can’t even see difference between prices and value. They certainly can’t be bothered to understand the movement of prices.
I dated a chick once who thought Cloud Computing was done in a actual cloud. And she worked for Microsoft.
If they’d allowed them more monopoly powers this wouldn’t have happened. It’s the Hedge Funds that extract dividends, stock buybacks, etc., and preventing managements from investing in many other industry directions. Perhaps.
Maybe this is the point in time where the fantasy hallucination starts fading away and the pandemic fog dissipates?
In retrospect, the pandemic fog came in layers, like when Zoom exploded as the essential tech — which seemed transformative — unlocking the key for work from home.
It was like dominos falling with various technology connections that helped weave together our evolving global experience. This was a time where it was felt that technology adaption and adoption had been pushed forward in an exponential blast.
Suddenly, everyone was far more willing to conduct business or shopping and embrace digital solutions. The future is here!
I think these building layers of adoption resulted in the perfect nurturing environment for the launching of ai-hype. Essentially, it was technology that already existed — but because people seemed attenuated and enthusiastic towards pandemic tech — ai-mania was far easier to promote as being something that was the next immediate step forward after the pandemic transformation.
The mania aspect of ai has been a narrative about profound economic changes that will happen sometime in the future and it’s not to late to invest in a handful of companies that will experience unimaginable, unfathomable wealth beyond imagination — the greatest ponzi in human history.
It doesn’t take many brain cells to go back in time to the pandemic, to review the price history of Zoom — and see what happened after people burned out on the hype.
Zoom was essential and transformative up to a point, but the lack of follow through adoption and usefulness evolved into a nothing burger — about as important as a McDonald’s drive through with malfunctioning, hallucinating ai service.
The pandemic laid the foundational groundwork for tech to evolve with new promising innovations — but the Magnificent Five is as structurally flawed as The Hindenburg — and instead of the ai bubble popping — we’ll see an explosion.
“Zoom was essential and transformative up to a point,…”
Video chat services have been around for many years, starting with Skype, as soon as broadband made that possible. Before broadband, when everyone was on dialup, Skype was audio only. Google, Microsoft, and many others have offered video services similar to Zoom for years. Zoom somehow got to be a hugely popular brand during the pandemic – that’s the phenomenon, that it somehow got to be so popular, instead of Google’s service.
…that old saying: “…what’s in a name?”.
may we all find a better day.
Back in 1985, I was involved in the installation of video conferencing centers in ARCO’s 9 business center locations in the U.S. they worked well enough to cut back on flying to meetings between company offices.
Heck even Trump sold his name to some company doing video phones back in the day… which was just a multi-level marketing scheme he got sued over as it turns out.
Its just a peanut. Nasdaq doubled in the last 5 years when we had the worst worldwide pandemic in our lifetime. Stocks will most likely retest Covid lows soon and due for “mother of all crashes.”
Aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaany day now…
I think this will happen when they finally have to do something about the ballooning deficit and implement major cuts, higher taxes, which would cause a big recession.
As the country becomes more polarized, it seems that companies are increasingly getting forced (or in Musk’s case choosing) to take controversial political stances which can have serious consequences for investors in the stock.
Musk has basically stated (as I understand it) that he is in a fight to the bitter end with trans activists, and apparently is willing to use X (with all the knockoff effects on Tesla).
Anheiser Busch had the well documented similar problem.
Both opposite sides of the issue, both losing customers (and market cap) because of it. If you are an investor in either stock, you are probably wishing you just stuck with S&P 500.
It seems that Bill Ackman and a ton of other investment types are lining up the same way way (some on each side), and that companies are increasingly going to be forced to do stuff like this.
Other than buying indexes, does anyone have any thoughts on how investors can protect themselves from this kind of stuff?
It feels like the investment environment is going into some uncharted waters and it can be very easy to get on the wrong side of one of these situations.
“it seems that companies are increasingly getting forced to take controversial political stances”
Who(m) is forcing these companies to take controversial political stances? I suspect these are voluntary decisions by management, possibly thinking being seen as ‘hip with the times’ is a good strategy.
Personally I don’t think there’s anything wrong with staying in your lane. As an analogy, the only stickers I put on my car are about my car.
“does anyone have any thoughts on how investors can protect themselves”
You won’t have this problem with 5% T-bills.
Most of the political crap and virtue signaling is calculated moves by corporate marketing departments.
Remember, the bottom line of any company is to make money. No large company gives a shit about anything but the bottom dollar and if you think that isn’t true, you’ve been snookered.
Musk and Tesla were the first widespread practical EVs to market. I knew many, many left wing groups who dropped 60-100k dollars on Tesla cars to save the environment or whatever. Tesla hasn’t had really any innovation or new cutting edge models in a decade other than the origami truck. Meanwhile legacy manufacturers have been offering up many great EVs choices. Half the country are convinced through identity politics EVs are the devil himself more or less. Musk coming out being some voice of the alt-right rubes while also cozying up to the party that is all about cutting corporate taxes and handing out corporate welfare means he can likely sell his EVs to the other political camp.
He’s made his money off the left wing as much as is reasonable. Now he can soak up half the population by playing the tribalism game. While basing Tesla in a state with garbage worker rights, limited corporate taxes, and other tangential benefits.
Granted, some of the political pressure is from majority owners, big investors, and board members with an activist agenda. My company is having a lot of pressure from a few “unnamed” stock buying high rollers and mutual fund investors to keep our company from shipping arms, ammo, explosives, and military gear. Additionally, to secure stock purchases from one exceptionally high roller we had to implement a company wide system across thousands of trucks to monitor drivers idling the truck. As soon as we set the brakes, the ignition has to be cut off even in -40 degree temps or 110 degrees outside. Otherwise management busts our balls for making our terminals emissions score go down.
Despite an absolute garbage trucking market right now, our stock price is still going up when companies are going bust left and right. And the stock price is above all.
TG- as always, appreciate your observations, esp. pp2…
may we all find a better day.
In my hood 50% of higher end homes listed for sale reduced their asking price in the past 48 hours. I suspect that the stock market decline has something to do with this reduction.
Now that’s an interesting observation. Did you use Redfin? Or some other platform?
Reventure maybe?
“after the massive melt-up, it was barely a dip.”
So true and correct.
Markets started rallying after Oct 2022. It kept on going up. S&P500 From 3500 to 4700. Then after Dec 2023 Rate cut Mania Rally started again to S&P500 index 5600.
I would like to see Mag 7 Market Cap go back to 12T range (Jan 2024 levels). We are in huge asset bubble where Billions don’t matter much.
Last 3 months Apple went up 35% up. Even after crappy low earnings.
Who knows after July FOMC Presser, Market will choose to believe Powell was Dovish and mania comes back and we go to new ATH.
Unless you plan to spend your returns immediately, the only thing that matters is the long term.
Only fundamentals based prices can be used as proxy for wealth and saving. Everything else cannot be relied on.
The Fed wants us all to feel rich not spend like rich. They want spending to increase from wealth effects but only so much that it doesn’t cause inflation….because then wealth evaporates and spending actually decreases.
This stupid interventionist policy is making wealth planning complex and risky. Imagine the fate of people that will retire soon and have their wealth decimated with the bursting of the bubble. These people have been misled into saving too less.
The Fed doesn’t understand this…..does not acknowledge it and is causing all sort of social problems.
end of rant
canada clearly too if they’re cutting rates because of variable rate mortgages about to reset.
you grow an economy by increasing production, not by creating asset bubbles to make people feel rich.
The most reliably ‘correct’ measure of the ‘value’ of any given stock has always been and still is its PE (Price/Earnings) multiple with ‘safe’ valuations for most all stocks being in the range of 5 to 15 which means the stock is valued for earnings 5 to 15 years forward at its present price. Excessive PE multiples in the hundred – or nonexistent – have been and always are red flags as to the overvaluation of any individual stock.
The S&P 500 has only been below PE of 15 for something like 10 or so months out of the last 400 months. One should would have passed up some nice gains for a long time if they cut it off above PE of 15.
The reasonable PE ratio will vary somewhat by industry and even wider groupings like market sector.
Your not talking about investing but rather gambling like playing the horses at a race which has 100% risk of loss.
The single stock I own has a PE of 1.06.
Price to sales is a good barometer of insanity too. Nvidia will be going the way of sun Microsystems at some point a la 2000 and Scott McNeelys observations then.
Folks, we got a pair of important indicators
falling in the next few days AHEAD of the July 30-31 FOMC:
PCE on July 26
JOLTS on July 30
Then we get 7 more before the FOMC meets again on September 17-18:
BLS Jobs Report on Aug 2
PPI on Aug 13
CPI on Aug 14
PCE on Aug 30
JOLTS on Aug 30
CPI on Sept 11
PPI on Sept 13
Buckle up.
Hi Wolf. Any thoughts if the steep decline is because of earnings over-estimation or primarily contributed by yen-carry trade unwinding? Guess the reason would give some hint on how far the unwind/ fall will go? Thanks
Trying to explain why the market rises/falls on any given day is a fool’s errand. A large portion of volume is algorithms buying/selling between themselves, completely divorced from rational reasons like you expressed. Taleb explains this phenomenon well and in great detail in “Fooled by Randomness”.
CorrectaMundo JS:
Was fortunate to be able to sit in the local brokerage branch watching the ticker, starting in the 1950s, as one of my wonderful mentors explained his understanding of the SM, as an investor who had been a ”player/trader” when young, and then a ”long term investor” living on dividends for many decades…
Has not really changed since then IMO,,, and contrary to at least some of the other older folx on Wolf’s Wonder,,, I have been out of the SM since mid 1980s when I realized the truths of the lack of ”rationality”,,, etc., and went totally into RE.
Best of LUCK, cause that’s what ya gonna need, to anyone willing to gamble in the SMs these days.
It’s like divine irony. Right now, instead of showing a woman in underwear for Temu advertisements as is usually common on my browser for this website, right now there is an add for:
“Amish Country Gazebos”….”Gazebos – Pergolas – Pavilions”…”Our Gazebos Are Better. Amish-Made in the USA”
(with graphic displaying Amish looking guy operating a DeWalt chop saw)
Haha, fantastic. Especially if anyone remembers the comment I made like a little less than a week ago with my negativity and harsh critique of our nation.
Come on world, just smack me in the face with it like a smelly dead fish from the market. I need it, I deserve it. I know life is like that, I’ve learned from being around this long, you’re not surprising me! I know you think you’re funny (…all alone, shaking fist at sky with a deranged smile…)
ooh, refreshed browser………….the Temu ladies are back guys! Smokin’
I need some of that.
Do I want the one Amish guy with the DeWalt chop saw or the 8 Temu ladies wearing very stylish bikini swimwear.
Do I want mega-mulla investing in the Mag-7 or do I want to be a prude and ride the T-Bills back down to inflationville.
I’m tired of not getting any action. Send me down the river! I’m done wearing these pants.
I am green with envy. Right now I am looking at an advert for a pair of plyers, presented as “34% off the KNIPEX 10″ Soft Jaw Electrical Connector Cannon Plug Gripping…”
I am like whattttt…….it is a pair of pliers.
I would rather see the 14 Temu ladies in their underwear.
Hey, Knipex is good stuff, no joke. I have a lot of their pliers and some crimpers, it’s worth the price if you depend on them to do good work. Maybe I should invest in Knipex. Every time I find a good company that makes quality stuff they are never ever ever a publicly traded company, that you can buy stock in, ever.
Cup – buying a respected name with the only intention being to whore it out and discard in bk has been de rigeur in US ‘business’ for some time, now…
may we all find a better day.
More to come, looking at you AMD…
You keep referring only to California re: EV numbers.
What is happening elsewhere? As in the rest of America and the world re EV numbers?
It’s impossible for me to get the actual US registration data, quarterly going back years. I get some superficial quarterly numbers from Experian’s report but not an actual data series. Its Q2 report hasn’t come out yet. In the US, EV sales rose year-over-year in Q1 despite the plunge in Tesla sales, which we see in California which is Tesla’s biggest US market. But Experian didn’t give actual EV registrations numbers, only that they rose in line with overall vehicle sales.
I covered this here: Ford F-150 Falls off Cliff in Q1 Registrations, Toyota RAV4 Leaps to #1, Tesla Model Y Gains Share, Still #2 Bestseller in the US
In early July, based on Q2 deliveries reported by automakers, I explained that in Q2, EV sales surged year-over-year in HUGE percentages at Ford, GM, and other automakers (except Tesla), while their ICE vehicle sales declined.
GM’s EV sales: +40%; ICE sales -0.3%
Ford’s EV sales: +61%; ICE sales -0.9%
You can get the numbers here:
New Vehicle Sales, Q2: EVs Surge YoY, Except Tesla. Stellantis Drops to #6 for First Time, behind Honda. GM & Ford ICE Vehicles Dip YoY, but their EVs Spike. Prices Drop
Globally, EV sales are surging.
Ford stock (F) is down more than 17% today and headed lower.
Yes, serves them right. I have said for years: Ford cannot manage itself out of paper bag. I have despised management at this company for decades. They make stupid long-term decisions at every twist and turn, largely to kowtow to Wall Street short-termism, and when the results of those decisions become obvious, their stock plunges. It’s the same thing every time. CEO Farley is an idiot.
That’s what they get for discontinuing the Focus and Fiesta.
Since Fiesta and Focus mentioned: this was one of the worst auto transmission debacles. There are lots of them CVT for one but this Ford FU was a doozy.
Class action law suit filed. Lawyers for plaintiffs get hold of Ford’s internal emails which prove beyond a doubt Ford knew it was a problem. If this had been the F150, there would have been a Stop Shipping order. But it was just a car for little folks who needed low price and fuel economy. The least able to afford problems. The coms between the dealers who were under the gun and Ford are amusing.
I believe this led to BK of Getrag, the trans designer. Cost Ford more than a billion… 2 B?
Not just because of this but a factor, a lot of cos have email policy to not discuss big problems.
The Focus ST with the manual trans (the one I’d want) doesn’t have that issue, but yeah the automatic trans in those models was a doozy for sure.
The elevator down has barely moved. And the FED will make sure it doesn’t fall too far. For now. But ultimately someone with an override key is going to get on board, insert the key, and watch amusingly as the other riders panic as they hit the buttons in vain, trying to stop the descent.
‘Yard sale’ on the first floor. (Those who are snow skiers will understand the reference).
Bargains galore. And it will be glorious.
Individual stocks have fallen massively. About the only ones that haven’t moved down dramatically are the 130 or so stocks on the indices known as the DJIA30 (Dow) and HASDAQ. No, the Federal Reserve has nothing to do with the stock markets.
“The Magnificent 7 – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla – dropped 4.8% today and are down 10.4% from their July 10 high”.
The thing is, if you look inside some of the largest mutual funds (in particular), funds that are offered in nearly every 401k plan (ex: FXAIX~Fidelity Large Cap 500, 7 of their top 10 holdings are these stocks. And it’s the same in their growth category, and value category, and total mkt category). And since the equal weighted index is essentially flat, millions of 401k holders woke up this morning down an amount nearing double digits. A few more similar days and how much pain is tolerated before redemption requests begin to take their toll. IMO, not many. But I could be wrong.
Reminds me of 2000 bubble. I invested in the janus worldwide fund in the late 90s to diversify away from the madness I was seeing in the US. Was doing quite well for a while and then I saw it’s top 10 holdings were all the poster children of the bubble. Sold it 1st quarter 2000, lucky timing but learned a lesson – look at the holdings of every fund before investing.
It’s always fun to see Wolf get spun-up at reader comments!!! LOL! Great piece as always.
How much of this 7 capitalization is margin. It has to be huge. Any little panic will cascade and margin calls will send everyone to the door at the same time. Huge crash. Maybe historic.
I doubt it’s a huge with those high interest rates.
The only thing that matters for the price of stocks, especially the Mag7, is the amount of liquidity in the system since “trading” today is a computer game mostly played by AI’s battling each other every nanosecond on every little blip of a move. They “learned” how a short squeeze works and that’s what they do. They just flip what four-letter-symbol they use, it switched between AAPL and TSLA lately with some MSFT thrown in. You can look at any chart of these, it’s glaringly obvious. That’s why the move in TSLA yesterday was ominous: no squeeze, just 10% down. The same for MSFT, on the 21st/22nd the squeeze “worked”, now it’s just down. That points to a shortage of liquidity in the system, which would spell real trouble for this market.
Nope.
As the Swamp predicted Tesla is on its way to joining Wolf’s list of imploded stocks. ENJOY.
Poor Wolf – tring to explain markets to those without a clue!
Does anyone do research, before they buy a stock or is it all day tradeing?
Anything may work until it dosen’t.
In regard to Tesla, specifically, it’s called reap what you sow in my opinion. Let me explain; basically saying I believe part of Tesla’s issue is Elon Musk discovering what happens when you give your customers the political middle finger (if I may be permitted to mix my metaphors).
Effectively, in saying to the principal consumers of his expensive electric automotive product (Tesla consumers = liberals with both the money and willingness to buy into the promise of electric), gain, he’s saying ‘Duck you and your political beliefs, I’m putting money behind your hated Orange man!’, then they’re going to react in horror and thus, he’s going to reap the repercussion whirlwind.
How do I come to this opinion? My Virginia sister-in-law is ‘politically liberal’ (we’re politically conservative and thus, when we get together we are the very reason you never discuss politics or religion at Thanksgiving). Anyway, six months ago she had been lobbying her husband for a Tesla (he wanted a Lexus). Her, principally in my opinion, because the queen bee in her little social group drives one. Then she suddenly switched off Tesla and they got her a Mercedes-Benz EQS 450+, instead.
Curious at the change because my wife has been driving MB wagons for more than 30 years and she’s never evinced even the slightest interest in her brand-choice, I didn’t ask her and instead, inquired of her husband what brought about the switch in interest. That’s when I learned she now utterly detests Elon Musk and doesn’t want anything to do with owning a Tesla. So I’m telling you, when a company begins to run their mouths regarding politics, or like Disney not long ago, being ‘woke’, I believe that’s a sell-signal.
So they spent about $140k on her car (they can basically afford pretty much whatever they want, within reason). And it’s 100% to do with Mr. Musk’s politics (in my opinion). Yes, merely sample size n=1 but my sister-in-law is, I suspect, a pretty typical affluent Karen-type. So out of the blue California Tesla sales are down? I’m thinking, chalk it up to this.
It’s a study in human tribal pecking- order behavior.
Note the car ads show the next door neighbor or relative admiring the new car. Unless you have a very unusual car, the stranger in the next lane is very unlikely to swivel his head and say: ‘Oh wow an MB, or Tesla or … etc.’ But this doesn’t stop the proud owner imagining that this is happening.
…always keep a copy of Packard’s classic: “The Hidden Persuaders” handy and perused…
may we all find a better day.
Great report Wolf, again. As you say, this has been a crazy week in AI stocks with a lot of big winners and losers. It looks to me like investors are reading the tea leaves to figure out which companies are successfully implementing an AI program, and hedging the AI boom by selling off NVDA. On the other hand, IBM and NOW are among the winners after big AI growth this quarter, while TESLA is among the losers since Musk BS (autonomous driving soon) didn’t fly. The AI revolution continues to play out. For now, I’m holding my positions.
It appears, as J. P. Morgan reportedly said, that the stock market is ‘fluctuating’ today.
If it’s true that in real terms the economy grew in Q2 and the unemployment rate is holding steady … maybe the Fed will keep interest rates the same. “Higher for Longer”.
Or increase the Federal Funds Rate somewhat after November.
SoCalBeachDude,
+1000
First of all let me state that as a Chicagoan I am 100% jealous of your ‘endless summer’.😀
Yeah, a Fed increase would be nice but I also have to agree that it is highly unlikely that happens BEFORE the election.
There seems to be near unanimity that we are in a bubble. Maybe so. But bubbles are generally associated with euphoria, none of which is visible among this group. Lots of doubters mean this could run longer than you folks think.
That’s has been my thinking. Likely in few weeks bull resumes. There will be fuzzy feelings, what the July correction was all about. Corrections are normal.
All bubbles do not pop. Most just slowly deflate and it may take years.
Think of all the hype with AI and EV. In 5 – 10 years it may all be true and China will own both.
“double-WTF”. I like that. Says so much in so few words.