Monday massacre: Tesla, Trump, Amazon, China keep markets on edge
WASHINGTON, April 2, 2018: Enjoyably bullish, pre-Easter Thursday stock market action ended an otherwise nasty Q1 2018 on a positive note. But Monday, after a long weekend of thinking about it, a bearish herd pounced on stocks at the opening bell. After fighting this heavy hit for a time, it seemed by the noon hour that the bulls had capitulated. Result: another Monday massacre on Wall Street.
As of 12:15 p.m. this fast-building Monday massacre had lopped off around 500 points from the Dow. The S&P 500 is down roughly 62 points, while the NASDAQ is being clobbered for a loss of nearly 185 points. All three major market averages are off over 2 percent on the day thus far, while the NASDAQ, suffering from an ongoing, waterfall decline in techs, is off close to 3 percent at the moment.
Worse, every time the averages try to recover, they get hit again.
Monday massacre of tech and the Amazon issue
The ongoing tech problem is a major reason behind this year’s ongoing stock market decline. In our opinion, the main reason is that so many tech stocks are so horrendously overpriced – still. Making matters worse is President Trump’s ongoing tweet attack on the richly valued shares of Amazon (symbol: AMZN). Observes CNBC:
“The e-commerce giant’s stock fell after President Donald Trump tweeted on Saturday that Amazon was scamming the U.S. Postal Service, adding the service loses ‘billions of dollars’ delivering packages for the e-commerce giant.
“Trump tweeted again about Amazon on Monday, saying: ‘Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed.’”
The President is right to a point That’s due to the sweet deals between Amazon and USPS that keep the merchandise moving at favorable rates to Amazon. On the other hand, the USPS has been losing its derrière for years anyway. Thus, its “bad” Amazon deals could very well allow that “quasi-governmental” organization to remain alive.
Amazon and the Washington (Com)Post
More likely, however, the President’s ongoing anti-Amazon tweet storm aims more directly at the Washington (Com)Post and Amazon boss Jeff Bezos himself. The former, without any intervention (that we know of) from Bezos, has been about as trustworthy and newsworthy as a fresh, steaming horse turd since Trump’s 2017 inauguration.
But if your “paper of record” morphs from a onetime role as a respected newspaper into a snarling, condescending and often fabricating Democrat house organ, what else can you expect in this bitterly divided town?
That said, Trump’s tweets have been bludgeoning AMZN for days now. The subsequent waterfall decline of its shares can’t be helping the NASDAQ average very much, and it’s likely to continue. The clubbing of Amazon’s shares is another big reason behind our Monday massacre.
Beijing: The Chinese “trade war” counter-attack
Adding to Wall Street’s woes was the inevitable announcement coming out of Beijing. To wit, well over 100 tariffs are being slapped on mostly U.S. food and grocery basket items by the Chicoms in retaliation for those aluminum and steel tariffs the U.S. imposed a week ago. CNBC again:
“China announced overnight Monday it had implemented tariffs on 128 types of U.S. imports. The goods hit with the charges the list of products proposed by Beijing in March and comes as a direct response to Trump signing off on tariffs on imported steel and aluminum last month. China said in March that those goods had an import value of $3 billion in 2017.”
None of these moves constitutes a surprise. It’s China’s routine and expected retaliation against those U.S. tariffs. All this means, thus far: U.S. and Chinese trade experts have now entered the unsafe spaces defined by “The Art of the Deal.” Don’t look for the Chicoms to give up their casual theft of U.S.-invented technologies any time soon, BTW. If we can’t solve this major issue, and soon, U.S. stocks may face more than just today’s Monday massacre.
Yet the Chinese response means there’s no trade war. Yet. Unfortunately, traders and investors are acting as if the shooting has started. Hence, today’s miserable numbers on Wall Street.
Tesla shares tank due to April Fools Day joke tweet
As if things weren’t negative enough today, a genuinely stupid tweet hit the wires earlier today. No, it wasn’t President Trump again. It seems as if sainted, taxpayer subsidized super-genius Elon Musk decided to indulge in an April Fools’ Day Tweet some time on Sunday.
Tesla Goes Bankrupt
Palo Alto, California, April 1, 2018 — Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.
— Elon Musk (@elonmusk) April 1, 2018
Had he reflected on this tweet for maybe 10-12 more seconds, Elon the Eloquent might not have sent this one. Given Tesla’s perpetual production issues with it soon-to-be-profit-generating “people’s car,” and given yet another human casualty due to “self-driving” car faults, many readers likely took Musk’s tweet literally.
We ourselves think that Tesla (TSLA) will eventually go down the toilet bowl, particularly if President Trump pulls all those Obama-era subsidies and perks by pulling away Tesla’s punch bowl. So do lots of other folks.
So much for a whimsical April Fools tweet. Tesla’s never-profitable shares are getting pummelled again, another casualty of our Monday massacre. The stock off nearly 12 points as we write this, having fallen even more earlier in the day. The shares still look like an awesome short. But in this volatile market we remain, frankly, too nervous to gamble on this.
What to do as an investor?
Doubtless, stocks will make one or two recovery efforts after we file this report. But no one has a happy face on today. That could mean the current stock market correction still has some way to go.
To answer that, we will continue to trim positions, raise cash, and hide in a few select bond-like investments. These include term-preferred stocks (when we can find them at reasonable prices). Additionally, we like bond-like ETFs and CEFs, and other like-minded safe havens like the occasional REIT.
Otherwise, markets don’t seem worth buying here, as they don’t appear to have any level where they can find support.
Back later today, if and when things change. But we don’t expect they will.