Tesla shares jump. HFTs dive. Sell in May? No way.


WASHINGTON, May 10, 2013 – Thursday’s markets were looking a little weird yesterday afternoon. After attempting a halfhearted rally in the morning, stock prices took a steep dive in the afternoon. As we belatedly discovered after the close, it turns out that someone floated a rumor that the Fed was about to remove the QE punchbowl from the stock market party, sending the news-and-rumor algos and the HFTs out the door.

As Dave Fry writes:

“A tweet rumor the Fed was going to end QE, even as most didn’t believe it, nevertheless was picked-up by a few HAL 9000 algos and selling ensued to close the trading day.”

When is the SEC going to crack down on this kind of investor-discouraging nonsense? You know the answer. Not as long as the law allows former SEC employees to go directly to work for Wall Street’s thieves in order to make the real money.

Perhaps even more remarkable than this kind of institutional stupidity—lucrative for them but discouraging for the average investors who are left in this market—was the amazing price action in electronic car manufacturing startup Tesla Motors (TSLA). The company’s stock soared $13.61, or 24 percent, to $69.40, after the electric carmaker posted its first quarterly net profit since it was founded a decade ago.

Here’s an adoring video, praising the actually rather impressive drag-racing capabilities of the high-end Tesla sedan vs. a Beamer:

Lest we get too excited about this, let’s look at this interesting comment we spotted in the Financial Times’ online Alphaville segment (registration required for free content):

“Climateer Investing directs us to this story in the LA Times:

“’In its zeal to push electric cars into the market, the state has created a system in which Tesla can make as much as $35,000 extra on each sale of its luxury Model S electric sports sedans. That’s because the Palo Alto company qualifies for coveted state environmental credits that it can turn into cash. These Zero Emission Vehicle credits could put as much as $250 million in Tesla’s coffers this year, according to one Wall Street analyst, and they are a key reason the 10-year-old automaker has survived this long. Tesla gets to sell the credits to other automakers that need them to satisfy tough California regulations.’

“That means Tesla is effectively long environmental credits.”

It gets even more interesting. Apparently, “Tesla’s stock began to outperform just after RIN prices peaked on March 11. RINs are obviously different to Tesla’s zero emission vehicle (ZEV) credits, but there are some crossed influences.”

RIN stands for “Renewable Identification Number” which in turn refers back to the complex nonsense buried in U.S. energy regs that forces refiners to use ever-increasing amounts of ethanol and specialized ethanol—the mandated production capacity of which does not currently exist! It gets even worse, so read the whole article here for an explanation.

What it boils down to, once again, is that taxpayers and the average consumer—aided and abetted by the kind of California carbon credit rebate regime that even socialist Europe is beginning to rethink—are the reason for Tesla’s “unexpected” profitability, not sales of the company’s cars. That and at least a few purchases by mega-rich, trend-seeking consumers, a segment of the 1% and the only demographic that can afford this $60,000-and-up vehicle whose list price is achieved after a further taxpayer-supported rebate of $7,500 per car. (Where can the Maven get in on this racket?)

Tesla Model S, front view. Gosh, would the taxpayers build one for me, too? (Tesla Motors)

Thus, once again do we have perverse government incentives that make favored crony capitalist companies “profitable” via mandatory taxpayer payoffs. We’re actually in favor of viable electric cars and affordable new energy sources. But neither is any good for any of us if it raises the costs of practically everything, which in fact, both electric cars and new energy sources actually do.

We’d be much better off without this stuff until its costs come down. But that won’t happen in this Administration, which is yet another thing that low information voters, who can’t afford to fill their tanks these days, never bother to think about. Neither, apparently, did Motor Trend, which made the Tesla its “Car of the Year.” Car of the year for whom?

‘Nuff said.

Meanwhile, else where on Wall Street, Barnes & Noble (BKS) surged $4.31, or 24.3 percent, to $22.08 after the technology news blog TechCrunch reported that Microsoft was considering acquiring the book retailer’s digital book venture Nook Media for $1 billion. Hmm. Wonder what Apple’s (AAPL) Tim Cook thinks of this development.

The B&N move doesn’t make avid readers in DC suburb Reston Virginia (the Maven’s home base) any happier about the company, though. The slowly swooning big box book retailer abandoned its Reston megastore recently, just a year and a half after its only other competitor, the also badly failing Books-a-Million (BAMM), shuttered its doors here. If mega-bookstores can’t make it in affluent, Master’s Degree-plus cities like wonky Reston, it’s pretty clear that they’re slowly heading for that great Border’s bookstore in the sky.

Today’s market action:

The “sell in May and go away” mantra is looking dumber and dumber in this QE-driven bull market. But that said, only yesterday’s phony bear raid kept the stock market in general from heading into oversold territory where it’s likely to be parked after today’s close.

At this point, there’s nothing to be gained by chasing stuff. If you do need some yield, we’d repeat our observations in yesterday’s column, namely, to look with favor on “master limited partnerships (MLPs) in oil and gas continue to boast excellent yields. A basket of these, the ETF AMLP, is one way to spread the risk. AMLP also carries the added benefit of doing the IRS paperwork for you in the sense that it owns the MLPs, not you directly.”

Cut and paste. It’s the kind of market we have. So square up your positions and enjoy the weekend already.


Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Follow Terry on Twitter @terryp17


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17