WASHINGTON – Tesla shares (NASDAQ: TSLA) have been going crazy over the past few weeks. Admittedly, that’s not exactly news for these shares. They’re always going crazy. And even at their worst, they’re always overpriced for a company whose rare profitable quarters make us want to know the name of CEO Elon Musk’s accountant. (I could use the dude.) But lately, Tesla shares have been crazier than usual.
Reason: The company is finally slated to move into the fairly rarified S&P 500 Index of (primarily) America’s biggest cap stocks. For professional investors, it’s this average that’s more important than the widely touted Dow Jones Industrial Average (DJIA, or sometimes DJI).
The latter average only lists the 30 biggest US industrial stocks, a term that’s loosely defined these days. But the S&P 500, and particularly its average movements more clearly define the movement of the stock market in general.
Tesla shares to enter the S&P 500
Whether justified or not, Tesla’s always overly lofty share price marks a huge chunk of market capitalization. That’s why the S&P 500 gurus continue to dither over whether they’re going to add the shares to the average later this month all at once. Or whether they intend to do it in bite-sized chunks.
Speculation over how this unfolds varies daily, causing the S&P 500 average to wobble more than average. In turn, Tesla shares continue to gyrate even more wildly in an unpredictable manner.
After the shares backed of from a massive run earlier this week, I decided to make my first attempt to trade this beast. I acquired a few experimental shares (TSLA was at about $660 per share at the time), and then a few more as the stock predictably started tanking. So I bought a few more shares.
Well, this morning, I dumped them as TSLA fizzled down near $600 per share. As of 2 p.m. ET Friday (December 11), I find the shares bouncing back up to close to $610 per share. I concluded that these shares may prove even more volatile than Amazon.com (NASDAQ: AMZN). I also dumped those shares this morning for a modest trading profit.
The Tesla betting game is too nutty for me, so I’ll likely sit out the rest of this speculative carnival on the sidelines, since I’m a pretty conservative investor at heart and only play the Wall Street slots once in a blue moon.
Tesla shares: The one stock I can never comprehend
Personally, I still despise Tesla. I continue to regard it as a company that made its eccentric Pilot-in-Chief a mega-rich man. Yet much of that wealth arrived courtesy of taxpayer subsidies from you and me. Worse, Musk’s high-tech electric automobiles seem about as mechanically safe and reliable as Fiats. That makes me wonder why rich people love to buy them. Maybe they can afford the constant repair bills. Meanwhile, when their Teslas actually do work, envious plebes can watch them swan down Rodeo Drive, virtue-signaling all the way.
Musk has turned into a genuine superstar capitalist (so far) through his far better conceived investment in SpaceX. That endeavor makes NASA’s engineering efforts look like amateur hour by comparison. And, arguably, NASA spent far more taxpayer money for vastly slower results and quality than Musk’s so-far phenomenal record in the space industry. So maybe we need to give Elon a bit more credit, at least on the SpaceX side of the register.
But back to TSLA and the S&P 500. One way or another, Tesla is getting added to the S&P 500 average, and soon. Which is one main reason why action in this stock not only gets crazier and crazier. It also sets up massive pin action in the S&P 500-based and sector based ETF world.
That’s because every one of these ETFs needs to incorporate TSLA into its share balance and equation. And this, in turn, means that every time TSLA shares take a big dip, mass quantities of big-time share buyers will flood back in to goose the shares back up again as they try to acquire them at a good price, since they must hold them in inventory to keep their ETFs tracking with stocks currently in that big average.
Which way will Tesla shares and the S&P 500-related dominoes fall? (Or rise?)
This rolling event could be, and perhaps already is, the beginning of a massive domino effect on a lot of these investments, which involve millions of investors.
Which, to come full circle, is precisely why crazy Tesla shares are acting even more crazy this month. I tried to have a little fun to inject a bit more life into my well-performing but somewhat dull big portfolio. Obviously, I don’t know enough yet about how this stock trades. As a result, I got my fingers burned. I should follow my own advice, right?
I may try again. But TSLA, on per share price basis, are a bit rich for you and me. So I’m out for now, though I may try this virtual slot machine of a stock one or two more times before I give it up. That said, I still hate Tesla. But what I hate even more is that a lot of dudes are making money on this puppy while I am not.
Coronavirus vaccines and Mr Market
In other news this week, Fox reported the following news.
“Elsewhere this week, U.S. equity markets recouped their early losses Tuesday as the first doses of the Pfizer/BioNTech COVID-19 vaccine were administered in the U.K. and the U.S. Food and Drug Administration delivered some encouraging news about the inoculation.
“The Dow Jones Industrial Average climbed 64 points or 0.21% helped by Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ).
“A staff report issued by the FDA on Tuesday said the Pfizer/BioNTech vaccine is both safe and effective. The vaccine could receive emergency use authorization in the U.S. as soon as Thursday – two days after the first shots were given in Britain.”
The FDA is taking action, however, as we write this column Friday.
Pfizer, politics and vaccine credit
Even so, however, the nasty political machinations continue, re: the Pfizer entry. The company clearly and deliberately withheld announcing its nearing success prior to Election 2020. Pfizer apparently wanted to avoid giving President Trump any credit for helping make his Operation Warp Speed the grand success that it was and is. They continue to rob the President of any credit for this major accomplishment.
“The White House on Tuesday claimed that Pfizer is “negotiating in public” on the allocation of the forthcoming coronavirus vaccine and trying to embarrass the U.S. government in an effort to gain market share over its vaccine competitors.
“White House officials told FOX Business the initial contract signed with Pfizer was for 100 million doses of the coronavirus vaccine, with an option to purchase another 500 million doses at $19.59 per dose.
“That contract, according to officials, stipulated the timeline for the option of 500 million doses, which would be negotiated at a later date.”
Putting in a belated plug for Trump’s Operation Warp Speed
The White House did manage to get its own licks in, however. But, as expected, the MSM hasn’t bothered to report this rejoinder.
“Operation Warp Speed is unequaled and unrivaled anywhere in the world, and leaders of other countries have called me to congratulate us on what we’ve been able to do, and we’ve helped many countries with their ventilators and all of the problems they were having.”
My columns have been a bit fewer in number in recent days due to some scheduling conflicts of interest, but also due to the fact that this market has gotten way boring, as in my recent “Waiting for Godot” column. More on this in my next column.
– Headline image – Tesla Model 3 production model. Image via Carlquin, via Wikipedia entry on Tesla. CC 4.0 license.