WASHINGTON – We’re back on the Wall Street roller coaster Tuesday morning. Having gone to sleep last night happy to see stock future nicely up – auguring well for the early Tuesday trade – we logged onto our accounts this morning to discover Mr Market was smack in the middle of another sickening slide. Tuesday’s atomic drop was led by – you guessed it – the tech sector. Techs seem determined to take away all the gains investors spent the entire summer accruing.
The Wall Street roller coaster on the down-slope
To investors, these big opening drops – the Dow was off roughly 500 points after the opening bell – are not unlike that first massively steep drop riders experience on a roller coaster. You’re chugging up a steep hill. And then, at the top, you look down in horror at the almost vertical drop that’s about to hit you and your equilibrium. It’s a sickening feeling for all but the most dedicated roller coaster thrill seekers.
But frankly, we don’t seek thrills in the stock market. We seek capital gains. And they’ve been eroding fast over the last few trading days. That’s why we’ve unloaded many of our beloved techs into these periodic waterfall declines. Better to take some profits – as high as 30-40% in a couple of our (former) tech holdings. Otherwise, you can risk going back down to 0% in these always-volatile issues.
As we wrap today’s column, circa 3 p.m. ET, after recovering a bit earlier, the Dow is again off over 530 points (-2%). The tech-heavy NASDAQ is off a horrendous 400 points (-3.5%), and the S&P 500 is getting slammed for a loss of 84.42 (2.5%) points. This could be yet another late afternoon massacre. In any event, only a miracle could get today’s markets to close in the green. The bears are back!
And speaking of volatile. Though it’s primarily an auto manufacturer, S&P includes Tesla (trading symbol: TSLA) in its Consumer Discretionary sector rather than the Industrials. But whatever the case, TSLA remains one volatile stock. And, we think, one massively manipulated stock.
That said, we’ve always avoided going short on these shares. That’s because if you bet wrong, and if Tesla suddenly launches one of its moon-shot rallies, you’re hosed. You turn in all your chips, call it a day, and find a job as a ditch digger. (While still maintaining proper social distancing.)
But last Monday, after Tesla completed its surprise 5-1 split — splitting its wildly expensive shares into smaller pieces by giving shareholders 5 new split share for every one share they owned (which shares were now worth “‘last pre-split closing price’ ÷ 5”) — the Tesla rally went belly up without advance warning. Another ride down on the Wall Street roller coaster, at least for smaller investors.
Tesla trading action
After hitting a post-split high of $502.49 last Tuesday, TSLA shares jumped on that Wall Street roller coaster just as it hit the top of the incline. By mid-morning just a week later (today) shares had cratered all the way down to $335.99, for a loss of $168.40 per share. That’s a nearly 35% decline in just one week by our informal lead pencil calculation. As of 2:30 p.m. ET this afternoon, they’ve dropped another $2.00. Pretty rough for newbie investors who, in all the excitement over the split, bought more shares of Tesla last Monday.
In short, this name remains way too radioactive for us, even though, if a trader (not an investor) manages to figure out the next entry point, there might be another ride coming up. On the up-slope.
Was fresh GM news the culprit in Tesla’s rapid decline
Part of the reason for today’s fresh whacking of Tesla shares might have been the following news earlier today from Reuters on an old line automotive competitor, General Motors (GM).
“General Motors Co and electric truck startup Nikola Corp [NKLA] will join forces to build electric pickup trucks and fuel cell commercial trucks to take on Tesla Inc, in a deal that lifted shares in both companies on Tuesday.
“As part of a multi-part, multibillion-dollar deal, GM received an 11% stake in Nikola, valued at about $2 billion. In return for the Nikola shares, GM will supply Nikola with batteries, a chassis architecture, fuel cell systems and a factory to build the startup’s proposed Nikola Badger pickup. GM will also supply fuel cell technology for Nikola’s planned Class 7 and 8 commercial tractor-trailers.”
Oops. That could be a game changer. Assuming that GM knows what it’s doing, something that’s constantly in doubt these days. Which, maybe, is not the case. GM also has the right to appoint one member to Nikola’s board. Late last week, GM announced a manufacturing alliance with long-time competitor Honda Motors (HMC) as well. In any case, GM share are up about $2.50 today on the news. Not bad when most of the rest of the market is getting clobbered.
Battery technologies and hydrogen fuel cells
All this action plus the signs that GM’s evolving battery technologies and potential advances on hydrogen fuel cell technologies might be coming to fruition may have given Tesla speculators the heebie-jeebies. About time. Tesla has been running on air – and plentiful government subsidies – for years. GM’s moves once again stir up doubts about Tesla’s long-term viability. At least for us. And so far, we’ve been consistently wrong. Maybe next week…
Oil takes a hit, but refiners Phillips 66 and Valero may yet turn out OK
Elsewhere on the Wall Street roller coaster, oil is getting body-slammed (again) and we’ve taken a few losses here as we lighten up positions in oil shares. We still retain modest positions in Phillips 66 (PSX) and Valero (VLO), however. These two giant refiners, while down a bit, have held up well in this, the latest 2020 Wall Street bloodbath. So we’ll hold on for now, and perhaps even pick up a few more shares on weakness.
Hedging with SDS and keeping an eye on the 2020 Marxist Revolution: Headline risk, big time
We’ve also started covering our remaining long positions once again with our favorite hedge instrument, the ProShares Ultrashort (2x short) S&P 500 ETF, with their always amusing trading symbol SDS. Reminds us of 1967-1971 when we last experienced the kind of anarchy and attempted Commie revolutionary violence that we’re seeing today.
Except that in some ways, today’s is much better organized (as in covering a lot more cities), well supplied, and well funded by the usual suspects: Soros, foreign governments, likely the DNC, and, for sure, Biden staffers as well. The latter have happily provided some of the funds that bail out violent demonstrators to get violet and destructive again.
Why rant about this here? Simple. This is another malign influence on the current market action. As Democrats and Marxist fellow travelers continue to advance warnings that the vote count in Election 2020 may go on forever – until Joe Biden wins – traders and investors, including the professionals, are getting nervous. Serious headline risk may soon become an every day occurrence.
Giving the Capitalist Running Dogs enough rope…
Ironically, it’s the wealthiest bigwigs that provide a great deal of support to the party that endorses the destruction of capitalist Amerikkka and private property. Maybe that’s why these idiot property owners are bailing out of their long positions now. As Lenin once observed, today’s capitalists may indeed be selling today’s Stalinists and Maoists the rope these thugs will eventually use to hang the capitalists. Makes no sense. But there it is. And if the fear grows and spreads across the nation more than it already has, the market will continue to sink.
So get set for more sickening Wall Street roller coaster rides this fall. None of us really know the end of this movie.
– Headline image: Speaking of the Wall Street roller coaster… In this 2001 photo, we see the crazy corkscrew turn in the “Raptor,” one of many famous roller coasters at Ohio’s Cedar Point amusement park. Coaster fans love this treacherous, looping ride. But not so much traders and investors. (Image via Wikipedia entry on roller coasters, CC 3.0 license)