Wednesday was inflation day in the US and July’s CPI report was poised to rescue what might otherwise be a totally unremarkable, lifeless session spent blinking into summertime suspended animation.
Elon Musk did his part to inject some excitement by disclosing the sale of nearly $7 billion in Tesla shares, which he later explained by reference to the “hopefully unlikely” prospect that Twitter might “force this deal to close.”
“This deal.” As though it wasn’t Musk who tried to buy Twitter in the first place, unprompted, unless by “prompted” you mean his legions of fans, who prod him to buy everything that occasionally annoys him.
“In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” he said.
Musk is selling the rip. Or at least that’s how some described the situation on Wednesday. Tesla was up more than 40% from the lows when he sold (figure below).
It’s entirely possible that stocks could retreat again by the time the Twitter trial gets underway, and any prospective selloff could be particularly acute in tech if equity weakness is driven by expectations for a more aggressive Fed or, relatedly, a renewed rise in real yields.
Some observers were vexed at the timing. Just a day earlier, a grinning, giggling Musk called dips in the stock “a buying opportunity” while regaling the faithful at the company’s 2022 shareholder meeting. Hours later, he sold almost 8 million shares.
It’s not so much a comment on Tesla, which Musk said could become the most valuable company on the planet once it does all the things he wants it to do. Rather, it’s a comment on Tesla’s leadership, namely Musk, whose Twitter lark is compelling him to offload shares of a valuable company in order to fund the purchase of a far less valuable enterprise he doesn’t even want anymore. “I’m shocked,” Gene Munster said. Maybe he was being sarcastic. I’m certainly not — shocked at Musk’s sale, I mean.
As for July’s US CPI report, the billing was akin to a must-see summer blockbuster — one you have to stream because watching it in theaters risks a “rebound” case of Omicron or whatever else might be wandering around out there, be it some manner of “-pox” or, God forbid, Marburg.
“Yes, today is finally inflation day! Not high unit labour cost inflation day — that was yesterday in the US. Not house price inflation day — that’s every day,” Rabobank’s Michael Every quipped. “I mean actual headline and core US CPI day, where increases in the price of just about everything are likely to be offset by temporary declines in gasoline prices.”
Writing on Tuesday, following the productivity numbers referenced by Every, Bloomberg’s Cameron Crise acknowledged complaints from “the usual cheap-money advocates… about the Fed’s ‘war on jobs.'” “The fact is that unit labor costs are now at their highest since the first quarter of 1982,” he said, flatly. That isn’t tenable.
In the same piece, Crise noted that “trading volumes have dried up,” possibly because “punters are on vacation” or maybe because traders are just “unwilling to take much risk ahead of CPI.” It could, he mused, be both. After all, “the whole work-from-home phenomenon has surely made it easier to manage a book from the comfort of a seaside villa.”
