Supercharged!

Meanwhile, the stocks are unbothered.

As discussed in the latest Weekly, equities haven’t batted an eye in the face of an increasingly turbulent political environment in the US, where a defiant Joe Biden on Monday dialed into his favorite morning show to rant about “elites” trying to prevent him from being president again. (Sound familiar?)

“I don’t care what the millionaires think,” Biden, a millionaire, raged, in a combative phone call to “Morning Joe.” “I’m not going anywhere.”

It’d be funny if it weren’t so… you know what? It’s funny. Full stop. It’s sad too, but it’s undeniably funny.

Anyway, the soap opera’s no impediment to equities. Not when the big guns are firing, as they were last week.

As the figure suggests, the septet’s on a tear, led by erstwhile 2024 laggard Tesla, which powered to a ridiculous 28% gain during the holiday-shortened week in the US.

This is, I suppose, as good a time as any to say “I told you so.” On April 23, when Tesla was down more than 40% for 2024, I not-so-subtly suggested it was time to buy. “Elon Musk will figure it out,” I wrote, adding that although I don’t care for the man personally, you do generally want to buy dips in stakes of  Musk, and that’s what you’re buying when you buy Tesla shares: Stakes in Musk.

Here’s an excerpt from that linked article:

Musk will figure out something. It’s what he does. And when he does it, the usual army of credulous loyalists and acolytes — which run the gamut from homegamers to the Cathie Woods of the world — will be right there shouting, “Shut up and take my money!”

Fast forward a week and Tesla was up 30% courtesy of more vague allusions to a new, lower-priced model and a Musk cameo in Beijing.

After last week, the shares — which one reader called “dead money” when I published the April 23 article — are up 75% from the 2024 lows. (And yes, I put my money where my pen was. I bought Tesla on April 19 at $148.63.)

The proximate cause of last week’s surge was a short squeeze precipitated by better-than-expected Q2 deliveries which, in turn, probably presages a decent quarterly report.

According to Hazeltree, a data provider, hedge funds were accumulating bearish bets. In their infinite wisdom.

As the figure shows, nearly one in five funds tracked by Hazeltree was short headed into that Q2 deliveries print. (Oops.)

If you ask JonesTrading’s Mike O’Rourke, this is perilous. Or might be. In a Monday note, he compared the market’s “current behavior” to 2000.

“[Investors] become comfortable with lofty valuations and then comparisons start,” he said. “For example, the belief emerges that if Nvidia can trade 43x forward earnings, then the blue chips of the past two decades, Apple and Microsoft, should be able to support multiples in excess of 30x forward earnings and still be attractive.”

If you’re familiar with Mike, you know he’s not enamored with that sort of thinking. “Paying high multiples for the largest companies in the stock market historically has not worked well,” he went on to say, adding that after last week’s squeeze, Tesla’s multiple is back above 100x.

Fortunately, I don’t have to worry about that. I sold half my shares already. Now I’m playing with the house’s money.


 

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

4 thoughts on “Supercharged!

  1. With the Meta call, the Fall 2023 Bond call, and the Tesla call, I’ve paid for my subscription for basically eternity. Thanks very much.

  2. Yeah, but the earnings ARE real, they said. This time is different, they said.

    It’s funny how excessive bullishness always sounds the same with minor twists.

    That said, I wouldn’t be shocked to see 6000-6500 on the S&P before the music stops this round of irrational exuberance music chairs.

  3. H: Any thoughts on SpaceX or xAI? My thinking aligns with yours about Musk – don’t care for the man or his politics, but…..

NEWSROOM crewneck & prints