GM’s EV Fantasy, Airlines Knocked For A Loop & Dorsey Dumps Twitter
GM: General Misunderstanding
Welcome back, Great Ones!
I hope you had a great Thanksgiving break and that you didn’t miss this weekend’s Great Stuff Picks portfolio update. If you did, hurry up and click here to check it out now!
All done? Good. Now, today, we’re going to talk about the great electric vehicle (EV) delusion plaguing General Motors (NYSE: GM) … and President Biden, apparently.
But first, I feel like I need to address the elephant in the room: the COVID-19 Omicron variant.
When Wall Street heard the news that a new COVID-19 variant was on the loose, it panicked big time. I’m talking the biggest single-day decline for stocks since October 2020. The Dow, S&P 500 and Nasdaq all plummeted more than 2.2%. It was a fun day.
As of this morning, however, the Omicron variant — while still an ongoing concern — is a lot less scary than it was last week. You know, before we knew anything about it? Current vaccines appear to work just fine, and the variant’s symptoms appear to be “extremely mild.”
But Wall Street’s sell-off on Friday wasn’t so much about COVID-19 as it was about excessive fear, overvalued stocks and low market trading volume.
In other words, Friday’s plunge isn’t a referendum on COVID-19 concerns so much as it is an indicator of how the market itself is looking for any excuse to take profits in anticipation of a correction. The fear is palpable. The uncertainty remains. And Wall Street absolutely hates uncertainty.
I’ve warned y’all multiple times that things were getting dicey and top-heavy. Let Friday serve as a reminder that a correction is badly needed.
Let’s move on to General Motors.
At The New York Times DealBook Online Summit last week, GM CEO Mary Barra told CNBC’s Andrew Sorkin that GM was the leader in the U.S. EV market. Yeah, I’m scratching my head too. Here’s the exchange:
Sorkin: Right now, GM, in terms of the electric vehicle market, you have about 9% to 10% of the market. Tesla has about 63% of the market. Five years from now, if you succeed — but everybody else has their own success in this space — what does that pie chart look like?
Barra: Well, we have said, just like we’re the leader today, if you set aside you know with the distortion that’s happening with the semi shortage, we have been the leader in the United States. We’ve been number two in China for many years.
I’ll give GM the “No. 2 in China” ranking, even though it isn’t actually GM EVs in the No. 2 spot — it’s a GM joint venture with SAIC and Liuzhou Wuling Motors. I guess it can take some credit there.
But No. 1 in the U.S.?
GM isn’t even on the board for top U.S. EV sales, unless you do some creative redefining of EVs to include the Chevy Bolt hybrid EV. And even then, GM is only third in terms of EV sales — behind Tesla (Nasdaq: TSLA), of course.
I understand and applaud optimism from CEOs, especially EV CEOs. You need a certain degree of optimism at the CEO level to invest in EVs, especially when the majority of the U.S. isn’t ready for EVs just yet.
But this isn’t optimism. This is delusion.
Optimism: We will be the No. 1 EV maker in the U.S. soon.
Delusion: We are the No. 1 EV maker in the U.S. … even though Tesla has a 63% market share.
Facts are facts, Barra.
The fact is, GM may be ready and equipped to become the EV market leader … but a market leader right now, it is not. It’s plain to see to anyone looking at the numbers.
I wonder who put that idea in Barra’s head to begin with. Ah, yes … President Biden:
Well … I think that speaks for itself. Make of that what you will.
The takeaway here is that GM can’t let delusions of grandeur get in the way of actually becoming No. 1 in the EV market. It has the capital. It has the infrastructure. It has the technology. It just needs the will to pull it off.
The question is, how long will GM play pretend before it gets serious about EVs? If GM was serious, it would already be churning out sub-$30,000 EVs … and none of that misleading “after-tax rebate” BS, either. I’m talking true sub-$30,000 EVs.
You wanna take the lead in the EV market? That’s how you do it, GM. I know you can, but will you?
At the end of the day, the EV market is poised to surge more than 1,000% before 2030. GM itself has set a 2035 deadline for moving to all-electric. Needless to say, there’s a ton of money still to be made in the EV market.
You wanna know the absolute best way to play EV stocks? Click here now!
Going: Plenty Of Room At The Hotel COVID-19
Any time of year (Any time of year), you can find us here…
For the past two years, it feels like we’ve been stuck in some twisted dream called the Hotel COVID-19. And just when we think we can finally check out … the night man comes to tell us we still can’t leave.
In this case, the “night man” is a new, highly contagious COVID-19 variant called “Omicron” that I told you about earlier. On Friday, the World Health Organization (WHO) labeled Omicron a “variant of concern” because of its high infection rate and the number of mutations — about 30 — in the disease’s spike protein.
The worry is that current vaccines might be less effective against these mutations because they were designed to attack less aggressive versions of the virus. However, as I said, that’s pure speculation. There’s currently no evidence to suggest that Omicron’s symptoms are any worse than normal or that it’s more difficult to treat.
Thing is, Wall Street doesn’t like uncertainty … which is why we saw a major stock sell-off on Friday following the WHO’s announcement.
But while other stocks cratered, vaccine makers like Moderna (Nasdaq: MRNA) and BioNTech (Nasdaq: BNTX) took off like a moon shot. Both companies have said they’re working on new Omicron versions of their COVID-19 vaccines and that these new shots could be available “by early 2022.”
At this point, only time and testing will tell if Omicron is a serious threat … not to mention a long-term tailwind for vaccine stocks or a long-term headwind for everyone else.
They stab COVID-19 with their steely knives, but they just can’t kill the beast … or something like that.
Going: Airlines Brace For Impact
Airline stocks took a beating on Friday after several European and Asian countries announced new travel restrictions from South Africa, where the Omicron variant was first discovered.
United Airlines (Nasdaq: UAL), Delta (NYSE: DAL) and American Airlines (Nasdaq: AAL) each lost about 7% of their market value on Friday, only to rebound this morning as investors rushed to buy the dip.
It’s no secret that airline stocks have soared higher in recent months thanks to easing travel restrictions and fewer COVID-19 cases. Domestic flights were the first to recover over the summer, only to heat up heading into the busy holiday travel season.
But international travel hasn’t experienced the same kind of recovery just yet … and the threat of new travel restrictions over the Omicron variant isn’t helping matters at all.
Personally, I think it’s way too soon to start dumping airline stocks — especially seeing as no one has any definitive information on Omicron yet. There’s a good chance this new variant turns out to be a big nothingburger, in which case travel will resume as normal.
If more evidence comes out that Omicron is worse than previously thought, then act accordingly. But for now, don’t dump stock based on speculation. Wait and see what happens before you hit that panic button.
Gone: Hit The Road, Jack
Bye, bye birdy!
Jack Dorsey is stepping down as Twitter’s (NYSE: TWTR) CEO, effective immediately. The company’s chief technology officer, Parag Agrawal, will captain the ship in his place.
When asked why he decided to resign, Dorsey said: “I’ve decided to leave Twitter because I believe the company is ready to move on from its founders.”
Whatever you say, man. I guess it’s hip to be Square’s (NYSE: SQ) CEO from now on.
What’s even more interesting than Dorsey’s departure is that this is his second time leaving Twitter as active CEO. He was pushed out of the company in 2008 only to come back as the head honcho in 2015 after former CEO Dick Costolo stepped down from the role.
Second verse, same as the first? Who’s to say whether Dorsey is gone for good this time. Someone could always resurrect him from the ex-CEO cemetery he’s hiding in … especially if revenue and earnings take a hit under Agrawal.
Either way, Wall Street doesn’t seem too stressed over Twitter’s changing of the guard. Twitter’s stock initially jumped 11% after the announcement and only just dipped into negative territory … and by negative territory, I’m talking a less than 1% drop.
It’s pretty telling when your company’s founder resigns and your stock barely misses a beat. There’s a fish in Twitter’s percolator … and that fish, it turns out, was Dorsey all along.
What do you think, Great Ones?
Is Twitter better off now that Jack Dorsey’s (supposedly) out of the picture? Will GM one day overtake Tesla as the top EV automaker in the U.S.? How worried are you about our new Omicron oppressor?
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Until next time, stay Great!
Editor, Great Stuff