When Market Feels Fail; Readers Talk Tesla
Feel Good Inc.
The city’s breaking down on a camel’s back. They just have to go ‘cause they don’t know whack.
— “Feel Good Inc.”, Gorillaz.
I woke up this morning to a Dow futures fire sale — down 900 points. When Wall Street finally opened, the market was deep in the red across the board. The Dow was off more than 4%.
So, what changed?
The Federal Reserve certainly didn’t change.
In yesterday’s statement on U.S. monetary policy, Fed Chairman Jerome Powell emphasized that policy wouldn’t change for quite some time. Quantitative easing (i.e., asset purchases) is still “unlimited.” Interest rates won’t change for years — they aren’t even on the Fed’s radar right now.
The COVID-19 outlook hasn’t changed. Daily infection rates in the U.S. tick higher amid the “Grand Reopening.” Talk of a “second wave” of infections is ramping up now, but anyone with their head on straight already predicted that.
The coronavirus didn’t suddenly go away when the economy reopened. There’s still no vaccine, despite hundreds in development. There’s still no approved treatment, despite Gilead Sciences Inc.’s (Nasdaq: GILD) remdesivir snagging headlines last month.
For that matter, the “Grand Reopening” itself hasn’t changed. This morning, Treasury Secretary Steven Mnuchin — aka Mr. Make It Rain — said that the U.S. economy won’t shut down again.
“We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin said on CNBC.
Economic data hasn’t changed. With today’s better-than-expected weekly initial jobless claims, the trend toward economic recovery is still plodding along.
What’s changed? Why did the stock market suddenly plunge more than 4% today?
I can tell you what changed, Charlie Brown: market sentiment.
If I could give the current market rally an official song, it’d be “Feel Good Inc.” Stocks have rallied not on fundamentals, not on economic growth potential or coronavirus progress, but because Wall Street feels good.
We all know it … well, most of us. But Wall Street was finally forced to confront reality with the Fed’s statement on monetary policy yesterday, and it didn’t like it.
For the past month, stocks traded under the presumption that the economy would just return to pre-pandemic levels after the “Grand Reopening.” That everything would just be okay because it feels good. With no treatment or vaccine for COVID-19, how exactly would that happen?
Simply feeling good about things won’t work, hence today’s massive influx of volatility.
Great Stuff has told you for months to stay the course with safe haven investments: gold, bonds, cash, et cetera. Today’s spike in volatility and market selling is exactly why we’ve held this line. It’s for your peace of mind.
But don’t just take our word for it. Ted Bauman, editor of The Bauman Letter, had this to say on today’s market rout:
People have given me a lot of uphill because of my skepticism about the recent stock rally. But my position is simple. The rally is 100% sentiment driven.
Sentiment works both ways. If you’ve convinced yourself that we are operating in an alternative reality where everything is rapidly returning to normal, if you start seeing headlines indicating otherwise, you’re likely to panic.
Given that the recent run up has been driven by punters on Robinhood looking for an alternative to sports betting — and doing sensible things like running up the stocks of bankrupt companies by triple digits — volatility to the downside shouldn’t surprise anyone.
Indeed, Ted. That bankrupt company — Hertz Global Holdings Inc. (NYSE: HTZ) — could very well be the poster child for this market rally.
Now, I’ve said it before, and I’ll say it again: Don’t Panic.
Great Stuff is here to help guide you through these uncertain times. But, we can all use all of the help and guidance we can get. That’s why you need a straight shooter in your corner. Someone who sees the market for what it really is. That someone is Ted Bauman — and no-B.S. portfolio prep is his specialty.
If today’s volatility caught you off guard, don’t put off preparing any longer. If this didn’t catch you off guard (I mean, you’re reading Great Stuff after all!), you can never be prepared enough.
It’s Reader Feedback time!
You’ve waited for it all week, I know. The Great Stuff team, at least, always looks forward to digging into the inbox to hear from you all. This week’s episodes of your new favorite electric vehicle (EV) soap opera, EV Days, got everyone in the daytime crowd writing in.
So why don’t we get right to it?
Talking Tesla Tech
I think that investing in Nikola is very risky. … It is ludacris for Nikola to compare themselves to Tesla, since Nikola has a long road to travel to get to a third of where Tesla’s battery powered transportation technology is today.
It can not compete with Tesla on electric powered range. It does not have the software developed to run its trucks efficiently, it does not have a Tesla grade competitive operation to develop and supply the needed batteries. … Tesla took years building a fast charging network that they are still expanding all over the world.
Hey Flash! (Can I call you Flash?)
I won’t say you’re wrong on Nikola Corp. (Nasdaq: NKLA). It is a very risky company to invest in right now. However, I’d like to point out that your bearish comments on Nikola — range, scale, batteries, et cetera — are almost exactly what Wall Street said about Tesla Inc. (Nasdaq: TSLA) when it first got started.
Yes, Nikola stock appears to be getting a bit ahead of itself. It took Tesla nearly three years to see the kind of investment surge happening with Nikola shares right now. But then, it’s also a different market. Nikola doesn’t have to build many of its own components from scratch like Tesla did. There are established supply chains for EVs that Nikola can take advantage of.
I digress … the main point when it comes to investing in Nikola will be initial demand (the shares will spike on strong pre-order numbers) and production/deliverability. In short, will there be enough pre-order demand (other than reader Barry, below) to support NKLA valuations? And will Nikola be able to execute and deliver on that demand?
We’ll keep you in the loop!
By the way, if you’re looking for a way in on the EV market, we’ve got you covered there too! Click here ASAP.
Going Places With Gracie
I think if all car makers especially Tesla use CATL batteries that can run at least 600 miles on one charge, sales would definitely go up. I’m personally one of them. If I want to drive to Philadelphia from Florida for example, I need to add at least four hours to the trip just for charging (super charging). Very discouraging, I rather take my gas car, it’s faster.
— Gracie D.
Gracie, I’m with you on this front completely. This is one part of the threefold issue that stands between electric cars and the future of no-gas-power road trip. When you combine the long highway-side charging times, the lack of range and the sometimes-sparse availability for charging itself … gas is still king until better battery tech comes along.
I mean, what road-tripping parent hasn’t mastered the “sketchy off-ramp gas station two-minute fill-up hustle?”
Perhaps I’m just out of the loop here, but I’ve always wondered what you’re supposed to do while your car charges. “Plug in for about 30 minutes and grab a cup of coffee or a quick bite to eat while you charge.” It sounds great on Tesla’s website, but like you said … ain’t nobody got time for relaxin’ on the highway!
Now, I can already hear emails coming in from Tesla die-hards. (Oh hey, that’s me too, remember.)
The Supercharger network rollout! It’s happening! Slowly, but it’s happening!
Watch out — I’m going to hit with some unexpected optimism to balance out the realism. Like I said above, we discuss all this with the understanding that, when it comes to EVs, this electric rave just started! 7-Elevens didn’t just pop up on every street corner overnight when everyone kicked the horse and buggy to the curb.
Editor’s Note: Please don’t go kicking horses, curbed or otherwise.
Bought 300 shares of Nikola last week. Another 200 yesterday morning. Put in my request for a Badger today. Figured Nikola bought me a truck, or a helluva down payment. Looks great!!
Sent from my iPhone. pleez xcuse tipos!
— Barry R.
Badger-buying Barry, my man! With the Nikola vs. Tesla feud becoming the talk of the town (our town, at least), it’s the hottest soap drama since, well, Tesla vs. Edison. If anything, Nikola may be the jolt that Musk and company needed to get their $#!& into gear with its semitruck game.
Anyway, thanks for writing in again, Barry — it’s always great to see familiar names pop-up in our inbox.
And yes, if you’re asking, we do have our fair share of regulars here at Great Stuff. Are you one of them? If not … what’s stopping you? Send us a message today! GreatStuffToday@BanyanHill.com is where you’ll find the Greatest stuff.
Great Stuff: Super Charger Heaven
That’s it for this Thursday edition, dear reader. Thank you for reading!
Remember: Feel free to share your comments or feedback with us here. Send us a message at GreatStuffToday@BanyanHill.com. We love to hear from you.
Until next time, be Great!
Editor, Great Stuff