There are a few very significant items on the agenda for this Wednesday (April 28) that one needs to pay attention to. i.e., for those that want to try and stay ahead with the dearth of any meaningful business or financial “news” insight.
The reason I make the above commentary is for what came glaring through my earphones yesterday during my daily run. As I was running, a very well known financial show host gave his usual business and Wall Street commentary, in what I can only infer by his giddy declaration, was that he must have Tesla™ stock in his retirement account, probably their entire net worth by the way it was reported.
Now, it’s been pretty hard for me to be surprised on just how everyone has bought into either their “stock picking expertise” or their business acumen regarding Wall Street and its relationship to capital formation, value and more. I mean, everyone’s now being looked upon as some “genius” or akin to it. (a few sycophantically reported “business” college professors come to mind, but I digress.) When all they are (and I mean this wholeheartedly) are the benefactors of central bank largess, for without it’s endless interventionism, it all falls apart. Repeat – all of it.
And for those that question my rationale or my voracity in why I state the above? Hint: The Federal Reserve – alone – has basically doubled its balance sheet over the past 16 months. Yes, in the past 16 or so months it had to spend more via QE than it had before, during, and after the 2008 crisis, and, is still spending $120 Billion per month, every month, open ended.
Everything that the Fed said it was going to do – it has reversed and reversed “bigly.” Oh, and by the way, that all happened in earnest before COVID, need I remind of the term, “autopilot?”
Yet, everyone throughout the mainstream business/financial media continues to slavishly report (and never question) the prognostications that the Fed delivers for financial conditions and policy one, two or three years into the future as if they are divinely endowed seers.
Hint to “news” staff, I repeat: “autopilot.” How’d that work out again?
I’m not saying this because I’m bitter. Personally, I don’t care. What I am very concerned about, and the reason why I began making my own commentary about all this, now over a decade, was for the absolute fact – this was precisely the same type of “insight” that was later found to be absolute bullsh#t that preceded the 2007/08 market melt down.
Back to my earphone story…
So, what set this off yesterday was the verbiage that went through my ear canals straight into my cranium, where I was told, Tesla™ had a record breaking quarterly report posting a profit of more than 75% than the prior, and sold some 180,000 cars. A profit of nearly half-a-$Billion (i.e., $400+million).
And that was it, they then went onto the next headline. Sounds just fantastic, does it not?
Here’s the dirty little secret that I heard no one via this same media either reference or articulate further. Ready?
They only made a profit via, once again, selling half-a-$Billion dollars worth of tax credits -and- a bit of Bitcoin™. In other words, once again, Tesla is not in the car business – they’re in the tax-credit sales business. i.e., the more cars they make? The more money they lose.
So, with that for a rationale, I need you to ponder the following…
At a market cap that neared “four comma status” (e.g., $Trillion) only months ago. How many cars would it have to make and sell to justify even it’s now lower diminished cap? i.e., in January it was worth $850 Billion, it has since lost $270+Billion. And yes, that is LOST over a quarter-of-a-$Trillion dollars in mere months.
Answer Hint: The more it makes – the more it loses. Oh yeah – and it’s still making them in a tent. Imagine the added cost when someone gets around to demanding they actually need to build a real plant here, rather than China.
Don’t hear that reported much, do we? Wait – did I just hear P.T. Barnum belly laughing? Must be the wind.
So with the above for context and commentary, what I would suggest to watch for is the following…
Today, we have the conclusion of the Fed’s two day conclave and the usual Jerome Powell presser following. Mr. Powell may need to have his dancing shoes tightly laced, because there may be questions in regards to President Biden’s speech this evening. It could get interesting, then again, as has been the case of late, it could very well be another snooze-fest.
As for Mr. Biden’s speech…
It’s now been reported that he’s going to introduce even more spending ($1.8 Trillion I’ve seen and yes, this is in addition to what’s now making its way through the congress) and – how “taxing the rich” and “increasing the IRS budget” to do just that will be laid out.
Oh, and Apple™ reports also.
Let’s just say this is a Wednesday that should be paid attention to.
As always, we shall see.
© 2021 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.