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Friday, December 23, 2022
Today’s newsletter is from Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and other market news wherever you are with the Yahoo Finance app.Yahoo Finance app.
Tesla stock fell another 8.8% on Thursday, taking its year-to-date losses to 64%.
With that drop, more than $800 billion in market capitalization has been wiped from the electric car maker. The current decline of 69.7% from its most recent high reached at the end of 2021 is the biggest in the history of the Tesla company.
And this slide was good news for short sellers.
Data from S3 Partners released on Thursday showed that through Wednesday’s close, Tesla was the most profitable short sale of the year – which stock traders were betting against – with mark-to-market profits totaling $15.03 billion so far this year. And those numbers don’t reflect Thursday’s drop.
“In December, TSLA shorts increased $4.54 billion in mark-to-market earnings month-to-date, up +33.2% on average short interest of $13.67 billion” , said S3 Partners in its report. “Since Elon Musk’s Twitter offer on 4/14/22, TSLA shorts have grown $13.74 billion in mark-to-market earnings, up 77.5% on an average internet short of $17.74 billion.”
And this year’s next most profitable short sale isn’t even close – short sellers bet $6.2 billion against Amazon in 2022, a stock down 49.7% so far this year until the close of Thursday.
The idea that Musk’s involvement with Twitter is the predominant problem facing Tesla’s stock has become a widely held view in recent weeks. Consensus, even.
Wall Street analysts said Musk “needs to pull himself together”, while reduce price targets and downgrade Tesla along the way. Some of Musk staunchest defenders have openly started calling on him to get away from Twitter.
And, to some extent, Musk himself seems to agree, organize a survey if he were to step down as head of Twitter and saying he’s going to resign from the job Once a replacement is found.
This all comes as reports indicate that Tesla has brings its team leaders to Shanghai to help stabilize operations in the United States as the company now offers Refunds of $7,500 to US customers ready to take delivery of some models before the end of this year.
That Musk’s attention seems to be lacking at Tesla is nothing new to Musk.
Meanwhile, the Tesla CEO tweeted at length about the impact the Federal Reserve’s tighter monetary policy is having on all financial assets, Tesla included.
Looking at the success of short sellers this year, there’s no doubt that the challenges for markets go beyond Tesla’s CEO having a second job as Twitter’s CEO: data from S3 Partners also shows shorts have increased by more than $300 billion in realized and unrealized gains this year.
In an exchange widely covered on Twitter earlier this week, Musk reprimand Longtime Tesla bull Ross Gerber will read Security Analysis 101 to understand what’s happening to Tesla’s stock.
Musk added in a follow-up tweet“As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly shift their money from stocks to cash. , causing the stock to fall.”
Like Warren Buffett said Andy Server, editor of Yahoo Finance, years ago: “Everything in valuation comes down to interest rates.”
At the time of Buffett’s comments in 2017, investors may have been puzzled as to why stocks were continuing to rise so aggressively. The lowest interest rates were then a useful guide. Today, investors face the opposite problem: high and ever-rising rates are crushing financial assets.
Hedge Fund Titan David Tepper said on Thursday he’s still “leaning short” on equities right now because he believes what central bankers are saying: that interest rates will rise next year.
For Tesla shorts — and short sellers in the market — the Fed’s plans may still be good news. And Wall Street strategists globally expect bets against the exchange will still work in the first half of 2023.
If an expected recession eventually causes the Fed and other central banks to ease off the accelerator, expect stocks to rebound sharply. And don’t expect Tesla to be left out.
Of course, none of this is very “Tesla”.
Tesla has been a battleground for so many years because the company’s ambitions — and the personality of its CEO — have always seemed to transcend mundane market talking points like Fed policy. Boring stocks, not category definitions like Tesla, are being pushed around by central banks.
While this market moment may be telling us something else about Tesla’s maturation, it signals that it’s now more like every other stock. And in this way of offering the bulls a new story, which is that he might just start to fit in.
What to watch today
Economy
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8:30 a.m. ET: Personal incomemonth-over-month, November (0.3% expected, 0.7% in prior month)
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8:30 a.m. ET: Personal expensesmonth-over-month, November (0.2% expected, 0.8% in prior month)
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8:30 a.m. ET: Actual personal expensesmonth-over-month, November (0.1% expected, 0.5% in prior month)
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8:30 a.m. ET: PCE deflatormonth-over-month, November (0.1% expected, 0.3% in prior month)
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8:30 a.m. ET: PCE deflatoryear-over-year, November (5.5% expected, 6.0% in prior month)
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8:30 a.m. ET: Basic PCE deflatormonth-over-month, November (0.2% expected, 0.2% in prior month)
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8:30 a.m. ET: Basic PCE deflatoryear-on-year, November (4.6% expected, 5.0% in prior month)
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8:30 a.m. ET: Durable Goods OrdersNovember Preliminary (-1.0% expected, 1.1% in prior month)
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8:30 a.m. ET: Goods Excluding TransportNovember Preliminary (0.0% expected, 0.5% in prior month)
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8:30 a.m. ET: Orders for capital goods excluding defense excluding aircraftNovember Preliminary (0.0% expected, 0.6% in prior month)
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8:30 a.m. ET: Shipments of non-military capital goods excluding aircraftNovember Preliminary (-0.3% expected, 1.5% in previous month)
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10:00 a.m. ET: University of Michigan Consumer SentimentDecember final (59.1 expected, 59.1 before)
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10:00 a.m. ET: Sales of new homesNovember (600,000 expected, 632,000 in previous month)
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10:00 a.m. ET: Sales of new homesmonth-over-month, November (-5.1% expected, 7.5% in prior month)
Earnings
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