The Dow and the S&P 500 slipped this morning as shares of Apple (AAPL) and TSLA (TSLA) continued their pullback in premarket hours. Investors are increasingly nervous about the continued uptick in U.S. bond prices.
| | | | | | | |  Dear No,
The Dow and the S&P 500 slipped this morning as shares of Apple (AAPL) and TSLA (TSLA) continued their pullback in premarket hours. Investors are increasingly nervous about the continued uptick in U.S. bond prices. This uptick in bond prices is weighing on growth companies' ability to borrowing money at rock-bottom interest rates. The 10-year Bond sits at 1.34%, a figure that is the highest since February 2020.
The uptick in rates draws attention to Federal Reserve Chair Jerome Powell's semi-annual testimony on monetary policy that kicks off tomorrow. Powell's insights on interest rates and inflation will likely impact the market's movement all week.
Let's dig into the stories for Monday.
Bad to Worse
This morning, investors are paying close attention to developments from Boeing (BA). Shares of the airplane manufacturer slumped another 3.2% after an engine failed on a United Airlines (UAL) 777 jet. The jet engine failed shortly after takeoff from Denver International Airport and showered several neighborhoods with debris. Following the event, Japan's regulators halted all plans with the specific Pratt & Whitney engine.
U.S. regulators have ordered investigations into the engine failure, and Boeing is now recommending a halt on all jets with the specific engine. The company has been under extreme pressure over the last two years. First, the company is still dealing with MAX jet problems after two planes crashed in 2019. Then, COVID has dramatically impacted its bottom line due to the cutback in airline travel during the pandemic.
Proceed with Caution
Is it a hunch? Is it nerves? Why do I feel cautious about this week?
On Monday, we're seeing a slight pullback in the markets, let by shares of Apple and Tesla. Apple represents a large, weighted percentage of the S&P 500, so as the company goes, so too does the market.
Investors are waiting for testimony tomorrow from Federal Reserve Chair Jerome Powell. Last week, the Fed made monetary accommodations of $125.8 billion, and the markets continued to rip higher. Here's the problem. One day, the central bank is going to have to stop pumping capital into the market. And, as we've seen, any drawdown in monetary accommodations tends to correlate with a drop in the market.
My key concerns are around the market's continued euphoria that attaches itself to the central bank's easing policies. We are clearly in a bubble – and it's uncertain how we will get out of this.
Hey, Here's a Thought
Tesla stock is down 3% this morning. But, I expect that investors will buy this dip.
I'm not a fan of Tesla. And – as I just stated – the market is in a bubble. Here's evidence.
Tesla is trading a pre-split value of more than $4,000.
At $758, shares of Tesla are hardly a bargain. I ask investors – what are you buying?
The answer: Tesla is the world's largest electric vehicle manufacturer. That's clear.
They will be the leading EV manufacturer in 2021, 2022, and 2023…
BUT. In 2024, they are likely to be surpassed.
By a company called Volkswagen. Hear of them? Volkswagen owns Audi, which just announced a luxury EV that looks better than any vehicle every produced by Tesla.
Volkswagen has been recovering from its emissions scandal dating back a few years. But VWAGY stock is trading at 0.82 book value, a sign that it is a value, and it pays a dividend.
Meanwhile, Porsche Automobile Holding SE – a company whose assets comprise 53% Volkswagen stock – is sitting at $7.80. That stock trades at a price to book value of 0.58.
Tesla is trading at 38 times book value.
Something has to give.
The Charging Bull
Finally, we finish on a sweet and somber note. I worked in New York for a few years, and every day – on my way to Wall Street – I passed the iconic "Charging Bull" sculpture.
Not many people know the full story behind it. But an Italian sculptor named Arturo Di Modica spent $350,000 in the 1980s as a joke. One night he and 40 friends used a crane and a truck to drop the statue at the corner of Broad and Wall Streets, just around the street from the New York Stock Exchange. It was 1989 and the statue weighed nearly 3.5 tons.
After some time, the statue moved to Bowling Green Park.
What started as a joke became one of the most iconic and most visited landmarks in Manhattan. They drank champagne after dropping it off thinking they'd created a comedy. Instead, they created an icon that has always served as a signal of resiliency after financial crises like the 1987 crash.
Over the weekend, the artist Di Modica passed away at the age of 80 in Italy.
That's all for today. If you have any questions or topics you'd like me to discuss, please don't hesitate to email the team at feedback@haveninvestmentresearch.com.
Cheers, |
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| | | | | Market Conditions with Dr. Bauer
The 5-13 EMA is a simple momentum gauge that I like to check each morning.
When the blue line below is above the red line, it is a good indicator of capital inflows and strong short-term purchasing across markets. When that line falls, it can be a good time to hedge your positions or consider moving to cash.
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| | | Despite this morning's downturn, conditions appear sunny.
In Time, |
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