Talk about things going wrong, just ask Elon Musk what can happen in business! Three months ago, his stock was trading at all time highs. He was launching rockets that he believes will for all intents and purposes allow ordinary citizens the chance to fly into outer space and eventually have astronauts land on Mars. Heady stuff for anyone, even Mr. Musk.
Then in January the first signs of trouble appeared on the horizon when he had delivery schedules that were running months behind on the Model 3. The Model 3 is designed to compete with other manufactures in the mid-price luxury range. The car was to be priced about $35,00 and incorporate many of the features of the Model S which is the standard for the company and electric cars.
Tesla has never made a dime of profit since it was founded in 2003. It was first funded by some affluent Silicon Valley investors and Mr. Musk did put skin in the game when he came up with $7.5 million of his own cash in 2004. There have been many rounds of financing that have followed to support the company. The round that sealed the deal was when Tesla combined with the US government and the Department of Energy to get a low interest loan of $8 billion-dollars.
This seems to be the next business model. Come up with an idea that will further green energy, get it far enough along and then go to the government for big loans and possible grants. Basically, Tesla has been repaying the government loan with the governments money. Musk, who still owns 20.5% of the company, has made about a billion dollars (in market capitalization). Pretty slick move by any standard.
As of March 30, Tesla has lost about 30% of its market cap since December 31,2017 and on the last day of the quarter it announced a recall of 123,000 cars that appear to have a bolt problem that could cause some heartburn if it were to fail. When you disappoint Wall Street enough they dump you. Is it possible that they have had enough and are now betting against Musk? Should be an interesting second quarter for Tesla and Mr. Musk!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
Why is understanding market psychology so important? (Part #2)
I am going to continue the theme we touched on in earlier weeks about market psychology and why it is so important for traders and investors. Earlier I talked about how trades are initiated. This week I want to talk about discipline. It is the second principal that a trader must learn after they understand that the market is an auction and there must be a buyer for every seller and vice versa. There is no silver bullet that prints money. Trading is a probability game and as such, some wild things are going to happen. Let’s say that you follow Market Edge which has had a terrific stock price forecasting record since 1992. Even if it picks 70% winners, you are still going to have losing periods where nothing goes right. If you quit trading every time you hit a slump, you will be around for the losers but will miss out on the winners. When you trade or invest you must be willing to accept the inevitable drawdowns that are part of the business. Even Warren Buffett takes beatings from time to time and if he quit every time things went sour, you wouldn’t know his name!
The Wise Guy Report: The View from The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation. Let’s look at last’s week price action from the electronic pits in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis.
Equities In Turmoil
The hot topic on the street this week is a combination of rising interest rates and whether the Long Bull market is ending or we are looking for a new leg to begin. Congestion markets are what the guys on the floor love. They can’t wait for panic selling followed by a sharp reversal and then frenzied short covering. The street loves turmoil and in many cases, tries to make it worse. Interest rates will continue to rise, the Fed has signaled their stance. But can the economy absorb this additional cost? Well consumer spending makes up over 70% of the GDP in the US and every time that credit card bill has an uptick it hurts a little more. Jobless claims hit a 45-year low on Thursday and that is definitely a bearish indicator. My guess is the Wise Guys, who have been eating bread crumbs for the past couple of years are now feasting on the volatility and are hoping that this broad congestion pattern holds. Will it? I wish I knew the answer, but it should be an interesting time to trade! This is the kind of market that the Optionomics’ trading systems were built for!
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I offer a FREE 2-Week trial to the various subscription services with no cost or strings attached. Each strategy is explained in a 5-7 page booklet which includes sample weekly recommendations and model portfolios. I doubt that you have ever seen anything like this. During your FREE 2-Week trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. : If your broker doesn’t offer a play money, virtual option trading platform, click on cboe.com/trading-tools/virtual-trading-tools/virtual-trade to access the CBOE site. Simply click on the appropriate tab at the top on the Optionomics’ Home page to access the informative booklets and then sign up for one or all of the weekly subscriptions.
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Each Monday morning by 10:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site site. The prices in the reports are Monday morning’s opening prices. In addition, I have a live webinar on Wednesday mornings where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $20 per month on a month to month basis with no contract or strings attached. I think you will agree that this is a super offer so give it a try. Click on optionomics@marketedge.com to access the Optionomics LLC web site and get started today doing what the pros do – “Sell Them – Don’t Buy Them’.
Mr. Seifert