Fine! Do whatever you want! Following these markets is like remembering what your mom used to say to you when you were a petulant, headstrong teenager. That was certainly the case for me. Some days I just try to tune out the idiots.
Exhibit A is Tesla (TSLA) , which is followed by the least competent group of cheerleaders. As a former sell-side auto analyst, reading "research" on Tesla often produced nausea. According to a relentlessly wrong FinTV Pro, (home of the Netflix! (NFLX) BUY! call at $500/share) Tesla "crushed" earnings.
Huh? Tesla actually burned cash in the quarter. Without a $936 million "cash in'' from selling Bitcoin (at a substantial loss) Tesla's net cash flow would have been negative in 2Q. Working capital cost Tesla $1.3 billion in 2Q22 , and has cost the company nearly $2 billion thus far in 2022. That's what happens when you launch new plants into a terrible macro environment... stuff builds up. But when you turn digital assets into actual cash... it tends to flatter things and confuse nitwits.
Elon Musk built two new plants -- one in Austin and one in Gruenheide -- into a declining market, and what is shaping up to be a nasty recession in the Western world. Tesla delivered fewer vehicles in 2Q22 than it did in 4Q21, but at a higher ARPU, as customers continue to choose the Model Y over the Model 3, which "celebrated" its fifth birthday on July 7th. But that's the key phrase "consumers... choose."
As nitwits focused on whether Tesla management would stick with their long-held guidance of 50% annual growth in unit deliveries for 2022 (they didn't on last night's call, and TSLA will be nowhere near that 50% growth figure in 2022), please remember that Tesla is selling a consumer product. Someone has to buy it. That's their key calculus. The Model 3 is becoming a real problem for Tesla. It's old, and that is never a good adjective for a consumer product.
If you want to bid up a stock in a company that has never competed with you to buy it -- Tesla has never bought back a share, although Netflix has bought a token amount this year, as have Amazon (AMZN) and Meta (META) -- via repurchases and never has paid you a dividend... Fine! Do whatever you want.
That's not how we roll at Excelsior Capital Partners. We buy securities that pay us for the pleasure of owning them. My old economics professors used to call this opportunity cost, and it is very real in these markets.
The Nasdaq has been absolutely crushed this year -- down 23% ytd even on today's Green Day -- but never forget that the (QQQ) 's yield all of 0.63%. Since we are so tech-addled, and Nasdaq represents a much larger percentage of the S&P 500 than it used to, that has lowered returns for the broader market. According to multpl.com, the S&P 500 is currently yielding 1.61%. But the 10-year US Treasury note is yielding 2.95%.
Back to our old friend, opportunity cost. You want to pay the market (which is effectively what you're doing by owning securities that produce lower real returns) a point-and-a-half for the privilege of owning companies that produce cars that drive themselves (Teslas can't), worlds where election-meddling never happens (hopefully this will be the case in META's Metaverse, unlike the real world, where Mark Zuckerberg's greasy fingers were all over the 2020 election, especially in Georgia), and the 4.5 billion-year-old planet -- yes, this has been a hot week here in NYC and for my clients in London, it's July, it's supposed to be hot in the Northern Hemisphere -- is... wait for it... melting?
Fine, do whatever you want.
ExCap is winning 2022... and my clients and I are having a great deal of fun while doing it. The investing world is large enough to sustain contrasting modalities. That's what makes me tick. It's how I roll. The feedback from the Real Money community is the fuel for my fire. Keep it coming!
(Amazon is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells AMZN? Learn more now.)
