• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Is Tesla Headed for a Minsky Moment?

What happens if there is even one piece of negative information to interrupt Musk's -- literal -- victory dance?
By JIM COLLINS
Jan 09, 2020 | 09:15 AM EST
Stocks quotes in this article: CTXS, TSLA, VLKAF

Citrix Systems (CTXS) has benefited from the Nasdaq's record rise, as CTXS shares finished trading yesterday at $113.76, giving the company a market capitalization of $14.8 billion. Citrix has 8,200 employees, generated revenue of $2.5 billion last year, and has existed since 2000. Solid company, probably overpriced at 5.5x trailing sales, but what isn't in this market?

I didn't select Citrix because of its positioning in networking or cloud potential and execution of transformative business practices. I selected Citrix because its market cap is equal to the dollar amount of Tesla (TSLA) shares traded yesterday. That's right, in one trading session, Tesla managed to move "a Citrix" worth of economic value. Most of that volume was on the upside as Musk's machine hit a valuation of $88 billion in midday trading, but just focusing on the final stats -- $491.87, up 4.85% --gives zero informative value.

I watched every Tesla trade yesterday for the final 1.5 hours of trading, and made solid profits for my trading venture, Excelsior Capital Partners, by buying put options in the high $490's and selling item in the low-$490's. That's a one-day strategy...what will happen today?

To answer that question, one would need a knowledge of how Tesla shares rocketed from $178 last May to a high of $496 yesterday. Certainly the raging Nasdaq helped, as it has done for Citrix, especially since Tesla had been a major laggard of the tech-heavy index from mid-2014 to mid-2019. But there's no "mid-" any more. It's now "early" 2020, and Musk has convinced the world that his goal of world domination has been achieved.

I could sit here and kvetch about the praise heaped on Musk for opening Gigafactory 3 in Lingang, China in 12 months when Volkswagen (VLKAF) opened its all-BEV facility in Anting in the same time period (ground break late-October 2018/Job 1 November 2019), but this is not the time for sour grapes. VW will be making models of its ID.3 model in Anting at an annual rate double Tesla's LIngang capacity (300,000 vs. 150,000.) Unlike the mercurial Musk, however, VW is currently producing prototypes on its modular MEB electric car platform at Anting ahead of a broad launch in October rather than salable units.

That says it all.

This market wants instant gratification, and Musk is the best at providing that. So, that is what has fed the frenzy in Tesla's stock. I doubt there are any short-sellers brave enough to bet against Musk in this environment, but if there are, yesterday's volume of >30 million shares traded likely shook them out. That chunk is about 20% of Tesla's float, and probably closer to a third of the real amount of TSLA shares available for trading, given that some long-term holders -- in addition to Elon Musk who controls about 20% -- are not active day-to-day sellers.

So, that's where psychology comes in. Tesla is in the midst of a Minsky rally. I have mentioned the work of the late Dr. Hyman Minsky several times in my RM column, but his descriptions of one way markets -- inevitably fated for a crash -- are very true in today's markets.

Tesla's "beat" on fourth quarter deliveries obscured the fact that its U.S. volumes have been trending downward. The company doesn't break out sales by geography, but I believe Tesla's U.S. unit volume was down year-on-year in the Q4. The market's superficial response also ignores the fact that, as published registrations data show, the normally ignorable country of the Netherlands accounted for an astounding 15% of Tesla's global vehicle deliveries in the fourth quarter.

Holland's subsidies on EVs -- especially expensive ones like Tesla's Model 3 -- were essentially eliminated on January 1st, leading to that inevitable pull-ahead of sales of Teslas into the fourth quarter. Tesla likely benefited from such pull-ahead in the U.S. as well, as my figuring shows the expiration of the $1,875 federal tax credit on Teslas on December 31st resulted in increased U.S. demand. So Tesla's already lackluster domestic 4Q2019 sales (the exact figures live in my model since they are not publicly released) would have been downright ugly without the tax credit pull-ahead. But, three cheers for the Dutch!

Does anybody care about these facts? Or the fact that overall EV sales plunged at least 30% in China in the fourth quarter following a mid-year halving of subsidies there? In the midst of an insane rally, no. People with no grasp of the fundamentals would rather yell "buy, buy, buy" on the television.

Price movements that aren't backed up by fundamentals inevitably lead to Minsky Moments. By my figuring half to the Tesla shares trading in the market today have been purchased at levels above $450. What happens if there is even one piece of negative information to interrupt Musk's -- literal -- victory dance? That's when Dr. Minsky comes in. Minsky moments are never pleasant for those who own risky assets during them.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jim Collins' firm was Long TSLA puts.

TAGS: Investing | Markets | Stocks | Trading | Automotive | China | Europe | Elon Musk

More from Investing

Updating Qualcomm's Break to the Downside

Bruce Kamich
Feb 24, 2021 1:05 PM EST

How do the charts look now?

Luminar Technologies Is Likely to Give Back All of its Gains

Bruce Kamich
Feb 24, 2021 12:28 PM EST

Let's look at the charts and indicators.

I Don't Want to Get Cornered Into Square

Stephen Guilfoyle
Feb 24, 2021 11:48 AM EST

Here's why the company's move with bitcoin just doesn't square well with my investing views.

Stock Picking Loses Some Energy as Interest Rates Surge

James "Rev Shark" DePorre
Feb 24, 2021 11:36 AM EST

The frenzy in certain sectors, such as bitcoin-related names, isn't as hot as last week but there is still a good amount of trading.

CrowdStrike Traders Should Take the Money and Run

Bruce Kamich
Feb 24, 2021 11:17 AM EST

CRWD has turned to the downside.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:36 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 2/24/2021

    SPX (Long-Term View) The 2/16 HIGH @ 3950.43 is ...
  • 08:30 AM EST GARY BERMAN

    Tuesday Morning Fibocall for 2/23/2021

    SPX (Long-Term View) The 2/16 HIGH @ 3950.43 is ...
  • 04:52 PM EST CAROLYN BORODEN

    WMT Updated

    View Chart » View in New Window » Since we vio...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login