Fleas Trade Blows Over DJIA’s Virtue

It was the Battle of the Fleas yesterday in the final hour, with the Industrial Average’s maidenly virtue at stake. Earlier in the day, the broad averages had traced out the EKG of a motorcycle victim lying brain-dead on a gurney. Then, when the NYSE’s clock struck three, stocks broke lower, impelled perhaps by an anxiety attack over payroll data due out Friday. Selling commenced in earnest, with an initial pitch that threatened to put the Indoos into a 250-point kamikaze dive. Would the blue chip index be sullied and degraded by a symbolically evocative loss of 100 points or more?  Or instead, would Wall Street’s one true White Knight – i.e., panicky bears covering short positions — ride to the rescue, as nearly always occurs?

Small, but nas-ty

Lo, with just ten minutes to go, the selling decelerated and reversed with the DJIA off 115 points.  More nail-biting action.  Two minutes left, and the Dow is now down 92 points, the matter still unsettled. Bulls and bears traded a flurry of puny blows, all of them aimed below the belt. A jab glanced off a buttock…a thumb sought purchase in a groin…a knee found its target in a thigh.  Alas, bulls needn’t have worried. The Dow finished down 96.28 points on the day, achieving the same obscurity in the record book as a long fly ball blown back onto the warning track by a stiff gust of wind.

***

Tesla Shares Fly

A sibling called yesterday wanting our blessing for the purchase of Tesla (NASDAQ Symbol: TSLA) shares, the hottest IPO to come along in quite a while.  The last time he called about a stock, it was just before eBay’s now-legendary IPO. An inveterate garage-sale junkie, he pleaded his case at the time, explaining that eBay was an idea that would succeed spectacularly. We half-agreed but advised him not to mix it up with all of the crazies who would be diving in and out of the stock in its first few weeks.  But EBAY took off and never looked back, stranding our sibling’s cautious bid.

The buzz Tesla has generated in the showroom has spread to Wall Street

So, is Tesla a buy from the get-go?  Maybe.  Although we are never quite comfortable forecasting a stock that has no price history,  Tesla’s “story” is pretty enticing:  a hot-looking design, fast as hell and easy on air quality.  It’s a bit pricey at just over $100,000, but the company will soon be introducing a sedan for $40k+ that will put it within the range of a much larger population of buyers.  Our sibling works at an airport, and what got him excited about Tesla in the first place was the sight, each and every day, of two or three of the sports cars being loaded onto a freight plane bound for Asia.

Tesla shares were priced at 17 for Tuesday’s IPO, but they opened at $19 and rose quickly from there.  Yesterday, on Day Two, they shot up to $30.42 before receding to $23.30 nearly as quickly.  Not for the faint-of-heart, for sure. But as a gambler’s risk, we would surmise that there are more-reckless ways to deploy one’s capital than buying Tesla stock around $20.

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  • DG July 1, 2010, 3:48 pm

    1) As great as not creating more pollution is, and this is arguable when you consider the source of the electricity (50% coal), the transmission, and the ecosystem of the battery (production, removal, replacement), the electric car is no eBay. Ebay, and many internet apps, provided huge economic benefit. Tesla does not create economic benefit, nor does it seem to be imminent. One may think that paying 8 cents a kwhr for electricity is cheaper than 3 bucks a gallon for gasoline…..until they replace their battery for $10k. Sure, Uncle Barack may mandate a $10,000 incentive to buy electric, but if you are wondering how this will turn out pull up any chart of solar power companies….most are down 95% from their 2008 highs -w/ the 2009 bounce!…and Spain (I’d guess, now that they are officially broke) would really like their 70 cent a kwhr subsidy back on the 3 GW they installed! 2) Tesla is late to the electric party. The Japanese have been building these forever and likely have a few tricks up their silky sleeves… 3) Unless this market is bottoming soon, nothing is going up.
    Selling to some loaded VC’s, who have long ago tossed any semblance of respect for utility of their own money, think its cool, is not much of a biz plan. Segue, anyone? I still chuckle that Roger Mcnamee thought that Segue would be the fastest growing company to ever reach a billion in sales…..10 years later, and only wasteful police budgets have bought the ridiculously uneconomic replacement for walking. A billion in sales? I guess it is possible – if we go the way of Zimbabwe!

  • gary leibowitz July 1, 2010, 3:03 pm

    Chasing the latest hot IPO. Yeah, I can say with confidence that fear is just not here. Making this expensive electric car viable to the general public is a long shot. Making a profit is an even bigger long shot.

    My counter indicator is Cramer. He is down right giddy over the prospect of picking up Gems at a great price. He’s the same guy that told everyone to sell everything on the day the market hit it’s bottom last year. The VIX isn’t very concerned either.

    I will once again mention the similarities between 1930 and today. Combine the chart similarities and the turn-dates we should see a temporary bottom next friday (9th). It could actually be a crash which would mean it breaks below 735 on the SPX.

  • Waterman Jim July 1, 2010, 2:42 pm

    Hi Rick

    I guess you were a bit disappointed in the bears yesterday, but is this not the start of something big?

    All the major indexes are below their 200 dma and the s&p just broke through its 20 month exponential ma, no?

    i like fast cars too, but are we not just polluting the air with the mainly coal we burn to make electricity? think about all the special metals in the car that need to be mined and refined and how much pollution that causes not to mention the amount of water used. electric cars are like windmills, great ideas, but in reality its just a different energy transfer system with no net gain and greater than expected after the sale maintenance. Without government subsidies neither would be viable.

    Id rather have a vette and use the other 40k to short goldman.

    keep up the good work.

    • Robert July 1, 2010, 5:54 pm

      “i like fast cars too, but are we not just polluting the air with the mainly coal we burn to make electricity? think about all the special metals in the car that need to be mined and refined and how much pollution that causes not to mention the amount of water used. electric cars are like windmills, great ideas, but in reality its just a different energy transfer system with no net gain and greater than expected after the sale maintenance. Without government subsidies neither would be viable.”

      Aaaaaaah, but the easiest profits are made by being out in front of the big money, not by being out in front of the smart money…

      People look at Tesla motors, and the enviro’s see “green and sexy” and the Facebookers see “sexy and green” and that’s probably good enough for them.

      I wouldn’t buy one, but I will own some shares.

  • Rich July 1, 2010, 2:27 pm

    Fleas and flies oh my, qualify as market genre journalistic literature at its finest.
    We say that having just penned Weary Glass Half Full for our JP hobby giving back website, noting at the same time the lower left-hand corner NOAA geomagnetics are unsettled, suggesting a volatile day ahead..
    We confess to having no small interest in Tesla, like so many hot IPOs a concept without economics – yet.
    We say yet because CEO Elon Musk, a proper visionary going through a nasty divorce as the naysayers like to observe, pulled off a neat hat trick with PayPal, and Toyota not only offered part of the old 1962 GM 1982 Toyota NUMMI plant in Fremont to Tesla, but invested $50 Million in Tesla to boot. What does the world’s number one auto manufacturer see that the world does not?
    Perhaps it is the vision of a real American Renaissance led by transportation technology innovations like Tesla, Clean Energy and Westport Innovations after the world kicked sand in our face…

  • Benjamin July 1, 2010, 2:01 am

    “The Dow finished down 96.28 points on the day, achieving the same obscurity in the record book as a long fly ball blown back onto the warning track by a stiff gust of wind.”

    I’m no stock analyst, nor a chart analyst, really, but I’m a bit confused here. Looking at the longer term charts, seems this rally has reached it’s head and shoulders…

    http://quotes.ino.com/chart/index.html?s=INDEX_DJI&t=&a=&w=&v=d12

    Hardly looks obscure to me, at least in the longer term. But looks like the long term already started.

    “Tesla’s “story” is pretty enticing: a hot-looking design, fast as hell and easy on air quality”

    Now, this is what gets me… You’re pretty much describing a muscle car from the good ol’ days. And because of the catalytic converter, you can’t even kill yourself via carbon monoxide poisoning anymore. Gotta pull the converter first, unless you have ten or more tanks of gasoline burning away in a totally sealed garage. So what it really comes down to is: how much cleaner do we want our air?!

    “It’s a bit pricey at just over $100,000, but the company will soon be introducing a sedan for $40k+ ”

    Wow, that little, huh? But a bit too little for my liking, especially since the extra cost doesn’t make much a difference to the air, and it ain’t all that different from anything we’ve ever seen. I mean, sheeze, what is that in inflation adujusted dollars 40-50 years ago? Probably still too much compared to the “less classy” oldies of the bygone era. We’ll see if the Asians are as money savy as they’re said to be…

    • Rich July 1, 2010, 3:56 pm

      Head and Shoulders patterns are supposed to be 95% reliable.
      If I had a buck for everyone that broke, I would be better off.
      If I had a Buick for everyone that busted, I would be a king…

    • Benjamin July 1, 2010, 4:37 pm

      Thanks for the clarification, Rich. I almost missed the buck/buick difference, though!

    • Rich July 1, 2010, 4:56 pm

      Not to be too picky, aren’t H&S’s supposed to be at tops like 2000 and 2007, and isn’t the right shoulder supposed to bounce off the neckline first?
      Mark Twain’s observation about the cat, having sat upon a hot stove, will not sit on a cold one either,
      comes to mind. What do I know?…
      http://stockcharts.com/charts/historical/spx1960.html

    • Benjamin July 1, 2010, 5:30 pm

      That’s what they say. I think…? But technicals is something I’ve yet to get the hang of. You probably do know better than I do, Rich!

      Nice chart, btw. I like to take a look at it every now and then, myself.