Read on the Trading Floor - 24 April 2024
Today’s focus… Elon, JPY, Visit Rwanda and much more
Macro Themes At Play
Theme 1 - Elon goes bear hunting
Theme 2 - JPY calm before a potential storm
Theme 3 - Sunak banking on Rwanda
Further reading and listening of note
Theme 1 - Elon goes bear hunting
You do have to impressed by Elon, if he is one thing, he's an incredible sales man. Sell the dream, leave the details for later.
The share price was must certainly compressed, as bears danced on his grave on FinTwit, but his "switch" from high end cars to cheap and affordable family saloons has caught a mkt underweight and given momentum (as well as a growth story) for those who worship at the altar of Elon to take back control of the share price. The redirection from high end to large scale production numbers for an affordable Tesla badged model could be a utopia but I'm pretty sure we heard this all before. Either way, talk is cheap, Tesla cars will sell, the Robotaxi sounds futuristic and cool but the competition is fierce. There will be very few winners in the EV sector. Manufacturing costs as well as R&D budgets remain high and the market is flooded with models from historic companies as well as new ones. Elon may believe consumers want EV’s but the trend has been back to petrol plug-in hybrids. Until the solid state battery appears and exponentially changes the range of an EV, consumers will stick with what they know, trust and has proven to maintain a strong residual value.
WSJ - Meet the Tesla Diehards Sticking With the Stock Despite Its Disastrous Year
Reuters - Tesla promises 'more affordable' cars after shelving all-new Model 2
Bloomberg Opinion - Musk Sells the Tesla Dream, But Don't Ask for Details
Bloomberg - Tesla Speeds Cheaper EV Plans, Calming Fears Over Strategy
Elsewhere, the mkt is enjoying a reprieve from the stronger US data and tensions in the middle east. The softer US manufacturing PMI is allowing some doves to reappear after it slipped into contraction territory, settling bonds yields ahead of today's important 5y auction. The current restraint shown by Iran/Israel is also providing the fuel to a bounce / correction off last week's fire sale lows in equities.
MacroVisor flag an important chart, showing softer PMI output prices leads inflation by 4months. We've already seen lumber slide as new housing starts reduce. As a result, the "Buy The Dip" crowd is on the front foot with SPX back above 5000 and potentially set for a rally into month end.