Here's What They Aren't Telling You About TSLA

Let’s address the elephant in the room… [Morning Reckoning] July 02, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Here's What They Aren't Telling You About TSLA Baltimore, Maryland July 02, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Now’s the perfect time for the red-hot semiconductors to take a nap. If this year’s major chip winners – NVIDIA Corp. (NVDA), Super Micro Computer Inc. (SMCI) and Micron Technology Inc. (MU) – continue to chop sideways or retest key support levels in July, what will be your next big trade this summer? We’ve discussed several potential summer rotation trade ideas over the past several weeks ranging from energy names, industrial stocks, and even small-caps. Any one (or all) of these plays could catch higher from here. But there’s another group – and one stock in particular – that’s already showing signs that it might take the lead during the third quarter. I’m talking about Tesla Inc. (TSLA). Groups of tech-growth names and the main Magnificent Seven laggard Tesla are waking up and beginning to break out as third-quarter trading gets underway. But before I get into the details of this summer breakout, we should address the elephant in the room… I can sense the skepticism every time I make a bullish Tesla argument. I get it! After all, this is a company that evokes strong emotions from just about everybody. Whether we’re talking about Elon Musk’s politics or online trolling, the latest Cybertruck recalls, or dwindling demand throughout the EV space, even casual investors hold strong opinions on Tesla. Most of them are negative! I don’t necessarily disagree with a lot of the criticism. In fact, I could easily cobble together more than a few convincing bearish arguments against Tesla. And it’s almost impossible to escape the negative news swirling around Musk and the company that helped launch him into the public eye as one of the world’s most polarizing billionaires. Despite a roaring tech rally, TSLA shares have remained out of favor for nearly three years. Most recently, the stock broke from its Magnificent Seven brethren in late December and spent most of the first quarter digging itself into a deep hole. Tesla shares have lost as much as half their value so far this year. Based on performance alone, we can reasonably assume sentiment is extremely bearish. As most of the household name mega-caps were soaring to new highs back in the spring, Tesla was catching some serious flack as it badly lagged behind its Big Tech peers. But something changed in the spring that would set the stage for the incredible comeback unfolding this week. [Your Credit Card: Declined?]( [Click here to learn more]( Take a moment and picture this scenario: The line at the gas pump is getting longer as you insert your credit card for the second time. You decide to head in and ask the cashier what’s going on. There’s a long line inside. The woman in front of you looks frustrated. Everyone does. “There’s nothing I can do. You’re declined,” the cashier says to the man at the front of the line. It’s not just you. Everyone is declined. Something doesn’t seem right. A sinking feeling sets in as you realize something has gone terribly wrong. [Click here now for an urgent new prediction from a former advisor to the CIA and Pentagon.]( [LEARN MORE]( Bad Numbers, Good Results One of our main concerns heading into spring trading was how some mega-caps like Apple Inc. (AAPL) and TSLA were decoupling from the melt-up. Back in early May, TSLA shares bottomed out alongside AAPL after both stocks managed to rally on what the financial media and Wall Street analysts insisted were “bad” earnings. Apple beat top and bottom line estimates, yet reported a 10% year-over-year drop in iPhone sales and offered lackluster guidance. The stock gapped higher and has since rallied nearly 25% to new all-time highs. Just a week earlier, Tesla reported quarterly profits sinking to 3-year lows, along with a slew of other concerns ranging from pricing pressures and questions about whether full self-driving features would ever come to fruition. The stock was already in freefall, plummeting to new 52-week lows in the days leading up to its Q1 earnings announcement. Yet the stock gapped higher and ran for five trading days, erasing the April meltdown and climbing back into its choppy range. After a quick trip back into the $190s, the stock consolidated for nearly two months. That changed last week as shares started to build toward a breakout. The stock turned higher on Wednesday, then broke above the $200 level on Monday on a decisive 6% move. Not only did TSLA break above $200 for the first time since February – it also filled the January earnings gap to close at 5-month highs. Remember, most investors continue to expect the worst from Tesla. Yet despite a strong, positive reaction to mediocre earnings numbers along with bullish follow-through and a clean breakout, bearish sentiment prevails. This could add fuel to the fire should Tesla continue to post any positive surprises. Second quarter earnings will drop on July 17. Is the stock setting up for a big beat? Are expectations so low that even small improvements will entice additional buyers? It’s possible! Despite this latest base breakout, TSLA shares are still off by more than 15% this year. Even a modest earnings beat late this month could ignite a longer-term move. Sometimes, a stock is so hated that the bar for “good news” becomes extremely low. I think that’s the case here. No one is thinking Tesla can beat earnings or announce anything productive regarding deliveries or full self-driving advances this summer. But what if they’re wrong? Price is telling a very different story. If this breakout above $200 holds and extends higher, the downtrend that has trapped TSLA since late 2021 could be finished. If you’d like to watch a complete breakdown of this trade idea with Doug Hill, check out the video we shot last week for the Paradigm Profits YouTube channel. Click below to watch… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Buy this Sub-$5 Play on Elon Musk’s Final Masterpiece]( After revolutionizing space exploration and the auto industry… Elon Musk is now planning to revolutionize MONEY with this new venture. [Click here to see the details because once Elon flips the switch…]( Which could happen in the next 24 hours… It could send [this sub-$5 play skyrocketing in the coming months](. [LEARN MORE]( In Case You Missed It… It’s Not You. It’s Bidenflation. Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, Joke Biden didn’t invent inflation. But he inadvertently attached his name to it, much like Jimmy Carter did in the 1970s. A few months ago, Greg Ip wrote the most condescendingly asinine article The Wall Street Journal ever had the misfortune to publish. In “[What’s Wrong With the Economy? It’s You, Not the Data]( Ip alleged The Great Unwashed™ were too stupid to realize how good everything was under Dear Leader Potatohead Biden. Ip wrote: Yes, some individuals faced higher inflation (someone who bought a house, for instance) but, for the average person, inflation went down. When it comes to the economy, the vibes are at war with the facts, and the vibes are winning. This is obviously bad news for President Biden’s re-election hopes. He can’t exactly tell voters that they are wrong; he would be called out of touch. And it probably wouldn’t change anything. The vibes seem symptomatic of a broader pessimism disconnected from the data. It’s tempting to chalk this up to a misunderstanding. Lower inflation means the level of prices is still rising, just more slowly than before. People sometimes conflate inflation with the level of prices and believe inflation is getting worse because the price level keeps going up (it rarely goes down). The thing is, Ippie thinks you should care more about the math than your wallet. Sure, inflation can fall (disinflation) while prices keep rising, and deflation (falling prices) only happens in industries where the government can’t get its paw in the jar. But the government policy counts, not the fact you can’t buy steak next month, according to Ip. Idiotic. If a product cost $1 two years ago, and last year’s inflation was 10%, and this year’s is 5% (year-on-year): yes, inflation fell 50%. But it also means that the product cost $1.10 last year and $1.16 today. That’s much more expensive (16%) for the lower and middle classes, as food, shelter, and energy costs eat up a lot more of their wallets than those of rich folk. So, of course, they — the hoi polloi — are upset at Biden. But more compelling evidence has come out lately. Bidenomics Here’s a pro tip from Seanie: never attach your name to something when you believe in nothing. Joke Biden has never had a coherent economic strategy. His only economic method is to rely on his Congress to spend as much as they can without outright destroying the dollar. Bidenomics shows you everything wrong with the Beltway’s Madison Avenue obsession. But it’s worked so far, depending on how you view things. If you’re in the crowd that gets the goodies, you must be pleased as punch. But I suspect you’re not, which is why you’ll hold your nose and pull the lever for The Donald this autumn. But this chart has been making the rounds on social media, with good reason. Courtesy of [The Wall Street Journal]( Things make a lot more sense now. Biden claims household wealth has gone up nearly 20% under him, roughly the same as Trump's through three years of their presidency. But there’s one huge difference: Biden’s growth is a mere 0.7% once you adjust for inflation. Trump’s was 16.0%. But The Nobel Prize Winners Say… Old joke: Why did God create economists? To make weathermen look good. The Nobel Prize in Economics is fake, in case you didn’t know it. The Swedish Central Bank awards it, not the Nobel Committee, which is why it’s called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. So foul is the odor that emanates from this prize, that four of Nobel's relatives have formally distanced themselves from it. And yet, we accord the people who win this gong a level of respect they simply did not, can not, and will not earn. Ever. They aren’t the coming of Hari Seldon, of Foundation fame, much to Paul Krugman’s chagrin. They can’t predict the future. Heck, they’re so awful at calling the shots, you may as well flip a coin and listen to them. And yet they keep committing their signatures to nonsense papers because they think no one’s keeping track of their awful track records. For instance, my friend and colleague Alan Knuckman brought up in our editorial meeting yesterday that sixteen — count ‘em! — sixteen Nobel Prize-winning economists wrote an open letter warning that if Donald Trump won a second term, his economic agenda would be “vastly” inferior to that of President Joe Biden’s and that Trump would also “reignite” the inflation “which has come down remarkably fast.” As the British would say, “The bloody cheek!” Thanks to Tiana Lowe Doescher of [The Washington Examiner]( we know 14 of the 16 who penned this letter also wrote a letter in 2021 supporting Build Back Better. Doescher writes: You see, 14 of the 16 economists from the 2024 letter wrote another letter in September 2021 cheering on Biden’s “Build Back Better” agenda, which would later become the Bipartisan Infrastructure Law [BIL]. Spearheaded by Joseph Stiglitz of Columbia, George Akerlof of Georgetown, Sir Angus Deaton of Princeton, Sir Oliver Hart of Harvard, Eric Maskin of Harvard, Daniel McFadden of Berkley, Paul Milgrom of Stanford, Roger Myerson of the University of Chicago, Edmund Phelps of Columbia, Paul Romer of NYU, William Sharpe of Stanford, Robert Shiller of Yale, Christopher Sims of Princeton, and Robert Solow of the Massachusetts Institute of Technology claimed that the BIL, which infused about half a trillion dollars of new spending into the economy, would “ease longer-term inflationary pressures” despite inflation already running at 5%. Again, this September 2021 letter would be less embarrassing if Stiglitz hadn’t already endorsed the preliminary portion of the BBB agenda, the American Rescue Plan. Rewind back to February 2021, when inflation was just 1.7%, Stiglitz called a refusal to pass the “urgently needed” $1.9 trillion ARP “irresponsible and reckless.” In short, these guys don’t have any better idea of the outcome of policies than you do. Trust your wallet. Don’t ever trust these charlatans, one of whom (Akerloff) is married to the most incompetent Treasury Secretary in U.S. history. Wrap Up The reason why you don’t feel any wealthier than when Trump was in is because you aren’t materially wealthier than then. If you were worth $100,000 (for math’s sake) on Day 1 of Biden’s term, you are now worth, on average, $100,700. You’ve increased your wealth by $700 over three years, or $233.33. Thanks to Joke Biden, you can go to one more baseball game than before. Of course, if you’re lucky enough to be in the arms business, I congratulate you. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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