When In Doubt Just Blame It On Trade Tensions - Why Not!

When In Doubt Just Blame It On Trade Tensions – Why Not!

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May 23 – Stock Mentions: TSLA, INTC, NVDA, AMD, ACAD

Michael Kramer and the clients of Mott Capital own TSLA and ACAD

Well, we knew things were going to heat up today, the chart of the S&P 500 told us that it would happen. The only thing we weren’t sure of was the direction. So blame it on the trade war if you want, the action today was baked-in into the charts, and I am not surprised. The only place I went wrong was the direction. Hey, you can’t get everything right all the time, 1 out of 2 isn’t bad. I should have realized yesterday when the S&P 500 failed at 2,863.

Hey, trade tensions are even helping people in the US buy homes with mortgage rates going down. When in doubt blame it on trade worries. Why not, it sounds good.

Forget about those weak PMI’s today across the US and Europe, they don’t matter at all!

I’m still scratching my head in terms of what the potential impact of a trade war would be on S&P 500 earnings estimates? I spent about 3 hours this afternoon trying to come with a hard number. I get the sense that nobody has a clue, and I’m not saying I do either. I have no way to actually to assess the impact on earnings. The actual impact on the economy based on the import numbers and GDP, I believe will likely be minimal, there are actual numbers I can use to think that through.

The best I could come with regarding earnings is roughly a 4.5% hit to earnings estimates, assuming all the tariffs go into place.  Let’s have some fun and see what we come up with.

Operating earnings estimates for 2019 would fall to $158.20 from $165.52, and 2020 would fall to $175.56 from $185.03. That would leave the S&P 500 trading at 17.8 times 2019 estimates, and 16.1 times 2020 earnings estimates. Still, that is below the S&P 500 historical one-year forward earnings of 17.4 going back to 1988. Even at 17 times 2020 earnings, the S&P 500 gets to 2984, at the historical average of 17.4 it goes to 3054. So do I feel the trade stuff is overblown, yes!

Does that mean the market can’t fall further? Of course, it can, at 15 times 2020 estimates with 4.5% discount, we get to 2,633.  But with rates on the 10-year 2.32%, I find it unlikely.  I mean the S&P 500 SPDR (SPY) yields 1.85%, keep that in mind. As prices fall, yields rise.

S&P 500 (SPY)

The good news is that the S&P 500 closed well of its lows, and the index managed to hold last weeks lows. The other piece of good news is the RSI still has a positive trend. So, no I’m not jumping on the gloom and doom wagon yet, and no, it is not because I’m a perma-bull.

S&P 500, spy

Tesla (TSLA)

There weren’t many stocks that went up today, but Tesla was one. Elon has seemingly found a better way to communicate with the public about TSLA. Put out sensitive emails to employees knowing they will be leaked to the media because that seems to always happen. It is a much more efficient and direct way to communicate with the mass instead of messing around with Twitter.

Anyway, I have done some work on Tesla these past few days myself, and based on my “data,” it seems hard for me to determine that demand is waning? I’m wondering how the sell-side guys know how to measure demand? Is there some gauge that blows in the wind? Again, my data says demand seems fine, and the email Musk sent out today seems to suggest that.  You can watch my video if you’d like Does Tesla Have A Demand Problem?

I do think the stock is reflecting more China nervousness than demand worries. Remember they are building a large plant in Shanghai.  The $191 level is the last stand for the stock, before a drop to $130. I think the stock is oversold at this point and due to rebound back to $251.

tesla, tsla

Intel (INTC)

In a sign that perhaps some of these semis are oversold, Intel managed to rise today. It has room rise to $46 before hitting resistance.

Intel, intc

Nvidia (NVDA)

Nvidia fell through $150, and now the door opens for a decline to $139.

S&P 500, spy, stocks

AMD (AMD)

I don’t know what to say about AMD. The stock is on the slow grind lower. Every time you think its breaking out it fails. I give up. I think it needs to test 25.75 first before we know what happens next.

amd, stocks,

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Acadia (ACAD)

Acadia has one of these wedges forming too, like the one in the S&P 500 yesterday. This time I hope to get it right. I think $27 is on the way, maybe even $31. How many times I have said that before about Acadia, and been wrong? A lot. 🙂

acadia, acad

Sleep tight!

-Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.  TSLA

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.