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Last week, while the media were wringing their hands over fake news, the Dow Jones Industrial Average jumped another 354.68 points or 1.7% to close at a record 20,624.05, hitting seven straight days of record highs. The S&P 500 popped 1.5% to a record 2351.15 and the Nasdaq Composite Index gained 1.8% to a record 5838.58. While Trump's opponents may fear for the future of the Republic, they would do better to fear for the future of their 401ks because this rally is running on fumes.
The truth is that markets thrive on investors' stupidity and we are seeing a perfect example of that today while markets rally on nothing more than hot air. Believe me, I thought the market would rise after Mr. Trump was elected; the opportunity to rid the country of 8 years of anti-growth policies was a game-changer that promised good things in the future. But that doesn't mean that investors should be discounting a decade of growth and two terms of promises, many of which will not be kept, in a one month period.
The market is well ahead of itself and poised to correct. Sentiment and other warning indicators are flashing red. Investors chasing stocks at these levels are taking big risks. And one of the biggest risks is Tesla Inc. (NASDAQ:TSLA), which plans to announce earnings after close today.
TSLA Can't Expect Anything But Bad News – Here's Why
The nausea factor has risen so high for those of us who have lived through earlier bubbles and know how this is going to end that all of the Dramamine in the world isn't going to settle our stomachs. When you see the type of near-parabolic market moves we saw recently – seven straight days of record highs – it feels like we are partying like 1999 except Prince is dead and that party ended with one of the worst market crashes in recent history. Naturally, these moves are accompanied by epic levels of smugness by what I call the country club crowd, by whom I mean the amateur investors who know nothing but think they know everything simply because the value of their retirement account statements has risen (and whose after-tax value, by the way, is much lower than they think, but that's a story for another day). These are the same know-nothings who weep the moment their accounts are down a couple of percent and blame their brokers (er, excuse me, their "wealth managers") for putting them in such "risky stuff."
These are the same amateur investors who have bid up TSLA, one of my least favorite stocks, to sky-high valuations. Unfortunately for them, the party isn't going to last forever.
Today after market close, TSLA is due to report earnings, which in this case means it is going to report a loss unless one of two things happens: it cooks the books like it did last quarter, or God came down from heaven and b…
About the Author
Prominent money manager. Has built top-ranked credit and hedge funds, managed billions for institutional and high-net-worth clients. 29-year career.