Stocks traded flat this morning after enduring a poor start to the month in the week prior. Historically, bulls have done their best in November and December. October, by comparison, has been a decidedly less bullish month in the past.
But this year, equities roared strongly through October and now face significant economic headwinds going into the holidays. The normal seasonal sentiment trend is at risk of going completely out the window.
This shouldn’t come as much of a surprise given how distorted the investing landscape has become, though. Major dovishness from the Fed (via quantitative easing) sent bulls into overdrive. As a result, bad economic data was a boon for stocks over much of the last year and a half.
It meant that the Fed would continue to keep rates low and liquidity at an all-time high. Reports that showed better than expected economic growth, on the other hand, would send equities lower.
This relationship has changed over the last few months, however. Good news is finally being taken at face value as 2022 approaches.
But that also means bad news will indeed be viewed as a bearish impulse. Inflation is red-hot and the US still faces significant supply chain problems. The Fed is expected to raise rates at some point next year in response.
That had tech shares lagging this morning. Making matters worse was Tesla (NASDAQ: TSLA) CEO Elon Musk, who asked Sen. Bernie Sanders over the weekend whether he should sell additional shares of TSLA.
“We must demand that the extremely wealthy pay their fair share. Period,” Sanders tweeted, to which Musk responded:
“I keep forgetting that you’re still alive.”
Musk continued, asking:
“Want me to sell more stock, Bernie? Just say the word…”
TSLA shares opened for a slight loss this morning before tumbling over 4% on the day shortly before noon. The stock is now down more than 20% from its all-time high.
For Musk, this is likely the best possible moment to cash in his shares. The market has gone on an absolutely explosive post-Covid run, rising 113% from its initial pandemic lows. Anyone who exits the market right now wouldn’t be blamed for doing so.
And for anyone holding TSLA shares, that’s doubly true. TSLA is up almost 1,300% since its Covid lows.
It’s something that “Big Short” investor Michael Burry noted on Twitter last night.
“Let’s face it. @elonmusk borrowed against 88.3 million shares, sold all his mansions, moved to Texas, and is asking @BernieSanders whether he should sell more stock. He doesn’t need cash. He just wants to sell $TSLA,” Burry tweeted.
It can be easy to forget that Musk’s net worth is almost entirely tied-up in his TSLA shares. Unless he sells those shares, it’s all unrealized wealth.
Really, Musk would be a fool not to sell right now. He could easily take his profits and apply them in an even more profitable manner.
Or, he could simply buy more TSLA shares down the road at a major discount once the “everything bubble” deflates. Musk has claimed that he’s selling his shares to pay taxes and personal debts.
In reality, though, he may simply be getting ready to make an even bigger exit. At least, that’s what most traders would do in this situation.
And based on his most recent TSLA sale, it seems like Musk understands “buy low, sell high” very well, especially with a rate hike looming next year.