Speaking to a couple of knowledgeable sorts yesterday and a recurring theme emerged: what is true innovation? What is a truly impactful stock? Is another streaming app really ‘innovation’? Is another social platform going to make us more productive? (no!) There’s lot of fake innovation out there; hardware masquerading as software, software as AI. The Metaverse sounds crap. Expect more reality checks. ESG is going through a similar reality check. Cutting through all this fakery is not an easy task and wasn’t really required when the liquidity was abundant and the party was in full flow these last 12 years. Now the punchbowl has been removed and the mask has slipped.
On that note, downgrades, or at least price target revisions, are coming for Tesla. I call this a***-covering. Daiwa Securities analyst Jairam Nathan lowered his price target on Tesla to $800 from $1,150 while maintaining an outperform rating. This is less than a week after Dan Ives at Wedbush lowered his PT on Tesla to $1,000 from $1,400 and kept his outperform rating...reality is catching up with some of the most prominent Tesla bulls. Last week BNP Paribas’s EV World Cup left Tesla with no wins – competitors are already overtaking. The decline in the stock is entirely justified and the Street is playing catch-up. Ives on the situation last week: “While the Twitter situation in theory does not impact the Tesla fundamental story, the distraction risks for Musk (perception is reality) are hard to ignore at a time that the Tesla ecosystem have never needed Musk more with the worst supply chain crisis seen in modern history.”
Shares in Tesla declined almost 7% to $628, a new low for 2022. But it wasn’t the worst performing of the big holdings in ARK Innovation ETF. Roku fell almost 14%...needless to say Cathie was providing the liquidity, buying 231k shares for ARKK. Insiders meanwhile are getting out and she’s providing the off-ramp they need. She also bought 190k shares of Block as it declined 9%. Keep on doubling down...Zoom is now the number one holding at 9% of the fund.
Twitter AGM today is going to be interesting. Streams from 10am Pacific Time. Does the board just Musk all the way to signing or does he back out, get a discount? Shares are not priced for the deal to go through as it stands.
Tech fell hard yesterday on that Snap update. The reverberations were felt across global equity markets, but the Dow held up a small gain as the Nasdaq fell 2.5%. Snap itself dropped 43%, whilst Meta declined 7% and Twitter slid over 5% to under $36.
Hardware masquerading as software: Today’s Ocado update has all the hallmarks of the Target/Walmart earnings reports last week. Since its last update in March, management note how “the trading environment has deteriorated, as has been widely reported in industry data, with the cost-of-living crisis compounding the impact of a return to more normal consumer behaviours as restrictions have ended and many people return to the office”. The online grocery market has declined by around 20% compared with last year, they say. Shares are down 52% YTD and about 75% from the all-time highs.
M&S back in the black but a 1% rise in the share price is hardly covering the 43% decline this year. And despite the business starting to fire on more than one cylinder, a pessimistic outlook is hardly helping drive investors to pick up shares. “There is substantial inflation in both cost of goods sold and operating costs including fuel, power, building materials and maintenance ... Consequently, customers' spending capacity is under pressure. We expect these pressures to increase as the year progresses. We are therefore planning for an adverse impact on volumes due to price inflation, slowing the rate of sales growth.” Meanwhile it’s pulled out of Russia.
Retailers...looks tough given the consumer today but some pandemic momentum stocks doing well still – Pets at Home up 8% as pre-tax profits rose 40% on +15% revenue growth. I guess not everyone has kicked out their lockdown panic purchase pooches yet. Shares still down by a third in 2022.
SSE is today’s energy complex in microcosm: operating profits up 15% to £1.5bn but profits are its renewables business is down 22% quite simply because it wasn’t windy enough. Shares rebound almost 5% after taking a hit yesterday apparently on windfall tax fears and a downgrade at Citi to neutral from buy.
European stock markets nudged up in early trading on Wednesday, with shares in London and Frankfurt up around half of one percent. US futures are holding up ok this morning. E-minis here running into the trend resistance – watching for a break here as the descending wedge plays out...vicious bear market really or capitulation moment? Vix still not doing anything but hang around the 30 mark, evidence of no great downside fear but equally no surge in optimism...slow grind lower territory.
Yesterday, Atlanta Fed president Raphael Bostic suggested the central bank could pause hikes in September and cast doubt on back-to-back hikes of 50bps in June. Markets reacted by reducing the chances for a move in September. The Fed can be relatively happy for now that tightening is producing a relatively orderly decline in stock markets as opposed to a panic. But it’s still walking a very fine line. FOMC minutes are due today
Elsewhere, crude oil continues to hang around the $110 level even with Chinese lockdowns, a massive SPR release, a recession round the corner and a major sell-off of risky assets. Imagine where it can go after the ‘wall of worry’ (horrid phrase) crumbles...EIA inventories today seen at -2.2m after API reported a surprise build of 0.6m barrels. Gasoline and distillate inventories continued to fall amid a shortage of refining capacity just as the US enters the high-demand summer season.
In FX, the New Zealand dollar built on recent gains versus its US counterpart after the RBNZ raised rates 50bp to 2.0%, its fifth straight rate hike in a row and “agreed to continue to lift the OCR at pace” which was a hawkish surprise for the markets.
Sterling took a major hit yesterday as on some pretty dreadful PMI figures. Activity is slowing fast, hitting a 15-month low and the outlook is horrendous. It’s a horrible data set and traders are scaling back rate hike bets in its wake with the 2yr gilt down 14bps on the news before ticking up a touch along with sterling. Not a great setup for the pound but can still make headway as the long-dollar positioning is apt for further unwinding. Neckline of inverted head and shoulders at the 61.8% retracement of the longer-term move is the support/resistance for now. Looking for this to provide springboard for 1.2640 area even though macro setup looks so poor...bullish MACD crossover on the daily charts still in force.
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RISK DISCLOSURE STATEMENT In consideration of Safecap Limited (“Safecap”) agreeing to enter into over-the-counter (“OTC”) contracts for differences (“CFDs”) and spot foreign exchange contracts (“Spot FX Contracts”) with the undersigned (hereinafter referred to as the “Customer”, “you”, “your”), Customer acknowledges, understands and agrees that: 1. Trading Is Very Speculative and Risky. Trading CFDs and Spot FX Contracts is highly speculative and is suitable only for those customers who (a) understand and are willing to assume the economic, legal and other risks involved, and (b) are financially able to assume losses significantly in excess of margin or deposits. Neither CFDs nor Spot FX Contracts are appropriate investments for retirement funds. 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It is your responsibility to carefully read these Trading Policies and Procedures and to inform Safecap of any questions or objections that you may have regarding them before entering each and every Transaction. You agree, represent, warrant and certify that you understand and accept Safecap’s Trading Policies and Procedures, as set forth here and as may be amended from time to time by Safecap, in its sole discretion, and you agree to comply with Safecap’s Trading Policies and Procedures. Terms capitalized in these Trading Policies and Procedures are defined in the Glossary as found on Safecap website. 2. TRADING HOURS All references to Safecap’s hours of trading are in Greenwich Mean Time (“GMT”) using 24-hour format. Safecap normally provides access for trading CFDs and Spot FX Contracts via the Website from 21:00 GMT on Sunday to 21:00 GMT on Friday. Please refer to our “Instruments Table” for additional information. 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Where you place Orders with us, the execution factors that we consider and their relative importance is as set out below: 1. Price. The relative importance we attach is “high”. 2. Speed. The relative importance we attach is “high”. 3. Likelihood of execution and settlement. The relative importance we attach is “high”. 4. Size. The relative importance we attach is “high”. 2. We are the principal to every Order you place with us and therefore we are the only execution venue. 4. ORDERS 1. Orders Placement. All Orders must be placed through the Safecap Online Trading System or by telephone to the Safecap Trading Desk. Telephone Orders are accepted in the sole discretion of Safecap. 2. Types of Orders Accepted. Some of the types of Orders Safecap accepts include, but are not limited to: 1. Good till Canceled (“GTC”) - An Order (other than a Market Order), that by its terms is effective until filled or canceled by Customer. GTC Orders do not automatically cancel at the end of the Business Day on which they are placed. 2. Limit - An Order (other than a Market Order) to buy or sell the identified market at a specified price. A Limit Order to buy generally will be executed when the Ask Price equals or falls below the Bid Price that you specify in the Limit Order. A Limit Order to sell generally will be executed when the Bid Price equals or exceeds the As Price that you specify in the Limit Order. 3. Market - An Order to buy or sell the identified market at the current market price that Safecap provides either via the Online Trading System or over the telephone through one of the dealers. An Order to buy is executed at the current market Ask Price and an Order to sell is executed at the current market Bid Price. 4. One Cancels the Other (“OCO”)- An Order that is linked to another Order. If one of the Orders is executed, the other will be automatically cancelled. 5. 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For example, if Customer has purchased a long open position and the market Ask Price increases, the Trailing Stop price will also increase and will trail behind the market Ask Price at the fixed distance set by Customer. If the market Ask Price then decreases, the Trailing Stop price will remain fixed at its last position and if the market Ask Price reaches the Trailing Stop price, the Order will be executed. Please note that because of market gapping, the best available price that may be achieved could be materially different to the price set on the Trailing Stop Order and as such, Trailing Stop Orders are not guaranteed to take effect at the fixed distance for which they are set. 3. One Click Order Entry/One Click Execution of Market Orders. 1. Electronic Order entry for Market Orders equals Order execution. To enter an online Order, Customer must access the Markets window, then click on “BUY/SELL” for the relevant market. A new window will appear in which the Customer enters the price and lot size. The Order is filled shortly after the Customer hits the OK button provided the Customer has sufficient funds in his Account. Orders may fail for several reasons including changing dealer prices, insufficient margin, unspecified lot size or unanticipated technical difficulties. 2. One-Click Trading. To use one-click trading, Customer must go to the “Settings” menu and choose “View and Edit”. Customer should check the “One-Click Trading” box. To enter an online Order with one-click trading, the Customer must access the Markets window and enter the price and lot size. The Order is filled shortly after the Customer clicks the BUY/SELL button provided the Customer has sufficient funds in his Account. Orders may fail for several reasons including changing dealer prices, insufficient margin, unspecified lot size or unanticipated technical difficulties. One-Click Trading can also be used when closing positions. 3. 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In cases where the prevailing market represents prices different from the prices posted by Safecap, Safecap will attempt, on a best efforts basis and in good faith, to execute Market Orders on or close to the prevailing market prices. This may or may not adversely affect Customer’s Realized and Unrealized Gains and Losses. 5. CUSTOMER ACCOUNTS AND INITIAL DEPOSITS 1. Documents. Before you can place an Order with Safecap, you must read and accept the Customer Agreement, including the Risk Disclosure Statement and these Trading Policies and Procedures and all applicable addenda, you must deposit sufficient clear funds in your Account and your Customer Registration Form and all accompanying documents must be approved by Safecap. Upon the approval of your registration, you will be notified by e-mail. 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