The price action of the Consumer discretionary sector, and of TGT in particular, so far today shows the essence of a bear market. Despite being down by 20% from its high last year, TGT has lost a quarter of its market value, or about $20 billion, in trading today that in the first hour is already about 8x normal daily volume.
Yes, the quarterly results the company reported this morning were surprisingly bad. Yes, the company might have lessened the shock if it had hinted at the weakness it was seeing as the quarter developed (although I’m a holder, I don’t know the company well enough to understand its disclosure policies in this kind of situation). And, yes, we may not see positive earnings comparisons until next year. But a loss in market value this large seems a bit much.
But this is the essence of a bear market. The same bad news–in the present case, higher interest rates, supply chain disruptions, the end of extra government stimulus…–gets factored into stock prices over and over and over again. WMT, for example, which had its wings clipped by 10%+ just yesterday on earnings that weren’t as bad as TGT’s, is down another 5% in the first hour today. HD, which reported an excellent quarter yesterday, has given back Tuesday’s gains and then some so far today. Also, the market has a relentless focus on the here and now, reacting especially to bad news.
The most reliable indicator that the down market is over when companies report quarters like TGT’s and the stock doesn’t go down. We appear to be a ways away from that.
I don’t use TWTR and I don’t pay much attention to it. The internet tells me Elon Musk is worth $200 billion+, although I vaguely recall a number closer to $150 billion being tossed around in commentary about his bid for TWTR. A good chunk of that is his 17% interest in TSLA.
My sense, having owned both TSLA and Solar City for a considerable time, is that he thinks big thoughts and is willing to take substantial risks, but that he leaves the details to others. His apparently shaky grasp of the securities laws that pertain to his proposed acquisition of TWTR are a case in point.
Knowing only this much, my guess is that Musk thought, based on his past successes, he would have no trouble obtaining third-party finance for his (fun for him) bid for TWTR. That doesn’t appear to be the case, however. Instead, he’s essentially being asked to take out a margin loan secured by his TSLA stock.
If so, if TWTR turns out to be SolarCity redux, or if TSLA stock weakens for any reason, his loan could be called and he would lose the stock put up as collateral. Embarrassing? Yes. More important, he could end up losing control of TSLA.
My guess is that Musk is only working all this out now, and that this is the source of his apparent cold feet with TWTR.