It’s an opportune time to short overvalued risk assets now that Wall Street’s multi-year pump is in mid-freefall.
But there’s no more enjoyable equity to dump (or just watch plunge from the sidelines) than Musk’s crashing crown jewel, known by its ticker $TSLA.
Market Background
Yesterday, the tech heavy Nasdaq had its worst session since June of 2022, plummeting over 4%. The Dow Jones Industrial Average fell almost 900 points. The S&P 500 dropped over 2.5% and broke well below its 200-day moving average.
Blue chip growth stocks like semiconductor manufacturer Nvidia, one of the best performing equities in the stock market the last three years, fell 5%. Meanwhile, social media giant Meta, which has lost over $140 of its value from its all-time February high of 740.91, plunged $27.67 yesterday, closing at $597.99, down 4.42%.
Another risk asset, Bitcoin, fell below $80,000, raising concerns about a new crypto winter on the horizon.
Overall, market uncertainty is rising for a host of reasons: a pending government shutdown, continuous chaos in the Oval Office, cracks in the NATO alliance, a slowing economy, sticky inflation, rising unemployment, burgeoning default rates on consumer debt, and Trump’s on-again, off-again tariffs levied against our Canadian and Mexican allies—tariffs that will acutely hurt our own local economy, in particular the Kentucky Bourbon and vehicle manufacturing industries.
Furthermore, dark terms presaging pending doom such as “recession,” “trade war,” and “correction territory” are being bandied about by Wall Street Journal reporters and financial pundits on CNBC and Bloomberg News as the feverish and previously en vogue talk of “animal spirits” subsides.
And it this economic and political backdrop that has led Wall Street’s fear gauge, the VIX, to shoot up to 29.56, a level not seen since last summer during the Yen Carry Trade unwind in August, which I also reported on for LEO Weekly.
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But the largest turd in the punch bowl is Elon Musk’s company, Tesla. Tesla stock was not only the worst performer in the S&P 500 yesterday, but the worst performer this whole year.
The electric car maker crashed over $40 during intraday trading, losing 15% of its value, closing at $222.15. Musk himself lost $29 billion of his net worth in a single trading session. Let that sink in.
The stock is now down over 50% from its December all-time high of $488.54 and has given back the entirety of its “Trump bump” gains since Election Day last November—and then some.
Moreover, consumer confidence in Tesla is at an all-time low as his factories and showrooms across the US are being bombarded by “Tesla Takedown” protests spawned by citizens incensed over Musk’s atomic approach to cutting federal government spending, including the firing or offering buyouts to over 100,000 federal employees—of note, 19 offices here in Kentucky are “slated for funding cuts” as reported by Spectrum News 1.
Although the majority of these protests have been peaceful, there have also been isolated incidents of vandalism, including “fires intentionally set at Tesla showrooms and charging stations in Colorado and Massachusetts,” according to the BBC.
To add insult to injury, there are multiple reports of Cybertrucks being vandalized across the US, as well as some car owners “defacing their own Teslas in protest of Musk!”
And these demonstrations have raised an alarming specter over the company and provoked serious questions about when Musk will return to his day job.
Across the pond, Europeans are no less disenchanted with Elon. Benziga reported, “In Europe, where the overall electric vehicle market grew by 37% in January, Tesla’s sales plunged by 45% during the same period.”
To be certain, Musk’s entree into politics, while becoming Trump’s DOGE consigliere, has permanently damaged his company’s brand, a brand that has been massively overvalued for years in large part due to his own cult of personality that up until this point has remained remarkably unscathed.
A cult of personality built on Tesla’s endless revolutionary narrative that has created an enormous bubble, which has begun to burst due to both his endless controversial antics and macroeconomic trends—the electric vehicle market is becoming more and more competitive, while China’s dominance is ascendant, which has forced Tesla to cut prices.
In the past, Wall Street and retail traders have backed and bought up Musk’s Tesla stock through thick and thin, and it has always rebounded off pullbacks and been more prone to short squeezes than crashes.
But Nazi salutes, slashing veteran’s jobs, and ruminating on Joe Rogan’s show about Social Security being a giant Ponzi scheme is no way to build brand loyalty.
No doubt this is a new day, as large institutional investors and “dumb money” are both busy “defunding” the stock.
And I believe, because each of these aforementioned factors, among others, this is only the beginning. How far it will fall is to be determined.
What is assured is that even if Musk resigned from DOGE today, the public damage to his crown jewel is irrevocable.
Or another way to put it, even if you removed the turd from the punch bowl at a party, how drunk would you have to be to grab the ladle and start slurping from the fecal-tainted libation?
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This article appears in Feb 28 – Mar 6, 2025.
