Yesterday, Moody’s downgraded Tesla’s debt to B3 from B2. Moody’s also changed its outlook for Tesla to negative from stable. Because of the downgrade Tesla has been named the eighth nail in the 2009 Bull’s coffin.
On yesterday’s news Tesla’s share price declined by 10% and to a new 52 week low. The downgrade also impacted Tesla’s junk bond that it had issued in August of 2017. The bond has declined by 10% from its original offering price.
The reasons why Tesla was named as the eighth nail:
- Share price will likely never eclipse its June 2017 all-time of $389.00. At its all-time high its market capitalization was $65.3 billion which was higher than GM or Ford.
- Share price will continue to decline since Tesla will have to sell shares and will dilute existing shareholders for it to cover its massive negative cash flow. Tesla has produced negative cash flow for every year since inception. Tesla’s negative free cash flow for its latest 12 months was $4 billion.
- Tesla is the darling of the secular bull market which has been underway since 2009. Elon Musk and Tesla have millions of individuals who are rooting for the company to become successful. The share price remaining depressed for an extended period would weaken investor confidence.
The seventh nail was intense volatility. See “Chart Depicts Fierce Bull & Bear Battle; Intense Volatility Seventh Nail in Bull’s Coffin”. Each additional nail increases the probability that the market will not get back to its January 2018 all-time high for at least eight years. This is because it’s likely the new secular bear market was born in January 2018. The table below which includes the eight secular bulls and bears since 1802.
The chart below which depicts the stock market’s bubbles since 2007 is based on the price history of the S&P 500 versus long-term US government bonds for the period of 2003 through February 2018. The large bubble which had been in place prior to the election of Donald Trump as U.S. President has expanded significantly.
I have been monitoring this bubble since 2016. It was originally discovered from my crash research that I have been conducting since the Bank of Japan (BOJ) instituted a Negative Interest Rate Policy (NIRP) in February 2016. My research enabled me to find the bubble and other historical anomalies or distortions in the capital markets that have been present for the last several years. Watch the video below to view the charts and graphs for the anomalies and distortions which have put the markets on the precipice of a crash.
I am recommending the deployment of a 90/10 Crash Protection Strategy. For information on the strategy which is the only fail-safe strategy that one can utilize to protect their liquid assets from crashes, recessions and depressions view video below entitled “Crash! & 90/10 Crash Protection Strategy”.
My crash research that I began to conduct in 2016, resulted in my developing an algorithm that I utilized to issue market crash warnings during 2016 when negative interest rates posed great risks to the global economy. See equities.com article “NIRP Crash Indicator Signals Very Reliable for 2016”. Due to the ebbing of negative rates in 2017, after Mr. Trump’s election as President and the unprecedented low stock market and especially currency volatility, the NIRP Crash Indicator was disengaged in March of 2017. See equities.com article “No Longer a Need for NIRP Crash Indicator Signals”. Upon currencies volatility picking up the NIRP Crash Indicator will be re-engaged. Its warnings will be available to Trophy Investing’s members.
Disclaimer. Mr. Markowski’s predictions are frequently ahead of the curve. The September 2007 predictionsthat appeared in his EquitiesMagazine.com column stated that share-price collapses of the five major brokers, including Lehman and Bear Stearns, were imminent. While accurate, they proved to be premature. For this reason he had to advise readers to get out a second time in his January 2008 column entitled“Brokerages and the Sub-Prime Crash”. His third and final warning to get out, and stay out, occurred in October of 2008 after Lehman had filed for bankruptcy. In that article “The Carnage for Financials Isn’t Over”he reiterated that share prices for Goldman and Morgan Stanley were too high. By the end of November 2008, the share prices of both had fallen by an additional 60% and 70%, respectively — new all-time lows.