ELAM: The New AxisEV reality sets in

People are finally seeing reality.

Toyota Chairman Akio Toyoda

Mr. Toyoda has stated for years that the auto industry should not go all in on EVs only. Hybrid gas electric and other options exist. This comment occurs as Ford and GM pare back on EV plans. Meanwhile inventories of unsold EVs pile up on dealer lots across the U.S.

The powers that be in the energy industry, Exxon and Chevron, also confirmed this view. Exxon is buying Pioneer Resources for $60 billion. Chevron is buying Hess for $53 billion. Those represent long term bets on fossil fuels.

Despite the start of two wars and a third in Taiwan on hold, WTIC is down a whopping $2.17 at $83.22. This seems to endorse our view of a long-term bear market in securities and a slowing economy.

The headline says Alphabet (Google) and Amazon have pulled down to ‘correction’ territory. Don’t believe it. This column announced the completion of the bull market November 2021-January 2022. Seven tech stocks have held up the averages while internals of the market have weakened considerably. Now only 16% of the NDX, NASD 100, are over their 50-day moving average, which means 84% are under that mark. Only 31% of the New York Stock Exchange listings are over that same measure. Amazon dropped 3% while Google fell 7.3%. Remember the bear market is just now getting underway. All those headlines about a new bull market were quite wrong.

AT&T popped to $23 at the start of 2020. Today it sags at $15. Cullen Frost bank touched $160 just last November. It is now about half that at $83. Book value is $50 which is also the COVID low in 2020. Looks like it is headed there again. Mind you both ATT and CFR are earning millions of dollars. The market is messaging bad news when hefty earnings are marked down.

Elon Musk with Tesla and Space X has been the Teflon billionaire. But the banks who loaned him $44B to buy Twitter are having remorse over that decision. Normally the banks would sell such a loan to private equity after getting a rating. But the on again, off again management style of what is now X, downgrades the loan quality.

Yesterday I bought three-month Treasury bills with an annual yield of 5.4%. I expect higher rates as fears of default grow. The short maturity will allow a switch to higher rates as the bills mature. This is the safe way to survive the bear market. Most investors would not dream of selling their ‘portfolio.’ They are going to get a real education the next two years. Stay safe.