Horrific Swings In The Bond Market

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Horrific Swings In The Bond Market
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In his Daily Market Notes report to investors, while commenting on the horrific swings in the bond market, Louis Navellier wrote:

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Q3 2021 hedge fund letters, conferences and more

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Horrific Bond Swings

There were some swings in stocks due to the hot CPI releases, but the swings in the bond market were truly horrific. We declined below a rising 50-day moving average on the 10-year Treasury yield the day before the CPI release, and we violently rose above it when the 6.2% inflation number hit the tape. 

I am puzzled that Treasury yields declined as much as they did in November, going into the Fed taper announcement (reduced bond-buying starts officially this week), but with increased tapering in December and more bad inflation coming, I think we will see the 10-year Treasury yield soon rise above 1.70%.

There hasn’t been much trading above 1.70% so far in 2021. Bonds are known for momentum moves when the market is leaning the wrong way and needs to right itself, but I still think the probability of seeing a 2% print on the 10-year by the end of the year is very high.

Automotive Bubble

Both Lucid Group Inc (NASDAQ:LCID) and Rivian Automotive Inc (NASDAQ:RIVN) are “bubble stocks” because their market capitalizations are higher than both Ford and VW Group, respectively.  Naturally, Ford and VW Group make more electric vehicles (EVs) than Lucid and Rivian, so their post IPO surges are likely due to venture capitalists controlling the stock float and overhyping the companies to the ESG crowd.  What happens after almost every signal IPO is that as more stock becomes unrestricted, venture capitalists and company insiders can begin “cashing out,” so I expect that both Lucid and Rivian will collapse in the upcoming months as their shares outstanding increase dramatically.

I should add that the Lucid Air was just named the Car of the Year by Motor Trend and Rivian’s R1T pickup continues to get rave reviews.  Clearly, many investors think that Lucid and Rivian, with their consumer-direct models, are following in Tesla’s footsteps and poised to have similar market valuations.  It is important to remind everyone that due to an acute shortage of lithium-ion batteries that the entire automotive industry is being held back by these acute battery and semiconductor chip shortages

The best thing that Tesla Inc (NASDAQ:TSLA) did recently was to shift to less efficient CATL’s iron-phosphate batteries at its Shanghai plant, so it can lower to price of its Model 3 and Model Y vehicles to customers in China and Europe.  CATL’s patent on iron-phosphate batteries is scheduled to end soon, so other battery manufacturers, like LG Chen and SK Innovation, are expected to begin making iron-phosphate batteries.  VW Group is planning on making cheaper, city-oriented EVs for its SEAT and Skoda brands with iron-phosphate batteries.  Right now as I survey the EV battlefield, BYD is winning in China, VW Group is winning in Europe, and Tesla is winning in America

As far as overall EV sales are concerned, Ford Motor Company (NYSE:F) is expected to become #2 in America by 2023 due to its hot-selling Mach-e, plus 160,000 reservations for the F-150 Lightning, followed by VW Group with it’s all its Audi, Porsche, and VW EV models.  Eventually, I expect VW Group to pass Tesla in worldwide EV sales, but it all depends on how many EVs they sell in China and America.  Right now, I am expecting VW Group to pass Tesla in worldwide EV sales in late 2023.

The Commerce Department reported on Tuesday that retail sales surged 1.7% in October and have surged 14.8% in the past 12 months.  Although consumer prices based on the CPI have risen 6.2% in the past year, there is no doubt that consumer spending is robust, which bodes well for the holiday shopping season.  Sales at online retailers surged 4% in October and electronics & appliance sales rose an impressive 3.8%.  Not surprisingly, gasoline sales rose 3.9% in October due to higher prices at the pump.  Restaurant and bar sales were flat in October, but have risen 29.3% in the past 12 months.  Retail sales have now risen for three straight months, which is a good sign as we head into the holiday shopping season.

Clicks vs Bricks

Black Friday will provide a good preview of holiday sales.  Already, I am getting “Black Friday” special offers from Bose and other retailers, which is a good sign.  Black Friday and Cyber Monday are fueled more by the “Clicks” versus “Bricks” retail trade war.  Our friends from Bespoke Investment Group have a chart that shows that Clicks now account for 14.37% of all retail sales, while Bricks account for only 11.38%.  This chart also shows that Clicks are steadily growing, so I expect in the wake of the October retail sales report that both Black Friday and Cyber Monday will post record holiday sales.

Heard & Notable:

A bear was rescued in Florida from a plastic container stuck over its head for nearly a month. Biologists had to use bolt cutters to cut the plastic, believed to be a pet food feeder, and pull it off its head. Source: UPI

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One of Wall Street's renowned growth investors, Louis Navellier is the editor of four investing newsletters: Blue Chip Growth, Emerging Growth (formerly known as MPT Review), Quantum Growth and Global Growth. His longest-running publication, Emerging Growth has a track record of beating the market nearly 3-to-1. Navellier is the author of a BusinessWeek best seller, "The Little Book That Makes You Rich", and the Chairman and Founder of Navellier & Associates, Inc.
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