Tesla is the 'canary in Wall Street's coal mine,' warns retired fund manager

It’s all eyes on Houston today, as the area works to recover from the worst storm to hit Texas in more than a generation. Haunting images, such as the one in this tweet, have dominated social media:

An unbelievable photo of nursing home residents waiting to get rescued in Houston. pic.twitter.com/lxPmYA6bGI
— Mike (@mike_58stingray) August 27, 2017

The “catastrophic, life-threatening flooding” isn’t over yet, as a slow-moving soaker drenched the region and kept emergency crews busy overnight.

Click here for the latest.

Nevertheless, there’s a stock market to deal with. And as you can see from our chart of the day below, a shift in sentiment is upon us.

So, are history and reality getting replaced by pie-eyed dreams with little substance, in a stock market that’s looking increasingly like the one that gutted paper millionaires in the Pets.com days?

Retired hedge-funder David Rocker asked — and answered — that very question in a piece in Barron’s over the weekend. In one word: Yes. In hundreds of words, he explained how one company is an example of what’s wrong these days.

Tesla TSLA, -1.38% he warns, is “becoming the loudest canary in Wall Street’s coal mine.” And once the buzz dies down, it’s curtains for the bull market.

“For most companies, profit is the major objective,” says Rocker, who has a short position in the company. “Tesla is different, because its founder is different. Musk is smart and imaginative, but none of his major companies are profitable. Tesla has been around for 14 years and has cumulatively lost more than $3.7 billion, despite the massive subsidies that it and its customers have received.”

Musk himself has said the stock’s overvalued, “yet the bulls swallow all of the weirdness with little question,” Rocker writes in our call of the day. “There were virtually no comments or questions about imminent competition in the last conference call.”

It’s that kind of blind faith that bears claim is fueling a market that just continues to churn out positive days even when, in another era, investors would be surely running to the sidelines to raise cash.

Key market gauges

Stocks are looking somewhat queasy this Monday morning, with futures on the Dow YMU7, -0.10% and the S&P ESU7, -0.04% leaning lower. Gold GCU7, +0.34% is up a bit. Asian markets ADOW, +0.01% closed mostly higher, led by a strong showing in Shanghai SHCOMP, +0.93% Bitcoin BTCUSD, -0.53% is also seeing some demand to start the week.

Importantly, keep an eye on energy markets. Harvey knocked out almost 15% of U.S. refinery capacity, and disruptions could make for a bump ride. Crude US:CLU7 is gradually stacking up losses, while gas futures are surging.

See:Here’s how much more you might pay for gasoline after Hurricane Harvey

The buzz

Dara Khosrowshahi is the Uber board’s choice for CEO.

More twists to the Uber tale, as former General Electric GE, +0.78% CEO Jeff Immelt dropped out of the race for the top job over the weekend. According to Recode, it looked for a bit like HP Enterprise HPE, +0.00% CEO Meg Whitman was in the lead, but ultimately, Expedia EXPE, -0.45% boss Dara Khosrowshahi ended up in the driver’s seat.

The chart

When volatility VIX, +4.70% picks up, investors tend to get a bit more skittish. When everything starts to calm down, the bulls tend to take the upper hand. The chart below from Callum Thomas of Topdown Charts mostly illustrates that trend, until it gets to where we stand now.

Notice the divergence? The VIX is moving lower, but the bears are starting to growl. “This gap will close one way or the other,” Thomas writes.

The quote

“The president speaks for himself” — Rex Tillerson, in an interview Sunday on Fox News when asked if the president represents American values.

The economy

The Dallas Fed survey of manufacturing activity hits at 10:30 a.m. Eastern Time, but other than that, there’s not much data-wise to watch for Monday.

There’s a steady stream of notable reports throughout the week, including monthly car sales and Case-Shiller house prices. But the big one arrives on Friday, in the form of the August employment number.

The stat

$400,000 — That’s how much Floyd Mayweather tried to bet on his fight against Conor McGregor. His wager, according to ESPN, was that he’d knock out McGregor in under 10 rounds — which he technically did by winning a TKO 1 minute, 5 seconds into the 10th.

He wasn’t allowed to bet, however. Don’t worry, Floyd fans, he still made out fine.

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Flooding isn’t the only thing Texas need to be worried about.

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