Your Thursday Blip 8/13/20

Your Thursday Blip 8/13/20

It was a mixed market today, with the S&P and Dow indexes down, the NASDAQ up, and a better than expected jobs report. For the first time since March, the U.S. Labor Department reported initial jobless claims under 1 million. Claims came in at 963,000 which was well below the expectation of 1.1 million. This is good news, especially since we are seeing inflation, which is to be expected with the amount of money that is being pumped into the economy from the federal government. The Dow closed the day down 80 points at 27,896.
The one area that is not seeing inflation is the price of oil. Earlier this year, there were actually oil contracts that were selling for negative dollars, meaning you would get paid to take a barrel of oil! The price of oil has normalized a little more, but at $42 a barrel it is still well below a level that allows providers to make a comfortable profit. Today, the International Energy Agency continued to lower their forecast for oil demand for the rest of 2020, and expects 2021 demand to be less than that of 2019.
On the other hand, there continues to be plenty of inflation surrounding Tesla shares. The stock is up 18% from when they announced the stock split two days ago. I think this is a perfect example of how market prices can be entirely about perception in the short term. There has been no new news about the company or their ability to profitably sell cars or other services since the announcement, and nothing fundamentally is different about them since they reported earnings a couple weeks ago. All the information is the same. At this point, all the market is betting on is that regular mom and pop investors will want to buy Tesla shares when the price is lower after the split, which will drive the price up even more.

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