Your Wednesday Market Blip 2/19/20

Your Wednesday Market Blip 2/19/20

The Dow ended higher by 115 points at 29,345. Trading volume was a bit lower and the rally was in part driven by what appears to be a slowing spread of the China corona beer virus. Market action is similar to the back and forth we saw during the trade negotiations.
With US stock markets trading near all time highs people are asking if we are in a bubble. The answer to that depends on how you look at things. If you consider price to sales then yes we are in a bubble. If you look at price to free cash flow then we are fairly valued and if you look at price to earnings versus bond yields stocks are cheap. The other angle to consider is to look at cash on the sidelines and market sentiment. Bubbles are usually accompanied by low cash levels and bullish sentiment but currently we have high cash levels and low bullish sentiment.
As Tesla soared past $900 per share today an article yesterday by Reuters asked if the golden age of the German auto industry is coming to an end. The article cited slowing sales to China, rising competition from Tesla and other EV makers like Renault and new emissions regulations all hitting the heart of the German economy which is an auto sector based on the internal combustion engine (ICE) and employing 1 in every 7 Germans. With Tesla knocking on the door with an assembly plant in the Netherlands and starting to build the Gigafactory 4 near Berlin the German gubment is faced with the prospect of how to avoid a recession and transition to EVs without laying off tens of thousands of middle class workers who make ICE parts that have no place in an EV world.
Last night I took part in an Eagle Scout board of review which was fitting since it was the same day that BSA National threw “ace duce” and declared bankruptcy. It showed that scouting is not a national thing but a local thing. This young man recounted his best and worst hikes (he put the tent rain fly on sideways and got soaked) and what he learned about leadership, making friends and working with others to accomplish a common goal. This young man knows nothing of the bankruptcy. All he knows is his future is bright and he has the tools to succeed.