Could get a little crazy at the 4 p.m. close today, since index funds and all their trackers have to buy shares of Tesla. As of the open on Monday, it's officially part of the S&P 500.
I've been wondering if any of this buying can happen ahead of time, to avoid price spikes and market dislocations; but as the Wall Street Journal explains today, it doesn't behoove anyone to buy Tesla early. If you do, and the price is higher or lower when it goes into the S&P 500, suddenly you've got tracking error and could end up underperforming your benchmark.
So everyone is basically trying to buy at the same price, at the same time, on the close. Will there even be enough shares available? "Some investors have questioned whether enough sellers will come to the table," the Journal wrote, "given Tesla's famously passionate fan base." The Nasdaq, where TSLA is listed, apparently even discussed whether to lift the 10% price limit that typically triggers a trading halt, but for now has left it in place.
No wonder shares keep running up; Tesla is up about 65% since its inclusion was announced last month. Read more of my thoughts about it here: "We're all buying Tesla at the highs." And if you're looking for ways to diversify away from the S&P 500: "How to become a value investor."
Elsewhere, Senator McConnell says stimulus talks are "making significant headway." Today is presumably the deadline, unless it's not. More on that here. As for the stimulus checks, they're back (unless they're not). Senators Hawley and Sanders are still pushing for $1,200 checks--same as the first round--versus the $600 checks in the latest proposal.
Finally, two developments on the national security front. One, the Defense Dept. is launching a program to incentivize semiconductor manufacturing in the U.S., which is sorely needed. Here's more on the national security implications of Intel's recent struggles and the rise of chipmakers like Nvidia who rely on Taiwan Semi. Two, the headlines about the "suspected" Russian cyberattack keep getting worse. More here.
And just to circle back quickly to the Tesla rebalance today, it's not only Tesla that could see big moves; keep an eye on shares of AIV, Apartment Investment & Management, which Tesla is replacing. Also Xerox, Intel, and even Berkshire Hathaway, according to the Journal and RBC, could come under selling pressure.
Money Report
Hard to believe it's the last trading Friday of the year. Could be a memorable one.
See you at 1 p.m!
Kelly
