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Week ended April 25, 2025 (early edition): earnings, whining and wining

  • Writer: tim@emorningcoffee.com
    tim@emorningcoffee.com
  • 11 minutes ago
  • 6 min read

I am considering alternative formats for the weekly update, including releasing my “blah blah blah” commentary earlier (e.g. on Fridays) and updating the tables in my blog after the week closes.  Hopefully, this provides some interesting reading as you end the week.  Let me know what you think. The update covers (with links in case you want to skip the rest):



Earnings: focus on TSLA and GOOG

There have been plenty of earnings so far this week, but I have been mainly focused on numbers coming from Tesla and Alphabet (Google), two of the infamous and under-pressure Mag 7 companies.  As a matter of disclosure, I do not own TSLA and I do own GOOG, which I consider a core holding.


  • #Tesla reported its 1Q25 results after the bell on Tuesday, which were much worse than expected.  However, investors latched onto the assertion by CEO Elon Musk during the analyst call that he would be winding down his time working at DOGE under the Trump Administration, to return to focus on the dwindling prospects of Tesla.  I was shocked to see the stock price increase in the after-market simply on this news, given the massive headwinds facing the company and the fact that TSLA is so significantly over-valued based on fundamentals.  It’s this simple – $TSLA is a classic meme stock which has a life of its own in the retail market among its die-hard supporters.  It makes no sense to me but go ahead and place your bets on Mr Musk and his aspirational views if you wish to play the momentum game. 


  • #Alphabet ($GOOG / $GOOGL) reported results after the bell on Thursday, and in contrast to the dismal results from TSLA, GOOG smashed it.  The company met top-line and beat bottom-line consensus expectations, with revenues and net earnings increasing 12% and 46% YoY, respectively, driven by increases in advertising revenues (from search) and cloud revenues attributable largely to AI.  The company also raised its dividend by 5% and increased its stock buyback programme to $70 billion.  Keep in mind that GOOG is in the sights of antitrust authorities in the US and Europe, and there is a chance that the company might have to pay substantial fines and / or divest its search engine Chrome.  However, unlike Tesla, GOOG is priced based on its fundamentals, and it still looks relatively attractive to me at these levels.


As of the close on Thursday, TSLA shares were up 7.5% WoW (explain that!), and GOOG shares were up 5.2%.  However, post-earnings but pre-open this morning, GOOG is up another $7.43/share, which brings its weekly gain to 10.1%.


Whining (and capitulating)

Overnight on Monday following another disastrous day in the US stock and bond markets, the Trump administration did an about-face (again) on two matters that were un-nerving markets heading into the Easter weekend ¬– Mr Trump’s threats (or suggestions) that he might sack Fed Chair Jerome Powell, and “staying-the-course” for the on-going trade war particularly with China.


  • Mr Trump said overnight Monday that he was just kidding about sacking the “loser” Fed Chair Powell (what wonderful decorum this president has!), as global investors were obviously rejecting both the threat of undoing the Fed’s independence and sacking the “adult in the room”, with the Fed occupying the high ground as the Trump administration’s economic and fiscal policies fall deeper into the abyss.

  • Treasury secretary Bessant was the mouthpiece at the spring IMF meetings, saying that in fact that the ridiculous tariffs applied by the US on China, and China in response, were not sustainable since they effectively acted as a trade embargo between the countries. This is an unsustainable endgame for both the world’s largest and second largest economies. What has become clear is that the Chinese government is not about to throw in the towel no matter how much the Trump Administration believes that they have the upper hand. As a result – and with the more intelligent of Mr Trump’s economic advisors seeing the damage being done in the global economy – Mr Trump again walked back his bellicose attitude admitting that the trade differences need to be resolved.


The messages I take away from these two more recent events haven’t changed my views on the horrific economic and fiscal policies of the Trump administration, at least from the perspective of an investor. Keep in mind the following:


  • Trump is unpredictable and unstable, he stretches the truth, and at times he outright lies, so everything he says has to be taken with a grain of salt

  • The “trade war” is proving to be a disaster. It can be walked back and more appropriately focused, but the damage to the US in the global investor market has been done. The repercussions are being felt most accutely in the US Treasury bond market and on the depreciating US Dollar (and hopefully will not worsen).

  • Any innuendo from the president that threatens the Fed’s independence or its leadership will be universally rejected by investors.

  • As economist after economist revises their projections down for US and global economic growth – most recently the IMF – it is clear that Mr Trump has taken an economy handed to him on a silver platter and nearly destroyed it in less than four months, with collateral damage being felt in countries around the world.


If there is any silver lining to all of this, it is that that bond – and perhaps even stock – vigilantes provide guardrails for Mr Trump’s economic policies that seem to bring him to his knees each and every time he says something stupid. This is comforting for me as an investor. Stocks slumping are one thing, but when investors shun US Treasuries and the US Dollar even briefly, the profound effects of Mr Trump’s ill-advised economic policies reach an entirely different and more dangerous dimension.


What do these sorts of policy actions mean for markets as we look forward? The risk-off trade might have been overplayed now, but the damage has been done. The (potential one-time) lift in inflation from tariffs will keep bond investors on edge. As consumer confidence falls and businesses sit on their hands regarding future investment, I see no real positive news for stocks aside from potential trading ranges, hopefully nowhere near the early April lows but equally unlikely to test the pre-Trump stock market highs. The good news though, at least through the Thursday sessions, is that risk markets responded favourably to Mr Trump’s capitulation, with the S&P 500 up 3.8% through Thursday’s close (and futures in the green this morning), and US Treasury bonds also performing slightly better (as yields edge lower).


The 2024 Bordeaux en-primeur campaign

Some of my readers are collectors of fine wine, which like many collectables, is classified as an alternative asset class.  It is not strongly correlated with other assets, which makes fine wine a good candidate for portfolio diversification.  Moreover, the default scenario is that fine wine can be opened and enjoyed as a default fall-back scenario, should the secondary market not support the sale of cellared inventory at a price that an investor might deem attractive.  

 

Having said this, it has been apparent for a few years now that fine wine has seen its best days as far as pricing.  Bordelais in prominent and sought-after regions like Bordeaux and Burgundy are apparently well long inventory of past vintages, and are facing waning demand, caused by a combination of macro trends (e.g. people are drinking alcohol less) and current global economic uncertainty driven by the Trump-triggered trade war.  New issue – or en primeur – wines in prominent fine wine regions in France and Italy, as well as top-drawer wines in new world locations like California, will all suffer.  Not only will collectors purchase less fine wine (unless prices are lowered to find an appropriate equilibrium), but investors with cellared inventory will need to mark down their holdings as primary prices fall.

 

I wrote about fine wine in my blog last year around this time: “Is fine wine a good investment?”  However, the start of the 2024 Bordeaux en primeur campaign in the last week has fostered a lot of discussion on the appropriate pricing for this vintage to be considered a success.  Two great sources to which I can direct my readers that are interested in learning more or in determining fair value for the 2024 releases from Bordeaux are:


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