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From Trump to Tesla -- the day when everything was distorted

11:58 am ET July 25, 2019 (MarketWatch)

By Tim Mullaney

How can you correctly view news about Amazon, Facebook, Tesla and our president? As always, look at the big picture

Wednesday was the Day of Getting It Wrong -- about Amazon.com, Facebook, Tesla and, most of all, Donald Trump, who had a really bad day as former special counsel Robert Mueller dismantled months of the president's propaganda about the investigation of his campaign's tender wooing of Russian intelligence with seven hours of mostly monosyllabic answers to congressional questioning.

The common thread: How hard it is to get things right in real time, how the news cycle distorts reality, and that there's often fun and profit in thinking independently. Not least because, if you listened to the press and even the stock market Wednesday, you would have at least risked a whole series of bad decisions, basically all day long. Let's review.


With Washington spending months a-Twitter about the possibility of antitrust investigations into Big Tech, Treasury Secretary Steven Mnuchin made his usual turgid contribution to the discussion, claiming on CNBC that the retailer was taking over the world (http://www.marketwatch.com/story/mnuchin-lays-into-amazon-says-it-destroyed-the-retail-industry-hurt-small-businesses-2019-07-24).

"If you look at Amazon, although there are certain benefits to it, they've destroyed the retail industry across the United States," Mnuchin said.

Say what?

To bore the secretary with facts, Amazon (AMZN) may have nearly half the online-retail market, but it has only 5% of overall retail -- far short of the threshold for any antitrust action aimed at breaking up its "dominance."

Verizon Communications (VZ) controls 36% of the U.S. wireless-phone market and AT&T (T) 32%, but no one at Verizon owns The Washington Post, which bedevils the administration and is owned by Amazon CEO Jeff Bezos. So no one talks about breaking up Verizon in today's Washington. Instead, they're letting T-Mobile (https://www.wsj.com/articles/u-s-poised-to-approve-merger-of-t-mobile-sprint-11563967640)(TMUS) and Sprint (https://www.wsj.com/articles/u-s-poised-to-approve-merger-of-t-mobile-sprint-11563967640)(S) merge (https://www.wsj.com/articles/u-s-poised-to-approve-merger-of-t-mobile-sprint-11563967640), concentrating wireless further.

Neither does Amazon's market capitalization, now $1 trillion again, bespeak untrammeled retail power. Amazon's engine is its cloud-computing business. According to Goldman Sachs (GS), it provides two-thirds of Amazon's market value. Walmart (WMT) is worth about as much as Amazon retail. So evidence that Amazon's dominance is crushing retailers, rather than outpacing them in a computing transition, is thin and weak.


Speaking of antitrust, wasn't Wednesday's brief Facebook selloff hilarious?

The social-networking giant (FB) was thrown, for about a minute, by word that it had settled for $5 billion (http://www.marketwatch.com/story/this-is-what-facebooks-5-billion-fine-means-for-your-privacy-2019-07-24)with the Federal Trade Commission, resolving an investigation into whether Facebook lied about how Trump-linked data firm Cambridge Analytica and others accessed Facebook users' information. Later, it disclosed that the administration, still crabby that its minions and supporters are criticized and sometimes banished online for misdeeds like claiming the school massacre at Sandy Hook Elementary was faked, wants to investigate it for antitrust too.

Then Facebook's earnings sank in (http://www.marketwatch.com/story/facebooks-earnings-hit-by-fines-and-growth-slowdown-but-investors-remain-unfazed-2019-07-24). And beyond the 28% second-quarter revenue gain, which overwhelmed a profit drop mostly due to the FTC settlement, the thing to watch is how Facebook is spending its billions.

Investment in R&D rose 31%. Spending on cost of goods rose 49%, indicating the company is spending heavily on product (including trying to control the various hicks and hacks who are polluting its platforms with fake news).

Two truths should be obvious: First, Facebook displays no fear of regulatory outcomes, or privacy-related consumer backlash. Second, consumers and advertisers are simply not abandoning Facebook over privacy, no matter how trendy it is to predict that particular form of doom.

"We are more positive," RBC Capital analyst Mark Mahaney wrote. "Facebook could be in a sustained re-rating period, as the worst FB fears appear not to have been realized."


Oy, Tesla.

So, recently, optimism rose as second-quarter unit sales beat targets. Yesterday, they tanked as the electric-car maker missed revenue and profit targets (http://www.marketwatch.com/story/tesla-stock-tanks-after-companys-larger-quarterly-loss-sales-miss-2019-07-24) despite the unit sales. One popular conclusion: That Tesla's owners have to accept that it's no longer a growth company (https://www.wsj.com/articles/teslas-growth-story-nears-final-chapter-11564006645), with its market barely 1% penetrated.

Uh, no.

Tesla's problem is not that it's not growing -- sales actually rose by more than half. Tesla's problem is that it's badly managed, by the visionary but stupendously vain Elon Musk (http://www.marketwatch.com/story/congratulations-tesla-but-you-should-still-fire-elon-musk-2019-07-03). What happened to Tesla was a problem of forecasting, management and operating discipline -- fixable, if its board has the will.

I've long argued that Tesla needs either a chief operating officer or a new CEO (http://www.marketwatch.com/story/the-sec-may-be-doing-tesla-a-favor-with-its-lawsuit-2018-09-28), to do the part of Musk's job that he is manifestly, by now, terrible at. Nothing Wednesday changed that.


NBC's Chuck Todd personified Washington's disappointment that Robert Mueller didn't storm the barricades at the morning House Judiciary Committee hearing like romantic hero Marius in "Les Miserables,' only to flee the Intelligence Committee's afternoon hearing to wed his beloved Cosette. The Washington Post's Max Boot was a hoot, too, bemoaning the supposedly failed optics of Wednesday's hearings.

Instead, one syllable at a time, Mueller buried the president.

By day's end, we had a Mueller-endorsed picture, on camera, of a clear obstruction-of-justice case should Democratic House leaders open formal impeachment inquiries against Trump. The picture of a campaign practically following Russians around to curry money-making favor -- a counterintelligence mess of a compromised team and compromised boss -- was devastating. Mueller said Trump could be indicted after leaving office, said (but walked it back) that Trump was only not indicted because he's president, and that accepting campaign help from Russians is a crime.

That's a disaster. Don't let anyone tell you it isn't.

The next inquiry should dig in to find the actual crimes and misdemeanors in the squalid mess Trump has made out of his camps (http://www.marketwatch.com/story/the-skyrocketing-cost-of-securing-the-southern-border-in-one-chart-2019-07-17) along the Mexican border, where kids have died, families have been ruptured, and humans are sleeping in cages on floors in the president's race-based campaign to stop illegal entrants -- an offense carrying fines as low as $50.

Along the way, Congress' demand for Trump's tax returns will be litigated, and we'll likely have weeks to wallow in the controversy they'll produce. It all pushes final decisions on impeaching the president into next summer, putting the administration's sleaze factor (http://www.marketwatch.com/story/why-the-democrats-long-game-on-impeachment-is-working-2019-05-23) front and center as he's up for re-election.

Common theme

The common theme here: Think for yourself, with clear eyes. In each case, people who tried to convince you Wednesday lost the big picture. Remember: Electric vehicles will take over the world. Trump's Big Tech obsessions are going nowhere. And Trump is, in Doonesbury's old line about Richard Nixon's attorney general, "Guilty! Guilty! Guilty! Guilty!"

The big picture almost always wins in the end. In politics, investing and life.

Tim Mullaney is a MarketWatch columnist.

-Tim Mullaney; 415-439-6400; AskNewswires@dowjones.com

(END) Dow Jones Newswires

July 25, 2019 11:58 ET (15:58 GMT)

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