It’s interesting to watch Tesla’s valuation as a slow motion train wreck. Their earnings are steadily growing and the valuation of the company is slowly dropping, so maybe we’ll eventually see on a longer timeline the price of the security approach fair value. As of writing its a bit above $150 a share based on free cash flow analysis.
People have been calling it a train wreck since it went public in 2010, at just a tiny fraction of its current price. Tesla has long exhibited a tendency of suddenly surging and defying the doubters, over and over.
Telsa is running out of ways to keep their stock going. Musk used some market manipulation to squeeze shorts, which propped up their stock price. Then there was the inclusion in the S&P500, which opened up the floodgates from retail investors who are forced to throw a portion of their retirement at Tesla. That helped for a while. Now it looks like they are trading/manipulating crypto prices in an effort to keep their stock price going.
Telsa has absolutely defied the doubters. But I think they've reached the end of their bag of tricks. This crypto stuff might float them for another year or two, but eventually, the market is going to demand real revenue proportional to the value of the stock. When that happens, the fall is going to be epic. I wouldn't be surprised if stock plunge -> removal from S&P500 -> delisting -> private buyout at 1/1,000 of current price happens in the span of two months.
If the EV market continues to grow by 173% YoY and Tesla continues to lead sales, then it's unlikely the market will demand real revenue for quite awhile. Investors are quite happy with companies that can maintain that kind of growth.
VW now sells more evs in Europe than Tesla. Tesla will not be able to compete with legacy (lol) manufacturers. BMW, Daimler, Toyota and GM are not sleeping either. The fall of Tesla will be of epic proportions.
It's true that VW sells more in Europe, but is Model Y generally available in most European countries yet?
Given sufficient demand, it makes more sense to sell cars locally vs. pay export and tariffs. If Tesla is still not able to compete once the Berlin factory is up and running, then I concede the point.
Growth Stocks are not priced based on current profits, but future growth and profits. When I bought GOOG in 2005, the consensus was that GOOG was overpriced because they didn't have a lot of revenue. When I bought TSLA in 2014 the consensus was that another automaker would beat them or buy them before they were very profitable. In 2024 when TSLA is at $1500 and people are saying that it is overpriced because it only makes 5 million cars a year, I'll still be explaining this same principal.
But the marginal cost of an additional dollar of revenue for Google was close to zero - for Tesla it’s much higher.
Google’s lead grew as it grew (Metcalf’s law). Tesla’s won’t for the same reason that everyone doesn’t want to drive the same car (a the Model T issue). [0]
So we have seen this story before, but some people are attached to different points of it.
> It’s interesting to watch Tesla’s valuation as a slow motion train wreck. Their earnings are steadily growing and the valuation of the company is slowly dropping,
Not really though. It's up for the month. There's a huge difference between a correction after a surge and a stock being a train wreck. That's just wishful thinking to the ethos people want to see.
Go look at netflix. Is netflix a train wreck? Similar claims could be made, but they're up 9% YoY.
Are you actually trying to deny that Tesla's stock price did not dropped around 25% since the start of 2021?
Because all you need to do to refute that is look at the stock price.
> It's up for the month.
No, not really. On June 1st Tesla was trading at $623 and today it's trading at $604.
> There's a huge difference between a correction after a surge and a stock being a train wreck.
The best thing about the stock market is that people can just put their money behind their beliefs.
A tanking global market share, increased competition globally but specially in China, a 63% drop in sales, earnings with an overreliance on tax credits and crypto sales... Well, anyone decides what to do with their money.
> Are you actually trying to deny that Tesla's stock price did not dropped around 25% since the start of 2021?
I'm saying that calling the stock a train wreck is wishful thinking. Crying doom and gloom because the stock is down 25% over the past 6 months when it is also up 200% from the past 12 months is some serious cherry picking. Yes, the stock was likely overvalued by hype for a period. Maybe it will continue to fall for a while. And? On June 1st it was $623. Well, in early June last year it was below $200. To call it anything but a major success is one heck of a long shot.
> a 63% drop in sales
I don't really follow these things but I'm pretty sure that's not correct.
edit: decided to read their financial statements. Q1 2021 automotive sales appears to be up 77% YoY. To make such confident statements on the direction of a company while making basic, yet enormous mistakes like this is exactly what I mean by wishful thinking.
Yeah, I would like to see some analysis of why he thinks so. Having no financial knowledge I tend to agree based solely on the social phenomena surrounding these things, but it would be nice to see the reasoning and numbers from someone who actually knows something.
What is in The Greatest Speculative Bubble of all time? Everything? Crypto? Stocks? Just Telsa stocks? All tech stocks?
Then there's the other half of the equation, which is, "what can I do about it?" The answer to that question is what's actually important. Anyone can make accurate predictions, but it the decisions you make with those predictions that count.
If everything is in a bubble, then what does it matter? If crypto is in a bubble and you don't own crypto, then what does it matter? Same with Tesla.
The dude is probably right, but over what time frame remains to be seen. Frankly, I'm more worried in general over normal economic issues than I am about any speculative asset bubbles:
The USA is "returning to normal" while a pandemic is still raging.
There's a massive supply shortage across all sectors of the economy that politicians are blaming on a boogyman (unemployment insurance) instead of actually investigating or addressing the problem.
The country still hasn't addressed the riot that happened in its capitol where a mob attempted to murder politicians (and successfully injured/murdered officers protecting them).
There's a drought and record heat wave hammering half of the country, putting them at risk of more deadly wildfires.
Plus dozens of other things I've either forgotten about, or are not widely reported enough for me to be aware of.
So yeah, the likelihood of Bad Shit happening in the next year is pretty high. But I'm not worried about Tesla and crypto at all.
> If everything is in a bubble, then what does it matter? If crypto is in a bubble and you don't own crypto, then what does it matter? Same with Tesla.
It matters because you can: 1) divest from said assets classes or 2) short said asset classes. It also matters because there are downstream consequences of a broad market crash, from which you can protect yourself (if you choose to believe this prediction).
> Frankly, I'm more worried in general over normal economic issues than I am about any speculative asset bubbles
There's nothing stopping you from worrying about inflated asset prices along with your long list of other unrelated concerns.
I agree that the article is light on details, but I fail to understand the rest of your point if there is one.
> 1) divest from said assets classes or 2) short said asset classes.
If you really think it's a bubble you should do the first and put your money into something you think is safe.
The second depends on timing and "knowing" how big the bubble will get (How much damage can you take before things start going your way?). I don't think anyone can know that, so shorting is speculation/gambling.
Your skepticism is well founded given the lack of details. I on the other hand, instantly had the opposite reaction when I first read the claim earlier today.
It stirred up memories of recent speculative manias like sports cards, D&D cards, Pogs, etc selling for ridiculous sums of money. 11 month wait times for grading of cards.
Yeezyzs and sneakers are now bonafide asset classes to many people?
Housing prices in my country were supposed to be stable or maybe even set for a correction and they are up 20-30-40% in different places.
Used Cars are not really in the speculative, but the prices behind them have led to Runs on certain new cars. I recently had an acquaintance of mine purchase a brand new Rav4 hybrid at an "insiders" price from a friend at a dealership, with the sole purpose of flipping it for a couple thousand dollars profit when he finally took possession.
These are just anecdotes, but it certainly seems like everyone is vying to participate in the get rich quick economy.
The idea is that the shorts never actually covered. They shorted it greater than 140% back in January, as that was the maximum that can be reported. Even before January it was slowly rising from 4 dollars, so the hedgefunds kept doubling down on their bankruptcy jackpot.
If they short the company to zero, the shares are worthless and they don't have to cover their short positions. This has always worked, they have power and abuse it to put companies like Toys R Us out of operation with no way to effectively raise capital.
They did not anticipate that a company could turn around, which is essentially what has happened. Ryan Cohen the new CEO has effectively taken GameStop's domain name and is building a whole new business around it, with all the debts gone, the whole board replaced, and completely new management.
Not to mention they have raised billions with ATM offerings and are now completely debt free.
Even without a short squeeze, Gamestop is set to compete with Amazon for gaming, and has poached ex-Amazon talent in it's management. Fundamentaly it's a solid company, and that is even without the MOASS.
Hedgefunds are trapped now, and are now triggering FTDs (Failure to Delivers), and need to reset the timers using various means including deep ITM options, ETFs, and shorting whatever shares they can get their hands on. For example XRT has been 240% shorted since Feb. They'll buy up a whole ETF just to get their hands on the GME shares inside.
They will dig a deeper and deeper hole until they are margin called and forced to cover. Conservative estimates have retail holding 110 million shares, but due to the lack of transparency in the market, this cannot be proven.
In addition all the new SEC filings that have been coming out have been specifically worded to agree with this. 005 for example is an ass-covering exercise about options manipulation, and 002 increases the frequency which short positions must be reported. Most of these are to prevent this kind of scenario happening ever again.
Finally the media coverage has been constant dismissal of Gamestop and the promotion of other meme stocks such as AMC. Gamestop is no longer a memestock at this point and is a solid play MSM (the news network) do not want to advertise. Only recently has the media been talking about 'naked shorts' (2 weeks ago by accident), and 'dark markets' (2 days ago), where these subjects were discussed on Reddit 6 months ago!
You won't find this on WallStreetBets, there is a dedicated subreddit SuperStonk, which is a bias confirmation echo chamber still, but incorrect info does get corrected and people called out.
I certainly see the value in those anecdotes. When I realized how much my Steam inventory was suddenly worth, because old CSGO items were rising in value for no apparent reason, that was my personal 'oh crap, this is exactly what an everything-bubble would look like' moment.
The US brings trillions from the future and injects into the economy, of course GDP is going up.
I don’t see a bubble per se, what I fear we might face is the consequence of projections based on the speed of a machine, where the machine is red hot and can’t keep it up for too long.
Crypto is having a fever dream. Real estate is ballooning. Index funds are at an all time high and the fed is printing money like Gutenberg reincarnate. What do I do?!
There is a small X% chance of the USD failing catastrophically. So assets that are backed by cash flows in any denomination have a premium of (? something huge ?) * X%.
A lot of people got burned by staying ‘safe’ after the 2008 crash. The 2005-2007 bubble was caused by derivatives expansion up to $2 Quadrillion, without much money supply growth. It was easy to pop that bubble because of razor-thin excess reserves, so small losses leveraged into bank failure of Bear Stearns. There’s nothing like that today. Valuations feel stupid-high, but reserves are at record high, indicating there’s a lot more air to go into the bubble.
In USD terms, the fed has absolute power over pumping and popping bubbles.
But if you denominate assets relative to each other, or relative to something you actually need or want, like housing, they have zero power, except to denominate tax gains in an arbitrary basis.
50 comments
[ 2.7 ms ] story [ 103 ms ] threadThe price itself has nothing to do with it.
Telsa has absolutely defied the doubters. But I think they've reached the end of their bag of tricks. This crypto stuff might float them for another year or two, but eventually, the market is going to demand real revenue proportional to the value of the stock. When that happens, the fall is going to be epic. I wouldn't be surprised if stock plunge -> removal from S&P500 -> delisting -> private buyout at 1/1,000 of current price happens in the span of two months.
https://insideevs.com/news/504647/global-plugin-sales-march-...
Tesla's market share is dropping, and it just tanked to its lowest level in two years.
https://www.businessinsider.com/tesla-market-share-april-low...
https://www.bloomberg.com/news/articles/2021-06-02/tesla-hea...
Given sufficient demand, it makes more sense to sell cars locally vs. pay export and tariffs. If Tesla is still not able to compete once the Berlin factory is up and running, then I concede the point.
Since the start of 2021,Tesla tanked from $880 to around $660.
Google’s lead grew as it grew (Metcalf’s law). Tesla’s won’t for the same reason that everyone doesn’t want to drive the same car (a the Model T issue). [0]
So we have seen this story before, but some people are attached to different points of it.
[0] - http://www.autolife.umd.umich.edu/Design/Gartman/D_Casestudy...
Tesla is up 200% over the past year
Tesla peaked at around 880$ on January 2021.
Since then it gradually tanked to around 660$.
Clearly their valuation is indeed dropping at a considerable rate.
Go look at netflix. Is netflix a train wreck? Similar claims could be made, but they're up 9% YoY.
Are you actually trying to deny that Tesla's stock price did not dropped around 25% since the start of 2021?
Because all you need to do to refute that is look at the stock price.
> It's up for the month.
No, not really. On June 1st Tesla was trading at $623 and today it's trading at $604.
> There's a huge difference between a correction after a surge and a stock being a train wreck.
The best thing about the stock market is that people can just put their money behind their beliefs.
A tanking global market share, increased competition globally but specially in China, a 63% drop in sales, earnings with an overreliance on tax credits and crypto sales... Well, anyone decides what to do with their money.
I'm saying that calling the stock a train wreck is wishful thinking. Crying doom and gloom because the stock is down 25% over the past 6 months when it is also up 200% from the past 12 months is some serious cherry picking. Yes, the stock was likely overvalued by hype for a period. Maybe it will continue to fall for a while. And? On June 1st it was $623. Well, in early June last year it was below $200. To call it anything but a major success is one heck of a long shot.
> a 63% drop in sales
I don't really follow these things but I'm pretty sure that's not correct.
edit: decided to read their financial statements. Q1 2021 automotive sales appears to be up 77% YoY. To make such confident statements on the direction of a company while making basic, yet enormous mistakes like this is exactly what I mean by wishful thinking.
https://tesla-cdn.thron.com/static/R3GJMT_TSLA_Q1_2021_Updat...
Similar concept.
No insight on why this is the top now, compared to 6 months ago, or 12 months ago
No insight into flows of capital, any monetary policy
What is in The Greatest Speculative Bubble of all time? Everything? Crypto? Stocks? Just Telsa stocks? All tech stocks?
Then there's the other half of the equation, which is, "what can I do about it?" The answer to that question is what's actually important. Anyone can make accurate predictions, but it the decisions you make with those predictions that count.
If everything is in a bubble, then what does it matter? If crypto is in a bubble and you don't own crypto, then what does it matter? Same with Tesla.
The dude is probably right, but over what time frame remains to be seen. Frankly, I'm more worried in general over normal economic issues than I am about any speculative asset bubbles:
The USA is "returning to normal" while a pandemic is still raging.
There's a massive supply shortage across all sectors of the economy that politicians are blaming on a boogyman (unemployment insurance) instead of actually investigating or addressing the problem.
The country still hasn't addressed the riot that happened in its capitol where a mob attempted to murder politicians (and successfully injured/murdered officers protecting them).
There's a drought and record heat wave hammering half of the country, putting them at risk of more deadly wildfires.
Plus dozens of other things I've either forgotten about, or are not widely reported enough for me to be aware of.
So yeah, the likelihood of Bad Shit happening in the next year is pretty high. But I'm not worried about Tesla and crypto at all.
It matters because you can: 1) divest from said assets classes or 2) short said asset classes. It also matters because there are downstream consequences of a broad market crash, from which you can protect yourself (if you choose to believe this prediction).
> Frankly, I'm more worried in general over normal economic issues than I am about any speculative asset bubbles
There's nothing stopping you from worrying about inflated asset prices along with your long list of other unrelated concerns.
I agree that the article is light on details, but I fail to understand the rest of your point if there is one.
If you really think it's a bubble you should do the first and put your money into something you think is safe.
The second depends on timing and "knowing" how big the bubble will get (How much damage can you take before things start going your way?). I don't think anyone can know that, so shorting is speculation/gambling.
It stirred up memories of recent speculative manias like sports cards, D&D cards, Pogs, etc selling for ridiculous sums of money. 11 month wait times for grading of cards.
Yeezyzs and sneakers are now bonafide asset classes to many people?
Housing prices in my country were supposed to be stable or maybe even set for a correction and they are up 20-30-40% in different places.
Used Cars are not really in the speculative, but the prices behind them have led to Runs on certain new cars. I recently had an acquaintance of mine purchase a brand new Rav4 hybrid at an "insiders" price from a friend at a dealership, with the sole purpose of flipping it for a couple thousand dollars profit when he finally took possession.
These are just anecdotes, but it certainly seems like everyone is vying to participate in the get rich quick economy.
When I try to explain it, I end up looking like the crazy conspiracy meme guy.
If they short the company to zero, the shares are worthless and they don't have to cover their short positions. This has always worked, they have power and abuse it to put companies like Toys R Us out of operation with no way to effectively raise capital.
They did not anticipate that a company could turn around, which is essentially what has happened. Ryan Cohen the new CEO has effectively taken GameStop's domain name and is building a whole new business around it, with all the debts gone, the whole board replaced, and completely new management.
Not to mention they have raised billions with ATM offerings and are now completely debt free.
Even without a short squeeze, Gamestop is set to compete with Amazon for gaming, and has poached ex-Amazon talent in it's management. Fundamentaly it's a solid company, and that is even without the MOASS.
Hedgefunds are trapped now, and are now triggering FTDs (Failure to Delivers), and need to reset the timers using various means including deep ITM options, ETFs, and shorting whatever shares they can get their hands on. For example XRT has been 240% shorted since Feb. They'll buy up a whole ETF just to get their hands on the GME shares inside.
They will dig a deeper and deeper hole until they are margin called and forced to cover. Conservative estimates have retail holding 110 million shares, but due to the lack of transparency in the market, this cannot be proven.
In addition all the new SEC filings that have been coming out have been specifically worded to agree with this. 005 for example is an ass-covering exercise about options manipulation, and 002 increases the frequency which short positions must be reported. Most of these are to prevent this kind of scenario happening ever again.
Finally the media coverage has been constant dismissal of Gamestop and the promotion of other meme stocks such as AMC. Gamestop is no longer a memestock at this point and is a solid play MSM (the news network) do not want to advertise. Only recently has the media been talking about 'naked shorts' (2 weeks ago by accident), and 'dark markets' (2 days ago), where these subjects were discussed on Reddit 6 months ago!
You won't find this on WallStreetBets, there is a dedicated subreddit SuperStonk, which is a bias confirmation echo chamber still, but incorrect info does get corrected and people called out.
No? That kind of stuff makes for good headlines to get clicks, but is there any data showing it is anything but clickbait?
https://qz.com/1994596/stockx-a-sneaker-resale-site-is-now-w....
I don’t see a bubble per se, what I fear we might face is the consequence of projections based on the speed of a machine, where the machine is red hot and can’t keep it up for too long.
Crypto is having a fever dream. Real estate is ballooning. Index funds are at an all time high and the fed is printing money like Gutenberg reincarnate. What do I do?!
Edit: https://twitter.com/BurryArchive
There is a small X% chance of the USD failing catastrophically. So assets that are backed by cash flows in any denomination have a premium of (? something huge ?) * X%.
A lot of people got burned by staying ‘safe’ after the 2008 crash. The 2005-2007 bubble was caused by derivatives expansion up to $2 Quadrillion, without much money supply growth. It was easy to pop that bubble because of razor-thin excess reserves, so small losses leveraged into bank failure of Bear Stearns. There’s nothing like that today. Valuations feel stupid-high, but reserves are at record high, indicating there’s a lot more air to go into the bubble.
In USD terms, the fed has absolute power over pumping and popping bubbles.
But if you denominate assets relative to each other, or relative to something you actually need or want, like housing, they have zero power, except to denominate tax gains in an arbitrary basis.