There is little doubt in my mind that an economic shock lies in our future. An economic shock similar to that of the dot com crash where technology stocks were not profitable, bleeding cash, and had little or no chance of survival. In fact, if not for the hype and continued injections of venture capital, many of those stocks were technically insolvent. There is also little doubt in my mind that the middlemen, those that facilitate the buying and selling of assets, will continue to draw their commissions, in one way or another, while watching the “greater fool theory” in operation. This will not be a black swan event, because any number of people can see the problem on the horizon.
THE GREATER FOOL THEORY
In matters of finance, the greater fool theory posits that there is always somebody more stupid, more gullible, and more trusting -- no matter what you own and its acquisition price -- to purchase something from you.
Of course, this is tempered by volatility (churn) which drives the market narrative and individual story, and the float that ensures one can exit the market due to a willing buyer known as the greater fool.
Tesla Tops $100 Billion as Record Run Lifts Market Value Past Volkswagen
After topping the combined value of Ford and GM earlier this month, Tesla is set to overtake Volkswagen as the second most-valuable carmaker in the world as a record run in
Tesla Inc. (TSLA) - Get Report shares surged to a fresh all-time high Wednesday, lifting Elon Musk's clean-energy carmarker past the $100 billion mark and extending a run that has taken his company past the likes of Ford, General Motors and Volkswagen in less than a decade.
Tesla shares have more than doubled over the past six months as analysts and investors re-set profit expectations for the electric car market's industry leader amid stronger-than-expected quarterly delivery figures, the ongoing expansion of production facilities in China and a more disciplined approach to communications and stewardship from founder and CEO Musk. <Source>
To believe investors assign a value to Tesla that exceeds the valuation of companies that know how to mass-produce cars and market them worldwide is almost unbelievable. But, this is the time we are living in. There is no doubt that Elon Musk is one of the world’s best financial engineers and self-promoting businessmen. And, like Apple’s Steve Jobs, he is surrounded by a reality distortion field that allows one to suspend belief and accept what is being said at face value.
Tesla vehicles are cool, expensive, and just the thing for environmental virtue signalers. Ignore the fact that batteries are significantly degraded in both hot and cold weather. Everything in Tesla is a tradeoff for vehicle range – go fast, less range; more people – less range; temperature extremes – less range; pay less – less range (dictated by software). Miss a charging station, prepare to be inconvenienced. The Auto Club does not carry fast-chargers. It is the perfect vehicle for the virtue-signaling, wealthy Silicon Valley crowd or those who want to drive an aspirational vehicle.
Just remember, everything has a natural price and resistance point. Your bet is on Elon Musk and his ability to manage others to actually execute a program with controlled costs and acceptable profit margins.
There are a number of companies like Tesla and a number of companies like the ill-fated over-valued We Work. Be careful out there. Nobody is about to tell you the truth – not the government, not your broker, and certainly not the regulatory agencies, accountants, lawyers, and consultants. The final question you might ask is: what happens when the government stops providing tax incentives and subsidies?
You are on your own.
“Nullius in verba.”-- take nobody's word for it!
“Beware of false knowledge; it is more dangerous than ignorance.”-- George Bernard Shaw
“Progressive, liberal, Socialist, Marxist, Democratic Socialist -- they are all COMMUNISTS.”
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS "The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius “A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell “Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar “Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS
"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius
“A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell
“Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar
“Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS