Convictions are more dangerous enemies of truth than lies, wrote Friedrich Nietzsche in “Human, all too human”. Convictions, beliefs, dreams.
When you hear that Tesla now is the biggest carmaker in the world, you should not think that it makes the most cars (its is very very far from achieving that). It only means that currently investors value its shares more than other carmakers’, regardless of what they produce and for how much they sell. What’s even more interesting, is that Tesla market capitalization is now bigger than that of Volkswagen, GM, Ford, BMW and Daimler combined, although these five carmakers last year sold almost 100 times more cars than Tesla.
One could argue that the past does not matter, since internal combustion engines are the past and electric vehicles are the future. But what rarely mentioned by biggest believers is that Tesla is barely growing – it has been selling around around 80-100k cars per quarter since Q3 2018. At the same time quite a few “legacy” carmakers are increasing their production of electric vehicles faster than Tesla. This year Tesla is losing its market share in almosy all EU countries as competitors from right and left are producing cheaper or more attractive alternatives with warranty and service.
So Why did Tesla share price and its market capitalization kept rising on any news, no news, or even bad news? For example, decision to cut prices for some reason is interpreted as good news (as reflected by rising share price), although it clearly indicates that Tesla has no unfilled backlog of orders and is desperate to maintain market share. Why do investors look through the uncomfortable facts and imagine only most miraculous scenario that could materialize in 2025?
It is not the first massive bubble driven by irrational expectations, beliefs and “fear of missing out”. We’ve seen them over and over throughout centuries – from tulipmania in the 17th century to alt-coins a few years ago. They all end the same.
This is not an advice to buy or sell. This is an advice not to let your beliefs or hopes cloud your judgement.
Hey Andrew, I can support you by sharing how I learnt to read financial statements and create a story behind securities' valuation methods. But I would rely on people who spent time professionally and have the right credentials to educate about investing.
Two of my favourite bubbles have merged! :)
Bitcoin transactions consume close to 100TWh energy per year, most of it produced in coal-fired plants. It will be harder for Musk to pretend it is all about saving the planet.
But it is not completely unexpected - losing market shares, revenues stagnate, can’t make profit selling cars, what is there left to do? Speculate in cryptocurrencies, of course.