Ask HN: Are we in tech-stock bubble? How would you justify current TSLA stock price? |
Ask HN: Are we in tech-stock bubble? How would you justify current TSLA stock price? |
I made a bunch of money speculating on the swings of stocks. Not with options, just patience, and it enabled me to make wild returns. For example, I bought and sold Virgin Galactic 3 times over the past 13 or 14 months, which tripled my initial capital. I did similar but with a risky few pharma stocks. PLTR tripled since IPO (and unlike AirBNB it wasn't rigged to benefit banks-and-friends) so that's another 200% return. While many people dump their capital into index funds, I keep most of my money in cash and speculate wildly with a fraction of it, and my returns over the past 5 years exceed what many large funds do. I also learn about industries and follow news that I wouldn't otherwise. Stock market index funds terrify me because I want to use the cash in the coming years for property.
I don't know, but none of this seems healthy and normal. I've been following the financial press for a long time almost daily, and I'm pretty confident no one's proclamations of the bottom or top can be trusted in advance. We'll know in months or years whether we're in a top.
You would have more than tripled your capital if you'd bought 14 months ago and held until today.
Let's continue. I sold it all in 2/2020 in 3 separate transactions between $32-$37. Later, I repurchased it at $22, and again two more times as it dropped to the 18's. I then sold everything again at $28... about 10 days ago.
So it was two sets of purchases and sales, not three.
So no, buying and holding would have not maximized my gains. And this is true for many stocks.
By the way, this is in an IRA account so there is no need to think about short v. long-term cap gain taxes here. The behavior in my main brokerage accounts accounts a bit more for the potential tax implications. However, if it's a volatile stock and I think went up or down in an extreme way that I think isn't justified, I'll jump in.
The markets have never been more efficient. Beating the market consistently over 5 years, particularly these last 5 years, which have been part of an unprecedented bull run in the market, means nothing. There's been many hedge fund managers who pulled off outsized returns over those sorts of timeframes only to go on and fail in subsequent endeavours.
Also you said you entered and exited virgin 13 times. How do you time your exits. Are you willing to reveal your strategies or algorithms?
NPV = Rt / (1 + i)^t
Rt is the incoming cash flow at time t, and i is the discount rate. This is the "theoretical" way that businesses should be valued: estimate their future cash flows, then discount them back to the present to take the time value of money into account (of course, in the real world, there is a lot more that goes into the price of stocks).
The issue is that as the discount rate approaches 0, the net present value then equals the same as ALL future positive cash flows. For large, perpetually operating businesses, this can then turn into something between "a lot" and "infinity".
Again, there are lots of other things that go into actual stock prices, but our economic system really is in new territory when the discount rate approaches 0 (or heck, goes negative!)
But - other tech stocks? Arguably justifiable. Since the risk free rate (treasuries) has cratered, this has altered the DCF calculation that analysts use to value a company (the outcome is essentially this: the company is worth more, because this risk free rate is used in discounting the PV vs FV of the company’s cash flows).
Thus, it makes sense to have companies worth more (compared to historical price-to- earnings comparisons).
Then on top of this, there is a somewhat deflationary force of tech companies providing more efficient means and processes to things - which further perpetuates the cycle of these companies being worth more (their inputs cost less and are less labile, and their outputs are greater than say, a mining or oil company)
Besides, even if none of those bets pay off, they still sell 3-5 million cars a year at over $50k per unit, and waiting lists for more buyers and don’t pay a dime to a dealer network. Once their fully autonomous self-driving software is released, I see them at a $1 trillion valuation (roughly $1000/share) easily.
But I think there's often some hidden game going on with tech companies that go well beyond selling more sugar water and expanding overseas to places that haven't seen sugar water before.
Amazon is the best at this... using one business to launch a second.
So what I'd look for with TSLA is not whether cars can ever justify this price, but whether there is an adjacent business that is actually bigger than cars. Is there? I have no idea.
The result? Amazon pays zero taxes and can continually expand. The NoLs offset the profits, and every time Amazon has a division that becomes profitable they offset it by entering a promising but loss-inducing new sector. Then, when that division becomes profitable - rinse and repeat.
This is Bezos’ genius.
His genius is gaming a readily game-able tax system for personal gain and public loss?
I do agree it's what he's good at, but I disagree about it being "genius" and question whether it's worthy of praise.
https://ark-invest.com/articles/analyst-research/tesla-price...
I think advertising and marketing is a good example of this. The amount of advertising a typical person is exposed to has increased by orders of magnitude but the amount of disposable money people have hasn’t followed. Given the primary objective of advertising is to drive a purchase (either directly or indirectly through brand awareness), an adjustment is bound to happen. Currently a lot of advertising & marketing is propped up by VC-funded companies who burn unreasonable amounts of money on customer acquisition in an attempt to monopolise their market, but these attempts are petering out which in turn means the advertising companies’ revenue would diminish and get closer to the true value of their services. We’re already seeing this on major platforms where they cram more and more ads in, in an attempt to maintain their revenue despite the declining value of their ad slots.
It could be worse. Much worse. It could be the great depression, caused by massive shrinking in the money supply. Nobody likes growth in the money supply (well, ok, debtors do). But, it's better than a shrink. Or as Ray Dalio sorta says, a beautiful deleveraging.
Yes it's a bubble, defined by everyone saying it's not a bubble. Is TSLA justified - no and yes. Purely monetarily, no. But in relation to all it's competitors yes. They're all FUBAR. Most of them don't have a clue about either EVs or self-driving. They are horse carriage companies in the age of the Ford Model T.
Relative to their competitors, yes, TSLA should be ahead as a measure of future growth, or future ownership of the transportation sector. There is little doubt how clueless their competitors currently are. But it's still arguable TSLA is ahead of the curve a little.
Will TSLA come down? Different question. Now they're in the S&P 500 this isn't simple. Probably not. If you transpose or invert the question - who will challenge TSLA? Crickets. Silence. That's why TSLA is so highly valued. There is nobody even close. LOL NKLA.
Will tech stocks come down? Yes, but there's many ways to think of it. Will covid end? Yes, this too shall pass. tech stocks will come down but relative to what? The dollar? Maybe. But more likely everyone else will catch up a little.
Stepping back - let's ask a better quesiton. Who's long tech stocks? What would you bet tech stocks go up (a dollar? 10 dollars? 100 dollars..?). These questions are better asked as bets or about current positions.
What this means is scarce financial assets are going to go up, and up, and up. Every person who doesn’t want to lose money needs to become a risk manager and start investing because there is no other option.
I believe that if it is, it's only the start. We will be seeing higher highs for at least a few more years. The euphoria has just started. I believe it so much that I think we will see the 1st Trillionaire with in the next 15 years.
These innovations plus our positive progressive social views will improve the standard of living for many and that in effect will help many others.
Good days are in our future.
The google search term to get your feet wet is “CAPM”. I personally think that risk free rates being 0 is not sufficient to justify some of the valuations we’re seeing in the technology sector.
https://tanay.substack.com/p/the-rise-of-intangibles-and-the... https://news.ycombinator.com/item?id=25556726
The valuation is unimportant as long as there isn’t something else for cash rich people to put their money into. Same for BTC or beach property.
Tesla is doing real things and is a great company that I'm sure will be profitable and do well in the future.
Doesn't mean I don't think that it's stock price is still inflated by 10x right now.
Well they redefined what full self driving means, that's for sure.
I laid out my reasoning for getting in back in May 2020. I raised my position to 86% a month after writing this: https://news.ycombinator.com/item?id=22970810
TSLA is a meme stock that operates on a narrative that "TSLA always goes up". It's pure speculation and that bubble is going to pop very badly. And it might take the whole economy with it now that it is in the SP500 with a ridiculous valuation.
Tesla's coming FSD and robotaxis still haven't been priced in. https://www.youtube.com/watch?v=hx7BXih7zx8
Only advantage they have is branding. Which is good, but companies like BMW have the premium brand down good too.
Nobody is gonna trust the car to drive while they're napping or working on their laptop lol.
I disagree. If you discount self-driving (and I do), then there are clearly other manufacturers who know perfectly well how to produce an EV. I own both a Tesla and a Bolt, and neither is a clear winner over the other. They each have ups & downs, but in any case GM produced a perfectly good EV. And Ford's Mach-E appears to be an improvement on Tesla's Model Y. The game is on, and the big boys seem to know the rules.
Where to even begin? Thin seats. Smaller car. No charging network. No self-driving. No remote software updates... It's a long list.
Does GM even know how to make a car these days? TSLA has massive growth problems. I've had my own issues with my Tesla cars. But how could we even talk about Bolt and Tesla in the same paragraph?
We should be talking about BMW. My past BMW service experiences were far better than Tesla. That's comparable to my Teslas. Who cares about GM?
If, one day, the Mach-E ships, and anyone buys it, and it has anything near AutoPilot then maybe we can talk about it. But right now the Mach-E is about as useful as a NKLA truck. With no charging network. Or AutoPilot. So it's basically a bigger LEAF.
Good for equity investors. But - Individuals? We’re on our own. A bit crony, in my mind.
Until they don't...The exuberance I'm seeing lately scares the shit out of me. This is going to be a horrific crash when it comes.
The situation you described has the potential to wipe off quite a lot of money there as well.
We are in a period of rapid inflation but mainstream economists and the government pretend we aren’t. It has been going on for decades but the official inflation rate is supposedly sub-2% while healthcare, education, daycare, high-quality food, housing, and all manner of highly-desirable-yet-cannot-be-easily-created assets have gone way up in price and are unreachable to even the middle class let alone the poor.
Yet many applaud the “heroic” actions of the central banks and government when all they are doing is printing ever more money and patting themselves on the back. We as individuals need to act in our own best interests to avoid this disaster because no one is going to help us.
The Tesla seats are awful compared to pretty much every other car at the same price point, so I'm not sure this is a good point. The Bolt seats aren't great either, but they're not significantly worse.
> Smaller car
Yep, more nimble. Not as powerful, for sure. But more tossable. Much tighter turning radius.
> No charging network
Except it can use standard non-Tesla DC fast-chargers, and those networks are collectively growing much faster than Tesla is growing the Supercharger network.
> Does GM even know how to make a car these days?
Uh, yes? They've always had the engineering chops, even when they cut corners and made duds. My last car before the Tesla was a Camaro SS 1LE, and it's so far on a different planet from anything by Tesla that it's unfair to consider Tesla a car manufacturer at that point. Yeah, GM knows what they are doing, what a silly thing to say!
> We should be talking about BMW.
No, we should not. They make exactly two cool cars now. The rest are just as cookie cutter boring as everything else.
> Who cares about GM?
Anyone who likes cars? I get that this generally rules out Tesla owners, I accept that. But GM makes the mid-engine Corvette - at a price point normal people can even afford! And Camaros, and many other cars. Hate on them all you want, but they're a very legitimate car manufacturer.
> If, one day, the Mach-E ships
It is...
The Mach-E has a nicer interior than a Model 3, and even has an actual dashboard screen in addition to the big center one. Not to mention an analog-ish volume knob. I bet it uses actual rain sensors, too ;). Maybe even a manual glovebox release.
Tesla is good at being different, and their drivetrain technology is excellent. The rest of the car is just barely acceptable, and only if you squint, and only if you've never ridden in anything with Recaros, etc. I like my P3D but only because there isn't yet anything equivalent, aside from the just now shipping Mach-E.
TSLA has nothing unique besides brand and battery tech. Battery tech is definitely going to be ubiquitous in a decade. They're already nearing an ideal range and charge time for average usecase.
Like I said, self driving is like a nerdy "cool feature". Nobody is gonna do something on their computer or take a nap or something.
I test drove the Bolt and the Tesla, and the Bolt is a MUCH better value for the dollars paid (you can get it for around 30k$ with a bit of haggling). Saying that GM doesn't know how to make car is laughable.
Never underestimate the power of everyone doing crazy things to make them not crazy. Housing prices in the US have been crazy long enough that the whole system is bought in to these levels it seems. Of course reality could be different in a few weeks or months but the bubble in real estate has been going on for a significant fraction of my adult life.
You didn't create more wealth - the equities didn't become more productive (cept may be the tech companies did more this year and thus have a deserved rise in price).
Can't agree more. Cheap, imported crap remains cheap and crappy, and everyone pretends that because TVs and egg mcmuffins remain affordable to the common man, therefore inflation is under control. Meanwhile asset prices, healthcare, housing, education (i.e., all the real, actual things important for someone's life that take up the bulk of their income) balloon in price.
Why even tax us anymore? If it’s so easy to print new money just sum all the money necessary for the budget and print it fresh. Basically the same thing at this point.
Is it a positive or negative thing? (honest question, I don't have much knowledge in this area)
Some socialists have openly stated that the end goal of democratically run companies can be attained by funneling government money directly into buying equity stakes in businesses, growing over time. This would be an extremely terrible outcome for anyone that likes productivity and efficiency.