The old adage that “the market can stay irrational longer than you can stay solvent” can hold true for individual stocks. There were periods, such as 1870-1900, 1919 – 1929, 1945 – 1970, and 1981 – 2000 where optimism in our future was unbounded. Most of the optimism came from huge advances in technology.
The first period mentioned above came with major advancements in mass transit. The second period mentioned above came with huge lurches in personal transport technology. The third period came with huge leaps in media technology. The last period saw a vast jump in digital technology.
Whether or not Tesla is merging mass transit, personal transport and digital to form a great leap in transit remains to be seen. Investors are buying into the “disconnecting from the electrical grid” and the hyperloop dreams. As long as Elon Musk can continue to sell the dreams, I believe investors will be buying the dream.
In the market, since November 2016, there is a certain unbounded optimism that has started again. The market is up 24%, which is the greatest one year advance in the market in over 50 years. Is Tesla riding this wave to newer daily highs? Or is it on its own path, separate from the market because it’s about to change the world?
In the former case, it’s better to short the stock. In the latter case, it may be time to buy.
Personally, I wouldn’t be betting either way. There are much safer stocks to buy.
H/T to Whitney Tilson for the article.
Tesla is burning through cash and losing billions. It’s also crushing short sellers.
Source: Elon Musk Versus the Haters
