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It is not manipulation. The stock is tremendously overvalued and has been basically forever, but that doesn't mean it will go down. Unfortunately "fundamental

• darawk 9y ago
  The same is more or less true of bonds though, no? Bond value is determined by perceived credit risk and people's feelings about the future direction of interest rates in general. Of course, eventually if you're correct you do indeed get paid by the borrower with a bond. However, the stock market will eventually fall in line with realized earnings. The only real difference is that the bond market's time horizon is fixed, whereas the stock market can stay irrational for a finite, but arbitrary amount of time.
  • lambda 9y ago
    Or as they say, the market can remain irrational longer than you can remain solvent.
    • danmaz74 9y ago
      More specifically, as John Maynard Keynes said
      • lambda 9y ago
        Not according to http://quoteinvestigator.com/2011/08/09/remain-solvent/ http://quoteinvestigator.com/2011/08/09/remain-solvent/. Apparently what Keynes said was something similar, but not that same phrasing: There is nothing so disastrous as a rational investment policy in an irrational world.
    • ucaetano 9y ago
      And in the long run we are all dead anyway.
• ng12 9y ago
  > Unfortunately "fundamental value" doesn't mean shit in a popularity contest where you have a lot of retail money investing in whatever they happen to like. The stock market is fundamentally not meant to be an algorithm mapping company statistics to valuation. Treating it as such is nonsensical.
  • tcoppi 9y ago
    Not sure why you're being downvoted, I don't think you are wrong. Possibly the misunderstanding comes from a slight technicality - markets exist because buyers and sellers like a convenient place to trade. When buyers and sellers convene they arrive at a market clearing price, which is by definition the value of a company at that time. But finding that value is not the purpose of a market, and the fact that there are many varying opinions as to what the value of a company at any given time should be is what makes a market in the first place.
• jfaucett 9y ago
  > It is not manipulation. The stock is tremendously overvalued. This. I was going to say even $180 is still ridiculously overpriced. Teslas statements are not good by any means when compared to GM and are even poor when compared to a company in problem times like Ford. Tesla even has massively less capital expenditures than both GM and ford. For instance, Fords after tax income was 4 billion, they had capex of 1.7 billion, and an EPS of +0.2. Compare this to Tesla at -0.6 billion revenue, 0.7 billion capex, -4.8 EPS (and they are issuing new shares each quarter for financing). Yet Ford cost $11 a share while paying out a 5% dividend - and this is all from a company in rough patch. I have no idea why anyone is putting so much money into Tesla. You have to give Musk credit for great marketing and creating a cult around his image and ideas.
  • ng12 9y ago
    Probably because the perception of Tesla is that it's more than just a car company. Retail investors don't see much of a future in the American car industry so they're betting hard on tech-first innovation. I wouldn't buy Tesla for more than $200 but I really don't think it's hard to see why people do.
    • almost_usual 9y ago
      Which makes it a high risk speculative stock. You're essentially gambling on the future knowing the present company is extremely overvalued. I wouldn't even call it "investing" if you were to purchase their stock right now.
      • ng12 9y ago
        "Overvalued" is a funny term -- how can you overvalue a company who's competing on innovation? Remember people said the same thing about Facebook when they were worth $50b and Google when their only products were search and gmail. I agree that it's a risky buy, I disagree with the notion that there's something fundamentally wrong with high-value speculation.
        • 9y ago
• nhatbui 9y ago
  You can diversify and allocate funds to stocks/bonds in a way that suits your risk tolerance and financial goals.
• jfoutz 9y ago
  That's wild. I'd have thought 401ks and institutional investors would be orders of magnitude more money than etrade and tdameritrade stock accounts. crazy.
  • tcoppi 9y ago
    TSLA is approximately 66% owned by institutional investors(investment banks, funds of any sort(including active and index funds that may be in 401(k)s). That leaves ~30% of the shares controlled by individuals, which is fairly typical.
    • jfoutz 9y ago
      That's sort of a weird way of looking at it. Don't Musk and Ahuja own like 10% of the shares? Is there an easy way to get non-insider, non-institutional numbers?
      • deleted 9y ago
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      • deleted 9y ago
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      • tcoppi 9y ago
        As of February Elon owns 22%. He and other board members/early investors are individuals so I don't see how it is weird to include them, though.
        • jfoutz 9y ago
          Ah, OP's assertion was the price is crazy from retail investors, which i assume would be non-institutional, non-insiders. It's impressive that a few % of owners can double the share price. Unless, they meant Musk was buying shares at $350+
          • tcoppi 9y ago
• callmeed 9y ago
  Please tell me you don't think GS is above manipulating the market [0]. Why can't it be both? I completely agree that TSLA is overvalued. But that doesn't mean GS is issuing a report and lowering a price target in order to help out small, retail investors like us. [0] https://en.wikipedia.org/wiki/Goldman_Sachs#Controversies_and_legal_issues https://en.wikipedia.org/wiki/Goldman_Sachs#Controversies_an...
• austenallred 9y ago
  > Unfortunately "fundamental value" doesn't mean shit in a popularity contest where you have a lot of retail money investing in whatever they happen to like. We can all disagree on what the proper valuation of Tesla really should be, and there are good arguments on both sides, but this comment exhibits a fundamental and simplistic misunderstanding of how stocks such as Tesla are valued, and it's something HN as a group needs to do a much better job at understanding. To say that its valuation is purely based on a "popularity contest" is simple enough that it feels right, but is dead wrong. The value of any asset is the present value of its future cash flows. In other words, find all of the cash that a company (or any other thing) will ever generate, sum it all up, and then translate that cash back into a value today using an interest rate you choose (since cash today is worth more than cash tomorrow). With that behind us, it's fair to say, "Ok — but how in the world can you ever know how much cash a company will generate next quarter, let alone next year or throughout its entire existence?" And that is the challenge of valuation, especially at this stage - Tesla's future cash flows will vary wildly based on whether or not it can execute. That's why growth is so important in startups and other relatively young companies. If your company has revenues of x and will grow them at x^n, the n will matter so much over time that the x is nearly irrelevant. Because these sort of projections are often overly optimistic, HackerNews has become incredibly biased against this kind of valuation, and tends to focus on the times when it's way too high. But in doing so it ignores the times when they're way too low - something that's very easy to do. Everyone was saying Instagram was an obvious sign of a bubble when it was bought for $1B, but now it kicks off over $1b in revenue every year. We cried "bubble" along with DHH when Facebook was valued at $33B, and now it's comfortably at 10x that, spitting of $8B in revenue per quarter. The likelihood of that growth curve and those projections being wrong is usually priced in. The question around Tesla isn't whether or not their market size will be big enough if they do what they say they're going to do (they're building the largest battery factory in the world, building an electrical recharging grid, have easily the largest data set anywhere for self-driving cars, etc.), but whether it's possible. That is Tesla's fundamental value, and fluctuations in its price are based on disagreements around what its fundamental value actually is. So maybe that all comes to naught; maybe Tesla is wrong. That risk is priced in. Tesla's market cap is roughly the same as Ford's. I'll just say that, for my money, if I had to choose whether I would own 100% of Tesla in 20 years or 100% of Ford, I would choose Tesla in a heartbeat.
• bogomipz 9y ago
  >"With a bond, if your analysis is right, you get paid at maturity" I don't understand this statement. Barring a default, if you hold a bond until it matures you get paid the face value, period. Also how is betting on future interest rates moves any less riskier than betting on future stock price moves?
  • solaxun 9y ago
    Because you buy at a given yield, dictated by the coupon and the purchase price / maturity. Duration (sensitivity to interest rates) affects the price PRIOR to maturity, not at maturity. If you buy a bond at a 5% yield to maturity, and there is no default, you get earn that 5% period. You don't have to rely on somebody else believing that instrument is "worth" a certain price, the company pays it or they are in default and can potentially be forced into bankruptcy. Yes, default risk is a real risk (more in the high yield space than IG), but that is a much lower risk than volatility you can see in equities. Just to be clear, I'm not saying stocks are bad, they typically always earn more in the long run, but they are volatile, much more than bonds.
• MarkMc 9y ago
  > With a stock, you can be right, and it doesn't matter. Stock is only worth what somebody will pay for it I don't see it that way. To me, a stock is worth the 'fundamental value', i.e. the future divided payments discounted by an appropriate interest rate. If no-one is willing to buy my shares I'm still happy because I get the future dividends.
  • solaxun 9y ago
    That's all find and well, and using the "dividend discount model" is one of the many methods of valuation, but not every stock pays a dividend. Those that do can cut them at their leisure.
• dlwdlw 9y ago
  The overpricing is like a mattress topper. It's considered stable enough for short term investment at least. Especially the kind of investment that relies in volatility and mob psychology. It's entirely to gain value from a bubble as long as the bubbles life span is longer than your goals. However you must exit the bubble before it pops by transferring ownership to someone who doesn't believe it is a bubble. The timing is important because you need the right mix of doubt and hope. When good news hits, it's actually a great time to offload the bubble gains as there is a spike in hope with more buyers believing in a longer bubble. This may account for why good news often is followed up with a drop. This is irregardless of belief in the stock. Bubble gains may be locked in to buy at a more reasonavke price because belief in the fundamentals of the stock are still strong. However the duration of the bubble causes the stock price to lose all growth rate information. As a tangent, this is why I don't believe wall street provides much value. Price discovery and liquidity is important yes, but most of the money made seems to revolve around psychological manipulation moated by lack of transparency.