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i don’t think you can look at Tesla surpassing Walmart in market cap today and rationalize it as normal forward looking behavior when there’s been zero news ove

by tempsy 6y ago

i don’t think you can look at Tesla surpassing Walmart in market cap today and rationalize it as normal forward looking behavior when there’s been zero news over the last 10 days outside of a stock split, which in theory should have zero impact on the market cap my point is we aren’t living in a world where a stock is simply the present value of future cash flows and no one should rationalize the market as such

throw0101a 6y ago
It's going up because it has gone up. See the momentum investing factor: * https://www.investopedia.com/terms/m/momentum.asp https://www.investopedia.com/terms/m/momentum.asp Also, it has just recently become eligible to become part of the S&P 500 (through some perhaps 'amusing' accounting), so a bunch of folks may be front running it's possible actual inclusion: * https://www.thebeartrapsreport.com/blog/2020/07/19/gaming-the-sp-500-inclusion-process/ https://www.thebeartrapsreport.com/blog/2020/07/19/gaming-th... Though long-term stock holders may not actually want inclusion: * https://www.nber.org/papers/w27593 https://www.nber.org/papers/w27593
- tempsy 6y ago
  that has nothing to do with forward expectations, which is my point.
  - throw0101a 6y ago
    It has gone up for the last little while, so the expectation is that it will continue to go up. From the article I linked: > When applied, an investor can buy or sell based on the strength of the trends in an asset's price. If a trader wants to use a momentum-based strategy, he takes a long position in a stock or asset that has been trending up. If the stock is trending down, he takes a short position. Instead of the traditional philosophy of trading—buy low, sell high—momentum investing seeks to sell low and buy lower, or buy high and sell higher. Instead of identifying the continuation or reversal pattern, momentum investors focus on the trend created by the most recent price break. Momentum is a recognized factor in investment returns in peer-reviewed research: * https://en.wikipedia.org/wiki/Factor_investing https://en.wikipedia.org/wiki/Factor_investing
  - idoh 6y ago
    If that's what you believe then you can always put your money where your mouth is and go short on Tesla.
    - tempsy 6y ago
      there’s no point in trying to act rationally when the market is in extreme moral hazard mode.
im3w1l 6y ago
> there’s been zero news over the last 10 days Everything in the world effects everything else in a very complicated manner. Almost anything that happens will have some indirect effect on tesla / walmart. I wont pretend to know the reason, or that there is a reason this particular time. But indirect news do affect prices regularly.
nostrademons 6y ago
Inflation expectations. Inflation hits different companies differently. Companies with a strong brand and a strong moat, ones that basically define their categories, can raise prices as much as they want. Companies that produce an undifferentiated commodity product get undercut by competitors when they try to raise prices. People buy a Tesla because they want a Tesla. Any old car will not do - the typical Tesla buyer is not considering a Toyota or a Subaru or even a Leaf. (They also tend to be fairly high-earning, and in a profession where they can capture much of the increased prices from inflation.) When more money goes into the economy, Tesla's buyers capture a good fraction of it, and then Tesla can raise their prices to match. Nobody shops at Walmart because it's Walmart. They shop at Walmart because Walmart has the lowest prices. Now, Walmart is being undercut by Amazon (whose stock is rising as they steal business away from Walmart). If there's inflation, will Walmart be able to raise prices? Probably not by very much, because if they do, Amazon holds their current prices and Walmart loses even more business to them. It's the same story for Apple, which has roughly doubled in the last 4 months. Did the value of Apple double in the last 4 month?. Certainly not in real terms. But in nominal terms - probably. I could easily see a future where prices in general are double today in 5-10 years, and the price of an iPhone is likely to rise to keep pace. During the 1970s, prices rose by roughly 10x on average, though the impact was widely disparate on different professions. (At the beginning of the decade, my mom - a teacher - was make maybe 20-30% less than her engineer/lawyer/academic friends. At the end of it, they were making about 3x what she was.) If anything, the market may be understating the effect of inflation on certain company's earnings, perhaps because a lot of people don't believe we're going to get inflation.

by tempsy 6y ago

throw0101a 6y ago

It's going up because it has gone up. See the momentum investing factor: * https://www.investopedia.com/terms/m/momentum.asp https://www.investopedia.com/terms/m/momentum.asp Also, it has just recently become eligible to become part of the S&P 500 (through some perhaps 'amusing' accounting), so a bunch of folks may be front running it's possible actual inclusion: * https://www.thebeartrapsreport.com/blog/2020/07/19/gaming-the-sp-500-inclusion-process/ https://www.thebeartrapsreport.com/blog/2020/07/19/gaming-th... Though long-term stock holders may not actually want inclusion: * https://www.nber.org/papers/w27593 https://www.nber.org/papers/w27593

tempsy 6y ago
that has nothing to do with forward expectations, which is my point.
- throw0101a 6y ago
  It has gone up for the last little while, so the expectation is that it will continue to go up. From the article I linked: > When applied, an investor can buy or sell based on the strength of the trends in an asset's price. If a trader wants to use a momentum-based strategy, he takes a long position in a stock or asset that has been trending up. If the stock is trending down, he takes a short position. Instead of the traditional philosophy of trading—buy low, sell high—momentum investing seeks to sell low and buy lower, or buy high and sell higher. Instead of identifying the continuation or reversal pattern, momentum investors focus on the trend created by the most recent price break. Momentum is a recognized factor in investment returns in peer-reviewed research: * https://en.wikipedia.org/wiki/Factor_investing https://en.wikipedia.org/wiki/Factor_investing
- idoh 6y ago
  If that's what you believe then you can always put your money where your mouth is and go short on Tesla.
  - tempsy 6y ago
    there’s no point in trying to act rationally when the market is in extreme moral hazard mode.

im3w1l 6y ago

> there’s been zero news over the last 10 days Everything in the world effects everything else in a very complicated manner. Almost anything that happens will have some indirect effect on tesla / walmart. I wont pretend to know the reason, or that there is a reason this particular time. But indirect news do affect prices regularly.

nostrademons 6y ago

Inflation expectations. Inflation hits different companies differently. Companies with a strong brand and a strong moat, ones that basically define their categories, can raise prices as much as they want. Companies that produce an undifferentiated commodity product get undercut by competitors when they try to raise prices. People buy a Tesla because they want a Tesla. Any old car will not do - the typical Tesla buyer is not considering a Toyota or a Subaru or even a Leaf. (They also tend to be fairly high-earning, and in a profession where they can capture much of the increased prices from inflation.) When more money goes into the economy, Tesla's buyers capture a good fraction of it, and then Tesla can raise their prices to match. Nobody shops at Walmart because it's Walmart. They shop at Walmart because Walmart has the lowest prices. Now, Walmart is being undercut by Amazon (whose stock is rising as they steal business away from Walmart). If there's inflation, will Walmart be able to raise prices? Probably not by very much, because if they do, Amazon holds their current prices and Walmart loses even more business to them. It's the same story for Apple, which has roughly doubled in the last 4 months. Did the value of Apple double in the last 4 month?. Certainly not in real terms. But in nominal terms - probably. I could easily see a future where prices in general are double today in 5-10 years, and the price of an iPhone is likely to rise to keep pace. During the 1970s, prices rose by roughly 10x on average, though the impact was widely disparate on different professions. (At the beginning of the decade, my mom - a teacher - was make maybe 20-30% less than her engineer/lawyer/academic friends. At the end of it, they were making about 3x what she was.) If anything, the market may be understating the effect of inflation on certain company's earnings, perhaps because a lot of people don't believe we're going to get inflation.