Comment by mixdup
17 days ago
The thing is fundamentals really don't matter. TSLA and SPCX aren't paying dividends so there's no real performance they have to hit, no one is going to miss a dividend payment and dump the stock. The Elong vibes can carry it as long as people keep smoking what he's selling
The real question is, when does that run out of steam? When do we wake up to the charade that has built up around us? That's a much bigger thing than just Elon and his businesses. Like someone else said, when the next crisis/downturn/depression hits the house of cards will fall. Unfortunately it will hit all of us not just people in the meme stocks
I'm extremely cynical about the way the US government would react to any sort of financial crisis. I do not believe that they would not completely cave and bail out the AI companies and the monopolists if there is a downturn. And it's not that I don't trust the Republicans specifically. The whole political sphere is completely convinced that AI is a national security prerogative, and the cynical political atmosphere will equate national security with investor protection.
Let me append the saying a bit: The US government can remain irrational longer than you can stay solvent.
*The US government can remain irrational so you can stay solvent.
I’m pretty sure the market agrees with you.
Unfortunately.
If you exclude dividend paying stocks, then the entire stock market starts to look like a giant pyramid scheme casino.
> If you exclude dividend paying stocks, then the entire stock market starts to look like a giant pyramid scheme casino.
Stocks can start paying dividends in the future: MSFT did not in the past, and does now. AAPL did, stopped in the 1990s, and started doing so again.
You should be indifferent to the company's dividend scheme since it's the underlying business activity that drives total returns, and not its distribution policy. There is all sorts of magical thinking when it comes to dividends:
* https://canadiancouchpotato.com/2011/01/18/debunking-dividen...
* https://pwlcapital.com/the-irrelevance-of-dividends-still-a-...
A pyramid scheme can run out of people to keep it going: the stock market is in a sense a 'savings scheme' for future consumption. Younger people work and turn their cash into savings, older people take their savings and turn it back into cash: as long as young people need to think about the future, and older people / retirees need to pay bills, there's a mechanism to maintain this cycle.
> A pyramid scheme can run out of people to keep it going
And then you describe how the secondary stock market requires 'fresh blood' to whom to sell stock to cash-out.
It's precisely a legalised pyramid scheme that always needs someone to come in at the bottom hold the bag to let someone else cash-out. In turn they need someone to come in 30 years later. That's exactly how a pyramid scheme works.
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> it's the underlying business activity that drives total returns, and not its distribution policy
That's exactly the question, though, since a lot of stocks seem priced disproportionately to their business activities.
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No, there are a huge number of companies that are valued reasonably for their revenue / profitability / growth.
There's basically two stock markets: things valued on fundamentals and things valued on vibes.
And I don't think there's ever going to be a unified theory of value that can span both, because the former is quantitative and the latter is psychology.
True, and it's a common question that comes up: What's the point of owning a stock if it doesn't pay a dividend? How do you participate in the company's performance?
There are other ways for performance to translate to the investors directly. For example, if the company sells itself then all the shareholders will get that payout. Stock buybacks are a thing. And, as other commenters here have said, eventually the company may start paying a dividend
But, you're not entirely off-base in that you're just buying into the vibes of a company. It's just that most of the time (much of the time?) those vibes have been rooted in some semblance of rationality, that there was something of value behind the shares you're buying. That is definitely not universally true anymore
There's taxation reasons. Stock buybacks mean that investors get the usually lower capital gains tax rates instead of dividend income tax rates. On top of this, it also juices earnings per share.
>How do you participate in the company's performance?
Most stocks give voting power even if they don't pay dividends. Notably, SpaceX's don't.
Aren't buybacks the new dividends?
It’s only a pyramid scheme for Tesla, SpaceX or X formally known as Twitter see a pattern there?
Gamestop is not an Elon venture. There's plenty of irrational stock valuations out there, most of them just come back to Earth on a reasonable timeframe
Would you say the same thing about Bitcoin? Will that house of cards all fall in the next crisis/downturn/depression?
Hasn’t it crashed in every economic downturn and financial panic so far?
Not really, no.
A decade ago it was under $1000 and has never been that low since. It's peak price is only about 2x the current price.
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I personally think Bitcoin will eventually peter out, and that it's fairly risky as it has definitely been pushed by vibes and promotion and everyone wanting to get in on it
I mean that can apply to anything. There's nothing intrinsic about gold that makes it valuable other than it's rare, but there's plenty of things that are relatively rare that aren't valuable. Yes there's industrial uses of gold but that's not why we as a society and a species treat it as valuable
Maybe bitcoin is the new gold and will hold value forever, and as more serious people get into it, it will lose its volatility and be less subject to the vibes shifting and there being a run on the market. Maybe not
It is different from Elong stocks, though, because the myth of Satoshi aside, it's not exactly a cult of personality like his companies are
To me the difference is that BTC's continued value isn't predicated on the actions of one person, who has continually proven himself to be childish, mercurial, and dishonest.
Yes when will everyone wake up for the charade of having a monopoly on space launches? Of putting over 90% of all mass into space, of your closest competitor being the nation state of China, and they are years away from where you are right now. Ah yes, that charade, when will people learn am I right? Total genius.
An extreme majority of Space X's self-determined value proposition has nothing to do with space. Out of an overall TAM of $28.5 trillion, $26.5 trillion is based on AI. Personally I believe that number will actually approach zero, but it certainly even in my most optimistic view is a number with a B, not a T
The total addressable market even at Space X's own calculation for space launches is only $370 billion. And, supposedly as the only company that can launch things into space they are still losing money on that business. This is bankrupt-a-casino levels of incompetence
SpaceX are currently losing money on the "going to space" part of their business.
They're making money on telecoms, and may have just started making a profit on renting out the data centres they originally built for the AI that it turned out hardly anyone wanted to actually use.
Even if one assumes this is true, it still wouldn't justify the valuation.
The demand just isn't there, which is one of the reasons SpaceX is pretending they will generate more demand with their cosmic wizard spires.