TSP Funds: the Tesla Bubble

For perspective, in the last two days Tesla added a GM to its market value.

Since the Fed started flooding wall street with half a trillion in money created out-of-thin-air in late 2019, Telsa has added a GM, a Ford, and a Fiat Chrysler to its market value.

Yep, Tesla now has the same market value as those three plus Honda who combined sell 230 times more cars than Tesla. I’m sure it will work out just fine since they have no competition in the electric car business (sarcasm).

weeeee

Or for another perspective I converted Tesla’s price to market value in terms of other car companies…

How long to lose a Honda? a few hours

Which brings us to a lesson in market values. They are not based on anything but what people are willing to pay on the open market or in the case of Tesla today, what they were forced to pay.

Why “forced”?

Short-sellers were forced to buy to avoid massive losses. See when you short sell you think price is going down, so you sell today and are required to buy in the future at hopefully a lower price. When prices pop higher short sellers panic and are force to buy higher to avoid larger losses. It is called a “short squeeze”.

So at times, price is driven more by the supply and demand factor of the markets. No one wanted to sell their favorite company Tesla as it skyrockets in price but some people were forced to buy so the bid shot up fast. It will correct itself when this “short” demand situation clears.

Now with a market value like that, some are asking surely they will include Tesla in the SP500 now. It sits in the non-sp500 companies (TSP S fund) as the largest company. But the managers of the SP500 have a little rule that has and will keep it out.

They actually require companies to make a profit. Silly, isn’t it.


Invest smart even if no one else is right now…

TSP & Vanguard Smart Investor

PS. The money the Fed created did not go directly into Tesla’s stock. It created the conditions of the current stock market surge based on the belief market risk is being muted by another round of money printing. Otherwise known as “RISK ON”.



Categories: Perspectives, TSP Charts