Why the Stock Market Is Starting to Remind Me of the dot-com Insanity

Tesla Motors has a stock valuation that is completely unhinged from reality. If this isn’t reminiscent of pets.com, I don’t know what is.

Consider that in 2019 Tesla Motors sold less than 370,000 vehicles of all types, worldwide. Number of Tesla vehicles delivered worldwide from 4th quarter 2015 to 4th quarter 2019.

For a contrast – not chosen at random – lets look at Ford and the F-Series pickup truck. 2019 U.S Pickup Truck Sales Analysis. Well actually we can consider all pickup trucks, but comparing with Ford will do. As always, click the image for a larger view.

During 2019 Ford sold 896,526 F-series pickups in the US, and another 145,210 in Canada.

Also, while Ford manages to make money, as of 2018 (the most recent year I can find numbers for) Tesla lost something like 300 million dollars. Yet the market thinks that Tesla is worth more than Ford. Only to people who don’t know how to read a balance sheet or a statement of cash flows.

As bad as Tesla Motors is, there is almost always a carnie-barker hypnotizing the markets, or some bit of them. But Tesla isn’t alone.

Consider Carnival Cruise Lines, that currently has 2 ships tied up various places, and will certainly lose money over the Coronavirus outbreak. Carnival stock’s rally is a sign ‘this market is driven by hope,’ Jim Cramer says.

Now I don’t always like Jim Cramer, but I mostly object to his style. The man is not an idiot.

Wall Street is “blessing any company that spells out its China losses, from Carnival, with its highly visible duo of plague ships, [to] PVH and Nike,” the “Mad Money” host said. “When you see Carnival stock up 2.6% today on the possibility of a big but quantifiable chunk of earnings going away, well, you know this market is driven by hope.”

Before the market opened, Carnival announced that its earnings potential could decrease by 65 cents per share should the company have to shut down its Asia operations through April.

That 65¢ per share is on an EPS of $4.32 for the trailing twelve months. That is not an insignificant hit to the bottom line.

When people tell you that you can’t lose money in something… well, let’s just say that’s what I was hearing in the late 1990s about internet stocks, and around 2005 about real estate. This is the point were I reference Kipling’s “Gods of the Copybook Headings.” You have to scroll down a bit at that link.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

That’s my favorite stanza, probably, from that poem, which is all good. And while written in 1919 or so, manages to be very much on the money today.