Actually a P/E ratio of 200 would be an enormous improvement

 

 As we've said before, anyone with even a passing interest in business, finance, or the economy should sign up for Allison Morrow's newsletter. She has become one of my must-reads.

Here, she does a great job laying out the absurdity of Tesla's valuation and capturing the frustration felt by rational observers watching an irrational market.

Consider Tesla, a stock so detached from the company’s actual business some analysts call it the “OG meme stock.”

 

Its core product, electric cars, is quickly growing stale and losing market share to rivals. But don’t worry, it’s not a car company anymore, Elon Musk has said (despite cars being the only commercially viable, revenue-generating product Tesla offers). No, Tesla is an AI and robotics company now, its future staked to robotaxis (still in development, buggy, years behind Alphabet’s Waymo) and $20,000 humanoid robots (also still in development, and still require a human operator to do the household chores it’s billed to one day do autonomously.)

 

This week, Bank of America analysts said Tesla’s core automotive business represents just 12% of the company’s total value. Robotaxi is 45% and “full self Driving” — Tesla’s autonomous driving software that doesn’t reliably work and customers don’t reliably want to pay for — is 17%.

 

In short: Well over half of the stock’s value lies in products that either don’t yet exist or don’t exist at scale.

 

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Sensible investors might say “hey, there’s clearly value here but a stock that trades at 200 times earnings is overhyped and I’m going to sit this one out.” And they’d be right, in the Warren Buffett sense of right.

 

But they’re not Warren Buffett.

 

...

 

Being a naysayer in this market doesn’t pay the bills. Buying the dip does. All those crypto trolls who taunted skeptics to “have fun staying poor” were not, sadly, incorrect (though we can all agree they were jerks). Crypto has not only stayed alive, it’s practically gone mainstream. Even Jamie Dimon, the JPMorgan Chase boss Jamie Dimon, a longtime critic, has sort of come around, saying earlier this month that blockchain – crypto’s underlying technology — “is real.”

 

There is almost no “bad” news that can rattle Wall Street anymore, as investors have learned that buying the dip almost always pays off.

 

That is, of course, until it doesn’t. And no one knows when, or even whether, we’ll hear the record scratch.