[arcticbull]

You haven't shared "the point" just a link to MicroStrategy, a failed software company whose CEO had to pay an $11 million dollar SEC settlement decades ago for cooking the books, making a desperate Hail Mary play buying near the top of a speculative mania in a bid to gain relevancy. MSTR is the new "Long Island Iced Tea" -> "Long Blockchain Inc" rebrand [1]

Humorously enough, the same is roughly true of Tesla, a car company which sells 5% as many cars at Toyota while valued about twice what the entire rest of the car market put together is worth.

Their only source of profit is selling carbon credits to traditional automakers who won't need them anymore as they're all moving electric too. One more Hail Mary distraction to maintain the one thousand three hundred P/E ratio. In a manufacturing business. Not software with zero marginal cost. Manufacturing. The industry average P/E is right around 15.

> ...it's about living in a world of competitively devaluing currencies and resulting asset inflation.

Currency is an intentionally-lossy temporary store of value. It only needs to hold its value for as long as it takes you to buy assets with them. At 2% inflation it does. Anything else is a straw-man you'd recognize if you attended ECON 101.

Asset inflation isn't inflation, it's an ROI. CPI is inflation.

This is a typical set of r/Bitcoin talking points that are easily debunked.

[1] https://qz.com/1659246/the-fbi-wants-more-information-about-...

[DSingularity]

You know, your point about Tesla has given me lots of conflict. What did I miss? Obviously this question came when I sold off my TSLA stock at 500$ thinking — it was overvalued — and then watching it rise to the equivalent of 4,000$. I reached the conclusion it’s no longer solely about cash flow and debt ratios and market cap and addressable market and whatever other traditional metrics we previously used to value companies. The emotional component has become more important.

People are buying TSLA because they want to do something about climate change. Or maybe cause they worship Musk. This is probably holding for other companies in other industries. Bitcoin is definitely not only being bought because it’s digital gold. It’s being bought because people are emotionally attached to resetting the system. A bunch of middle fingers to the dollar rich (Bitcoin poor) by a bunch dollar poor (Bitcoin rich). This is why people are buying BTC.

Whether it is TSLA or BTC — value itself is being disrupted.

[arcticbull]

> People are buying TSLA because they want to do something about climate change.

I hope given Tesla's new affinity with Bitcoin that what they want to do is "make it worse" lol. Tesla is literally selling its green energy credits to dirty car companies, then throwing it at Chinese coal miners.

The market goes through particularly bubblicious periods of pricing mania from time to time. It's happening now, it's happened before, and it'll happen again. I wouldn't read too much into it.

  "..in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company." - Benjamin Graham

Prior to the pandemic stimmy money, poor people weren't investing and middle class folks were. When the pandemic hit, poor people lost their jobs, middle class folks kept them. Both poor and middle class folks received stimmy money. The middle class folks invested it.

The whole run up there were trillions on the side-line, and folks who remember 2008 weren't about to let another V shaped recovery pass them by. They plowed money into whatever they could. Literally everything exploded in value last year. My personal trading account is up almost 14X on a 1-year basis today.

It's nothing to do with fundamentals, just a bubble. It'll revert in time, and then it'll grow again.

[DSingularity]

It will only revert if people sell. What if nobody sells because they equate selling with giving up on their dreams of fighting climate change?

[kipchak]

Retail might never sell, I doubt commercial institutions Vanguard for example would not sell for idealistic reasons.

[DSingularity]

Vanguard doesn’t try to call tops. If they sell shares it would be to lock in profit and diversify their EV investment.

[arcticbull]

Again, Tesla makes climate change worse by investing in Bitcoin so if climate change is the driver they should sell ASAP. I think you're overestimating the average speculator's love of the environment.

Yes, this time could be different. Past performance is not an indication of future performance. That said, it would be the first time something's gone parabolic upward (while lacking the fundamentals) without retracing, and I don't see any reason this time would be different.

[edit: Check this out: (1) https://imgur.com/a/HATGeWr (2) https://imgur.com/a/umQLsnK]

[DSingularity]

I’m not debating the subtleties of Tesla’s carbon footprint. Im just asking what if the people buying TSLA are not buying for profit? What if they are buying because they believe it is the way they can fight climate change.

Will it eventually retrace? Probably. Almost surely. But it will probably not matter at that point relative to today.

I think we are in an era where stocks are mostly detached from fundamentals. Ask yourself who truly cares about fundamentals? It’s the uber wealthy who are trying to preserve their capital. Wealth disparity is huge so those numbers are fewer.

The Robinhood investors aren’t pouring over spreadsheets to decide where the best PE ratio tradeoff is most favorable. They aren’t trying to balance growth and income. They are literally buying whatever hyped them the most.

Now regarding the AMD chart. You should consider it in context of their defeat by Intel and subsequent turnaround. That, I think, drove the price movements shown in the chart. Did profit taking from amazing runs also matter? Probably. But you can’t ignore that AMD was nearly bankrupt and had to reinvent itself because it lost so much ground to Intel.

[whobar]

I think you can't judge whether TSLA is overvalued or not until they are no longer instantly selling out of all their products. People are bullish on TSLA because they have a product that many, many people want, more than they have the capability to supply.

Once they have their peak production capacity and have surplus stock across all markets we will get a better idea of their true value.

The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.

[arcticbull]

Yes, I agree, but I'm confident they're not worth twice the sum total of the entire car market by themselves.

> The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.

Well, that and one holds a chunk of the other. They're also surprisingly heavily correlated from a price action POV. I suspect there's a bit more going on than meets the eye. Burry tweeted the crazy level of correlation a few days ago.

[jerry1979]

CPI probably doesn't reflect inflation the way Fed looks at it. They use PCE[1]:

>An accurate measure of inflation is important for both the U.S. federal government and the Federal Reserve's Federal Open Market Committee (FOMC), but they focus on different measures. For example, the federal government uses the CPI to make inflation adjustments to certain kinds of benefits, such as Social Security.[3] In contrast, the FOMC focuses on PCE inflation in its quarterly economic projections and also states its longer-run inflation goal in terms of headline PCE.

[1] https://www.stlouisfed.org/publications/regional-economist/j...

[imtringued]

That's quite interesting but the overall picture is the same in both CPI and PCE. It's just another way to measure inflation in consumer goods and services. Compare that to the usual Bitcoin advocates talking about inflation of the dollar relative to Bitcoin. It's measuring something completely different.

[janoside]

Your view on currency exposes your extremely elitist bias.

Are you aware that a large portion of the population is unable to purchase assets? What do you say to these people? What do you say as the dollars they earn pay less of their rent? Less of their healthcare? Soon...less of their groceries?

[arcticbull]

Nah quite the opposite. The world has had 14 years to buy Bitcoin. Happened at the same time as the iPhone. Everyone in these poor countries has iPhones or android devices and nobody wants Bitcoin for them except the first world pushers. I defer to the locals. If they thought it was any good they’d use it. They don’t.

I would tell those people that if their government is broken they have bigger problems than their currency and once they solve their leadership problems the currency won’t be an issue anymore. Tough but true. Nothing there changes with Bitcoin and it’s $20 transaction fees.

[throwaway20875]

>CPI is inflation

Lol

[arcticbull]

Right, yeah, if you pretend how much AAPL appreciated matters to anyone, asset inflation counts. Otherwise, it's CPI, and [citation needed] if you want to posit otherwise.

[danhak]

Housing, healthcare, education and childcare costs matter. I don’t believe CPI is accurately capturing the skyrocketing costs of these things, which are the most significant expenses for most households.

[arcticbull]

And yet you and everyone else are unable to produce any meaningful sources or analysis that justify your beliefs. [citation needed] and we can talk about it.

Healthcare is a social policy matter, not monetary policy, and nothing to do with increase in the money supply. You take that up with your representatives not the Fed.

Housing is a function of city council zoning policy. You take that up with your city council not the Fed, or with the federal government it you want Japanese style zoning rules. [1]

Childcare is social policy, not monetary policy, and you take that up with your representatives not the Fed.

You can't just point to anything you don't like and say the Fed Did It or is responsible for it. All they do is control the money supply. Nothing more.

A reduction in your welfare isn't inflation. Necessities can outpace inflation. It's bad social policy, but it happens. What you fail to understand is that these prices will continue to outstrip a platonic ideal even if denominated in Bitcoin because the increase in pricing has nothing to do with monetary policy. Any temporary reprieve is due to speculative mania.

[1] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html

[danhak]

> Housing is a function of city council zoning policy...

This is the laughably reductionist take that predictably appears on HN when folks think the dynamics of San Francisco apply everywhere.

Housing costs have nothing to do with the Fed? Really? You don’t believe record low mortgage rates are driving demand at all?

Nah, it must be city council zoning policy that is sending home prices soaring all over the country—-even in rural and unincorporated areas.

[arcticbull]

I'm sorry you're just wrong about that though.

On average, the price per square foot of housing in the US is exactly the same now as it was in the 1970s, on an inflation adjusted basis. [1] In major metros, that number is higher, because of city policy, but on average, the number is flat. That means on an inflation adjusted basis in rural areas houses are cheaper per square foot.

Once you take into account that interest rates are about 1/5th of what they were back then, it's clear, housing is actually more affordable now than it ever was (per square foot).

Yes, zoning matters in rural areas. Minimum size rules, minimum setback rules -- all sorts of code changes -- have conspired alongside the 20% decrease in average family size and the changing tastes for more space, to make houses twice as big. Same price per square foot -- or lower! -- Twice as big. Twice as expensive.

I was wrong to say it has "nothing" to do with it, but it is by far not the dominant force as evidenced by the numbers.

If you're unhappy about poor folks not being able to afford the houses that's again social policy not monetary policy. I am too. But inflation isn't why.

By all means have at those windmills though, and please, cite your sources so we can have a debate on facts.

[edit] You're missing my point. Pricing in metros is more expensive because of council policy. Pricing outside the city is higher because they're twice as big. End of story. Please CITE YOUR SOURCES. This. Is. Not. Inflation.

You having a worse quality of life is not inflation.

Yes, white flight may or may not contribute to it. That's not Fed policy. That's social policy. And that's my point.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[imtringued]

>Housing costs have nothing to do with the Fed? Really? You don’t believe record low mortgage rates are driving demand at all?

Imagine if you are a bathroom remodeling company and people are building new bathrooms for $5k. You can build a bathroom for $4K. Suddenly the fed is loosening its monetary policy and people are building bathrooms like crazy with their bathroom mortgages. They are willing to pay $10k per bathroom but your costs didn't change. It's now extremely profitable to build bathrooms and that's exactly what you are going to do. You're going to hire lots of workers so that everyone can get their bathrooms. Turns out, a competitor does the exact same thing but they sell their bathrooms for $9k. Add more competitors and the price will be very close to the cost of construction.

Now replace the bathroom with the entire house. Suddenly you realize something. It's very difficult to find land to build your new house and even if you did you would have to upzone the property by tearing an existing property down and building a 2-3 story multifamily home there. Unfortunately, doing this is illegal in many places and where it is legal permits are being denied for arbitrary reasons.

You can't tell me that construction companies can't make money off new construction because the cost of housing is too low.

[SpicyLemonZest]

Rural and unincorporated areas have strict zoning too. Look at Tuolomne county (https://www.arcgis.com/apps/webappviewer/index.html?id=3e926...) for an example I could easily find a graphic for. The vast majority of privately-held land in the county is zoned RR (brown, 1 unit per 5 acres), AG (1 unit per 18.5 acres), or TPZ (1 unit per 37 acres).

[chordalkeyboard]

> the increase in pricing has nothing to do with monetary policy.

This is incorrect.

[arcticbull]

Inflation adjusted $/sqft on average across the US housing costs exactly the same as it did in the 1970s. With interest rates 1/5 of what they were back then, each square foot is actually much more affordable.

I admit I misspoke, because of course, monetary policy controls interest rates, but I maintain that a change in affordability is not dominated by inflation but rather other social policies. Houses are twice is big and families are 20% smaller.

Happy to debate more but [citation needed].

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[rank0]

There's actually considerable debate on the subject. I find it reasonable that things which are outside the CPI basket can indeed experience inflation.

https://www.investopedia.com/articles/07/consumerpriceindex....

If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?

[arcticbull]

> If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?

Not necessarily, no. The value of money is a function of supply and velocity. If the velocity went down and the supply went up 25% the fed can still nail its 2% target. [1, 2, 3] If the velocity increases next year the fed can shrink the supply commensurately to maintain its targets.

[1] https://www.investopedia.com/terms/v/velocity.asp

[2] https://www.stlouisfed.org/on-the-economy/2014/september/wha...

[3] https://www.investopedia.com/ask/answers/042015/how-does-mon...

[rank0]

That's very interesting I was not familiar with the concept of velocity.

It still seems to me that velocity can vary depending on the underlying entity. So unless every asset has the same velocity measure as the items in the CPI basket, it seems that there has to be some amount of inflation somewhere like possibly US equities.

[arcticbull]

The idea of velocity is pretty simple. If you print a $1T coin and hand it to me, then I throw it in a safe and forget the code, did the increase in supply cause any material increase in inflation experienced at the point of sale by the average person? Probably not. The supply went up, but the average velocity went down commensurately.

How this interacts with assets is in my opinion not super clear. Pricing of assets is supply and demand, unlike the CPI basket. The CPI basket is based on human need. There's no human need for AAPL shares. However, there's a ton of stimulus money, and folks who remember 2008's V-shaped recovery, and a bunch of people stuck at home day trading. I think that's much more likely to be driving asset prices than supply. After all supply is enacted by changing lending parameters.

To the extent asset prices don't put pressure on CPI, they reflect an increase in welfare, not an increase in inflation.