[bayarearefugee]

> We Think the SpaceX IPO Is Overvalued

Well... yeah, sure, everyone thinks that.

And the fact that it doesn't matter and won't impact demand for shares illustrates how increasingly and dangerously untethered the stock market is from reality.

[ElProlactin]

> ...and dangerously untethered the stock market is from reality.

"Disconnected from historical valuation norms" is a more sensible statement.

The idea that the stock market is "detached from reality" is dangerous too because the stock market is...reality. People make and lose real money in it every day.

There are good arguments that the historical valuation norms are reasonable and deviation from them is "dangerous" but there's no actual law that says the stock market needs to behave according to history.

While I personally think the current behavior has significant risk, I also can't dismiss that the role the stock market plays today is different. It's not just about raising capital, providing liquidity, price discovery, risk management and building wealth, for large numbers of laypeople it's also the go-to casino (entertainment) and a platform for expression (way to express dissatisfaction with corporations, politicians, the world, etc.).

[ink_13]

For certain values of "reality". It doesn't take a financial analysis to tell you that it is bananas that Tesla (~1.3T) is worth more than four times as much as Toyota (280B), and yet.

[ElProlactin]

But there's no law that says prices must be based on standard financial analysis.

You and I and a million other people might run away from Tesla's valuation but that doesn't mean that the market must.

I think it's very obvious that the historical norms that governed and explained pricing in the stock market no longer apply, for better or worse. Between the massive manipulation of the markets by central banks to the rise of the retail investor (and social media, meme stocks, etc.), there are a lot of factors in play that weren't a thing 30 years ago.

[WalterBright]

People grossly undervalued the IPOs of Amazon and Microsoft.

[Teever]

“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.” -- Carl Sagan

[ElProlactin]

The problem is, as an investor, you don't know whether you're looking at a genius or a clown when dealing with these types of powerful trends.

Markets allow people to bet on it. So one would assume the author is taking the revenue from his $70/year subscriptions and shorting the bubble he sees (or at least positioning himself to do so).

[tarsinge]

Bitcoin has a 1.5T market cap with 0 revenue. I think Musk really got his eyes opened when he started playing with Dogecoin a few years ago. He applied the lessons successfully with Tesla, making the company an empty shell PR vehicle to support the TSLA "token".

[valicord]

People make and lose real money in Las Vegas every day too, but millions of people don't have their retirement dependent on casino winnings.

[Zigurd]

There is a simpler explanation: passive investing in index funds turned out to be too effective and ruined the game for active investment management. Now the banks have figured out how to exploit passive investors and turn them into involuntary bag holders. That is why the IPO will go out at the stated price and the underwriters face little risk.

[darth_avocado]

> And the fact that it doesn't matter and won't impact demand for shares illustrates how increasingly and dangerously untethered the stock market is from reality.

Part of the reason for this demand is the fact that index tracking funds like QQQ will be forced to buy up massive volumes of shares. Not only that but other non index tracking funds that track large cap stocks will also have to buy. Vanguard large cap for example manages trillions of dollars. That in itself will have 100s of billions worth of buy orders.

[themafia]

Does this not follow from the basic 401k structure in this country? Most people will be defaulted into a fund like Vanguard and from what I can gather from my co-workers, none of them are particularly wild about taking their retirement money and playing the day trading casino to try to increase their performance.

It's better than what preceded it but we still manage retirement wealth poorly.

[darth_avocado]

You could argue either way. This funnels retirement money into private pockets by forcing a listing at ridiculous valuations.

[johncearls]

On a tech site, pessimism like this make me sad. I'm a nerd. I have been dreaming of a future where humanity finally takes its place among the stars since I was young enough to have dreams.

I am looking forward to buying a little piece of it. I plan on putting a couple thousand into the IPO. I view it like buying into D.D. Harriman in "The man who sold the moon." I plan on taking those shares and forgetting about them for a couple decades. Maybe leave them to my grandchildren. This is the longest of plays and I hope it works out.

Maybe SpaceX will fail, but this is the first time since I was a boy that there is any real hope that humanity will step into that future, and I want to be part of it. Maybe Musk is suckering in dreamers like me, but I'll bet on a better future. This is it. This is our shot. Godspeed.

[anon7000]

I mean the market is seemingly completely detached from the reality of financial performance. However, it’s VERY MUCH attached to the reality that is investor whims. You’re not betting on a company doing well, you’re betting that other investors won’t want to sell it en-masse. That’s it.

As far as I can tell, that’s exactly how it works. Reality is investor emotions. If it shouldn’t be that, I mean the whole system needs a rework.

[bluGill]

Short-term, you are correct. However long-term, the stock market does tend to weigh value heavily. That is something that people who aren't familiar with the stock market often get confused because how can people who are in the short term and the wrong term have such different outcomes.

One of the obvious problems with the short-term thinking is you can trade on feelings all you want, but if things go really bad the company goes bankrupt and suddenly the court say no more trades allowed anymore and your and your value goes to zero.

[nandomrumber]

The market can remain irrational longer than you can stay scared of it.

[epistasis]

Let's go check on the cautionary tales of the Tesla shorts.... poor folks, we let them run around in the yard of the asylum without a fence because they have lost the motivation even to run away. They just keep mumbling about PE ratios....

[soundwave106]

From my perspective it's more of a "stay away" type of stock (short or not). The price is not supported by business finance fundamentals, and seems to be pushed upward via the retail market, driven by Elon's gift for selling futurism to the masses. To me, the value of Musk's companies is dangerously dependent on one single person, in a way that I can't think of for any other current company. It makes "investment" in the company more speculative, and closer to other "retail mass" phenomena like "meme stocks" or cryptocurrency.

As an example here, in the 2022 (relatively mild) stock market downturn, when the S&P 500 gave back about 20%, TSLA dropped from a peak in the low 400s, to a low of 122... roughly a 70% drop peak to peak. It's back to ~400 now, and it could go higher again. But, in the next downturn, it could go a lot lower.

[tananaev]

It doesn't mean it's a good investment. It's just a personality cult. I suspect it might take a generation or more to settle on some reasonable price.

[outside1234]

The next time there is a real correction all of these “concept cult” stocks are going to get hammered.

“When the tide goes out we will find out who has no shorts on.”

[the_real_cher]

The federal reserve can keep printing money for longer than anyone can afford.

[epistasis]

We can print more money, but it's not about "affording" it, the money printing at most changes the value of the dollar (i.e. inflation/deflation).

The rest of the world wants dollars, and as long as they do, the US benefits massively from that demand, and it would be foolish not to satisfy that demand, as it's pure benefit to the US.

It seems that many are devoted to ending the status of the dollar as the reserve currency of the world, but it's a strange and subversive thing for any US resident to want or desire.