[mixdup]

The thing is fundamentals really don't matter. TSLA and SPCX aren't paying dividends so there's no real performance they have to hit, no one is going to miss a dividend payment and dump the stock. The Elong vibes can carry it as long as people keep smoking what he's selling

The real question is, when does that run out of steam? When do we wake up to the charade that has built up around us? That's a much bigger thing than just Elon and his businesses. Like someone else said, when the next crisis/downturn/depression hits the house of cards will fall. Unfortunately it will hit all of us not just people in the meme stocks

[philistine]

I'm extremely cynical about the way the US government would react to any sort of financial crisis. I do not believe that they would not completely cave and bail out the AI companies and the monopolists if there is a downturn. And it's not that I don't trust the Republicans specifically. The whole political sphere is completely convinced that AI is a national security prerogative, and the cynical political atmosphere will equate national security with investor protection.

Let me append the saying a bit: The US government can remain irrational longer than you can stay solvent.

[fluoridation]

*The US government can remain irrational so you can stay solvent.

[namuol]

I’m pretty sure the market agrees with you.

[philistine]

Unfortunately.

[lossolo]

If you exclude dividend paying stocks, then the entire stock market starts to look like a giant pyramid scheme casino.

[throw0101c]

> If you exclude dividend paying stocks, then the entire stock market starts to look like a giant pyramid scheme casino.

Stocks can start paying dividends in the future: MSFT did not in the past, and does now. AAPL did, stopped in the 1990s, and started doing so again.

You should be indifferent to the company's dividend scheme since it's the underlying business activity that drives total returns, and not its distribution policy. There is all sorts of magical thinking when it comes to dividends:

* https://canadiancouchpotato.com/2011/01/18/debunking-dividen...

* https://pwlcapital.com/the-irrelevance-of-dividends-still-a-...

A pyramid scheme can run out of people to keep it going: the stock market is in a sense a 'savings scheme' for future consumption. Younger people work and turn their cash into savings, older people take their savings and turn it back into cash: as long as young people need to think about the future, and older people / retirees need to pay bills, there's a mechanism to maintain this cycle.

[dingaling]

> A pyramid scheme can run out of people to keep it going

And then you describe how the secondary stock market requires 'fresh blood' to whom to sell stock to cash-out.

It's precisely a legalised pyramid scheme that always needs someone to come in at the bottom hold the bag to let someone else cash-out. In turn they need someone to come in 30 years later. That's exactly how a pyramid scheme works.

[throw0101c]

> In turn they need someone to come in 30 years later. That's exactly how a pyramid scheme works.

The entire economy is a pyramid scheme: the expenses of some people (shelter, food, clothing, entertainment, etc) are the income of other people (landlords/mortgages/property taxes, farmers/grocers, etc). It's why, during economic downturns, personal virtues (saving) can become vices from macroeconomic perspective: if everyone is saving, no one is spending, and so producers/suppliers lose their income (and generally start laying people off, which causes more saving / less spending).

At any given point in time, if no one spends, then no one has income.

This was the 'innovation' of Keynes in the 1930s: use government spending to 'induce' demand to get the cycle going again:

* https://archive.nytimes.com/krugman.blogs.nytimes.com/2015/0...

For a stocks point of view: if no one is currently saving, then those that need income will lose it. At any given point there are folks who need to save/buy and those that need to spend/sell.

[ozgrakkurt]

Exchange of goods with money isn’t a pyramid scheme imo. Financial system is a pyramid scheme, economy isn’t

[throw0101c]

A typical pyramid/Ponzi scheme falls apart when (new) people stop putting money into the system.

What happens to the economy when people stop putting into the system (by saving, and not spending on goods/services)?

[andrewflnr]

> it's the underlying business activity that drives total returns, and not its distribution policy

That's exactly the question, though, since a lot of stocks seem priced disproportionately to their business activities.

[throw0101c]

> A Keynesian beauty contest is a metaphorical beauty contest in which judges are rewarded for selecting the most popular choices among all judges, rather than those they may personally find the most attractive. This idea is often applied in financial markets, whereby investors could profit more by buying whichever stocks they think other investors will buy, rather than the stocks that have fundamentally the best value, because when other people buy a stock, they bid up the price, allowing an earlier investor to cash out with a profit, regardless of whether the price increases are supported by its fundamentals and theoretical arguments.

* https://en.wikipedia.org/wiki/Keynesian_beauty_contest

Plenty of folks may think these companies are garbage but are 'playing along' because it's not necessarily what they themselves think that is important, but what others think. You can make money in a bubble, even when it eventually pops. What we're seeing now is hardly new, either:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...

This is why I stick with index funds, as I don't really can't be bothered playing the game:

* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

I generally check my portfolio once a year, in January, when I top things up when new contribution room becomes available with the new year. It's 'fun' to follow along with the gyrations and drama as things happen, but I don't sleep over it. If you're reasonably diversified you can generally weather storms and come out okay on the other side:

* https://awealthofcommonsense.com/2014/02/worlds-worst-market...

* https://www.forbes.com/sites/advisor/2010/09/13/its-not-real...

[altcognito]

I don't have better ideas than you to do anything except "buy indexes".

Everyone is happy enough to give Elon (and others) more and more leverage to buy politically strategic companies (this is not that, this is probably just an ego buy for him, something to kill time because he can).

I was worried about him selling out (from an overall market and even index perspective when they were going to bend rules), but it looks like largely the whole situation is predicated on the idea that he can't or won't sell. I don't know how exposed the market is but it doesn't feel good.

[throw0101c]

Well, if we taxed the top percentages of income/wealth more, and actually enforced anti-monopoly rules, perhaps we wouldn't be in this situation.

[andrewflnr]

> A Keynesian beauty contest

No shit. That's why, even if it's an exaggeration to call the entire stock market a pyramid scheme, you can't justify the claim that it's entirely "underlying business activity that drives total returns". That's the real question (from which dividends are, yes, a distraction).

[throw0101c]

> […] you can't justify the claim that it's entirely "underlying business activity that drives total returns".

The S&P 500 index tracks earnings per share (EPS) fairly closely over the decades:

* https://www.macrotrends.net/1324/s-p-500-earnings-history

A lot of folks think the top ten stocks in the S&P 500 making up ~40% of the capitalization is bonkers, but they also make up ~40% of the net income share:

* https://en.macromicro.me/collections/34/us-stock-relative/14...

So from an earnings/income perspective, there appears to be a link between the two.

Perhaps worth noting that the US markets seem to (only?) outperform when tech is outperforming, with other US non-tech sectors basically performing the same as out countries' non-tech sectors:

* https://ofdollarsanddata.com/do-you-need-to-own-internationa...

[ethbr1]

No, there are a huge number of companies that are valued reasonably for their revenue / profitability / growth.

There's basically two stock markets: things valued on fundamentals and things valued on vibes.

And I don't think there's ever going to be a unified theory of value that can span both, because the former is quantitative and the latter is psychology.

[mixdup]

True, and it's a common question that comes up: What's the point of owning a stock if it doesn't pay a dividend? How do you participate in the company's performance?

There are other ways for performance to translate to the investors directly. For example, if the company sells itself then all the shareholders will get that payout. Stock buybacks are a thing. And, as other commenters here have said, eventually the company may start paying a dividend

But, you're not entirely off-base in that you're just buying into the vibes of a company. It's just that most of the time (much of the time?) those vibes have been rooted in some semblance of rationality, that there was something of value behind the shares you're buying. That is definitely not universally true anymore

[hylaride]

There's taxation reasons. Stock buybacks mean that investors get the usually lower capital gains tax rates instead of dividend income tax rates. On top of this, it also juices earnings per share.

[fluoridation]

>How do you participate in the company's performance?

Most stocks give voting power even if they don't pay dividends. Notably, SpaceX's don't.

[PyWoody]

Aren't buybacks the new dividends?

[Danox]

It’s only a pyramid scheme for Tesla, SpaceX or X formally known as Twitter see a pattern there?

[mixdup]

Gamestop is not an Elon venture. There's plenty of irrational stock valuations out there, most of them just come back to Earth on a reasonable timeframe

[criddell]

Would you say the same thing about Bitcoin? Will that house of cards all fall in the next crisis/downturn/depression?

[lokar]

Hasn’t it crashed in every economic downturn and financial panic so far?

[criddell]

Not really, no.

A decade ago it was under $1000 and has never been that low since. It's peak price is only about 2x the current price.

[lokar]

Isn’t a 50% reduction pretty bad?

And being higher over 10 years has little to do with it if acts counter cyclical to stocks and other assets.

[throw0101c]

> And being higher over 10 years has little to do with it if acts counter cyclical to stocks and other assets.

BTC has been called many things at many different times. It was originally a payment system:

> A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.

* https://bitcoin.org/bitcoin.pdf

And it can still be used for that, however the transaction throughput is tiny, and so it became a store of value in essence: but it's kind of hard to be that when the value swings up and won so much. While "fiat" currency inflation is annoying, it is, generally, fairly predictable in most cases (<4%) and so you can plan ahead with regards to future value and purchase. The same is hardly true of BTC.

[tasuki]

Is it bad? Isn't 60x in 10 years still kind of ok? The things I invested in ten years ago didn't return 60x since.

[lokar]

Again, the original argument was that it was like gold, and provided a hedge against equities.

[thisisit]

There is some misunderstanding of what a crash really is. It doesn't necessarily mean that things get written down to 0 or some arbitrary level because everything has a price at which someone will buy.

Even companies have some value after a crash and you could make a case that at some arbitrary point it was worth $x and since the crash didn't cause the company to crater to below $x it has not "crashed". Even companies filing for bankruptcy have some residual value above what they might have been founded on - it doesn't mean the company hasn't gone bankrupt.

[lokar]

Yeah, I certainly did not mean go to zero, or near that.

To be more specific, I have often seen people argue for including crypto in a portfolio based on the theory that if equities drop a lot (25, 30%?) crypto will hold or go up. People make the same argument for gold.

[mixdup]

I personally think Bitcoin will eventually peter out, and that it's fairly risky as it has definitely been pushed by vibes and promotion and everyone wanting to get in on it

I mean that can apply to anything. There's nothing intrinsic about gold that makes it valuable other than it's rare, but there's plenty of things that are relatively rare that aren't valuable. Yes there's industrial uses of gold but that's not why we as a society and a species treat it as valuable

Maybe bitcoin is the new gold and will hold value forever, and as more serious people get into it, it will lose its volatility and be less subject to the vibes shifting and there being a run on the market. Maybe not

It is different from Elong stocks, though, because the myth of Satoshi aside, it's not exactly a cult of personality like his companies are

[senordevnyc]

To me the difference is that BTC's continued value isn't predicated on the actions of one person, who has continually proven himself to be childish, mercurial, and dishonest.

[ahcharades]

Yes when will everyone wake up for the charade of having a monopoly on space launches? Of putting over 90% of all mass into space, of your closest competitor being the nation state of China, and they are years away from where you are right now. Ah yes, that charade, when will people learn am I right? Total genius.

[mixdup]

An extreme majority of Space X's self-determined value proposition has nothing to do with space. Out of an overall TAM of $28.5 trillion, $26.5 trillion is based on AI. Personally I believe that number will actually approach zero, but it certainly even in my most optimistic view is a number with a B, not a T

The total addressable market even at Space X's own calculation for space launches is only $370 billion. And, supposedly as the only company that can launch things into space they are still losing money on that business. This is bankrupt-a-casino levels of incompetence

[ben_w]

SpaceX are currently losing money on the "going to space" part of their business.

They're making money on telecoms, and may have just started making a profit on renting out the data centres they originally built for the AI that it turned out hardly anyone wanted to actually use.

[V__]

Even if one assumes this is true, it still wouldn't justify the valuation.

[moogly]

The demand just isn't there, which is one of the reasons SpaceX is pretending they will generate more demand with their cosmic wizard spires.