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The ''greater fool' theory.

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  1. #1

    Join Date
    Jul 2011
    Posts
    1,004

    The ''greater fool' theory.

    I have never, ever, considered who will buy my equity shares when i choose to sell. Of course i am a wee tiny investor, in the grand scheme of things, but even so i simply tell Schwab to sell XX shares of QWP and bingo, sold. Who bought them, i have no care.

    Now consider TSLA at the astronomical current price, US$1500, and still has a 'buy' mention by some analysts. How will those sellers at this price find a buyer?

    According to the news i just read, once TSLA returns 4 consecutive quarters of profit, the massive passive INDEX funds are obligated to buy coz it's valuation is so great. And that day is coming soon, maybe. Apparently 3 such quarters already 'under the belt' and this coming week TSLA will report the earnings for the previous quarter.

    So folks buying now are betting the earnings will be enough to propel TSLA into the S&P 500, the DJ and maybe even the NASDAQ Indices thus rewarding today's buyers.

    I'm not buying but you can read more here:
    https://asia.nikkei.com/Business/Mar...-shares-ascent

    AsianXpat0 likes this.

  2. #2

    Join Date
    Feb 2019
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    2,492

    Tesla is already in the Nasdaq 100 index. Last time I checked, each one of your QQQ shares is roughly $5 of TSLA.

    Kowloon72 likes this.

  3. #3

    Join Date
    Sep 2018
    Location
    Hong Kong SAR China
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    TSLA being in the SP500 is just gonna pump that bubble even further. Don't even want to know what the PE ratio is going to be.

    I don't think TSLA is necessarily overpriced but would be concerned about the fact that they really don't have a moat and if a more traditional company could hire an executive with a personality like Musk then they are gonna get disrupted hard.


  4. #4

    Join Date
    Nov 2005
    Location
    Cramped island
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    5,095

    at 600/800/1000/1200 it was already questioned over and over again by all the value investors.. so what's new.. there will, or might, always be people willing to buy it higher.. especially with these index fund methodologies...

    Kowloon72 likes this.

  5. #5

    Keynes' comment about the ability of markets to remain irrational far longer than he could remain solvent applies here.

    Call me old fashioned but I tend to favour companies whose share price bears some relationship to its earnings ... or at least have some.

    LoganH likes this.

  6. #6

    Join Date
    Feb 2019
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    2,492

    If rates are zero, any cashflow that extends to the distant future is worth an almost infinite amount

    Tesla has captured close to 100% of the top end of the electric car market. That is a good place to be. For now, that cashflow looks very valuable.