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Abstract

gure id="c844"><img src="https://cdn-images-1.readmedium.com/v2/resize:fit:800/1*T32WUrvdWaRmDDKjHSWCaQ.png"><figcaption>Screenshot was taken by the author on TradingView.com</figcaption></figure>At the forefront of the ’90s bull run was Qualcomm, a chipmaker company. After some restructuring in 1991, the company focused its resources on mobile network systems. This was the future. After many years, the company succeeded in the mobile chip world domination. As proof stands the numerous lawsuits they’ve seen in the last years for monopoly practices. Even Apple sued them for $1 billion.All of this sounds like if you would have invested$ 10,000 in Qualcomm back in 2000, today you should have a nice retirement fund.As you can see in the chart, the company hasn’t yet reached the same highs. In fact, not taking dividends into account, if you would have invested $10,000 at the height in January 2000, 20 years later you would have roughly$ 8,800. If we take inflation into account, the figure is even worse.What happened?Back then, the internet just became widely available. Brokers saw an opportunity and started to offer real-time stock trading through online platforms. This opened the world of investing for many people, especially younger ones. The bulk of new investors favored internet companies, advertised as the industry of the future. And this is how the dot-com frenzy started.Everyone was right. The Internet was the future, but the transition took over a decade. This looks exactly like the EV market today.Media is full of analysts, like <a href="https://www.cnbc.com/2018/02/07/ark-chief-catherine-wood-sees-tesla-stock-going-to-4000.html">Catherine Wood</a>, predicting Tesla will reach a $4000 stock price. That would take the company to a$ 728B market capitalization. That’s equal to the entire automobile industry. For a scenario like this to happen, Tesla would need to a monopoly over the automotive industry. That’s highly unlikely.To me, these predictions sound like the ones made back in 1999 that Qualcomm will be the first company to reach the $1 trillion valuations. True in the long run, impossible in the next 2 years.<h1 id="5b04">This time is differe

Options

nt.</h1>“The four most dangerous words in investing are: this time it’s different. “ — Sir John TempletonAnalysts are rushing to explain why Tesla is different from Bitcoin, Qualcomm, and all previous bubbles. But before putting your trust in someone else’s opinion, look at the investing environment.In 2019, the EV market share was 2.5%, according to <a href="https://www.ev-volumes.com/">ev-volumes</a>. By 2030, it’s expected to reach 51%. That’s great but it is 10 years into the future. Do investors have 10-year patience?Coronavirus contributed to the rallyWhen the Coronavirus economic turmoil began, the Fed has stepped in and printed money with a speed never seen before. They put a hard stop on devaluation and bought junk bonds. Essentially, the Fed gave investors assurance that no matter what, they will not let the market crash.Coronavirus also meant lockdowns. And with lockdowns, the savings rate skyrocketed to 32%, according to the<a href="https://www.bea.gov/data/income-saving/personal-saving-rate"> U.S. Bureau of Economic Analysis</a>. Add to this the money giving programs from the governments, rents and loan payments postponed, and the public had a lot of cash in hand.Robinhood, a popular online broker, has said that a record 3 million accounts were created in the first quarter of 2020. Most of them are controlled by people in their 20’s who prefer tech companies. It comes in Tesla with its eye-catching products and we’ve got a winner.Not even Elon Musk can stop the price from going up. In April, he tweeted “Tesla stock too high IMO”. It quickly recovered the 10% drop the statement generated and went on to break new highs.The Stock Market is like a person with terrible mood swings: it goes from over-pessimistic too over-optimistic in a matter of seconds. All it takes is a simple push. We are emotional, and in times of great tension, we throw logic out the window and get guided by our emotions.Qualcomm survived the dot-com crash and came to dominate the mobile chip world. Tesla might one day dominate the auto industry, but that’s not going to happen overnight. It will take at least 15 years.</article></body>

Tesla’s $1000 share price proves the Stock Market is absurd again

A year ago, Tesla was running out of money. Now, it stands at 182 billion dollars market cap, more than Volkswagen, Hyundai, and General Motors combined. This looks like another tech bubble.

For the last 2 years, Tesla has been in the spotlight across the world, and why wouldn’t be? A charismatic CEO, best in class EVs by range, an amazing autonomous driving experience available, a strong fan base. All are ingredients to dominate the automobile industry of the future.

But is enough to make the company worth more than the top 3 automakers, except Toyota? It might be if it had a market share of 50% and sold more vehicles than its biggest competitor. In 2019 Tesla sold 367,000 vehicles, according to the official statement. Toyota sold 30 times more, 10,74 million according to the Japan Times. Not exactly in the same league.

So why is the company worth so much? Everyone thinks that the company has a big advantage in EV manufacturing, the industry of the future, and in the autonomous driving tech. This means it has the potential to dominate the auto industry. We’ve seen this in the past.

History tends to repeat.

“Those who cannot remember the past are condemned to repeat it.” — George Santayana

20 years ago, the dot-com bubble burst and wiped 78% of the Nasdaq index value or $1.755 trillion. It took 15 years and another crisis for the indexes to come back to the 2000 highs.

Screenshot was taken by the author on TradingView.com

At the forefront of the ’90s bull run was Qualcomm, a chipmaker company. After some restructuring in 1991, the company focused its resources on mobile network systems. This was the future. After many years, the company succeeded in the mobile chip world domination. As proof stands the numerous lawsuits they’ve seen in the last years for monopoly practices. Even Apple sued them for $1 billion.

All of this sounds like if you would have invested $10,000 in Qualcomm back in 2000, today you should have a nice retirement fund.

As you can see in the chart, the company hasn’t yet reached the same highs. In fact, not taking dividends into account, if you would have invested $10,000 at the height in January 2000, 20 years later you would have roughly $8,800. If we take inflation into account, the figure is even worse.

What happened?

Back then, the internet just became widely available. Brokers saw an opportunity and started to offer real-time stock trading through online platforms. This opened the world of investing for many people, especially younger ones. The bulk of new investors favored internet companies, advertised as the industry of the future. And this is how the dot-com frenzy started.

Everyone was right. The Internet was the future, but the transition took over a decade. This looks exactly like the EV market today.

Media is full of analysts, like Catherine Wood, predicting Tesla will reach a $4000 stock price. That would take the company to a $728B market capitalization. That’s equal to the entire automobile industry. For a scenario like this to happen, Tesla would need to a monopoly over the automotive industry. That’s highly unlikely.

To me, these predictions sound like the ones made back in 1999 that Qualcomm will be the first company to reach the $1 trillion valuations. True in the long run, impossible in the next 2 years.

This time is different.

“The four most dangerous words in investing are: this time it’s different. “ — Sir John Templeton

Analysts are rushing to explain why Tesla is different from Bitcoin, Qualcomm, and all previous bubbles. But before putting your trust in someone else’s opinion, look at the investing environment.

In 2019, the EV market share was 2.5%, according to ev-volumes. By 2030, it’s expected to reach 51%. That’s great but it is 10 years into the future. Do investors have 10-year patience?

Coronavirus contributed to the rally

When the Coronavirus economic turmoil began, the Fed has stepped in and printed money with a speed never seen before. They put a hard stop on devaluation and bought junk bonds. Essentially, the Fed gave investors assurance that no matter what, they will not let the market crash.

Coronavirus also meant lockdowns. And with lockdowns, the savings rate skyrocketed to 32%, according to the U.S. Bureau of Economic Analysis. Add to this the money giving programs from the governments, rents and loan payments postponed, and the public had a lot of cash in hand.

Robinhood, a popular online broker, has said that a record 3 million accounts were created in the first quarter of 2020. Most of them are controlled by people in their 20’s who prefer tech companies. It comes in Tesla with its eye-catching products and we’ve got a winner.

Not even Elon Musk can stop the price from going up. In April, he tweeted “Tesla stock too high IMO”. It quickly recovered the 10% drop the statement generated and went on to break new highs.

The Stock Market is like a person with terrible mood swings: it goes from over-pessimistic too over-optimistic in a matter of seconds. All it takes is a simple push. We are emotional, and in times of great tension, we throw logic out the window and get guided by our emotions.

Qualcomm survived the dot-com crash and came to dominate the mobile chip world. Tesla might one day dominate the auto industry, but that’s not going to happen overnight. It will take at least 15 years.