Can Tesla Catch Facebook?

Small Caps Rebound

This is low volume trading at the end of the year which doesn’t mean much. Obviously, if you are taking profits and buying stocks, the prices are real, but we shouldn’t use this action to make conclusions about how January will go.

As you can see from the chart below, the MSCI emerging markets index is at its early 2018 high which is when overall market sentiment last was this optimistic. Some are quite bearish on secular growth stocks, but bullish on emerging market value stocks. The VWO emerging markets index was up 1.39%. The next stop is the late 2007 high. What a terrible run it has been for these stocks as they have provided no returns for about 13 years.

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Maybe this isn’t a correction for small cap growth stocks as they increased 1.13% on Wednesday. The overall small cap index was up 1.05%. This time small cap growth beat the Nasdaq as the Nasdaq was only up 15 basis points. FANG stocks sagged as Facebook FB fell 1.77% and all the others (including Microsoft) fell. 

Tesla (TSLA) lifted the large cap tech index on its own as it rose 4.32% which put it 22 cents away from the record high it hit because of the index buying. It helped lift the Nasdaq 100 which was up less than a basis point.

As you can see from the chart below, the gap between Facebook and Tesla’s market cap is shrinking. Tesla has a market cap of $657 billion and Facebook is at $774.5 billion. If you include stock options, Tesla is already above Facebook. It's good to add up Tesla and bitcoin to measure the speculation in the market. 

Bitcoin’s market cap is now $536 billion and the entire crypto space is worth $760 billion. This is well over a $1 trillion bubble when you just add up these parts of markets.

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Top Funds Don’t Stay The Same

The top funds are usually lauded when they are doing well. The media chases the top performers just like investors do. It takes intelligence to determine if the fund manager actually has a good process or if their outperformance is cyclical. Obviously, no one can outperform the market every year, but when the cyclical shift occurs, the leaders dramatically underperform. These aren’t small shifts.

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