Retail Favorites Like Tesla Win Big

Small Thanksgiving Eve Decline (Tesla Rallies Again!)

70% of the time stocks rise the day before Thanksgiving, but they didn’t on Wednesday. Some investors don’t make anything of this decline. The market is overbought and few speculative stocks are dramatically too high. This decline doesn’t mean the market will regain its sanity. In fact, the most insane stock of all, Tesla (TSLA), rose again on Wednesday.

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Tesla is a throwback to the 1990s tech bubble. Cisco (CSCO) peaked at a market cap of $599 billion in March 2000. Remarkably, we have found one metric Tesla is behind in as the firm has a market cap of $544 billion. Tesla is way behind on an inflation adjusted basis and as a percentage of the equity market.

It’s barely behind Berkshire’s market cap though as Berkshire Hathaway (BRK-A) has a market cap of $547.5 billion. Some can’t believe this is happening. Tesla’s cars were ranked 2nd to last in reliability while Berkshire is a collection of great businesses organized by Munger and Buffett. 

They are among the top few business minds in American history. Tesla is the 2nd most popular stock on Robinhood. Elon Musk is richer than Bill Gates.

All these anecdotal points lead to the fact that Tesla is a massive bubble. Its stock was up 3.4% on Wednesday. It’s now up 40.7% since November 16th. It’s up 567% year to date. Best guess is it tops before the S&P 500 inclusion. When it finally tops, the decline will be ugly. It will probably fall over 80%. Speculators buying the stock are dancing at the edge of a cliff.

Retail Wins 2020

With 11 months of the year over, I can safely say, retail investors with the least knowledge and the largest propensity for risk have won big this year. This was a great year for people who never invested. A problem is they won’t keep their winnings because they don’t know how to invest in a normal market. Rules will change. Now things are good though.

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