Elon Musk: There are no lords and peasants at Tesla. Everyone eats at the same table.
“I actually know the people on the line, because I worked on the line, I walked the line, I slept in the factory, and I worked beside them. So, I'm no stranger to them.
There are many people at Tesla who have gone from working on the line to being in senior management. There are no lords and peasants. Everyone eats at the same table. Everyone parks in the same parking lot.
At GM, there's a special elevator only for senior executives. We have no such thing at Tesla.
We give everyone stock options. Many people who are just working the line, who didn't even know what stocks were, we've made them millionaires.
And I just want to say that I'm incredibly appreciative of those who build the cars, and they know it.”
New York Times DealBook Summit, 2023
THE LIFE CYCLE OF A BUBBLE
1. A genuine advancement creates real productivity gains. A real technological or economic improvement increases productivity and leads to genuine revenue and earnings growth.
2. Stock prices leak into reported profitability. Rising stock prices improve reported earnings, financing conditions, collateral values, and perceived business performance.
3. Reported profitability drives real investment. Companies increase hiring, capital spending, construction, expansion, and speculative investment because of their own or their customers’ reported profitability.
4. Bubble beliefs and abandonment of present-value discipline. Investors stop focusing on discounted cash flows and begin relying on continuing gains from the greater fool theory, believing they can sell later at a higher price.
5. Inflows from sideline investors. Previously cautious investors enter the market in large numbers. New money from existing and new investors participation drive prices higher.
6. Extreme overvaluation. Prices rise far above historical normal multiples of reported fundamentals, even ignoring the fact that reported fundamentals have been driven by rising stock prices.
7. Issuance. Companies take advantage of high valuations through IPOs, secondary offerings, stock-based acquisitions, SPACs, and insider selling.
8. Exhaustion of inflows. The flow of new investors starts shrinking while existing investors approach their risk and leverage limits. Volatility and dispersion grow and gains become less uniform across stocks.
9. Earnings disappointments from slowing price appreciation. As stock prices stop rising rapidly, the earlier boost from higher valuations into earnings weakens or reverses. Companies begin missing expectations.
10. Stock-price collapse with high volatility. Confidence in both the fundamental growth and in the greater fool theory break down and prices fall sharply. Volatility rises further as leverage unwinds.
11. Bear-market rallies and progressively greater exhaustion. Bargain hunters and frustrated latecomers repeatedly buy the dips, creating violent temporary rallies that fail. Markets make lower highs and lower lows.
12. Capitulation, abandonment, and normalization. Bubble participants eventually give up in disgust or exhaustion. Volatility falls, valuations normalize, and the market returns to more ordinary behavior.
DISPERSION IS HERE
“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
-- you know who
During the eighth step of the bubble, the flow of new investors starts shrinking while existing investors approach their risk and leverage limits. Volatility and dispersion grow, and gains become less uniform across stocks.
Now, dispersion is here.
Owen Lamont posted this graph today, which illustrates well how cross-sectional dispersion of monthly returns peaks at tops and bottoms.
My interpretation of the graph is not that high dispersion is always a sell signal, or a buy signal for that matter. To me, it's a signal that what has worked very well so far will stop working relatively soon. High beta was great during the late nineties, being short levered small caps was great going into the global financial crisis, and having just cash was great when Covid lockdowns hit. When the dispersion peaked each of those times, what worked on the way in stopped working soon, and what didn't work on the way in started working very well.
The obvious caveat is that we don't know that the dispersion has peaked yet. If this is a bubble, then we are close to the end of the beginning of it, but it's not yet clear whether the correct analogy is April 2000 or December 1999, the two alternative analogies having very different short-term return implications. To build on the analogy of the quote, the battle of El Alamein has started, but it hasn't been won (lost, if you're a Platner supporter) yet.
https://t.co/YNExM2kPCu
The only other time I saw this close to this level was 2015 when gold bottomed at $1,050 per ounce down from $1,700 in 2011. Gold stocks are up 600% from that time frame. If you think you missed the gold and silver stock move last year you are getting a do over.
@ttmygh I don't think the Brits understand this a global story, brazen example and warning to other countries how you lose control to far left pressure groups. British reputation for fairness has collapsed globally. It will have real implications, both economical and in real politk
@ttmygh "I don't think you have, mate" "I know , but we have to check". Facts on two tier policing are irrefutable. Real leadership would be to launch wholesale investigations into DEI programmes and indoctrination, and their impact. Labour chooses to ignore and lie instead
Grim times for Britain’s defence establishment.
An upcoming report by Parliament’s Public Accounts committee is thought to conclude that the British Army’s troubled Ajax armoured vehicle may never make it onto the battlefield because it is not ‘fit for purpose’.
Over £6 billion has been spent on the Ajax programme. It should have started service in 2017. It is still not deployed. It has been plagued with issues, including leaving soldiers vomiting and with permanent hearing damage during field trials.
This latest report discloses that soldiers have been instructed to conduct maintenance checks every time they stop the vehicle. Which is hardly realistic when operating Ajax for long periods in combat.
Another day, another defence procurement and resources shambles. Tory, Labour and Lib Dem politicians should hang their heads in shame for presiding over what is now a national scandal.
@maxtempers 🤣🤣🤣 Jonathan Portes , the vengeful midget. Touche. Quintessential epic fail produced by Britain's establishment. Man is an ass and contradictory indicator.
First, you can use the tax revenue to cut bills.
Second, your balance of payments improves which lowers costs across everything.
Third, there are entire sectors supported by the oil and gas industry - chemicals, plastics, even renewables - which is why a Government attacking its own industry is sheer insanity.
You talk about the centre ground, which is something you seem to think other people create - rather than accurately diagnosing the country's problems and pushing for the right solutions.
Maybe that’s why you pushed Net Zero legislation with no plan and with no forecast on the cost of energy.
Growth and cheap reliable energy is our priority.
@georgeeaton@YouGov polling doesn't include anything about EU demands and costs so it's vibes rather than facts. all it indicates how desperate is Yookay public is with status quo
Further to Blair. Literally every honest sensible person in all the main parties privately agrees with all these propositions:
- welfare spending is too high and is throwing good people on the scrapheap
- defence spending is too low
- the triple lock is unsustainable
- without cheap energy we cannot exploit the AI revolution
- we should be investing in EVERY form of energy: renewables, nuclear and the North Sea
- migration needs to be controlled to boost social cohesion and because the boats look like a huge failure of the state
- any new relationship with the EU will be imposed on us until we are stronger and cannot involve the closeness some desire without freedom of movement
- we are deeply embedded with America in ways which the public does not understand and cannot be told and however joyous it makes us feel to hate Trump, disengagement at the deep state level is not only wholly unrealistic but also undesirable
- Whitehall needs a total overhaul so specific project expertise and political appointees can be brought in quickly
Blair basically says all that.
The one thing he doesn’t say and which the same group of people agree on is this and it’s something Blair left behind:
- judges and quangos have too much power, are unaccountable and without redressing the balance in favour of parliament it is very difficult to do anything big fast
- the bare minimum that needs to change in this regard is to reform judicial review and planning law so we can put building and economic growth ahead of newts and NIMBYs
None of that above really ought to be up for discussion. It is all common sense but not one of our politicians will publicly say all of it
Whatever you think of Blair, engage with what he’s saying not how he makes you feel. The bare minimum we should expect from any leader is that they have an analysis of the current situation and a plan to deal with it which is as coherent and realistic as his intervention. Pretty well every critique I’ve read so far has failed to meet this requirement.
Over to Andy and Keir and Kemi and Nigel and Zack and all the others
A society that pays a woman half a million a month to show her body on OnlyFans but only eight dollars for her mind on Substack is telling you everything about its future.
@philippilk Nah. Yookay is too big for IMF to bail out. If yields breach 6-7%, BOE will fire up printing press. Parity one touch EURGBP is the trade, maybe GBP crosses against CHF, commodity currencies
@philippilk at least Merz is coming to terms with reality , unlike #YooKay whose establishment still think it's a rich country , only problem is that billionaires aren't taxed , NHS is envy of the world , civil service Is Rolls Royce, world beating leaders in xyz, lol 😂🤣