Harrison: Record Tesla Stock Price Reeks of Desperation

Your Real Vision Daily Briefing for July 13, 2020

Ash & Ed discuss life & markets during coronavirus & explore what might bring people to speculate on a stock like Tesla that is extremely overvalued.

  • Tesla stock spiked to a record high today, which likely has more to do with social psychology than the value of the company.
  • The macro view of what’s happening with Tesla is that investors are seeking control and stability amid unprecedented social, political, and economic uncertainty.
  • Despite instability in the U.S., it still better positioned than Europe in the long term.

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What might bring people to speculate on a stock that, by all traditional metrics, is extremely overvalued? Desperation, says Ed Harrison, who made the point while discussing Tesla during today’s Real Vision Daily Briefing.

Harrison said that people who take a gamble on Tesla and other retail favorites do so out of a sense of desperation to feel a sense of stability at a time when they are powerless. It’s not just a mania perpetrated by the Fed, he said, it’s people trying to take control of their lives.

It is worth noting that Tesla wasn’t profitable until recently; the company has no track record of delivering income on a consistent quarterly basis. Yet the stock price has been run up, which Harrison believes is because people are trying to reclaim a sense of safety that they’re not getting in the world today.

People are sick of being sold a bill of goods that things have changed and the world will be better, Harrison said. He thinks that the pandemic has brought it home for people that there’s no reason to hope that the current system will give them what they want. As a result, they’re looking for some way to feel in control, whether it is through stocks, politics, nationalism, or ideology.

In the U.S., political ideology has deeply fractured the public, but although that may prove to be the country’s Achilles heel during this cycle, Harrison said he’d still bet on the U.S. over Europe in the long term.