Comment by hnews_account_1 | Hacker News Reader

Comment by hnews_account_1 | Hacker News Reader

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hnews_account_1

Indeed. And while those financial numbers may show the truth if you squeeze it in a certain way, they're epically useless in the long run. 2 examples for my non financial friends:

Tesla has had negative cash flows for 5 full years until 2018. It posted a profit of any significance for the first time in a long long time last quarter. If you look deeper, you know that everything is wrong financially with the company despite Elon being celebrated as a genius engineer (debatable IMO, but not relevant). The stock just hit all time highs yesterday.

Apple started the year by lowering revenue guidance. And they also folded their fingers and flipped the entire financial analyst industry one massive bird when they said they wouldn't release iPhone sales numbers (their most important product and probably 99% of revenue / margin / income growth factor). Stock is up 104% this year.

So yeah, the entire edifice is made of shit and only the ones closer to the industry can see it. Even people working inside don't benefit from this shit moat for the most part and wish it gone.

Tesla trades on expectations of future profitability, just like any other company analyzed intrinsically with e.g. a DCF model or Gordon Growth Model.

It's Finance 101.

Oh please. We all know that scam. Unless you can create magical math out of thin air that produces a positive npv after negative fcff for multiple years, it is complete and utter bullshit. Take it from someone who has spent way too much time doing a goal seek to match up to market expectations.

When in 2014, we set out to evaluate tesla, no one in the industry saw 5 full years of negative cash flows. If they did, they certainly didn't show it in their models. And the stock price certainly made no sense if people with shorter time horizons were holding onto it.

So one of 2 things is true:

1) the market is all knowing and it sees out to a time horizon where tesla would have positive cash flows and discounts it absolutely perfectly. In which case, the market didn't see Bear Stearns or 2008 coming, so spare me the clairvoyancy pitch.

2) The entire thing trades on fairy dust because vast portions of the market work on self fulfilling prophecies of both big money brokers, and idiot retail i.e. in both cases, they believe the stock will go up based on false assumptions and even worse models and hold on for dear life as the fed pumps the market into the next euphoric orgasm.

Or 3, there is an invisible hand helping guide pricing.

1) It's a visible hand now. Adam Smith was a while ago and much has changed across economics. Enough that what you'd think are timeless truths have also become false.

2) We have a name for this hand - the federal reserve of the united states of america. If you saw the last Mr. Robot season, there's an episode where Mr. Robot says "behind every great fortune lies a great crime, this is the corporate motto of these United States". He was only slightly wrong. Behind all great fortunes since the advent of central banking lies the hand of the federal reserve.

Or 4, with capital deepening and lowering long term GDP growth (and the impact on interest rates that has), asset values trend upwards ever so slightly over time. And of course you have bubbles of valuation.

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