- $TSLA, gold, bitcoin, and FANG etc. are all part of one big trade: market participants desire to express the unsustainable Petro$.
- Distress in oil price and energy stocks is evidence not of oversupplied market-
- Rather, the distress in energy space is indicative that capital markets are approaching the limit of supporting the Petro$ system.
- Further support of the Petro$ system by the current structure of capital markets (stock, bond, FX, money markets) is a concern of enough market participants to matter.
- Market participants currently lack an ability to fully express this concern with available investment choices (put options, gold, bitcoin, cash, alternative investments etc.).
- Without completeness, market participants are making “next-best” choices to express their financial reasoning- which leads to traditionally unreasonable valuations of certain assets.
- Therefore, valuations of stocks like FANG, $TSLA, and the crypto phenomenon are due to lack of viable investment options in the end-game, rather than “irrational exuberance.”
- $TSLA the common stock, represents one viable “release valve” if the Petro$ system cannot be fixed by either market forces or institutional (mainly Central Banking institutions) intervention.
- If the capital markets fail to find a way to support the Petro$, perhaps oil’s role in the physical economy could be lessened- if capital markets can’t or won’t find a way to support Petro$, oil may search for a different support, and there will be intervention to prevent an alternate support system.
- The need for energy requires some input, and if oil’s role is diminished, society will search for something to fill the gap.
- Perhaps that is why we see increased attention to “environmental, sustainable, etc” factors in energy production, despite debatable economic advantage- not because renewable is inherently better.
- Rather, renewable is some viable option to meeting energy needs if the current system for recycling trade imbalances between oil exporters and importers cannot be reconciled.
- The increasing role of Spaceforce, and therefore SpaceX, also contribute to the valuation distortion- because if the Petro$ system can’t fix itself, great hostilities are likely, and outer space is a viable frontier to host international hostilities.
- So $TSLA is the least inefficient way to financially express these concepts: Petro$ instability and increased use of outer space.
- $TSLA violations of traditional valuations models could continue to reach greater levels of distortion (when compared to $GM, $F, $TM, etc.) simply because the common stock represents some way to move on from the Petro$ system…
- Distress in oil price and energy stocks is evidence not of oversupplied market-
The Bull Case for $TSLA: it’s all one big trade!
September 17, 2020