Investors shorting Tesla lost $2.5 billion on Monday alone. The stock is up 60% in the past week and 150% over the past year. It’s a shocking occurrence to the stock market, so investors are asking, “Why?” Did Panasonic’s battery news tip the scale? The Model Y got a chilly reception when it was unveiled, has the opinion changed? Last Wednesday’s earnings report showed zero year-over-year revenue growth, slimmer operating income, and only a modestly improved adjusted profit in Q4 2019. Is that news more exciting than anyone realized? Who knows? The only obvious development now is that the booming share values provide the company capital to pay down their $13.4 billion debt nut. That solidifies their growth and creates a firm foundation to move forward. There will be profit-taking, but the company is setting up a defense and preparing for further growth.
The entire stock market is dangerously overvalued and nobody seems to care. Yesterday, the market was in a panic about the coronavirus. Today it’s hardly in the news. Even in a slowing economy, electric cars are the future and their cost is coming down while there demand is increasing. Why in the world be so overly concerned about a company like Tesla with such strong fundamentals? The same question has to be asked about investors shorting gold. Gold is only up 18% in the past 12 months, but it’s still more that 22% below its previous high. Meanwhile, central banks have been buying it by the ton, literally. Could it be because central banks realize that gold performs best during geopolitical consternation, global recession and the obvious and necessary correction that follows a nearly 11-year raging bull market?
Today’s investors aren’t old enough to remember, but history clearly tells us that the “Roaring Twenties” were directly responsible for the “Great Depression.” As America went credit crazy during the 1920’s, the stock market soared, but suddenly, in October of 1929, the party, reality and a 10-year raging bull market came to a shocking and devastating end. Today’s stock market overvaluations are greater than anything before, today’s credit levels are greater than anything before and today’s national debt is greater than anything ever before. The application of George Santayana’s famous quote could never be more appropriate – “Those who cannot learn from the past are doomed to repeat it.”
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Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.