Our subjective perception impacts stock prices, that is logical right? But few know that consequently higher stock prices also improve fundamentals. Take the example of Tesla stock, high and higher stock prices allow for cheaper and cheaper capitalisations, the company can issue just a bit of shares and get to billions. These billions allow Tesla to be competitive, allow it to grow hyperbolically which reinforces its fundamentals, earnings, the theory behind such a feat is reflexivity.
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By discussing your comments we give examples on how we as investors, how our subjective mind impacts the market, stock prices and consequently fundamentals. The thing to remember is that it works also in the opposite direction.
Reflexivity Impacting Stocks (Tesla Example)
Transcript
Market Mentality
Good day fellow investors. I thought to start just a new series hope you will enjoy it. espresso with Sven or my wife calls it Sven'spresso. And in this quick video I want to discuss the market mentality and explain reflexivity because it is a big topic on what's going on in the market hour later, I found the research report and later discussed the impact that we as retail investors have on the market, which may also something very interesting. But in this video, I really want to an introduction to that on how we impact the market. And we'll go through your comments and some comments that really stood out for me in the comment section. I'll try to do a video every Monday on your comments. So please comment below, ask questions. What are you interested in? This channel would be nothing without you. So thank you for that. Thank you for subscribing. And thank you for your comments. And let's try to discuss them and increase the value here.
Fighting The Trend?
So on your comments, PC said that one should not fall into the trap of this time, things are differently. But with everybody investing in index funds, we might not see flat markets over the next 10-15 years or ever, we might see just markets going up, up, up and up. And yes, when you look at the last 5-10 years, markets just went up, up, up and up. And then you're thinking, Okay, this will last forever. It won't, because investing is cycles. The problem is that you never know how long the cycle will last. And now with the stimulus it will last even longer. And it's important to look at those things. And one of the best people that did that is George Soros. With reflexivity that we'll introduce in a second. Then another comment is if nobody likes value investing, and it seems like there are fewer value investors every day, who in the future will buy these value stocks for them to appreciate in value and even fewer amount value investors. And this is something very interesting. And a lot of comments are about mentality and what are we? What are you? Are you an investor that buys businesses, looks at the earnings, the dividends, earnings growth, dividend growth, buybacks, and invest in that? Are you an investor? Or you are someone who just wants to buy stocks that will go up. And I look at YouTube, and I thank you for subscribing. But a big chunk of viewers just asks what to buy, what stocks will go up. And then God forbid, if I do a video on a stock that went down these comments haunt me for years on the stock that went down that I discussed.
And this is something very important, gives a great opportunity to ask that invest in businesses. And as a value investor, I don't want my stocks to go up, I want them to go down to get my dividends, reinvest in those and be a bigger owner of the value on the globe. That's investing. That's what increases your wealth over your whole life cycles to eternity. It's sustainable, you don't lose money when things are bad. And you win the financial cycle game of Life. And that's it. And we can all be winners. If we switch from speculating stocks will go up to just pure investing. That's the core of this channel. And that's what I want to really discuss also here again, just another comment on Intel video to just hit the earnings. everybody's asking about update. I wrote the short update on my platform as I do for all stocks that I cover, but it's just a quarter. And then you see a park 7% of my portfolio here when there are other better companies and growth. And everybody's focused on growth. And the same commenter that did this then later on a different video said how he put a lot of money in Berkshire on March 23, should have invested in the S&P 500 like Buffett said, but it Berkshire performed terribly over the last eight months. So today in the market, I see that the problem these days 25% in 7 months is a tragedy. And people don't consider the risk and reward. Berkshire financial fortress not going bankrupt in March 2020 was a great risk reward by that led to 25% over the last eight months. Yes, the S&P 500 exploded higher. But the S&P 500 is not the financial fortress with extremely strong earnings. That's the difference. That's the risk and reward and looking in hindsight everybody is seeing with the rearview mirror, everybody is seeing stocks going up, up up and up. But that's not what investing is and what will happen in the future.
Reflexivity
Plus, there are extremely aggressive comments. Look at two videos spamming buy Tesla, by Tesla, don't listen to this guy. He's stupid. That's me. I am stupid, buy Tesla calls now. So there is such a strong public, they're just buying buying Tesla. And Steve gives a great comment, who are these neighbours running around killing it in the stock market that bought Tesla and that's a very pleasing comment for me. So Jimmy Chill is in the crowd. Thank you, Jimm. Chill. Thank you, Steve. So for us investors, I really wanted to explain the situation so that you don't fear missing out, just keep investing over the long term. And that does well. And then we come to reflexivity. We have a lot of people, they have subjective realities. Their thinking impacts the objective reality over time. And that improves the objective reality until it is not objective anymore. Their perspective changes. And then impacts again, the objective reality. For example, Tesla announces 5 billion capital buyback race taking advantage of the stock price. So people think Tesla is good. Tesla stock goes up, Tesla raises capital has more money to develop meteoric rise. That meteoric rise improves earnings growth business, and that is what pushes Tesla higher and higher.
On the reflexivity chart if we look, okay, at some point, this will be hit by reality. And then we have a pickle. But at least I wanted to explain what is the situation with Tesla, and also with the rest of the market, the tech stocks, a lot of companies taking cheap debt to grow, make acquisitions. And that yes, that can last, Tesla can last for another 10 years, depending on how good the cycle of reflexivity is. Tesla will go down when the sentiment and perception changes for now, it's so strong, so probably it might go even more higher. But you never know. It's speculating. And that's something I don't do here. But it's very interesting to discuss because it has huge repercussions on what's going on 10x over what a year and a half, a 100x since the IPO, taking advantage of this where the perception is positive, improves the stock price, improves earnings, improves the quality, improves the fundamentals as they can issue shares at very good prices. But then the question is, are you investing in businesses or markets? Are you looking for stocks that will go up? Keep in mind if you look for stocks that will go up you will also find stocks that go down a lot. And then you will get disappointed when you hit a rut like we have seen 15 years, 22 years and 30 years of markets going now nowhere 12 years here. And when that happens, then you don't know why you're investing. So I'm telling you always be an investor that invests in businesses own businesses. And that's the message for this espresso with Sven, let me know if you like it in the comments. I hope you enjoyed it, and I'll see you in the next video where we'll likely analyse a stock.
