Is Bob Lutz Right?

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Yesterday, a former top GM exec failed to convince an array of CNBC talking heads that Tesla is doomed. I wonder if he’s right or not, and whether we have the capacity to judge anymore.

His rationale was cold and direct: The innards of a Tesla aren’t unique or proprietary, and the only way the company can sell cars is by pricing them below cost.

“At this rate, they’ll never get to 2019,” he said.

His hosts stuttered their disbelief, noting Elon Musk’s brilliance as a disruptor, and that so many people believe he can do anything. Everyone agreed to politely disagree when the interview was over.

Earlier in the day on the same channel, a stock analyst predicted that Tesla’s stock will hit $500 per share. Its stock closed up almost 1% at $315.05.

Popular sentiment has never been a good gauge of business value, insomuch as average investors (yours truly included) don’t have a clue what EBITDA means. We’re also greedy and horrible at assessing risk, and expect little more from one another, so investments from tulips to collateralized debit obligations have seemed like good bets…as long as somebody else thinks they are, too.

The purpose of public markets is to enable us to share our expectations, vet them against objectively real criteria and, hopefully, save us from our most egregiously self-destructive investment intentions. This same process is supposed to allocate funds to those companies that evidence the highest likelihood of fulfilling our hopes.

Only today’s markets do nothing of the sort…

Read the entire essay at Medium

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