Friday, May 14, 2021

Pump and dump, manipulation

Wizard asked how did I reckon before Elon Musk is sent to jail. Well, I got already used to the fact that increasingly stunning examples of market manipulation are tolerated and I believe that it will get even worse – but it will stop at one future sunny day, anyway.

A comparison of BIG 5 electric SUVs released 2 days ago. Regardless of the price, Škoda Enyaq beats others in pretty much every respect, especially by its range which renders competitors obsolete. On top of that, it is 30% cheaper. Tesla Model Y may at most match the Enyaq but the price is 50% higher than the Enyaq, too.

In March, I discussed fake growth stocks and investments that weren't real investments, like the Cathie Wood ARK Innovation ETF Fund. It is a fund where the financially illiterate "guru" picks the "best" stocks – in particular, stocks of nearly worthless companies that are overpriced by a factor of 10+ and by promoting them (she has useful idiot friends in the media), she makes them overpriced by a factor of 100+ if not 1000+. By growing these bubbles around nearly worthless companies, she has been reporting impressive yields.

Manipulators like that often buy before others, and sell before others, and that is called the pump and dump securities fraud. Well, there are signs that she is forgetting to sell. If you click at the previous paragraph, you will see that the ARKK fund's price went from the peak $159.70 to the current $99.48, a 38% drop in 3 months. Compare it with the general stock indices that are at most 2% below the all time highs and even Nasdaq that is some 7-8% below the all time highs. Has the bubble burst?

Tesla Inc. remains the largest stock in the ARKK fund. By now, Tesla cars have become absolutely uncompetitive. It is particularly obvious in Europe. Check the Dutch electric car sales in March to May. In March, Tesla sold 344 Model 3s out of 2175 EVs, ahead of Volkswagen ID.4. Model 3 had a 16% market share.

But then the new models came. As a proud Czech technological fan, I must say that just like predicted already 15 months ago, the Enyaq arrived and became the darling of all these markets. In April, Enyaq was already #1 at 362 units out of 2369 EVs (the Netherlands). In May as of May 12th, Enyaq is at the top with 421 units, followed by Ford Mustang Mach-E (110). The Enyaq has sold more units than the following 6 bestselling models combined and its market share in May is above 40%. ;-) Tesla has sold 1 car in this country in May so far. And Tesla Model Y (SUV) just won't be able to compete because it at most matches the Enyaq (the Enyaq is better in so many respects) while it costs 50% more than the Enyaq.

Check a similar evolution in Norway (where most newly sold cars are electric!) and in other EU countries (where the data are only updated from April and Enyaq isn't fully incorporated there yet). Yes, Škoda is leading in Norway today, like it has for several days. The Enyaq is simply the best car, try to search YouTube to see why.

Now, Škoda's growth story is clearly far more realistic than Tesla's and Škoda already beats Tesla in sales wherever they compete. But Škoda, with a vastly higher profit margin (and it is a company that also produces 20 times more non-electric cars, but I will generously overlook all this part of Škoda LOL), may have the capitalization of some $15 billion within the Volkswagen Group while Tesla Inc. has the capitalization of $551 billion, even after the 30% drop from the all time highs. It is insane. Tesla is surely overvalued by a factor exceeding 100 and I think that 1000 is more realistic.

But it doesn't matter. The market contains a lot of braindead idiots who think that Musk is a very skillful engineer (he is not an engineer at all) capable of doing miracles, or something like that. On top of that, Tesla makes the money out of the carbon indulgences (otherwise it could have never been in the black numbers); and perhaps even more painfully, by manipulating the market of cryptocurrencies. So months ago, he announced that Tesla would accept Bitcoin as a payment. Musk had previously bought the Bitcoin for a billion dollars, it went up, partly because of his pro-Bitcoin tweet. (The number of people who bought a Tesla for Bitcoin may probably be counted on one hand.)

Days ago, he said that Tesla was stopping the payments in Bitcoin because the Bitcoin mining consumes a lot of electricity. The Bitcoin consumes more than all of Czechia – Škoda Auto is 5% of the Czech GDP – at this moment. Now, what is the probability that Musk was really so uninformed that he didn't know that the Bitcoin was a big environmental pig months earlier? Everyone who follows the basic data must know that it is a method to waste an incredible amount of energy. This clearly was a sign that Tesla has already sold most of the Bitcoin, or it planned to buy new ones cheaply. At any rate, the situation changed. Months ago, the two largest bubbles (Tesla and Bitcoin) were merging; now, the two religious cults are on the brink of a war (clearly, these two cults are heavily overlapping so many members must have mixed feelings now LOL).

Meanwhile, he also tweeted that he would lend a few minutes of his ingenious brain to improve the Dogecoin, a cryptocurrency that was created as a joke but it is valued at tens of billions, too. The Dogecoin's price immediately went up by more than 10% again. Clearly, Musk is totally incapable of "improving" the Dogecoin in any sensible way. He is just a snake oil salesman who knows what the prices will do after similar tweets that he makes. You may guess whether Musk had owned some Dogecoins before he made the Dogecoin price jump.

Of course, I would say that Musk is not the primary problem. The primary problem is the union of millions or tens of millions of braindead morons who aren't capable of figuring out that he is just a mediocre scammer with no unusual constructive skills. His main genuine skill is to manipulate millions – but it is only a relative skill which exists because millions of people have become really, really stupid and through a mass psychosis, they turned him into their god. And Musk isn't quite the only one (although he is surely the world's largest fish in this category). The number of people who are basically controlling the prices of various things by a tweet or a TV interview is larger. These scammers are mostly trading against others in a zero-sum game and you may be sure that they don't do things to intentionally lose the money. If you're trading with them by following their orders, if they make a profit, and if it is a zero-sum game, what will be the sign of (the mean value of) your profit? And how stupid do you have to be not to be capable of solving this homework exercise?

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