Credit: Greg Wester, @gwestr
At present, Tesla closed the trading day at $887.06 per share and is currently trading after-hours at $904.50. Its rise is nothing short of remarkable, having achieved these heights from a 52-week low of $176.99- that’s an increase of 411%.
Although enviable, it is also reminiscent of two historical examples that followed similar trajectories.
To the left is a graph comparing Tesla’s current performance with that of Bitcoin in the winter of 2017. Will it follow the exact same path? Likely not, but directionally, it probably will.
Another lesser-known example I’m borrowing from a passage I read recently in “Mastering Market Cycles” by Howard Marks:
Sir Issac Newton, who was the Master of the Mint at the time of the “South Sea Bubble,” joined many other wealthy Englishmen in investing in the stock [of the South Sea Company]. It rose from £128 in January of 1720 to £1,050 in June. Early in the rise, however, Newton realized the speculative nature of the boom and sold his £7,000 worth of stock. When asked about the direction of the market, he is reported to have replied “I can calculate the motions of the heavenly bodies, but not the madness of people.
By September 1720, the bubble was punctured and the stock price fell below £200, off 80% from its high three months earlier. It turned out, however, that despite having seen through the bubble earlier, Sir Isaac, like so many investors over the years, couldn’t stand the pressure of seeing those around him make vast profits. He bough back the stock at its high and ended up losing £20,000. Not even one of the world’s smartest men was immune to the tangible lesson in gravity!
(“bubble.com,” January 2000)
So in this instance, we should strive not to be like Sir Isaac Newton.