Is The Stock Market Getting Ready To Collapse? December 27, 2024December 27, 2024 But first . . . SELF-DRIVING CARS Daniel N.: “You’re doing the public a great disservice by pushing back on self-driving technology. For example, Google’s robo-drivers are now clearly 10X safer than human drivers. That means that over a hundred people now needlebssly die each day that we delay deploying this life-saving technology. As I understand it, the current requirement is to report robo-driver collisions and not human-driver collisions. The better answer would be to report all collisions in comparable fashion so that the danger posed by human drivers is readily apparent. But it seems clear that we can’t have that. So, paradoxically, the public is better served by avoiding the sensationalism that currently accompanies the robo-driver-only accident reporting.” → I agree we shouldn’t discourage self-driving technology. Data on human-error collisions have been readily available for decades. In 2022, for example, there were nearly 6 million police-reported crashes, more than 90% of them due to human error. There is every reason to think auto-pilot and self-driving systems will keep improving; little reason to think humans will. So the safety data should grow ever more skewed in favor of these technologies. Tesla and other car makers with good safety records (relative to humans) surely have the resources to get the word out. An even more powerful way to get the word out should be the free market. If self-driving cars have 90% fewer accidents, auto insurers will be offering big discounts to reflect that. And to the extent such cars do cause crashes, it may be the manufacturers — not the drivers — who are held liable. Another reason the insurer can afford to charge drivers less if they’ve chosen a vehicle with this capability. Rather than remove the reporting requirement, as the Trump transition team seems to be aiming to do, it should push for more publicly reported data. That would be in everyone’s interest — including Tesla’s. You can be sure the auto insurers themselves will be keeping track, even if the incoming administration chooses not to. And now . . . IS THE MARKET GETTING READY TO COLLAPSE? Quite possibly — though just when is of course impossible to know. The market has always collapsed from time to time. It’s not the end of the world when it does — and a buying opportunity for people with cash on the sidelines. People like Warren Buffett, who at last report was sitting on $325 billion (it’s probably more now). Tesla could just keep doubling every three months, but it currently pays no dividend and sells at 125 times earnings. As one of my smartest friends astutely observes: “It’s a car company.” (Ford sells at about 12 times earnings; Toyota, at about 10.) And, though tariffs could protect Tesla’s U.S. market for a while, Tesla’s Chinese competitors offer the world a similar product at a lower price. Nor is the market for cars likely to grow at some astonishing rate. Yes, in what we hope will be a more prosperous world, more people will be able to afford them. But many of those people live in populous areas where it makes increasingly less sense to pay a fortune for a car that sits idle 90% of the time — and endure the expense and hassle of buying it, registering it, parking it, insuring it, repairing it, and driving it. Why do all that when you can just summon a chauffeured Lyft or Uber? And in a few years may be able to summon a driverless Lyft or Uber for even less. Tesla is probably the most overvalued big market-cap company, but there are lots of others that, while less egregiously overvalued, are overvalued all the same. (And don’t forget: in a market panic, many good stocks become irrationally under-valued for a while. Irrationality swings both ways.) An example of a preposterously overvalued, insignificantly small company — it has just $5 million in annual sales — is DJT. It, too, could just keep going up and up, at least for a while. But what if its huge annual losses never become profits and it has to sell more and more stock to stay afloat? Or what if its chief asset, Donald Trump, doesn’t live forever? Steve Jobs didn’t and Apple has done just great; but can the sober-minded investor expect the same of Trump Media? The nice thing about “our” stocks is that — though some may collapse or disappear — they are neither overvalued (in my view) nor particularly tied to the stock market as a whole. The most obvious example is PRKR. It could lose all its lawsuits and go to zero. But if it recovered $1 billion or $2 billion from Qualcomm, et al, that would be a rounding error to them, but potentially $10+ a share to PRKR. So even in a bear market, the stock would likely jump well about its current 85 cent price. Similarly, if ANIX were to succeed in curing ovarian cancer, or its breast cancer vaccine proved effective — giant ifs, to be sure — then whatever the state of the stock market, its shares would likely be worth many times what they sell for today (not least because they have been beaten down, I’m guessing, by year-end tax selling pressure that ends Tuesday). At another is extreme BKUTK — not a crazy swing-for-the-fences like most of the things I suggest, a sleepy community bank selling at less than 7 times earnings. Whatever the market does, it seems not worth selling. Not least because, if the past is any guide, bear markets eventually end. Somewhere in between those extremes of aggressive speculation and hoped-for deep value, lies CNF. On the one hand it is selling at under 4X earnings. On the other hand, it’s Chinese (even though it trades on the New York Stock Exchange), so who the hell knows? In short: a “speculative value stock,” to be bought only with money you can truly afford to lose. It’s fallen so far for so long, I have to assume there’s been significant year-end tax selling; so I’ve been buying. [Speaking of losers . . . there is RECAF. I haven’t sold because the pain I’d feel seeing it go to zero pales beside the anguish I’d feel, having sold, if it somehow soared. But if you bought a meaningful number of shares between February 28, 2019 and September 7, 2021, click here to possibly join a settlement that entitles us, as a group, to some share of what appears to be about $5 million after legal fees and currency conversion. It’s likely not worth the time and effort if you bought only a few hundred shares; I can’t imagine it will cover a very large percentage of our losses. But if your loss, whether on paper or realized, has been large enough that getting even a modest slice back would be meaningful, follow the instructions very carefully and email your documentation no later than January 9.] Back to the question at hand. Is the Market Getting Ready To Collapse? If you didn’t click that link before, you might want to click it now. James Scurlock makes a strong case for being concerned. You certainly don’t want to be in the market “on margin” (i.e., with borrowed money) or with cash you might actually need in the next year or three; and you may want to have some meaningful amount of cash on the sidelines, like Warren Buffett. That said, Buffett (and Scurlock) would be the first to agree that in taxable accounts, there’s a huge cost in trying to “time the market,” because each time you take your gains, if they’re large, you pay a big chunk in taxes. That really crimps the power of compounding. So if you won’t need to sell any time soon . . . and are not the type to panic and sell at the bottom . . . then, in taxable accounts, it can certainly make sense to hold for the long term and pay no attention at all.