 Hello and welcome back to episode 96 of the market maker podcast and a happy new year peers to you and everyone. Yeah. So is it a Christmas one of those times where you just kind of you know loosen the belt, let the good times roll or are you a bit more disciplined than that. There's no, there's no place for discipline over the festive period. You know that. Well, I thought I thought you had your, your annual health check today. Well, yeah. Get in condition. Well, once once you get like like ancient like me, you get a health check free health check on the NHS once a year. Now you get this after you turn 40. Right. I'm actually 45 as hard as that is to believe. It's the first time I've actually gotten around to taking the NHS up on their offer. So yeah, it is true today I went in for a bit of a check up for the first time. So was it like a, like an Arnie movie. They like put the mask on and strapped you up on the running machine with weights. You would have, you would hope so right if they're doing, but this is the NHS. So there's two steps. Step one was today, they just took some blood tests. They get sent off for analysis. Step two, I don't know you go in and I think they just take your blood pressure, tell you what your blood test results are, send you on your way. This isn't, this isn't advanced 21st century stuff. You look fit and healthy. So it's good enough for me. So let me give you an overview of what we're going to talk about in today's episode. And so it's obviously the first episode of 2023. So we have a bit of a recap on how 2022 finished quite a remarkable year. And I'm sure you've got some stats to throw out there of just how remarkable it has been. And then we'll talk about the outlook for 2023. I did share a post with all the different bank research notes, which I'll share in the show notes, actually, if you want to have a look at those specifically. But I just wanted to get a bit more of a top level overview of what are going to be the major themes to look out for in 2023. So no doubt we'll talk about inflation, monetary policy interest rates, these sorts of things, China, COVID and so forth. But then look to go the next step and see then how does that and how will that influence stock sector selection asset class performances. And I think timing is probably going to be the really crucial thing here about when will rates peak and subsequently starts to climb and how might that impact markets. Also, want to throw in some black swans. I know you're a big fan of swan watching. So if you don't know what a black swan is, you're just going to have to stay tuned. But just know that peers has got three of them. And then we'll talk a little bit about Tesla. And we have to talk Tesla, of course, because Elon Musk is still dominating the headlines it kind of is just picked up where we left off last year. Their shares are down 10% on the week. I think they're actually called to open lower again today they're down about 40% in a month. Just how much are you loving this? Do you know what? Absolutely loving it but love it. I do love it. Absolutely smugness. I need to invent some kind of machine like the smuggometer has just got off, you know, just pins to the extreme right hand side. No, the extreme measure will not be hit until the bankruptcy filing. Then that will come true. But yeah, a lot of news for Tesla, even just this week, their deliveries fell short of market estimates. The Tesla board's been taking some heat about CEO succession planning, but I don't really want to talk so much about that. I want to talk about Tesla and, you know, like you said, I am a huge bear, but I want to step out of that suit and just talk about it from a valuation perspective. And I know there's been some good interesting articles circulating this week on that that you can break down. Before we begin and kick things off, don't forget to subscribe and leave us a rating for the show be much appreciated. It really does help kind of boost the Spotify Apple algorithms to get this out there to as many people as possible to be much appreciated. But Piers, let's kick it off and talk a little bit about how last year ended. Yeah. Well, it ended pretty much as it started on the back foot. I mean, look, definitely. Yeah, my career is definitely, definitely one of the. Well, hang on, let me just very quickly think about it. Yeah, it's probably the second second worst year ever in my career, which started in 2001. It was a great financial crisis and then last year just, but it was a unique year. Obviously, heavily negative for almost all markets, all asset classes, very hard to make any money last year anywhere, stocks and bonds, you know, basically pushing lower for the entire year. And then there was a story of inflation, which was the out of the hangover of the COVID supply chain issues with then the big government stimulus, pumped in, created this inflationary sort of storm, then interest rates went up faster than they've ever gone up for like 40 years. Basically in the end, it heralded the end of cheap money. And it's the cheap money that really fueled the bubble of 2021 so 2022 is cheap the cheap money era ending and the bubble that it created deflating. And that pretty much sums it up. I mean, very difficult to make any money last year, all in pretty much every investor out there was very, very happy to watch those sort of New Year's Eve fireworks midnight 31st of December, and to say 2022. See ya. Let's try and move on because that was a disaster. Unless I was on the board of Saudi Aramco. Yeah. Well, that's true. Obviously in amongst the general depression. There were a couple of highlights, I guess bright spots, so energy, energy stocks. Yeah, and so obviously Aramco in amongst that benefiting from, from last year's black swan, which was the Russia Ukraine conflict. Well, actually, the oil majors have probably got the reverse attitude that you have, because it's been announced today. In fact, that Shell expects a hit of almost two and a half billion dollars as a result of windfall levees coming for you in the UK. So now it's time to pay. Yeah. Yeah, it's, and look, I think in that situation, fair enough. You know, we've got massive bills to pay. I mean, governments, particularly. And so, you know, tapping into some of these monster public company profits profiting from, you know, conflict. You know, I think that's fair. Okay, so let's let's, the fireworks have happened. So let's move into 2023. And let's just talk about for you, what are the top themes that will influence the next 12 months. Yeah, well, it's going to be a pretty boring answer, because ultimately what dictated play last year was inflation. And ultimately what will dictate play this year is inflation. As it went up way faster than expected and got to levels we couldn't even fathom in 2022. You know, it's now we're on the, well, we, we hope we've peaked and we're on the downside. And so, absolutely key to the whole year is how quickly inflation comes back down that that's absolute top of everyone's list. Pretty much everything else doesn't matter, unless one of the big black swan risks come through then find that might be different but outside of any black swans unknowns, then that that's the story of the year ahead. And just to be clear, when you say inflation come down, how is it best that people interpret that type of information because today Eurozone inflation has returned to single digits for the first time since August. But that's not the entire story right so what is it that investors or students who are monitoring this should be more savvy to. Well, looking at inflation data in January or well I guess it's December inflation data that's being reported in January. So we've had the Eurozone as you've said, report their figures this morning so that they're the kind of first set of the kind of big developed economy inflation figures that we've seen for the month of December. Europe lags the US. But what we saw today from the European figures was that the headline inflation reading dropped, and it dropped by more than expected. And that's now two months of declines off the October peak. So in Europe in October 10.6% was what we hope is the peak. In November it was 10.1 and then December a drop to 9.2. Okay, so that puts it back at the same reading we had basically back in August right so it's looking this print today was really a good, good news story. So the month of decline and the decline was faster than expected so fine, but inflation is really complex and so what we need to do is kind of just move to what we call the core inflation data and core inflation is is looking at the price of including food and energy, which are very volatile and you would say more supply side impacted so core inflation is a better measure as to where we are with the overall inflationary conditions that impact our day to day lives and core inflation in Europe hasn't peaked. In fact made another new high. So that's continuing to rise but as I've said, Europe lags the US so in the US, we have seen core inflation, what we hope is peak, and it started to come down a couple of months in a row now core inflation dropping and we would expect Europe to follow that, but you know you never know right and these are the uncertainties so when you look at the European core inflation chart well then actually yeah it's not. But it does look a bit worrying was it again ticks to a, you know the uptrend continues so that's one thing just looking specifically at that data but now I think looking at the year broadly. There are two camps, broadly speaking in terms of people's forecasts and talking about big banks and economists and academics and how are they forecasting the year ahead and I think broadly, you kind of fit into one or two camps. And that number one of the doomsday guys. They're the ones who think that inflation will not drop fast. They believe inflation will remain stubbornly high. So this will have an ever more negative impact on consumption, and it will force central banks to continue to raise rates through the year, and rates will be marching higher, and that's your recipe for what we might describe a hard landing. Recession, where the recession is pretty deep, and then you're going to get painful kind of economic scenarios as a result. Okay, so deep hard recession is the pessimists outlook with inflation staying stubbornly high. The optimists, like people like who's in the optimist camp like gold ones for example, they're actually in the US, their base case prediction is no US recession. They literally don't think there'll be a recession at all. The idea is kind of around, well again always back to inflation. Okay, so it's, it's around the inflation situation, and they think that inflation will, you know, continue to drop at a nice steady clip, which will mean that recession will be avoided and so in some ways it's about the labor market when it comes to, and I think I mentioned this in the podcast before Christmas where we've seen this situation where the labor market, because when it comes to inflation, right, one thing that drove inflation was wage growth. Companies were basically forced by a very tight labor market where there were I think it got up to a in the US 11 million job openings, which is like a record ever. And so that meant that it's a labor market where the employees are in control. Companies can't find stuff and so they're having to up wage offerings in order to kind of attract stuff in right so this led to this in this wage growth which drove people's incomes higher and then they're spending higher and this drove inflation right. And the question is what happens in in 2023 with regards to wage growth and what we have seen is that things like job hiring and quit rates. We have begun to decline. Okay, that's always a good sign that employees are now less confident. If you're, if you're quit rate goes up. That means there's more people quitting, you only quit your job. There's another one to go to. Right. And so if quit rates go up that's like a sign okay a lot of people are hopping onto a different company where the wage offering is higher right. But what we've seen is the quit rate start to come back down. And actually that's an indication that perhaps the wage growth part of the inflation story that drove things in 2022 is beginning to dampen. So that would lead to inflation dampening in 2023. This then plays into the whole story. If you think inflation will steadily decline this year, then that takes the pressure off the central banks. And then that in turn enables more confidence to come back into the system. A lot of these banks think that there's a huge amount of capital on the sidelines. There's both capital within, you know, from an investor's point of view, where they're just trying to sit on the sidelines waiting for strong enough evidence that the economic decline is turning and then they're right bang let's go let's get our money to work let's start to to reinvest again and this can kind of begin the next cycle that recovery cycle. Yeah, that's the other camp then the optimists and again it's all about inflation and they're the ones who think it will come back down. Yeah, and fitting that narrative you described the wage data included in the non farm perils report that's literally just come out for December, kind of ratifies that notion of the fact that inflation in the US is dampening because the average hourly earnings figures, both were below expectations month month year and year and the prior months were revised down. So, as you can imagine the reaction here just looking at the charts in front of me now, actually T notes have started rallying quite aggressively and stocks are moving higher. So it's the complete opposite, even though this is a short term intraday reaction of course as an example. The opposite of that 2022 move as a whole where bonds and stocks are going down. This is the opposite then facing coming down people down that conversation of when rates peak and so forth and any news that supports the idea of inflations going to continue to drop that's your sort of that's your sort of kryptonite for the stock markets right and indeed the bond markets that's exactly what they want to hear. And, yeah, so you've seen a pretty sharp uptick on US stocks like global stocks, you know, off the back of this data this afternoon. Yeah, so, so I guess, here we are in the first week of the year and I guess in terms of those two camps. The bulls and the bears you definitely got one mill to the bulls here as that US labor market data supports the case that inflation is going to continue to drop. And that that optimism from Goldman's is more broad. If it impacts the global economy impacts deal volume as well and as you rightly said big investors. They said we're sitting on piles of cash preparing to fund transactions large companies earning solid profits will look to diversify their business. But they're just basically waiting for a bit of that economic uncertainty to fade was what they coined and this came after a sizable decline in their fee generation from the IBD side of the of the bank. And so they're talking up of course as you would in that sense. But what I thought was a good analogy they're co head of banking and markets when you go through periods of volatility you know it creates opportunity. Talking his book. Of course talking his book and it's such a cliched line of course but a lot of people say that line. Very, very, very few people have got the the bravery to actually do it. But obviously these banks are hoping that investors have got the bravery. Yeah, I mean the figure just touching on those IBD investment banking divisions last year what a shocker. I mean, the fees generated by the big boys so JP Morgan I've got the I've got the stats JP Morgan's IBD fees in 2022 dropped 48% and Goldman's down 45% on the year before this is Bank of America down 38% Morgan Stanley down 51% and I think the worst and maybe not surprising credit Swiss fee generation down 53% last year compared to 2021. Now, it was a tough comp because 2021 was a mega year. But even so, yeah, that was a blood bath and so of course, and obviously cyclical. The banks are hoping. And yeah, I thought I referenced Goldman's 2023 outlook being positive no US recession. You know, they talk their own book right they'd like nothing more for that to be the case because that would very much be the most positive scenario for their business. So you can go I don't know how far you want to go down that path of them trying to shape people's opinion on the future. Therefore, influence their confidence. So from a behavioral point of view, if Goldman says this is going to be a good year. How much does that move the dial of probability as to actually whether it will be a good year or not. And also just to kind of tie off the Goldman talk, a thing that was a big deal that you for of last year is about the radical restructuring again that they're going through through their business streams coming together. And I think that was clearly evident from those numbers you just said, they're so heavily tilted to banking, whereas I think it was Wells Fargo, who crept into investment banking top 10 leaderboard. And well as far goes not a name that you would usually mention when you talk investment banking because they're just a loans company right. So that's a good example of brave companies. When times are bad. Let's step it up because we can win market share. So just as you had the worst year for M&A and years and years like this century. Wells Fargo went a hat. Okay, let's do the op less let's go against the tide and actually build and invest in the growth in that side of our business, whilst everyone else is contracting and, you know, bailing out. And so yeah, that's a great story. I think they're eight from the table for 2022 and that's yeah. Yeah, they were a key advisor in Broadcom VMware, which was the biggest deal of last year. So, but yeah, well, look, let's talk about giving everything that you said then inflation is the key that will influence then policy and market direction, but from a sector perspective then energy was like the the only shining light. What do you see as the key sectors to watch good and bad. Yeah, I think so it obviously depends on which camp is right. Let's just go with the positive one. I'm an optimist. I'm a glass half full. And but everyone, it's such a saturated opinion is such a common view now that everyone's going look the start of this year is going to be a bit rocky a bit tough. And then like second half is just going to fly as we come out of the other side of this. Excuse me. Now, if that were to be the case, then I think it is still fair to say a defensive setup, going into the start of this year is probably the positioning, although that data we've just had from the US might question people's appetite for being defensive but anyway, I think people have gone into this year very much defensively. So that means defensive sectors, so investors overweight defensive sectors, like consumer staples and actually consumer staples as a good one, because that plays into the whole food price inflation thing so you could argue that margins for supermarkets are higher, because they're selling goods at a higher price, because of the inflationary situation so they're more profitable. So that's and that's that's what you call a consumer staple business because of course people are going to have to buy food doesn't matter what the economic situation is so you could argue there's within the supermarket space you've got opposite spectrum in terms of, I don't know where you shop and waitrose and m&s and then versus down the other side which is whatever little and asda, for example, but generally speaking defensive sectors will probably and then energy sectors will probably stay strong obviously we've got an ongoing conflict situation. And so that you know energy costs remain incredibly elevated, but I think then you're going to probably see if things play out with inflation continuing to drop then you're going to see a real inflection point in the economic cycle, where you're going to move. When you're going to move from recession into recovery. And that post recession part of the cycle. That's the, that's the sexy spot, because that's where the economic growth rates are at their fastest. And what tends to happen is companies have streamlined in a recession. Right so they've laid people off. They've used inventories. Okay, because sales are dropping. All right, so they're super lean. And then you start to see the sales growth ramp. And so that's where their profit margins are typically their best. And so from a share price point of view, the early part of the cycle, the recovery phase that the part of the cycle is immediately following the recession is the best one in terms of upside on share prices. So we that is coming. And it's just a question of timing, and how confident you are about this inflation thing, because if you're confident, you basically need to go now. I would say you want to go right now. But there is real real risk that inflation is going to stay high. And going now is going to be really painful. I actually think it's a weird year in so much as you were to ask me what where's the S&P going to be trading at the end of the year. I actually think both scenarios, it'll end up at the same place. So I think that by the end of the year scenario one inflation does fall. The Fed don't hike as much less of a recession or no recession in the US. And I think the S&P can steady and move higher from here. Right. I think if you get that hard. If you get inflation higher hard recession. I think there's another big leg lower in the S&P, but we'll probably start the recovery phase by the end of the year, which means I think there'll be a big rebound. But you might just find we end up at a similar place just with much more volatility. So there's some hints dropped there. So if Google allowed you on the board yet now that you've hit the five that you've gone over the 5% shareholder threshold. I've demanded a C on the board. Yeah, my request hasn't been replied to just yet. Okay, well, let's let's talk black swans. Yeah, perhaps a little bit about what a black swan is and then your best swans to look out for. Well, well, yeah, the whole thing that sort of black swan. Well, it's not it's so black swans very rare, right. The reality now I'm talking about a thing that kind of swims on a lake. They're very, very rare. So we kind of use that analogy about scenarios that occur that are incredibly rare. And I mean technically speaking from an economic point of view, this is a scenario that cannot be predicted. 2022 Russia invading Ukraine. So, like with all of these things, when I say you cannot predict it now. Okay, there were some, there was a tiny minority that were saying that's going to happen. But the vast, vast, vast majority that was definitely not on anyone's radar. And so it occurred and so it's a super surprising, plus very, very economically significant scenario. So that's basically what we call a black swan, something that's unpredictable but really impactful. Okay, so on the agenda for 2023. And actually I liked our macro hives description. Bilal was Bilal Hafiz was saying that he prefers to call it a gray swan. Because he's talking, he's referencing the fact there that, you know, a black swan will by definition you can't predict it. So if you are to ask me what are my black swan predictions. Right. Well, technically they are not black swan predictions because I'm predicting them. Gee, such such economist talk that. So my gray swan, so a nod to Bilal, my gray swan predictions. Tottenham winning the, no Tottenham winning the Premiership is a black swan. No, no, no, that's, that's not a swan at all. Remember it's got to be unexpected. So for me, top of the list, in terms of impact on the whole direction of the global economy is China and Taiwan. And this isn't a, it's definitely not a black swan. It's gray at best, because obviously this has been on people's risk radar for a while, but it's just never been. And it still is on the risk radar but far enough away that we don't really allow it to impact our behavior in terms of investment today. We just think it's, it's too far away, we'll worry about it if and when it might happen. So I think a surprise would be if it were to happen way sooner than people are currently sort of thinking. And so if it were to happen this year. And look, Xi Jinping had a big year last year. He had cemented power. Obviously now COVID is probably the top of his agenda, as they try and now open up. But obviously that's going to cause a lot of turmoil in terms of case numbers spiking we're already seeing it right so it would be classic Xi Jinping to deflect attention from all of that by going you know what. Let's act on our Taiwan and that he's been very upfront about bringing Taiwan back into the fold, which is absolutely an agenda of his. So just the timing, if it were to happen this year way earlier than anybody thinks and then the knock on impact that would have, because globally, you know Taiwan is the semiconductor capital of the world. And so the well indeed the Taiwan semiconductor manufacturing company are the largest producer of chips. And then the 15 largest company in the world by market cap at 400 billion but you know that would really alter the course of the global system. So that's that that would be my number one. What are your thoughts on that. Well, as a as a grace one, I think it's fine. Okay. Again, it's a case of probabilities isn't it so what's your what what probability do you assign to that in 23 completely picking at random I would say 1.5%. Okay, so you're that low. Yeah, all right. Yeah. Where would you sit. Yeah, as a. Yeah, you're an optimist you said. Yeah, I'm not. It's definitely still a low probability event. But I'm like, I don't know 5%. Yeah, so still really low probability, but if it were to happen then wow. The counter argument I'd see where that is the deflection argument I get the economic reaction from the global community toward China when they're economically not in good shape. I just don't think the Taiwanese acquisition is for now, basically. It's just later he's got a long game to play. And there's no point in it right now. Okay. Yeah. Fair enough. All right, moving on. There's some stuff that was there's a guy called Colt Colcani, who is from a company called MKM partners, which is like an investment house row hit Colcani the reason why I bring up his name is because you know what his black swan for 2022 was one of his black swans Twitter would no longer be a public company. Yeah. He said that the end of 2021 and lo and behold, Twitter. No, that was way before. Musk started that whole thing started in March of 2022 when Musk started to buy shares in Twitter so that was a genius call anyway so what's he say about this year. Yeah, exactly. So he's saying Pinterest and Peloton has two picks as the companies that will no longer be public companies by the end of the year so that just means that they're going to get bought. Right. So he thinks that they're both acquisition targets. And they would be taken private in a musk style scenario where someone or some entity buys up all the shares so yeah that they're on his radar Pinterest and Peloton and given his track record from last year. Not a bad shout. The other big theme for this year I think and I'm not quite sure how it will necessarily play out from an economic point of view, but it's the AI revolution is gathering pace. I feel like just gonna put it out there before you begin. I feel like we had the blockchain, you know, stick blockchain after any company name was this time last year it was stick Web three after anything. I feel like this year, everyone's gone way too far again. This AI GPT chat is just GPT. Yeah. Yeah, it's made everyone go stir crazy over that this is the next best thing and I'm not saying it's not. The only reason why it's different gone is because it's hit the mainstream. And you can't say that about blockchain. And you can't say that about web three chat GPT I think will hit the mainstream. So I think this is the year where AI genuinely hits the mainstream. And as I said, I'm not quite sure what that really means. At the moment, I think it's so early and so new that probably doesn't mean much, but I think longer term, it could be a real pathway to efficiency. And therefore productivity growth, which is something that developed economies have been really struggling with over the last couple of decades or certainly post financial crisis productivity growth has been taken a step change lower. And so it might take something like the AI revolution to kind of kick productivity higher but I think it's too new though. I just think it's a it is definitely a space that that's going to gather interest what will be interesting. So chat GPT the creator of chat GPT is a company called open AI. So one of the things people are talking about is well who's going to buy open AI. So will it be one of the big guns Google or Microsoft for example. We had a conversation probably this time last year about who our tech picks would be. Yeah. And I had Microsoft and Microsoft backed open AI. Yes, they do 2019 for a billion dollars in funding and it was this week that they reportedly are in works to launch a version of its search engine being using AI behind the chat function that you were talking about. It seems to be interesting Google have been very aggressive talking it down for obvious reasons. I think Microsoft are in pole position here as you say that they're a long time stakeholder in open AI, and apparently they're looking at raising its investment, you know, further. So it's certainly in the driving seat if there were to be an acquisition I mean what the, what the valuation of that would be. Well I've got it here. I've gone. So they're in discussions to raise capital evaluation of almost 30 billion US dollars, according to two people from a live of the matter. Okay. Yeah. Where is that at the moment. Well you say like 30 billion right. Whenever there's like an acquisition like this. I always think back to always immediately something sticks in my mind, which is Facebook buying WhatsApp. For a billion. That was for 19 billion. Was it? Oh I'm thinking Instagram on it. You're thinking Instagram that was one billion. They bought WhatsApp for 19 billion and that's got to be at least 10 years ago. Now would you buy, which would you rather? WhatsApp at 19 billion or open AI at 30 billion. You don't need to hesitate to answer that. No because with the open AI is going to be absolutely like monstrously huge. Yeah. Absolutely. I say 30. I'd buy it for 30. Just a bank manager now. Why don't you sell like part of your Google shares and take take take it private and don't let anyone else have it. Okay. I'll get on it. Yeah, that's that's really it. It's a bit dull as a kind of black swan list. I mean the other the other things the obvious things about obviously inflation does it stay high or I don't know. Everyone's forgotten about the Russia Ukraine situation but does Vladimir hit the nuclear button in 2023. It probably doesn't look like it does it so but he might do it's again it's a low probability scenario that if it were to happen then would certainly obviously you'd need to rethink your outlook. Okay, we'll find all grace one Tesla goes bankrupt. So, so talk to me about some of the pieces that were doing the rounds this week to conclude the episode about looking at the valuation of Tesla. Yeah. Right, I mean, so Tesla peaked the share price I'm talking about now and therefore its valuation and its market cap peaked in November 2021. And at the time it was above $1,000 per share. They then did a stock split. Can you remember what was it was it was it a three to one four to one. I can't remember now. Anyway, they did a stock split. So that's just why. So the share price peak in November 2021. After you correct for the stock split. It was a three to one stocks but thanks. It was just over $400 right back in that time it was over $1,000 but yeah you got to take into account split so 400 bucks let's just call it right today it's trading at 110. So that's a 75 whatever that is 75% drop roughly. So obviously it's been killed. The stock has been annihilated. All right. What I would say though is one I'll say that in a minute. So from a valuation point of view. So if you think about something called enterprise value. The enterprise value is the market cap plus its net debt. Okay. And the enterprise value at its peak was $1.2 trillion. That at the time made Tesla more valuable than the next four most valuable car makers who are Toyota Volkswagen Mercedes and Ford. So Tesla were more valuable than those four put together. Now when you say it like that, it's like well obviously that's ridiculous. Okay, but we were saying that at the time and it was ridiculous and actually people were saying they were saying that. I don't know at the start of 2021 you could have said this is wildly overvalued and yet it ramped higher and it ramped higher and it ramped higher and this is a bubble right the behavioral nature of bubbles. It's not rational. And if the things going up, but it's likely that it will continue to go up right and it's obviously you get musk in the equation here and he is driving this sensationalist narrative on social media channels and you get your hardcore fans and fanatics and they're making loads of money and then so you get FOMO coming in because your mates just made 50% of his Tesla straight right. I'm in there as well I'm buying, and it just feeds this, this bubble. Of course, bubbles burst and so the Tesla bubble has burst and I don't really want to talk about the bubble and the bursting. There was a bubble it has burst what's a much more insightful conversation I think is, well what's the value today. What is today's value worth it does is today's value correct or not was really hard for for people to move on to that conversation that is next to impossible. If you bought Tesla stock, you did not sell Tesla stock, and now you're sat on a massive loss. Most people will most likely fall into the classic behavioral trap, where now I'm just going to disassociate myself from that trade. I'm going to keep it on, because I'm not going to touch it until it gets back to where it was in 2021. What they fundamentally fail to understand is, it is not going back to where it was in 2021. That was a bubble. It's not, you might have to wait four decades for it to get back there. Elon Musk thinks he'll be bigger than Saudi Aramco. However, what that's what is that because is that after Saudi Aramco have collapsed when the world stops buying oil. Yeah, basically. Yeah. All right, but so, but I want to move on right. What's the value today so the enterprise value today when it's obviously come off 75%. Okay. The enterprise value today puts it at about, well, what is it? Yeah, puts it at about the same valuation as Toyota. All right, so that this make this is now back into the realms of at least something that's not stupid. So Tesla are worth the same amount as Toyota, right too big. What you think are both big giant kind of car manufacturers. However, from a obviously Tesla is a lot smaller. And in fact, Tesla has just one third of the revenue that Toyota have. So from a revenue point of view, Tesla are one third the size, and yet they're valued at the same. Okay, which means that Tesla has a much higher multiple. So it's price to earnings ratio multiple is 26 times profit equals the value of Tesla's company today. Toyota's PE ratio is nine. Okay, now there are some good reasons, or some arguments to support that. And that's just because, you know, Tesla have got higher profit margins. They've got better sort of capital efficiency. So their profit margins operating margin stories 16% for the sector that's really high. Then they've got 18% return on capital so both of those are much better than the other auto giants. So that supports the idea that they justifiably have a higher valuation. But is it justified that it's that much higher. Well, here I guess now you're into the realms of trying to predict what happens in this space in the future. Obviously, to this point, Tesla have come along, and they've pioneered the EV space, right, but now everyone's, everyone's going in that direction. So it's a question of can Tesla continue to dominate and here's where the big kind of question marks come, especially when you get the figures that we saw from Tesla this week, where their fourth quarter deliveries were at 405,000 again missed consensus forecasts. That's the third quarter in a row, where Tesla's delivery numbers have missed forecasts, right, and the bigger news and the much more important news when you're having a valuation conversation, and why the stock Tesla stock dumped again this week, you know, it's already 70% off it's high is because in quarter four. They made more cars than they sold. They had a 56,000 unit surplus. I'm trying to spin the story that we are pioneers were winning market share demands off the scale. Well, you, you know, you're selling every unit you make, right, whether or not. So if you and if you're in that situation, then what do you do, you cut prices. Right. That's what we've had. We're just markets just about to open for final trading session of the week. Yes, they're set to open down 7% today. So they're getting close to $100 a share now, just about 102. So overnight test the cut prices in China for the second time in less than three months. I get I mean I own an electric vehicle and it's annoying I'm on someone's the company I bought it through I'm on there. They're they're kind of database so they send me emails whenever they've got surplus stock in any vehicles. And I got an email this morning me who sends those by the way, they're just to you know what else I got an email this morning. Look, there's a whole range of stuff on here, but Tesla, the Tesla Model Y they've got 50 plus cars and for immediate delivery. These are cars you couldn't get you know it's like a 12 month waiting list 12 months ago. Now they're just immediate delivery because there's an excess of supply, all the other manufacturers, the ones I've never heard of. Fine they've got stuff that's available but like the Audi e-tron, which is one of the big new one, there's only five of those available. And that's available in March. So that's your perfect example Audi e-tron five available by March, Tesla Model Y 50 plus available immediately. So I think that kind of tells quite an interesting story. Yeah, but I think Tesla probably, I think it's a really important year for Tesla. One thing is, they're quite, because they were so pioneering. They were so early, right. It's actually nice some of their models are a bit near the bit like the Model 3 is six years old now. And it needs a revamp, it needs a new, you know, a V2 or whatever. The S and the X models, they haven't been updated for over two years now. And when you're getting the big gun manufacturers like the Audi e-tron where they're coming to market with their brand new versions. Tesla stock's looking pretty old. And competition has really ramped. The Tesla models are looking pretty old. You could say there's, there are macro issues, obviously, as well, both on the supply chain side. And obviously we've got an inflation crisis and maybe a recession. So, you know, you've got to factor those in as well. You know, this 2020, well, you've already seen the stock collapse, right, but 2023 it is either this is the year where the valuation of this business is now reasonable. And they consolidate and they go the next step where in an industry where competition is now fierce. Can they stay top dog? That's the big kind of question mark. Well, the other interesting thing is that SpaceX is reportedly in talks on a share offering that could value it at 150 billion. I just be interested to know whether the Elon is just as we were saying early last year, has it already begun? He's leaving. Yeah, he's been cashing out, cashing out. He gets out 2023. He gets out. SpaceX seems so much more interesting for him. I think the challenge and intellectual challenge of trying to flip Twitter is compelling for him. He's got neural link. He's got boring company. I think he just ditches it. Tesla becomes a bit of a mid-level EV. The Tesla valuation now is 390 billion. I don't know how much he's exited. I mean, he got some great exits. I mean, he totally sold 10% at the end of 2021. That's looking genius now, but he's still got a massive holding. So he's taking a big hit here on this share price decline. So whether it's fallen too far now for him to go, I can't leave it now. I need to stay to kind of make sure it rebounds, but I don't know. We'll see. One guy, there's a quite a notable New York University NYU professor who's quite notable. He came up with a valuation for Tesla when they were at their peak when they were at 1.2 trillion. He said, look, this is insane. I value them at 640 billion. They're now down to 390. So on his valuation in 2021, they were double that. Now they're actually not far off 50% discount. His valuation is based off the prediction that by 2032, Tesla will be selling 10 million units a year. They're trying to hit 1.9 million units in 2023. 10 million units by 2032. And he predicted an annual compound growth rate of 22%. That would see Tesla having 10% of the world's light vehicle market share. So if Tesla have 10% of the market share, I'm not talking EV share here, talking about the whole all cars. And of course, it's all moving towards EV. So that plays into their hands. But if they have 10% market share in 2032, a valuation of 640 billion is rational. What is their current market share? It's one... I think it's definitely less than... I think it's 1.3%, I want to say. I'll have to fact check that. Well, actually, electric vehicles... I do know in 2021, electric vehicles in the United States only made up 3.2% of the vehicle sales. Okay, so I got the stats here. So for 2020, Tesla vehicles accounted for 79% of new EVs in the US. 2021 that dropped to 69%. So we're talking of like coming from 70% down to 10%. So 69% of 3.2%. So let's just call it 2%. So they had 2% of the US market share in 2021. 10% of the global market share in nine years time. That's a big ask. That is rife with risk, that prediction actually, now that I think about it more. So I think a lot of people are looking at the share price now and going, you know what? And these are people who don't own the stock so they can be rational. They're like, now it's about right. Okay. All right. Well, to conclude, my other two Grace ones, Kanye runs for president. And Harry divorces Megan. And on that note, we'll close the episode. And I'll see you next week. Thanks very much. All right. Okay.