2. When even great news isn't good news
Congratulations to Elon Musk, who not only missed out on being owned by the Saudis, but who also celebrated Tesla's most profitable quarter ever this week.
- The Model 3 has proved to be a big hit, and Tesla hasn't even started selling it internationally yet, in countries where gasoline is a lot more expensive and demand for electric cars is correspondingly higher.
- Tesla stock rose on the news. After closing last week at $260 per share, it closed this week at $315. That's a rise of more than 20%.
- And yet: The stock is still 20% below its highs of 2017, when Tesla was losing billions of dollars a year. Great news at the corporate level isn't always good news for the stock market, especially when criminal probes still hang over the company.
At Netflix, blow-out earnings this week sent the share price soaring to $370 per share. By the end of the week, however, the stock had lost more than 15% of its value. It now trades more than 25% below the high it set in July.
The economy as a whole has now printed two blockbuster back-to-back quarters of 4.2% and 3.5% GDP growth respectively. The stock market, on the other hand, is basically flat year-to-date, and is down 10% from its early-October highs. That's correction territory.
The bottom line: Stock-price valuations are weird, and don't do a great job of reflecting present-day fundamentals. Corporate America, as a whole, is looking very healthy right now. It's worth remembering that current share prices would look fantastic if they hadn't been so ridiculously frothy in the recent past.