Comment by scoofy
It really is wild that investments are driven by the marginal investor, not the median investor. 99% of us can think that Tesla is trash, but 1% of world investors is an absolute ton of capital.
It really is wild that investments are driven by the marginal investor, not the median investor. 99% of us can think that Tesla is trash, but 1% of world investors is an absolute ton of capital.
You're more complaining that investors who don't own a stock have no influence on its price. Which is true, but I don't see a workable way to change that.
The median investor in Tesla, on the other hand, seems to be happy with the situation since they're not selling.
I'm not complaining really, just think it's a explanation that describes the downward sticky nature of companies that can't seem to justify their valuations.
I agree that the median investor feels that way, I just think that the median Tesla investor (apart from passive broad based funds) is a tiny, tiny, tiny part of the market.
Investing in a proportional index fund moves the market as a whole, but does not move the individual stocks in relative rank. Aside from short term frictional liquidity issues, it just makes the stocks' relative movements exaggerated.
The valuation of Tesla is still decided by the marginal investor.
One could even be excused for the paranoid thought that there's a conspiracy of capital backing techno authoritarians. Of course, some of that is a money maker, like surveillance tech. But these are the same people backing dodgy brain implants, and third rate LLMs at fabulous valuations. And who are OK with merging a dying social media site with that third rate LLM start up.
The last price in any market (whether it's stock shares or housing) is driven by the market liquidity which is extremely inelastic. It mostly just does whatever it feels like short term and the time it takes for elasticity and fundamentals to overwhelm it can be so agonizingly long.