Our Curious Stock Market

Without going into a long song and dance, let's look at a few details:

Firstly, today the Dow Jones Industrial Average breached the 22,000 mark.  That was enough of an event for them to make up "DOW 22,000" hats and make a big deal out of it on CNBC.  Is it a big deal? Yes and no.

It's a big deal if you own shares of Apple, McDonald's, Boeing, and United Health who, combined were responsible for 867 of the move from 21,000 to 22,000.  The Dow is a weighted average, so stocks with higher share prices (like Goldman Sachs, who was responsible for the last 1,000-point surge) have a bigger influence.

Conversely, if you were a shareholder of IBM, Goldman (recently) and GE, you were negative 462 points. So, as you can see, the largest companies are responsible for the gain.  All those in the middle (the other 23) were just hanging around. That's a bigger influence than a handful of winners and losers.

It's why the S&P 500 and NASDAQ 2000 are better gauges of market progress than the storied Dow. And, for the record, the S&P has been trading sideways for all that time.  Nobody makes hats for that. What I'm telling you is to take this "Dow 22,000" talk with the proverbial grain of salt.  So, let's move on.

Pfizer (PFE) reported a nice quarter, but my patience is wearing thin.  It's pretty much a 3.9% bond, since the share price doesn't seem to move on any sort of news, and they rely on the dividend to lure investors.  CEO Ian Read said that they have several drugs and exciting prospects for 2020.  Excuse me, but it's 2017.  What can you do for me now?  I'm leaning toward getting out, and finding something more suitable for my growth + value agenda.  I'm looking at BorgWarner (BWA) and Expedia (EXPE) and leaning heavily toward Expedia.  There is a lot of value there, and while I missed out on some of it, there is still room for it to run, and that's what I'm interested in.  And, as such ...

Square (SQ) my new holding, reported a stellar quarter today, and I'm excited about being a shareholder.  It was said that Square is "The Tesla of Payments," which brings me to my next point: What's up with Tesla?

Are they a car company or a tech company?  While I greatly admire Elon Musk and his ventures into solar power, space travel, and electric vehicles, I still think that the share price is ridiculous. If I miss out on it, so be it.  My value-oriented approach doesn't lead me toward investment. Consider these comparisons with another auto-maker, Ford (F).

Ford:  Share price = $11.00. P/E 11.52 with a 5.48% dividend.  Third quarter EPS: .31 Third quarter revenue $33 billion.  2017 estimated revenue $142.3 billion.  Return on Equity: 12.0. Return on Invested Capital: 2.5 Long Term Debt to Capital: .82

Tesla:  Share price = $325. P/E -4.77 with a 0 dividend. Third quarter EPS -1.83 on revenue of $2.51 billion. 2017 estimated revenue $11.32 billion.  Return on Equity: -24.3 Return on Invested Capital: -7.5. Long Term Debt to Capital: .57

Do you see all of those negative signs (-) in front of Tesla's numbers?  One wonders how Tesla's Market Cap is $197 billion and Ford's is $43.5 billion, or roughly 22% of Tesla's.  How many Ford cars do you see on the road?  Ford produces approximately half a million vehicles in a year, while Tesla says they are in "Production Hell" and struggling to keep up with orders of about 5,000 a month.

This isn't to denounce Tesla, it's to question why one company is valued so much less than another, when the lesser company clearly has market share and production. But, that's our stock market.  It's a "futures market," and value depends on what you are supposed to do, not what you are doing.  Ford's problem (if they have one) is that they are doing what people expect.  Tesla's value is in the idea that they will do what people want. Meanwhile, buyers are placing $1,000 deposits for cars that they have neither seen nor driven.  Let's see Ford try that business model.  It makes me question the wisdom of consumers, as well as question the wisdom of investors who continue to buy TSLA and have driven the price of the stock up to $360 after earnings were reported today.

OK - just don't let the water get over your head.