Everything Still Looks Bullish - In The Rear-View Mirror

In his 1999 warning that the stock market over the next 17 years "will not perform anything like it performed in the past 17 years", Warren Buffett made several other interesting observations.

He said [in 1999], "Investors in stocks these days are expecting far too much. . . . . . Once a bull market gets under way, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits, but simply to the fact that it seems a mistake to be out of stocks. In effect, these people superimpose an I-can't-miss-the-party factor on top of the fundamental factors that drive the market. . . . . . . Investors project out into the future what they've been seeing. That's their unshakable habit: looking into the rear-view mirror instead of through the windshield. . . . Staring back at the road just travelled [this was in 1999] most investors have rosy expectations."

If we do that now, we sure see no problems.

Tesla Rises as Jefferies Sees No Long Term Damage from Fire

Last week, Tesla’s (TSLA) shares hit a bump on the road. Today, Jefferies is out defending the company.

Who can forget the negative headlines that bombarded Tesla last week? The big news was the battery fire and the accompanying video that made the rounds. But there was also the downgrade from Baird, negative comments from technical analysts and even Toyota Motor (TM) disparaging the market for electric cars. Tesla’s shares fell 5.2% last week.

Jefferies analyst Elaine Kwei is out defending the shares today and even raised her price to $210 from $160. For starters, she believes the attention given to the fire is overdone:

Last week a Tesla Model S caught on fire after a freak accident in which a large metal object punctured one of the battery modules in the front of the car. On Friday afternoon CEO Elon Musk posted an explanation surrounding the incident: 1) the car performed as designed and enabled the driver to exit safely; 2) the probability of a vehicle fire in a conventional vehicle is 5x greater than in a Tesla; and 3) the firefighters on the scene may have unintentionally spread the fire. TSLA believes it is unlikely that the incident will merit an NHTSA investigation, and the company does not anticipate making any design changes to the vehicle. The owner of the car plans to buy another Tesla.

Then there’s the matter of Toyota. Kwei believes the rejection of electric cars by the big automakers is a boon for Tesla. She writes:

The chairman of Toyota, Takeshi Uchiyamada, recently stated that he believes hybrids will dominate alternative drivetrains for some time to come, and that there is no significant market for all-electric vehicles. We agree there is a limited market for compromised EVs that cost twice as much as a similar ICE vehicle, but we believe there is a market for EVs that can offer comparable (if not superior) performance and features at a given price point.

Finally, there’s the matter of the company’s sales. Kwei now believes that 5,500 of Tesla’s Model S will be delivered in the third quarter, up from 5,250.

Tesla has gained 2% to $184.65 at 11:41 a.m, while Toyota has dropped 1.5% to $126.05, General Motors (GM) has fallen 0.7% to $35.44 and Ford (F) has declined 1.2% to $16.89.