Is Tesla’s Trouble a Preview of the Market’s Next Major Turn?
Peter Reagan, March 14, 2017
Tesla is a Wall Street darling. Investors have piled into the stock for months, driving it higher and higher. But as the company’s earnings continue to disappoint, some recent news indicates that the party may soon come to an end.
Could this be a preview of what’s coming for the broader U.S. economy?
The Tesla Bubble
Price-to-earnings ratio (P/E), Relative Strength Index (RSI), and market capitalization to GDP are three common calculations used to measure if stocks are overvalued. Of course, since they take different approaches to measuring value, they rarely agree 100% with one another.
So when these three metrics do come together to say the same thing, you should take notice.
That’s what is happening right now.
The P/E of the S&P 500 is at a 13-year high. Put simply, prices are vastly exceeding actual earnings. Apparently, traders are buying on sentiment instead of fundamentals; there’s no concern about how much stocks are legitimately worth.
The S&P’s RSI – a measure of the market’s speed and change of price movements – shows that stocks are extremely overbought.
And the market capitalization to GDP again tells us that stocks are overvalued.
Tesla’s Stumble: Is the U.S. Next?
Despite an aggressive accumulation of debt, ongoing losses and a negative P/E, Tesla stocks have steadily climbed higher.
Why are folks ignoring these big red flags? Probably for the same reasons they’ve ignored warnings signs elsewhere in the market: group think, hype, and flawed psychology.
But reality is finally catching up. As investors finally realize the rally has no substance, Tesla shares have dropped in recent weeks. Goldman Sachs has even downgraded Tesla to Sell.
Here’s the scary part: This scenario could just as easily play out again on a much larger scale, with Tesla acting as a proxy for the rest of the market, which is equally overvalued and ripe for a correction.
When the correction for the entire market happens, the consequences will be far more severe.
How You Can Escape the Shell Game
Whether it comes next week, next month or next year, all signs point to a pending market crash. So, if your IRA or 401(k) is full of stocks and mutual funds, you may want to reconsider your options for protecting your savings.
That’s why thousands of Americans have been moving their retirement savings into gold, an asset that will ALWAYS have value.
While you still can: Get a FREE Info Kit on Gold, and the IRS Tax Law to legally move your IRA or 401(k) to precious metals.
Get your no-cost info kit on gold here. There is ZERO cost and ZERO obligation to you – we’ll even pay for shipping.
This comprehensive, 16-page “insider’s” Kit on gold reveals precisely how this IRS Tax Law works, and how you can start moving your IRA or 401(k) as soon as today… without paying any taxes on the transfer. It’s all explained in this free info kit on gold.
Remember, no matter what happens to the U.S. markets, gold is a time-tested and proven way to protect your savings through good times and bad. To get started, click here to get this free info to protect your savings.