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Daily Brief - The $1 trillion club's new member: TSLA (Oct 27, 2021)

The endearing meme below embodies a key aspect of any prolonged bull market: the ability of the bull to fuel itself.

The meme comes from r/WallStreetBets and tells an accurate story of market reflexivity:


One year ago retail traders ganged up to propel Hertz higher, thus ensuring the company’s continuity throughout the lockdown. One day ago, Hertz placed an order for 100,000 Teslas at full retail price, propellingTSLA into the $1 trillion club*.


You can make what you will of TSLA’s valuation and compare their tiny production numbers to Toyota, the underlying fact remains: liquidity begets liquidity.


George Soros popularized the term “reflexivity” to show how markets impact the real economy and vice versa. In the Age of Abundant Liquidity, strong capital markets enable positive economic outcomes that then propel the capital markets even further up.


With the Fed planning to maintain a steady (albeit lower) flow of liquidity, it seems that the musical chairs dance will continue for a while longer.


Cue


* along with Apple, Amazon, Microsoft, Google, Facebook - and PetroChina.