Are we in a “green” bubble?

In today’s Exponential Investor…

  • Straw rant
  • Tesla rant
  • Disco rant

I was driving home in the car last Thursday with my wife. We’d just been at an appointment and decided on the way home to grab a “cheeky McDonald’s”.

The drive-thru was surprisingly empty. I was expecting during lockdown, because no one can go into “Macca’s” itself, the drive-thru was going to have a lengthy queue.

It didn’t. That meant we were able to speed through and I was able to spout out my usual “McDonald’s Tourette’s” where I uncontrollably shout out “… and two cheeseburgers” at the end of every order.

We parked up as they had to prepare the order. As they walked it over and passed it to me via a tray through the car window, we checked the order then got on our way. As we began to drive and I began to consume my drink, I bemoaned to my wife (once again) about how infuriating paper straws were.

If you’re like us and are inclined to grab a “cheeky Macca’s” from time to time, then you’ll know what I mean. The paper straw used to be the root of many jokes. Jokes such as, “as useless as a flyscreen on a submarine” or “as useless as an ashtray on a motorbike”.

Except now, the paper straw is a bizarre reflection of the weird world we live in.

The most infuriating part about the McDonald’s paper straw however is the fact they still have plastic lids on the drinks. My argument – which I have presented to McDonald’s before:

Source: Sam Volkering, on Twitter

According to McDonald’s, the “paper straw meets all performance standards”, which leads me to believe its performance standards are very low…

Nonetheless, a simple switch to paper lids and plastic straws surely isn’t going to end the Earth? Or is it?

As I went off on my little rant in the car ride home, I suggested to my wife that I was going to create a new fast-food chain.

I would call it “Greta Burga” and my burgers would be made from as many fart-producing cows as possible, packaged in the classic polystyrene containers, my straws, cups and lids would all be dense, oil-consuming plastic and our restaurants would all be powered by brown coal.

She told me to shut up.

Model 3 rage

I did promptly shut up about my “futuristic” fast-food restaurant idea. That is, until we were driving past our local Covid-19 testing centre and a car coming out of the centre almost t-boned us out of existence (paper straws and all).

What got my goat this time wasn’t just the fact some imbecile almost killed us, but they were also driving a Tesla Model 3.

Let’s just say after my plastic straw melt-down this wasn’t good timing for the “green” economy growing around us.

I then proceeded to bore my wife for the rest of the journey home about the insanity around the valuation of Tesla stock. And that, “it doesn’t matter how green or fancy or expensive your Tesla is, if you’re still a bottom-feeder behind the wheel, you’ll always be a bottom-feeder.”

Again she promptly told me to shut up.

Later that day Tesla’s stock price rose 7.94% in trading to close with a market capitalisation of $773.5 billion dollars and Elon Musk became the richest person on the planet (that we know of).

Not that long ago, I suggested to a colleague I would run up the stairs of the Bank of England nude if Tesla became a $1 trillion company.

I’m now slightly worried about that.

But at the same time, I can’t help but look at Tesla, look at the entire green energy sector and ask a very relevant and important question. A question that’s been playing on my mind for a little while now…

Are we in the midst of a “green” bubble?

I’m very happy for people that are making money from green energy stocks right now. In fact, they are clearly one of the best-performing, most exciting areas of stocks you can invest in.

I’ve recommended ones that have done well. My co-editor here at Exponential Investor, Kit Winder, along with James Allen have recommended even more in their energy specific advisory, Exponential Energy Fortunes (they actually had 17 from 17 winners with their picks in 2020).

Being able to identify massive trends, moving ahead of the market and building wealth through these plays is not an easy task.

I think it’s important to recognise there is indeed a fundamental shift in green technologies and how they’re going to apply to our future world.

It is something that will be around for a very long time and something that will become a part of everyday life.

However, that doesn’t mean the market isn’t peaking. It doesn’t mean we shouldn’t be asking this question.

Preparing for the disco to end

When everyone is dancing at the party, you also need to consider what happens if the lights come on, the music stops and it’s time to go home.

When you’ve seen big tech trends build momentum, build excitement, explode, peak, trough and then go about the “long game” you can’t help but see a similar pattern here.

That doesn’t mean if this is a bubble, that it’s all worth zero.

There’s no doubt in my mind there are a lot of companies out there that long term will be critical to our energy, our connected technologies, how we move about, transact and participate in global trade and commerce.

But at the same time it does also appear that a lot of the market is white hot, overpriced and frankly, in bubble territory.

The thing about bubbles is there’s always good money to be made on the way up. And when it seems like the only way is up, then you need to be asking this very hard question.

Ask yourself, can you wear a 30%, 40%, 80% clip on values now and still be comfortable in these positions? Or is it prudent to clip some profits and make sure that you reward yourself for some great calls?

Markets will jump on and off big trends. And no trends ever go up in a straight line. Many big changing trends go through great periods of consolidation and sometimes years languishing far from their peaks.

That doesn’t mean it’s all a write-off or there’s not something there. But you still need to ask and consider that perhaps there is a green bubble. Either way, there will still be money to made if it’s not yet found its peak. But if it has, you also need to be prepared for what may come next.

Regards,

Sam Volkering
Editor, Exponential Investor

Category: Technology

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