The speaker begins by observing the significant surges in Tesla stock (up 8.5%) and SpaceX stock (up over 7%) on the day of recording. He immediately discloses his personal investment, which is overwhelmingly in Tesla (98.69%) with a smaller portion in SpaceX (1.31%), setting the context as a long-term holder of these innovative companies.
He explains that disruptive companies pioneering new industries or technologies inherently carry a high level of uncertainty, which translates into extreme stock market volatility. Wild price swings, both up and down, are expected for such ventures. He proposes a general rule: the greater the uncertainty surrounding a company, the greater the volatility its stock will experience. Conversely, if there's widespread agreement among investors about a company's future, its stock tends to be more stable. Significant differences in opinion regarding future revenue, profits, growth rates, or project success are key drivers of volatility.
The core of the discussion then shifts to what *truly* causes a stock price to move. The speaker firmly debunks the common belief that stock movements are primarily driven by "good news" or "bad news." He asserts that while this explanation might seem intuitive, it is incorrect. The *only* reason a stock's price ever changes on any given day is a "mechanical imbalance between the number of dollars transacting on that stock from buyers and sellers." If more money is flowing in to buy the stock than to sell it, the price rises; the opposite causes a decline. News, he clarifies, does not directly move the price; rather, it might *influence* this buying/selling imbalance. He emphasizes that the daily closing price is simply the cumulative result of all trading activity, not a valuation committee's decision.
While acknowledging that good news can indeed stimulate buying, the speaker introduces a crucial factor: the presence of "deep-pocketed" buyers and sellers who can individually dominate market activity. To illustrate, he uses a hypothetical example: Google, which holds approximately 7% of SpaceX, decides to sell just 1% of its stake (reducing it from 7% to 6%) in a single day. This internal decision, made without any new public news, could dramatically impact SpaceX's stock. Using an AI tool, he estimates that such a sale could plausibly push SpaceX stock down 3% to 8% in a single day, even if all other buying and selling were perfectly balanced. This highlights the immense impact a single large transaction from a major holder can have.
The speaker concludes that any significant percentage movement in a multi-trillion-dollar market capitalization stock indicates "billions and billions and billions of dollars of imbalance between buying and selling." Therefore, the definitive answer to why Tesla and SpaceX surged today is simply "there was an imbalance between buying and selling today in favor of buying." While one can speculate about underlying causes for this imbalance (e.g., news prompting more purchases), determining the exact reason is impossible without surveying every single participant. He candidly states, "I don't know. You don't know. No one knows."
This understanding shapes his investment philosophy: he avoids speculating on short-term stock movements. Instead, he focuses on valuing companies based on their long-term future outcomes, buying when he believes the current price offers a meaningful enough discount to his perceived future value to cover uncertainty. He explicitly states his intention not to sell his Tesla or SpaceX shares.
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