Ford vs Snapchat
The market is irrational, but it's no excuse to be delusional.
I’ve quit day trading, long ago. On the top, as the glorious GME days were winding down. My portfolio looks as bad as anyone else’s though, but that’s okay, it’s money that I don’t need, in very conservative stocks, companies that should only fail if our very civilization fails (a financial Pascal’s wager). No memes, no NFTs1, no crypto.
Early in 2021, Snapchat’s (SNAP) market capitalization hit $100 billion. Meanwhile, Ford’s (F) market cap was $50 billion. Hungary’s annual GDP was $150-$180 billion. Yes, these are different metrics, but they are all in dollars, so I’m comparing them, try and stop me.
Back in 2021, I asked American day trading anons about the — seemingly — irrational valuation of Snapchat; to me, it was just a dinky app with plenty of competitors. I didn’t know anyone who had used it since 2015. I honestly thought it had long been dead.
Yet it was valued twice as high as a giant, American car manufacturer. How was this so? A simple, naive, yet — to me — crucial question.
I received plenty of explanation for this discrepancy: Ford is actually worthless, as it’s weigh down by all the real stuff they have: plants, employees, a century of know-how. Physical stuff. Snapchat is nimble, and it’s tech. It’s the future n shiet. Never mind it had a revenue that would be a rounding error compared to Ford’s. Ford has expenses, has humans who weigh it down, that’s why it’s so worthless. Snapchat is tech, don’t you get it? Unfortunately, I was also “in tech”, had been “in tech” for all my life, so it made no sense to me that a stupid fucking photo sharing app should be a no brainer investment at this price.
I was alone. No one argued for my position, the position that this valuation is insanely anomalous. I was alone, in a sea of “advisors”, all trying to convince me that a stupid fucking photo sharing app, that’s not even selling anything intangible, let alone tangible, is somehow worths twice as much as a giant car manufacturer. The latter, demonstrably, too big and important to fail for the US government (aka. the global hegemon), thus being a safer investment; unlike a stupid fucking photo sharing app, that can be wiped out by next Monday (by a single terminal command), and the world would just move on.
As of January 2023 Ford has a market cap of $51.14 Billion.
As of January 2023 Snap has a market cap of $15.80 Billion.
Ford had ups and downs, but it’s pretty much where it was in early 2021, as of this post.
Snapchat’s price has collapsed since. It did despite their ever-increasing revenue:
Revenue from what? I wouldn’t fucking know. Do you know anyone who uses Snapchat? If so, what do they pay for? It shows you ads? Is that the excuse that allows experts to handwave the very important question away: “what the fuck is this stupid fucking photo sharing app is even selling”?
How come it still worths 15 thousand million dollars? I guess it has users, and that number is multiplied by a dollar value, and it suddenly makes sense, dummy. Never mind that by next Monday we — potential investors — might get the news that 95% of Snapchat’s users turn out to be bots, click farmers, or just cooked up by the management. Or that the dollar value, used in the multiplication by the active users, had to be adjusted to 1/4th of the previous one, for reasons.
No, no, no and no. I was stubbornly sticking to my position, and now, in 2023, when speculative money is running away from the market, clarity is returning with vengeance. I guess if I asked the same experts today about the fall of Snapchat, from $100 billion to $15 billion, while Ford stayed, well, Ford, I’d get some rationalization — totally different from the 2021 one, although similarly in unison.
When, earlier last year, NFTs became the craze, a no brainer, I stayed away. The proposition, to me, looked ridiculous. I never touched crypto, as it seemed absolutely irrational. To be fair, the day trading “experts” above also treated the market as, fundamentally, gambling, they recognized a level of inherent irrationality, but they still had the illusion that they understood it enough to buy low and sell high.
I looked at Snapchat being valued twice as high as Ford, got no satisfactory answer for this discrepancy from the investor community, so I left them behind, forever disillusioned.
I did ask the day trader anons if they themselves, or anyone they know use Snapchat? I got *crickets*. But it was easily and collectively dismissed by them: anecdotal evidence — or lack thereof — is irrelevant.
Yet the very same people would tell you the Wall Street (adjacent) advice that it’s too late to invest in a stock if even the cab drivers are recommending it. So, apparently, perceptible popularity does matter on the market. Snapchat, the product, the platform, had none.
Ford is Ford. Yes, the market can behave crazy, it can stay irrational for long, but it won’t stay irrational forever. If you ever thought that SNAP — a stupid fucking photo sharing app that’s not even selling anything — is worth $100 thousand million dollars, you were delusional, you were so delusional that you probably stayed delusional throughout 2021 and 2022, and you probably lost a ton of money on meme stocks, shitcoins and monkey GIFs (is that what an NFT is? I don’t care but please do leave a comment), and by stubbornly sticking to your guns in early 2021 about the “totally no brainer buy“ nature of SNAP versus Ford, making me realize that the day trader community is completely delusional, you saved me a lot of money.
I will forever be in your debt.
Do you know what a blockchain is? I used to understand it, once, long ago, took me some effort to wrap my head around the concept. Forgot since, space inside my head is way to precious for retaining such crap. I have a bachelor’s in comp sci which is 80% math.
Guess my opinion about fintech influencers.