The lack of anything resembling logic can be a challenge for old-school traders like myself. To play in the hottest running sectors, you have to simply brush fundamental logic aside. Unfortunately, that's not always so simple, especially for anyone that has traded through a bubble or nasty correction that didn't V-shape bounce.
Of course there are fundamental paradigm shifts and radically revaluations that occur in stocks and sectors. We're seeing that with electronic vehicles, albeit a bit overheated, but with many government agencies making the push away from gas-powered motors in the next 5 to 15 years, we have to remember the market is forward-looking and trying to figure out where those prices and the ultimate demand lie. In short, it's still a guessing game, but one fraught with momentum and aggressive traders.
A good way to think about entering that market here is with a poker analogy. Texas Hold 'Em is still a favorite of mine and a well-known game. Let's say you're engaging in a friendly game of no-limit Hold 'Em. While players are able to be the maximum amount of money they have in front of them, it's generally not too common. Maybe you play a casual game with $50. The small blind is 50 cents and the large blind a buck. Like I said, a friendly, casual game. It's the type of game where a $5 bet before you see the flop will raise some eyebrows.
Now, imagine the same game but you don't know anyone else sitting at the table. Let's say there are eight players including yourself. Let's also assume you're accustomed to your friendly game. First hand and two players bet $10 pre-flop. The next hand, and three players bet $20 pre-flop. Hand after that, first player to bet goes all-in. Every pre-flop bet is $10, $20, or all-in. Every time a player loses their entire stack, another one takes their seat and follows the same aggressive betting protocol.
If you're patient, you can play your strongest hands and probably come out in great shape. Unfortunately, you could get blinded to death or knocked out on one unlucky flop as well. In other words, it changes from a friendly, casual game to one of high risk and high reward.
That's where we are now, specifically in the electronic vehicle market.
Look, there's no logical reason why Electrameccanica Vehicles (SOLO) should be approaching a $1 billion market cap. The company has no sales. The deliveries it has planned are directed at promotional activities to hopefully generate more interest and actual sales in the future. But fundamentals don't matter here. Traders are pushing their chips all-in pre-flop.
That's just one example. You can go down a whole list of names now at $500 million to $1 billion+ market caps that should be pounding this market with offerings to shore up balance sheets that are doing nothing but bleeding cash and fighting over the few scraps of sales that can be had or hope to be hand once a product is actually developed.
Right now, I'll fold and wait for better hold cards.