Rule du Jour: Rule #73 - Price is in the Present (Patreon)

Investing Rule: “Prices Reflect the Present”

Rule Summary:
The market prices assets based on the present. But to make real money, you must be able to anticipate the future. This principle is at the heart of every successful investment strategy—from value investing to hyper-growth speculation.

As Wayne Gretzky famously said:

“Skate to where the puck is going to be, not where it has been.”

Investing is no different.

I’m emphasizing it today because of the growing confusion around Tesla’s Price-to-Earnings (P/E) ratio. Many investors dismiss Tesla because it looks “expensive” based on today’s earnings. But this approach misses the point.

The P/E ratio is a snapshot of current price divided by trailing earnings. It tells you where the puck is now, not where it's going.

Key Takeaway

Don’t just look at the price.
Look at the path.

• The market discounts the present.

• My edge has always come from anticipating the future. That’s where alpha lives.

I will say one final thing: after doing this for 35 years, the future is coming at us much faster than ever before. Seatbelts!