IN THE LAND OF SMOKEY MIRRORS, RATIONAL THOUGHT IS A RARE COMMODITY.

By Peter M. DeLorenzo

Detroit. On the eve of the New York International Auto Show, where real people actually pay real money to see cars and trucks of all stripes, from economy champions and electric wonders, to over-the-top, blue-sky luxury machines made out of unobtanium (see this week’s “On The Table” for more coverage from New York – WG), an intense buzz is threatening to swallow the show – and this industry – whole.

And this buzz revolves around the fact that the valuation of Tesla, the maker of electric vehicles that has rarely – as in never – made money being in the business of making cars, now has a market capitalization of $50.9 billion, which is $64 million more than General Motors.

As David Welch pointed out in his excellent piece for Bloomberg, “GM expects to earn more than $9 billion this year and analysts predict Ford will generate adjusted profit of about $6.3 billion. On that basis, Tesla is expected to lose more than $950 million.”

Read that back again slowly. And no, that’s not all, it gets even worse than that. Welch goes on to quote Alexander Potter, an analyst at Piper Jaffray Cos., who said the following: “Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies can’t replicate.”

Wait a minute, is this is a financial analyst talking, or one of Elon Musk’s unpaid shills who dot the landscape and crawl out of the woodwork wielding pitchforks the moment someone has the temerity to slam their esteemed leader for his smoke-and-mirrors act? Well, both actually. Yes, Potter is not only an analyst who upgraded the stock on Monday, but also an analyst who has owned a Tesla for seven months and who added, “As they scramble to catch up, we think Tesla’s competitors only make themselves appear more desperate.”

Catch up to what, exactly? Remember, folks, we’re talking about a car company that sold around 80,000 vehicles last year. For the record, GM sold more than 10 million. In the immortal words of Vince Lombardi, “What the hell’s going on out here?!?!”

If you’ve wondered why Tesla continues to be the darling of certain factions on Wall Street, against all rational measures of evaluation, I might add, you only have to re-read Potter’s telling quote to understand the madness. The valuation has nothing to do with any rational measure or reasoned perspective, it’s the Silicon Valley True Believers populating Wall Street who are completely intoxicated by the vapor trail left by the Muskian Vision of bunny rabbits and rainbows being propelled across the sky.

In other words, the Wall Street analysts buying into Tesla have veered off into the land of Cray-Cray, where the sky is bluer and the grass is greener, and The Future will be forged by the visionary brilliance of Elon Musk, and all of those dirty, nasty – and old – smokestack car companies that form the industrial fabric of this nation will be relegated to the scrap heap once and for all, replaced by clean, incandescent factories made up of equal parts magic and group hugs.

When you really think about it, analysts like Potter are simply sucking gas generated from the Silicon Valley VC think tanks dotting the Shiny Happy landscape, where betting on the come is a way of life and what could happen is far more important than what actually is happening.

The fact that Tesla doesn’t make money and Musk has promised that the new Model 3 will go from 0 to 500,000 cars next year – when they’ve repeatedly proven that they can barely build the cars they’re pushing out now – is inconsequential to Potter and others of his ilk. In fact Potter wasn’t through, oh no. Welch managed to get one more quote out of him that pretty much covers the depth and breadth of the mass stupidity going on. “Tesla’s products have a captivating impact on consumers and shareholders alike; this advantage will be difficult to replicate,” Potter continued. “Even if the Model 3 production launch goes badly, we think customers (and more importantly shareholders) will withhold judgment.”

All together now, WTF? Can you imagine if Mary Barra got up in front of the assembled media and said, “Even if the launch of our (insert vehicle here) goes badly, we think our customers and more importantly our shareholders will withhold judgment.” Can you imagine the hue and cry that would be unleashed on GM – and her – for that? It would be an unprecedented takedown of monumental proportions.

The sad thing in all of this? Analysts like Potter aren’t alone. There are hordes of analysts out there who are in lockstep with his thinking, who are totally sucked in to the cult of Elon Musk, and who, when given the option, would sign up for a custom-made, titanium-coated candlestick made out of shit as long as it had Musk’s “visionary” stamp of approval.

I am embarrassed for these people. They’re misguided and pathetic, and they spend far too much time talking to themselves in the mirror every morning basking in their own brilliance. But these are the same people who have “projected” Tesla into the stratosphere and, as I said, what could happen is far more important than what actually is happening. Is this any way to valuate a car company? In this day and age it’s perfectly acceptable, apparently, which is a giant bowl of Not Good.

So now you know. The next time you read about Tesla blowing by a car company in terms of valuation – the next company in Tesla’s crosshairs? Honda – remember this: car companies don’t run on conjecture. Or projections. Or “blue-sky dreams” and “what ifs?” Or delusional analysts who have been sucked in to the Muskian Maelstrom.

No, car companies run on long-term investments, intense cash flow, and focused consistency in design, engineering, technology and the ability to build and execute vehicles with high levels of efficiency, quality and fundamental appeal.

I know this perspective isn’t going to be popular in the Land of Smokey Mirrors, but too bad. Reality sucks sometimes, so get over it.

And that’s the High-Octane Truth for this week.