There was a telling sentence in Tesla founder Elon Musk's letter to his staff discussing the possibility that the electric-car maker might leave the public stockmarket. If it did, he said, it wouldn't necessarily be forever: the firm could return once it has entered a "phase of slower, more predictable growth" for which you can probably read, once its private backers have enjoyed its major growth phase, extracted all the cash they can, and found the right point in the market cycle to sell it back to ordinary punters at a price that extrapolates past growth for ever and will eventually seem insane in retrospect.
The key thing to note is that while it's fun to think that everything Musk does is exciting and new, this just isn't. The number of interesting companies listed on developed stockmarkets is falling and in particular the number of exciting growth companies listed is falling. That means that ordinary investors don't get access to their growth, which has long-term implications for the returns to our equity portfolios (the ones our financial futures depend on); for wealth inequality; and by extension, for the future of capitalism.
There is already a strong feeling that the fruits of capitalism return more to the already rich (those who have the wherewithal to invest outside the normal routes) than the little bit rich. Without active equity markets, that will fast become more a truth than a feeling.
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It is not, however, insoluble. Right now, being private looks more attractive than being public: there's plenty of cash and a lot less scrutiny. The answer, then, is to make being public more attractive. How? Not by cutting back on the scrutiny and transparency, but perhaps with incentives for owners to want firms to be listed.
You could give listed companies a lower rate of corporation tax during the growth years; allow listed firms preferential rates for offsetting capital expenditure costs; or allow them to offset more debt interest than off-market firms. I'm not entirely certain what would work best. I am entirely certain that a strong ordinary shareholder base is a core pillar of capitalism; that allowing it to be eroded will lead to disaster; and that we need to have this conversation sharpish.
Back to Tesla. Should you buy while you still can, or should you go short? Scottish Mortgage manager James Anderson has been clear that, in his view, $420 a share hugely undervalues Tesla. He may be right in the very long term, of course. Shorter term we aren't so sure. In this week's issue, Matthew Partridge gives his view on this and there's also a wider view from John Stepek on when and why to sell shares.
Finally, back to me. Our Adam Smith-themed show, The Butcher, the Brewer, the Baker and Merryn Somerset Webb, at the Edinburgh Festival Fringe, started this week. Tickets are selling fast get yours here. And if you want to know more about Tesla, note that James Anderson is on stage with me on the 23 August.
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Smaller companies: starting to turn?The long-awaited turnaround in smaller companies is unlikely to happen just because shares are lowly-valued. However, an improving economic and interest rate backdrop could spark renewed interest in the sector. M&A activity is also providing support for the smaller companies sector
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What does conflict in the middle east mean for oil prices and the economy?Tensions in the middle east escalated over the weekend with Iran’s drone and missile strike on Israel – but oil prices fell lower on Monday morning. What’s next for inflation and the economy?
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Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
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How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
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Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
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The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
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The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
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Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
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Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
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Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
