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The conversation explores the market valuation discrepancies between legacy energy companies like Valero and renewable energy firms like LONGi, focusing on stock price volatility, Tobins Q ratios, and the economic implications of technological advancements in batteries and solar energy. It highlights the structural challenges faced by traditional industries due to rapid shifts toward electric vehicles and renewable energy, questioning the rationality of current market valuations.
We also discuss the wild swings between the price in 2018 of Valero at 120 with the price in 2020 at 40 USD and now at 422. As usual the market confuses the circumstantial elements with structural elements putting way too much weight on “the news” and putting too much weight on the present without looking at the structural issues.
In fact Valero and LONGi are not only at the opposite spectrum of who is going to be powering transportation in the future but ALSO have an opposite set of circumstantial elements (the present) versus structural elements (the likely path in the future given the evolution of costs)