Chicken Little is embarrassed

Chicken Little admits to shorting Tesla at $364

It is embarrassing to short Tesla because it is among the most shorted stocks in the world. So with all my alleged financial sophistication, wisdom, training, and ability, I come up with the most obvious position in the world. And my super bowl pick - The New England Patriots (kidding on this one -- I pick Tom Brady for the Senior Bowl). 

Shorting TSLA is consensus, and consensus usually fails

Why short Tesla when it is so obvious? First, let me report that I do not agree with the most common reasons to short Tesla. 

Incorrect Bear reason #1 - production difficulties. 

Tesla bears frequently recount horrors from inside the factory. Reworked parts, late nights, etc. These may all be true, but making cars in high volume is a solved problem. The world is very good at making cars. 

Making a lot of cars is easy

Incorrect Bear reason #2 - Car quality. 

I believe that Tesla makes the best electric car, for most people, in the world. They seem great to me, and I would consider buying one. Especially if I could drive in the carpool lane in California. 

Teslas are awesome (even the Mercedes Teslas)

So if Tesla will make an enormous number of awesome vehicles, why short the stock? The explanation is that Tesla lines up terribly with the macro trends that I predict. I see a deflationary depression where people hold on to their cars longer, where financial conditions tighten, and where gas price stay low. 

In the depression TSLA will sell neither cars nor stock

The problem for Tesla is not making great cars in high volume. It is raising the capital to make those cars, and selling cars into a frugal environment. 

Attribute	Hurts	TESLA impact
Poverty & Thriftiness	Durables and Luxury goods	people defer buying cars, buy inexpensive cars
Tight financial conditions	Firms that need to raise money	Tough to sell more equity
Bear Market	Firms with Frothy Valuations	Valuations will come down for all firms, more for high-flyers like Tesla
Deflation including lower oil prices	electric car manufacturers	Removes the gas prices incentive to buy electric cars
Debt Crisis	Debtors	Tesla has a lot of debt, will find it hard to refinance, and hard to service existing debt.
Government deficits will rise	Any entity receiving subsidies	Tesla subsidy from Governments already on its way out.

Attribute

Hurts

TESLA impact

Poverty & Thriftiness

Durables and Luxury goods

people defer buying cars, buy inexpensive cars

Tight financial conditions

Firms that need to raise money

Tough to sell more equity

Bear Market

Firms with Frothy Valuations

Valuations will come down for all firms, more for high-flyers like Tesla

Deflation including lower oil prices

electric car manufacturers

Removes the gas prices incentive to buy electric cars

Debt Crisis

Debtors

Tesla has a lot of debt, will find it hard to refinance, and hard to service existing debt. 

Government deficits will rise

Any entity receiving subsidies

Tesla subsidy from Governments already on its way out.