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).
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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.
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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.
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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.
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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. |
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