The Perils of Shorting: A Real Life Example

James Kirk said:
We'll see what the call brings but I think it's fair to say the days of a $200 or $300 hare price are well gone.
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Brendan Burgess said:
So it's not "fair to say" that.
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The earnings call was very interesting and you could hear the excitement in Elon's voice as regards the future especially as he talked about batteries and the Cybertruck. The truck has a 3 year order back log to clear when production starts so no issue with demand there. Adam Jonas ask a strange question about integrating a satellite dish into the roof of a car to connect with Starlink.

There was one negative issue. The closing of Giga Shanghai for 10 days because of the flu virus. If it is for only 10 days it wouldn't be so bad but there is no guarantee of that. A Q120 profit was always touch and go. Tesla have almost zero inventory so China would need to produce a minimum of 1000 cars a week to reach the numbers needed for a profit. The 2020 target is "above 500,000". Even without China for a few weeks that target is not under threat. I still think it's fair to say the days of a $200 or $300 share price are well gone. Others are free to think differently.
 
Sunny said:
What I am reading this morning and is also bonkers is the compensation package for Musk
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Musk gets paid ONLY if he reaches certain goals. He was considered bonkers when he did the deal in 2018 because most believed he would never earn a $.

ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com
 
James Kirk said:
The earnings call was very interesting and you could hear the excitement in Elon's voice as regards the future
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So the messiah appeared last night, did any women faint in the front seats overcome by the sight of him?

Fair play though you called it correctly so you are obviously a happy man today. Even though we completely disagree on the future of Tesla and electric cars I think you should not get carried away, if I was you I would be taking some money off the table and invest in something dull and boring.
 
Hi Brendan,

This will probably be a bit rushed - bloody day job!!!!

I am talking about Colm's posts generally. I grant you that many of them are entertaining. He is clearly an intelligent man with a way with words. Their attractive, nay almost seductive, nature will entice the unwitting.

The concern that I have is that AAM should be about promoting good financial behaviour. Chasing needles in haystacks really isn't a good way to invest for the great majority. His admission that passive was the way to go was welcome and a long time coming!. Professional active fund managers do not en masse beat the index. As Gordon, Fella and others have said, it's really not smart for Joe Soap to think that he can outsmart the market - from the bedroom, kitchen, toilet, wherever! The fear that I have is that people will try replicate Colm's unusual style and will get mushed in doing so!

Accordingly, in my view, the articles do not inform how to invest properly. Entertain yes - inform, honestly don't think so!

Anyway, I'm speculating (but not accumulating). I asked Colm a few times previously to explain their purpose. Let's see will he explain his reasons now!
 
I'll keep my peace on Tesla for now, other than to say I found myself in a casino when I thought I was in the stock market. It's been a tough few months, but it could have been worse. I kept my exposure to what I could reasonably afford. That meant closing portions of my short position as the price rose. That pained me, but it limited my losses. As you can see from below, I haven't gone bust!

The main purpose of this post is correct a few mis-statements by others:
elacsaplau said:
At a general level, in my opinion, his (Colm's) writings are disproportionately reward focused. That has always been my concern and in that I remain steadfast.
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On the contrary, unlike most who write about their investments, I have always been very open about my losses. In addition to Tesla, I have also written about losses on Ryanair, WPP, Samsonite, AMP, and Carclo, where I lost over 75% of my investment. Carclo was the subject of my first diary entry back in September 2015. If you don't believe me, you can find past diary entries on my website here.
Fella said:
Colm writes about stocks and he's losing money hand over fist
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Again, completely untrue. I have just looked at my ARF statement for 2019. It's my largest account by far. The administrator (execution only) tells me that the return for the year was 46.5%. For my overall portfolio, including non-ARF investments, spread bet accounts (including Tesla) and cash on deposit, the total return for 2019 was 27.1%.

In the current month (January 2020), up to close of business last night, I earned a positive return on my total portfolio, despite the losses on Tesla in the month.

On a longer term basis, it was easy to calculate the average return on my AMRF for the 8 years 10 months between when I started it in December 2010 and when I folded it into the ARF in 2019 (I had to fold it because of increases in the state pension). There were no cash flows (in or out) in the period, so the return was simply the closing value compared with the amount invested back in 2010. The average return over the entire 8 years 10 months was 13.7% a year.

So much for losing money hand over fist. It also answers @elacsaplau 's point that my writings are disproportionately reward focused. That's because my returns are disproportionately rewards focused. The good returns are because I take a disciplined approach to investment. Implied in my approach is a belief that other investors will act rationally. I've discovered recently however that sometimes they act quite irrationally. That knocks me off balance. It has been a painful discovery, but it's been a learning experience, which I hope to use to my advantage in future.
 
Brendan Burgess said:
What purpose do you need?

They are highly informative and entertaining.
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Thank you, Brendan. I need lots of love today!!!

I have explained many times why I started the diary. It stemmed from my experience with Carclo (mentioned above) back in 2015, where I lost over three-quarters of my investment. I realised that I had bought into a story stock and that the substance didn't match the story. I concluded that I wouldn't have made such a stupid investment if I had tried to explain, say to my wife, who knows nothing about finance, why I decided to invest in it, other than some stranger saying it was a great buy. I vowed never again. I resolved that, in future, I would only invest in something if the numbers stacked up. Of course I've made mistakes but the overall results have justified my approach, as demonstrated in the returns quoted in my post of a few minutes ago.
 

Very good point.
 
Thank you - RichinSpirit

I still have no idea why Colm writes his articles. #406 explains why Colm favours the DIY approach and not why he writes about his DIY approach!
 
elacs

Colm's posts are in a thread with that title. "The Perils of Shorting - a real life example"

Anyone reading them knows the context.

No one could possibly read them thinking that Colm or anyone else is suggesting that the ordinary punter should be shorting Tesla or any other shares.

Brendan
 
My hand over fist reference was a joke based on Tesla comment losing money hand over fist , I guess some things get lost on the internet .
Anyway I wish colm and Brendan all the best this thread has run it's course for me , nothing has swayed me from the idea that shorting is any different to mug punting in the bookies .
Brendan and Colm and me disagree but that's what makes the world great , you learn more from disagreements , I have learned lots from this thread and @Colm Fagan I thank you for your knowledgable posts ,but I don't want to get personal to make a point and Colm and Brendan seem like nice folk so will bow out now at the risk of offending them . It's not nice to lose money and it's admirable colms postings in the face of such losses .
 
RichInSpirit said:
Very good point.
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Its a terrible point! So we are not allowed publish certain things on the internet now? Nothing must be published on this forum in case somebody does something that results in someone getting mushed? Come on! Colm is genuine, I learn alot from other people on this site and it would be a shame lose his contributions. This site is better with this thread than it would be without it.

Its 100% without a doubt a high-risk activity shorting equity. There is nothing in this thread to suggest that this is not the case. If someone gets mushed thats their own fault. Besides, Brendan has his heart broken trying to get people to switch their mortgages and the inertia is mind blowing! I cant see the less-financially savvy going spreadbetting as a result of this!

A discussion of high-risk activity should not be forbidden from this website because it is inherently high risk.
 
CNBC reporting that Tesla short sellers collectively lost over $1 billion in one day as stock skyrockets on earnings.
 
Even the mighty Microsoft which announced blockbuster earnings of 36 billion and profits of 11.6 billion last night only rose 2.5%, its market cap is now not that far ahead of Tesla. Microsoft is still dominant in the tech space all those years later, it does not have the massive expenditure that Tesla has in manufacturing and R and D, yet it can well afford it if needs be.
 
Very interesting thread. I had promised myself to keep an eye on it to see how it develops. I must admit feeling a bit conflicted.

I am very concerned about climate change and urban air pollution and think that EVs can help in this area. I like to see companies in this field grow and prosper. I think that when you short a company, there is a part of you which doesn't fully wish for the company to truly prosper. For example, imagine if the very respected leader of the Free World had some form of Damascene conversion and tweeted that our oil guzzling ways need to dramatically reduce asap. This would be a good thing for humanity, right? Presumably, however, this would just cause an extension to the nightmare for those who short Tesla. Is this reasonable?

The reason for being conflicted is that, at a personal level, I feel for those like Brendan and Colm who have lost money and applaud the fact that they have continued to post.
 
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