The Perils of Shorting: A Real Life Example

WhiteCoat said:
I feel for those like Brendan and Colm who have lost money
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Hi White Coat

I am up on Tesla? I made money on the first short I did which I had to close out of in November. I am down on the current short but not by as much as I made on the first one.

While Colm is down overall on Tesla, it's part of a portfolio which is doing well.

I am not losing any sleep over it so no one else should lose sleep over me.

By the way, I would love to see Tesla survive. I just want to see the price fall to its fair value. A manic bubble in the share price is not good for the company in the long-term.

Brendan
 
Peter Brown was discussing Tesla on newstalk business yesterday , in my opinion he is one of the best analysts in ireland. He described Tesla as a cult even if the stock goes to zero some people will not sell it because they want to identify with the story behind Tesla. He also said that alot of the financial guys have been shorting Tesla because the financials and stock price are completely out of whack but so far they have been losing alot of money. I think the whole "greta thurnberg" phenomena and the ratcheting up of this story in the media is obviously benefiting Tesla alot
 
Apologies Brendan,

The consequences of trying to speed read!

I am convinced what I said about shorting is true. Your point may be independently valid - personally, I am not so sure.
 
WhiteCoat said:
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?
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I think it is a stretch to associate your values with the market or to a stock or to associate someone elses values with their market purchases. It would be too far IMO to say you "dont want the company to prosper". All shorting is, is a statement to say that this company is overvalued at this point in time. I dont feel like you can extrapolate that to say that the company dosent reflect your values or that you dont want it to succeed. For example, I would share your view on climate change but should I short the oil majors because I dont want them to prosper? The market is a popularity contest. If you share a company's values you could buy their product or not, as the case may be. That would make more of a statement than buying the stock.
 
Well this thread certainly is dividing opinions.

Each share has a price based on the consensus market expectation. In reality, the company will perform better than, in line with or worse than this consensus view. I would have thought that most people when they buy a share hope that things go well for that company and when you short sell a company, you are quite relaxed if the company encounters the odd hiccup or worse. It seems to me that this is what WhiteCoat is saying and seems perfectly reasonable to me.

The idea that it's a bit of a stretch that some people would seek to have their investments aligned (within reason) to their values now also presents. This is news to me and presumably also to the many companies that market socially responsible investments.
 
elacsaplau said:
The idea that it's a bit of a stretch that some people would seek to have their investments aligned (within reason) to their values now also presents. This is news to me and presumably also to the many companies that market socially responsible investments.
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Its definitely happening that people are buying stocks based on their values, colm fagan referred to this himself. When you have a large number of stocks that people and funds wont invest in today, then they have obviously reduced the number of stocks that they can invest in, Tesla is at the top of this pile. It is a very easy strategy to follow now that we are in a bull market driven by tech stocks, so you are making money aswell. But all trends end especially if there is a blow up in the tech space like in 2001
 
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Cam across this quote from Musk from the earnings last week when asked about the negativity of analysts...

"I do think that a lot of retail investors actually have a deeper and more accurate insights than many of the big institutional investors and certainly a better insight than many of the analysts,” he said. “It seems like if people really looked at...what some of the smart — smaller retail investors predicted about the future of Tesla...you’d probably get the highest accuracy and remarkable insight from some of those predictions.”

So the CEO is saying that retail investors have a better understanding of his company than professional institutional investors......There are going to be people very burnt on this stock.....
 
Sunny said:
So the CEO is saying that retail investors have a better understanding of his company than professional institutional investors..
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In general, institutional investors are pretty useless at identifying overpriced or underpriced shares. So I don't think that they have either a better or worse understanding.

However, when a share is subject to mania, do the institutional investors evaluate it better? Maybe they do. I don't know.

Brendan
 
Sunny said:
There are going to be people very burnt on this stock.....
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Interesting post, Sunny

One of the points that I have consistently tried to make is that concentrated portfolios can create additional, unrewarded risks.

For a happier investment life, it's best to avoid the potential of getting "very burnt" - one's call might be flat wrong or just at the wrong time. Again, as I have said, Brendan's limited exposure and stop-loss is completely reasonable. The majority of people taking large bets will sooner or later encounter challenging market conditions!
 
Brendan Burgess said:
In general, institutional investors are pretty useless at identifying overpriced or underpriced shares. So I don't think that they have either a better or worse understanding.

However, when a share is subject to mania, do the institutional investors evaluate it better? Maybe they do. I don't know.

Brendan
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Has nothing to do with the share price per se Brendan. He is saying that the man on the street has a much better understanding of his company than professional investors. I am sorry but that it is rubbish. The retail investor is not buying the stock because he has some deeper understanding of the company that the professionals don't get. He is buying the stock because he believes or wants to believe in the story that Musk is telling. Nothing wrong with that either. But if Musk can't get those professional institutional investors to believe the same story, then there is a problem. At the moment, there are plenty of those investors giving them the benefit of the doubt but that won't last.

Even looking at their Q4 figures and it looks like they are still losing money from selling cars. They are still losing money from solar power. They are still losing money from servicing. The only reason they got to announce a 'profit' was from selling emission credits. 8 months ago, the company was laying off 7% of it's workforce. It was facing a cash flow crisis. It claimed it would sell 500,000 cars in both 2018 and 2019. Now they are saying it will be 2020. They are saying they will be profitable each quarter apart from those quarters when they are launching a new product. And yet the share price goes up double digits and people talk about it being game changing. By all accounts, there isn't much evidence of short sellers closing positions despite the huge losses they would be seeing which means that the there are increasing number of people believing in the story...

There will be tons of academic research on this company in years to come one way or another.
 
Just passed $715. Even I admit this is getting silly now. I had expected levels like this , but not until the Y , Semi and Cybertruck are in full production.
 
Sunny said:
Cam across this quote from Musk from the earnings last week when asked about the negativity of analysts...

"I do think that a lot of retail investors actually have a deeper and more accurate insights than many of the big institutional investors and certainly a better insight than many of the analysts,” he said. “It seems like if people really looked at...what some of the smart — smaller retail investors predicted about the future of Tesla...you’d probably get the highest accuracy and remarkable insight from some of those predictions.”

So the CEO is saying that retail investors have a better understanding of his company than professional institutional investors......There are going to be people very burnt on this stock.....
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Just a little troll from Musk :) he knows the big shorters are getting ruined
 
It's crazy , one or my smallest holdings in my portfolio, how I wish I put more in now .

This must be costing the shorters some amount of money , wonder how long Colm will stay in , it's interesting psychologically getting out now for someone like Colm who firmly believes it's overvalued like if it was a good short at 300 it's an amazing short at 700 how do you bring yourself to pay 700 for something you think is worth 200 or so.

I think this thread will be famous in a few years when Tesla is at 3000+ we will look back and say remember it was shorted at 200 as a good bet . I could be wrong but I think the same with Bitcoin I don't think it's done yet could also hit 30k+ over next 5-10 years , the exact path of these I don't know but I don't see either going anywhere soon.
 
In fairness to @Colm Fagan its hard to disagree with him that the price is moving for any particular reason , unless the shorts have been holding it back and there is a massive squeeze now .
 
This share has now lost all sense of reality. 16% up in a day because some little known research house raised its price target on the back of Q4 results that simply beat wall street expectations.

I can hear the bells in the SEC going off from here.........
 
I won't be selling for a couple of years yet so I would much prefer if the sp was at $500 now and grow from there with the company. Mad jumps of $50 and $100 in a day is crazy for any stock. Bullish as I am on Tesla this has the potential to end very badly for new bulls and old bears.
 
Brendan Burgess said:
In general, institutional investors are pretty useless at identifying overpriced or underpriced shares. So I don't think that they have either a better or worse understanding.

However, when a share is subject to mania, do the institutional investors evaluate it better? Maybe they do. I don't know.

Brendan
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Ah Brendan, come on...that is an outrageous comment
 
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