The Perils of Shorting: A Real Life Example

Connard said:
I don't know about that. There are plenty of people on r/wallstreetbets that have made an absolute fortune shorting the S&P500 right now.
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I'm sure loads of people made loads of money and equally these people lost loads of money at other times and you don't hear from them.

I've posted on reddit before , its important to remember about forums that there is so many people posting stuff they have no clue about as fact. I try to remind myself of this often . People just post stuff like its gospel , I was a moderator on one large gambling forum and we had constant problems with people "after-timing" , there was endless people turning up with stories of how they are making a fortune . There was a winning screenshots section that was littered with huge wins and you only had to look at what these people where doing to realise that they where in fact clueless and wouldn't be long losing it again. Whenever we ran competitions and people had to post their bets before the off you would see that over the course of a month there was almost nobody probably less than 1% making profits.
There was always the guys that "didn't want to give away their edge " that would be offered to post up a screenshot of net deposits v withdrawals and they would quickly disappear.

And fair play to Colm and Brendan posting Bitcoin and Tesla bets , I've more respect for anyone who posts prior than people that pop up afterwards with the fortunes they made.
 
The rise and rise of Tesla's share price continues - in spite of Musk's best efforts to dampen things down.

Where goes it from here? One thing for sure - it is not accurate to say that Tesla is losing money hand over fist as has been claimed.
 
Hi elacs

I stopped following Tesla when my short position was closed.

Even for a comparatively small stake, the roller coaster ride is very dizzying.

Having said that, I had always planned to short Bitcoin again when it got to $10,000 and it's there now.

Brendan
 
I luv it...…another headline for the Journal.ie

Leading financial commentator is taking a break from the puzzling gyrations of individual stocks and intends turning his speculative focus to the tried & tested relative and comforting calm of cryptos!

[Fair enuff - a wee bit long for a headline!]
 
Now Tesla has hit $1,000!

4689


It's so tempting to short it again.

But I am lucky (again) that I was kicked out before I had reached my limit.

Brendan
 
Hi Brendan,

I'd really love to know what you believe is a fair value range for Tesla and how you arrived at this valuation range.
 
Ah Brendan!

Is that it?...….I had the impression that you were shorting at $300 or maybe $400 coz it was too high and that it was a clear case of where the market had got it wrong?! Is this fair?!
 
Brendan Burgess said:
I don't know.

Musk thought it was overvalued at $780 a few weeks ago.

www.dw.com

Tesla shares fall as Musk says company's stock is overvalued – DW – 05/02/2020

The share price of the US electric-car maker nosedived by around 10% at the end of the trading day after Tesla's CEO tweeted that the company's price was "too high." Elon Musk is also critical of the COVID-19 lockdown.
www.dw.com www.dw.com

Brendan
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Do you really put any stock (pun intended) in what Musk says at this stage? :confused:
 
elacsaplau said:
I had the impression that you were shorting at $300 or maybe $400 coz it was too high and that it was a clear case of where the market had got it wrong?! Is this fair?!
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That is roughly right.

I was clear that it was overvalued. And I have not been shown to be right, yet.

I might prove to be right in the long-run, or it might be worth $1,000 a share.

Brendan
 
Understood - but the question was about your current valuation range and how you arrived at it. [Clearly, it's not a BOHA - we're talking, for the most part about non-BOHA tech!]
 
Hi elacs

I have kept only a half eye on the price since I closed out my short. I haven't really been following developments.

Have there been extraordinary developments in the last few weeks to justify a doubling of the price?

Brendan
 
My dear Brendan,

Word to the wise! I'm the one asking the questions here! As in, I am not the one who claimed that the market had got it majorly wrong in pricing it at 3 or 4 hundred bucks!:)

The real question is therefor whether there has been any extraordinary developments which changes your view that the price was madly overly valued back then? Because if no such extraordinary developments have occurred and you're partial to the odd short, then its current price must be one helluvan opportunity!
 
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Hi elacs

I think you are right. It probably is a helluvan opportunity.

The problem, as I have learnt to my cost, with Tesla is that it could be overvalued for a very long time.

It's not like Bitcoin. Bitcoin is worth nothing. That is very easy to see. Shorting is still risky, but the reward is greater in that it will fall to zero at some stage.

Tesla is worth something. Not sure if that is $200 or $1,000.

Brendan
 
Fair enuff - I'm just kicking the tyres a bit. I accept that cryptos are a strange animal (albeit having been extraordinarily kind to me).
 
As Brendan never actually gave a reason for his valuation of Tesla of $100 to $400 a few months ago it's difficult to update on what has improved to rise that valuation. You could throw in the huge success of Gigga 3 in China, the speed of G4 in Berlin construction, the 3Qs of consecutive profit, the 8billion cash in the bank as most other auto companies debt goes through the roof, the 50% sales growth YoY, SpaceX success, the ever widening gap to the competition, the MY, the 20% MY margin, battery developments, the pipeline ect ect.
 
I gave up ages ago on trying to understand what drives Tesla's share price. The mystery of the Blessed Trinity is in the penny-halfpenny place compared to it. One of the reasons it is impossible to fathom is the blind faith of believers. Facts don't matter. A classic example is
James Kirk said:
the 8billion cash in the bank as most other auto companies debt goes through the roof,
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The reality, as per Tesla's own accounts, is that it is Tesla's debt burden that is going through the roof. It is now $13.8 billion, more than double total 2019 revenues. Volkwagen's debt, by comparison, is less than one year's revenues. Bondholders are wary about lending more, but shareholders aren't so discriminating. They contributed twice as much in 2019 as in 2018. Tesla crowned that achievement in the first quarter of 2020 by taking in another $2.6 billion from suckers -investors, more in one quarter than it got in all of 2019. Every injection of shareholder funds means more mouths to feed when (if?) the company eventually turns the corner. Even then, shareholders will have to wait in line until bond-holders have got their pound of flesh. Good luck to them!
 
Colm Fagan said:
The reality, as per Tesla's own accounts, is that it is Tesla's debt burden that is going through the roof. It is now $13.8 billion, more than double total 2019 revenues.
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Colm you might want to check your facts. Tesla FY19 revenue was $24.6 billion. I think you are mixing Q419 revenue of $7.4 billion with FY. That reverses your comparison with VW but not you opinion I'm sure. As for VW they have grown their debt form ZERO in 2008 to $217billion before covid struck. For what???? As For Tesla, they have used the 13.5 billion to build a unique auto company from ZERO to one of the fastest growing in the world. Tesla has only 2.5billion debt due up to the end of 2023 so not in the least bit a strain on cash flow.

Colm Fagan said:
Tesla crowned that achievement in the first quarter of 2020 by taking in another $2.6 billion from suckers -investors,
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That 2.6 billion was well timed and will be well spent. As for suckers...the loosers are not the INVESTORS in Tesla Colm.
 
I stand corrected on the detail, which doesn't change the fact that Tesla's debt is higher than VW's as a percentage of revenues. Far more importantly, unlike VW, it is failing dismally to generate the profits needed to service its debt. Bankers would consider it a basket case. That's why it keeps presenting the begging bowl to shareholders. It has squeezed additional funds out of them every single year for the last nine years at least, probably for much longer. I thought the purpose of a business was to generate profits for shareholders, not to keep soaking them for additional cash. For how long does a 16-year old company want to be treated as a start-up, and not be expected to be generating positive returns for shareholders by now?
 
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