“Knowing that something could be bad for you is not always a barrier when temptation rears its head.”
(Wolf here, at the risk of sounding like a broken record: No matter how logical and well-researched the reasons, tread carefully when shorting crazy, irrationally priced stocks; by definition, they can get a lot crazier and a lot more irrational. Enjoy the read…)
By Martin Tiller, Oil & Energy Insider:
For me, shorting Tesla (TSLA) is like crack or heroin for some people…I know it is dangerous and I really shouldn’t do it, but at times the urge overtakes me and I lose all power of resistance. I rationalize it by telling myself that this will be the last time, and that it won’t be for long. This is one of those times.
Firstly, just look at that chart! If that pattern of roaring up, dropping and then stalling when trying to resume the upward move doesn’t scream “sell me!” to you, then you aren’t listening. Appealing as that visual is though, it was just confirmation for me that now was a good time to indulge myself. The real reasons lie in something probably not all that familiar to addicts of other kinds, logic.
First and foremost, there is the belief that stocks in general look vulnerable. The good economic news and strong earnings season are now fully priced in, and what is left is a lot of fear about an unstable geopolitical situation and confusion about the possible political implications of a Republican President who now looks more at home with Democratic leaders than he ever has with those in his own party.
I don’t have a crystal ball, so cannot accurately say what will cause a nervous drop, but from a fully valued position that looks more likely than another surge, especially to those who are following the drop in both Treasury yields and the dollar.
In the past, that wouldn’t have mattered to Tesla followers, but that is no longer true. Combine the first chart with the one above for the S&P 500 and it is clear that TSLA, once a stock notorious for having absolutely no correlation to anything other than the words uttered by Elon Musk, has become an exaggerated follower of market trends. If the more pessimistic view evident in other markets takes hold in stocks, a short, sharp drop looks likely.
There are also some company specific factors that have some observers worried. I have said in the past that some of the things that would be a concern for most stocks are perceived as positives by TSLA buyers, but when they start to pile up they still can have an effect. Borrowing more money as Tesla recently did may be a better option for stockholders than raising capital by issuing more stock, but it does indicate that cash flow is still an issue, and that view is confirmed by another worrying trend.
As Bill Maurer at Seeking Alpha points out in this article, Tesla has seen a rapid rise in inventory over the last few months. There are several possible reasons for that laid out in the piece, but none of them are encouraging for the stock’s short- term prospects. Maurer’s conclusion that the surge in inventory looks like a major contributing factor to the large discounts on Teslas that he noticed will cause some concern. Margin squeezes are bad enough for traditional, high volume car manufacturers, but for a relatively low volume producer with cash flow issues they are an even bigger problem.
There are then some sound reasons for believing that TSLA is about to correct downwards. I cannot stress enough though that selling the stock short, either directly or through an options trade, is always a risky play given TSLA’s logic defying history and the undeniable long-term potential of the company. Still, knowing that something could be bad for you is not always a barrier when temptation rears its head, and right now looks like a good time for one more hit… By Martin Tiller, Oil & Energy Insider
Alas, the bloodletting among Tesla shorts has become legendary. Read… 4 Short Sellers Explain Why They Target Tesla – But Don’t Try to Do this at Home
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Buy puts and have a pre fixed amount that can be lost. It is safer to buy fewer deep in the money puts than many out of the money puts. Let Tesla announce that they are taking deposits on their truck. The stock may then run up to either a double top or a higher head formation…then by your puts.
Short Tesla, Long Toyota.
Price/Sales: 0.68
Price/Book: 1.06
PEG: 0.46
P/E: 10.09
Div. Yield: 3.25%
And they makes cars that are much more affordable than Tesla.
Yeah, the Japanese stock market has a whole bunch really reasonably priced companies with good yields.
Toyota also has a big pile of cash sitting on the books. The share price has done quite well since around 2012.
IMO TESLA myth is based 100% on hype – maybe it will work in the short term, but one of these days people may actually wake up and see the reality not only with this company but all the others in the same universe: overvalued, hyped, and not worth 1/10th of what the shares are selling for.
If you want to see how the TESLA hype has affected some company’s shares prices in Japan look at the following article:
https://www.japantimes.co.jp/news/2017/08/30/business/corporate-business/elon-musks-battery-demand-boom-lifts-japans-tanaka-chemical/
And TESLA in South Australia:
http://www.news.com.au/technology/innovation/inventions/everything-you-need-to-know-about-teslas-battery-in-south-australia/news-story/a989f74cfccb8a1211de83f5becc60ed
Try something new…. Toxxx took their customers for granted when it came to quality.
As a pair trade this makes great sense in a down market. If the market zooms higher it’s a face ripper.
if you want to do a long-short on a risk-adjusted basis—mid-term IV for TSLA is 40-ish and guessing IV for TM is 10-ish (too lazy to look up).
So for everyone $1 long TM, short 25c to 30c of TSLA or buy the equvialent amount of 2019-jan TSLA puts. unless you got a high conviction.
After a week long power outage from Irma or a Northeat Ice storm how appealing will it be to own a Tesla? It’s a short except that Tesla is a nice pet government project and favorite of the man made global warming cabel that timing when it will finally collapse becomes impossible….it’s stock price is being supported by faith and hot air and not basic common sense.
Hmm if one has a suitable multi fuel generator (or generators).should be better to have a slow.charging ev l, you can always plug it into a home wind turbine (which can be quickly deployed from safe storage, you can always use it as battery backup for a lost grid. Kind of the idea behind microgrids, with enough small storage and generation chances are enough will survive to help till the main grid is restored. Less worry if fuel supplies can’t I get through on DC no worries about synchronization,since a Tesla has ac motor, and battery and is mobile should be possible to use as an emergency backup for essential multi phase gear. Hospitals, flood clearance
Hmm if one has a suitable multi fuel generator (or generators).should be better to have a slow.charging ev l, you can always plug it into a home wind turbine (which can be quickly deployed from safe storage, you can always use it as battery backup for a lost grid.
There have been a number of lawsuits by neighbors driven to near-madness by having to listen to the constant whine of their neighbor’s wind turbines. Not sure that’s a viable solution.
Most people don’t know that small wind turbines make a noise similar to ( and as loud as) a Cessna 152 warming up.
Good points, Alister. Not to mention touting the “environmentally friendly” aspect of the car overlooks the massive damage to the environment created by digging lithium out of the ground for the batteries. But hey, I FEEL environmentally conscious, and thus superior to you benighted peasants with your internal-combustion conveyances….
internal combustion has no future, get with the revolution man. ;)
Hmm…did you notice what kind of machines were used to rescue people recently in Houston? Yep, that’s right – all internal combustion engines. High water and high voltage batteries, no thanks.
If Tesla are increasing production of cars then they must be increasing production of their motors and motor controllers, given the value of this long term(why they are not selling to toyota, ford etc is beyond me, unless it is capacity constraints in which case musk strategy makes sense. He needs to bring costs down by an order of magnitude to compete with the ICE makers. Selling expensive cars to fund factory construction could work, watch carefully for reorganization ala alphabet to see if the motor/controller bit gets spun out from the dead weight car. Then musk could sell cheaper unbranded parts to Toyota etc(if he does not already have a shell for the purpose)
I absolutely agree with Wolf. Shorting stocks like these is no joke. But the article did leave me one question. What is Tesla? An automobile manufacturer (warranting a low P/E) or a technology company with its batteries etc. justifying potentially an above market P/E.? Color me confused.
Agree. The batteries are not really Tesla either. They just put it all together. IMHO Tesla is either the ev apple (all about the branding/marketing/ scale giga-factory and looks not actually doing anything someone else hasn’t) or it is the ev motor disruptor that happens to build a few proof of concept cars(look out Cummins, Caterpillar,Perkins engines, bombardier etc.) (Either way overhyped but maybe in the latter long term value.
I think a lot depends on how well the Model 3 sells and how reliable it is. Thing to consider about the current state is going forward Tesla probably isn’t at as much a disadvantage as any other car company. Bunch of the others are larger, but much of the valuation is in soon to be legacy products and manufacturing. Tesla has none of that on the books.
What is Tesla?
A electric infrastructure company that sells cars. a bit like as if Rockefeller’s Standard Oil also owned Studebaker.
But the $64,000 question is—is TSLA’s current valuation right for a hypothetical future dominant position in chargers and home/institutional electricty production (via Solarcity)
What is TSLA?
It is a company that is allowed to lose money while its competitors are NOT.
That is the only advantage it has, but a big one for now.
1. its tech is NOT exclusive. No core patent, and others can build what it builds.
2. it did NOT make any money even when there is NO competitor.
3. People say AMZN is allowed to make no money either. But AMZN is wiping out retail competitors and the delivery time shrunk from a week into 2 days. Dan you imagine TSLA wipes out all EV makers?
To me the only question to ask is “when TSLA is not allowed to lose money”, and to be honest, that is a political question because the people who backs tesla up can TAX you to back Elon.
Big deal. The whole market will very soon go down.
I thought that way in 2014 when I believed central bankers would operate logically and let the markets clear. However, they’ve proven to be illogical by pumping the bubble higher, with no exit plan other than a pop.
They can print to oblivion, they can hide inflation and change metrics, they don’t have to worry about elections, they can lie without recourse.
They work for the oligarchy now, and the oligarchy likes high stock prices.
The Fed doesn’t just “work for” the oligarchy. They were created by the robber barons of the era in 1913 for the express purpose of serving as the oligarchy’s chief instrument of plunder against the 99%. Since 2008 the Fed has sharply escalated its financial warfare against the middle and working classes, using engineered boom/bust cycles as the most efficacious means of transferring the wealth of the middle and working classes to the Fed’s grifter accomplices on Wall Street. Read “The Creature from Jekyll Island” if you really want to understand the magnitude of this swindle against the American people. Read “When Money Dies” by Adam Fergusson if you want to know the end game for what happens when the Fed debases the currency into worthlessness.
The reason everything Musk will keep rising is because America likes a good story, even if it is totally made up. He is cute, his wives are cute, his children are cute, and he makes cool stuff. What more do you need in America to make it big. Maybe we’ll discover that he really makes his space rockets in the garage and that will finally convince everybody.
And the sceptical ones who are not convinced, they get a trip in the garage-built(tm) Submarine.
I think it is sound to short Tesla before quarterly earnings and to use puts, even if more expensive to, contain the risk. Then use calls right after. Because the stock will always recover.
Now, I was considering getting a Tesla 3 because wife likes it. The problem is, they went and put in those “##%&% stupid, gull-wing doors. Who the /&%€# signed for that!?
I see vast complexity added just to prevent using Tesla 3 for what cars are used for – shopping – ferrying kids around …. in a normal car parking space those ridiculous doors will collide with something. During winter, the road salt is bound to get in there and rot the actuators and wiring.
Tesla 3 will fail the hype, I think. It will be hard for Tesla to recover from that.
So true.
America loves to believe that nothing is impossible. Money is rushing in to fund his hyperloop thingy and the brain implant thingy. The cult following for Musk is many orders of magnitude crazier than Steve Jobs’.
Somewhere in the piece it mentioned a ‘car’ called Elio.
Checked it out and for 7500 I want one!
Unfortunately looks like it ain’t gonna make it.
Ya know when guys say a car is a ‘head turner’
Well this thing will turn heads.
Three wheels, three cylinders.
I’d buy an Elio too. Looks fun and efficient.
Me three, except for this:
http://jalopnik.com/elio-motors-future-looks-doubtful-with-100-000-in-the-1790947889
it all depends on how much of Tesla USG is going to back. they could sink black contracts into the company and call it in the interest of national security. Janet Yellen wants to buy the entire stock market (broader range of assets) and this one might be to sensitive to let it go.
When Tesla was founded, people thought the price of oil was only going to keep increasing, and for a long time that looked to be the case. This was going to make electric cars a practical alternative. But now, gasoline engines are very efficient, and we all know what happened to the price of oil.
There’s no real reason right now to own an electric car, or to build out the infrastructure for mass adoption. If we see expensive oil again, then Tesla would be in a good position. But the company is 14 years old already, and has no profits. How long can a company exist without profits? 20, 25 years?
Thing to consider about the price of oil. The cost to drive a car (30mpg at $2/gal) to a 150,000 miles is $10,000. Maybe a 1/3 the cost of a new car.
It’s widely expected the sales price of electric cars will reach parity with gasoline cars in 5 years. And then will drop below the price of gasoline cars. That sets up the situation where when you throw in fuel costs, maintenance, and depreciation an electric car would cheaper to own and drive even if gasoline were free.
Many, many years ago when I lived in Japan I worked on a project for a famous automobile parts company in Japan in regards to using braking to generate additional ‘power’ from braking to power the vehicle.
The conclusion was that given the cost of the technology and returns it wasn’t worth it. I wonder if they ever dusted off the project to look at it again given the changes in technology and pricing……
In any event IIRC TESLA buys the the battery cells from Panasonic and they assemble them into battery packs.
So in effect isn’t TESLA relying on Panasonic’s technology and not their own?
Lee – it’s called regenerative braking and the Prius has had it for over a decade now.
That being said, the 2nd generation Prius, the first that looked like a Prius, was a hell of a leap. I personally thought oil would keep going up and my Prius would actually go up in value.
And here we are, Priuses (maybe Prii) come in many body styles and they’re all over the place. And most of the time their idiot drivers aren’t getting the kind of mileage they should and it’s not the car’s fault.
One thing in favor of the electric car is shorter driving distances and lower speeds. Simply said, you will soon be able to drive on of these golf carts to work, and the nature of making them fast, and light opens up a really ugly safety issue. Then there is the long term health effects of sitting on an electric motor for hours every day. Living underneath power lines is bad enough. Economically bankrupt, because it still takes fossil fuel to make electricity, (or nuclear power) and grid losses are going to eat up your advantage. Some believe electricity is free, although free gasoline would work. What’s the difference?
Just talked to a guy with a Nissan Leaf. Don’t know the guy just a park lot yack but seemed ok. Said his gas bill was around 400 pm (Passat) now elec is 30 pm.
I think an electric would be an option for a couple with two cars. Elec for town trips.
BTW: a few of the mall lots here have free 2 hr plug- ins PLUS only an electric can park there!
I want a small electric Sprinter van.
There’s no real reason right now to own an electric car, or to build out the infrastructure for mass adoption.
Except that, “they” are building the infrastructure and the cars right now, there is now a global trend established and I have never lost out on following a trend, no matter how flimsy the thinking behind it.
The raven was known to follow bands of vikings around, not because it understood what the vikings were up to, but because it knew from experience that when vikings move, probably there will be carcasses.
Places like The Emirates, allegedly sitting on a sea of natural gas, are not only buying a lot of solar power, they are buying it at a kWh price well below the costs of a gas-fueled power plant. They are still buying more too.
Using Fossils primarily for fuel are going out of fashion, that is a huge change, regardless of “reason” – not-fossil is the “next-thing”, fossil is the “old-thing”, investors only buy “next-things” (unless at bankruptcy auctions). There will be lots of stranded “fossil” assets sitting around for decades over this change. Including the petro-dollar and the vast military machine protecting it.
Sheik Yamani said a long time ago:
“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”
I think he will be proven right. And a lot of sparks will fly during the transition
I agree.
There might not be a compelling reason right now to own an EV but it is an unstoppable trend. China and Europe have already made their intentions known regarding eliminating ICE vehicles within the next 10-20 years. Whether Tesla will still be around in its current form is less certain but its technology lays some of the ground work for that EV future.
“but its technology lays some of the ground work for that EV future.
So did https://en.wikipedia.org/wiki/Lohner-Porsche
117 years ago.
Ev’s taday have become usable in the urban environment “Just”, Beyond that nothing much has changed.
Currently governments are making big noises about rapiod change.
Who is going to fund the infrastructure to support this (Not oil companies) and How is the extra electricity to be produced with out replacing pollution Point/Product “A” with pollution point “B”which is senseless..
The road of many shorts was paved with logic yet they defied gravity.
Love the read.
Cheap credit is ending and that will affect everyone.
Will this make Tesla stock go down? I think it will make every stock go lower than they would be with cheat credit still being a thing.
So is this a good time to sell your Tesla bonds? Who knows.
Tesla is something that works but like 3D for movies is also people might lose interest in. Unless oil prices skyrocket most people isn’t ready to switch to electric cars. Tesla probably knows that, they also know that if some big car company really gets into the electric car game, then they are screwed.
So what’s their long term plan? I wouldn’t be surprised if they are looking for a buyer.
Or maybe they aren’t, maybe they hope to cultivate a dedicate fanbase and live in that.
But they don’t have their own version of Steve Jobs, do they?
So yeah long term either the company gets sold or they will bite the dust.
Or maybe they will become like the Apple for cars, who knows?
Europe legislators are already banning petrol diesel(makers are keen to switch to ev (or hybrid) reduce imports and dependency. China and india needs EVs if it is to overcome the smog and allow people to have personal cars. So lots of room even if oil stays at same prices. (Even us states are bringing emissions standards in to respond to trumpet. EVs are the only practical answer. ) Plus for the technology firms there are other applications grid uses ev batteries as peaker plants now (outperformed natural gas in uk grid last tender/trial
One thing I wonder though: has there been a study on potential environment impact with say 100 million EV cars? Right now the global pool of EV cars is so tiny, they are even allowed to charge for “free”. But what if there are millions of EV cars? Where are we going to get all the required electricity? More coal plants? EV cannot fulfill its environmental friendly promise without an equally environmental friendly energy grid and infrastructure.
Shorting individual stocks in this QE fuelled market, is a dangerous game, unless you have high quality inside information.
Never short. Markets are washed with liquidity.
No more prototypes – Tesla Model 3 has arrived.
Musk has said – production will increase quickly to 200.000 per month.
The starting price $35.000.
Oops – there may still be some bugs to be ironed out = future recalls of the Tesla Model 3.
A 4 door with not much boot space – it drives well across the small parking area.
What’s there to be worried about guys !
Car Hire Companies – as public transport agents.
Look at all the 1 & 2 person electric cars out there.
Look at the fold-able electric bikes & scooters.
How easy it is to swipe at the depot & travel quickly & easily – without the responsibility & cost of ownership.
The oil is all but gone – & therefore the bus.
We really need to get it together & fast.
Someone needs to think public transport.
Massive physical destruction to Florida and Texas, yet futures are up. Go figure.
Poor Marco Island – it was the one place on the Mainland I had picked out to move to if Australia hadn’t worked out.
Hope everybody is ok there.
Here in Vietnam, students aren’t allowed to ride small motorcycles like the Honda Wave with clutch less gear changes. (Am riding a 110 cc these days. Get over 100 km on 2 liters with EFI. New? From 17,800.000 VND. Great bike). So they ride electric scooters made in China.
Want to try the concept? They sell them from 8,000.000 VND.
I fear the cost of replacing the battery after about 1,000 cycles. “That will be $ 13,800 plus tax, kind Sir”.
China’s announcement shows that there is a global force. Personally, I don’t like some developments. (Facial recognition, rolled out on behalf of governments etc.)
I see China have declared they want to go all electric by 2025 reference cars.
By 2025 they dont have that much clean energy.
So this is probably talk to make the US and West look bad.
Thy currently dont have the infrastructure to manufacture or service that many Electric cars either.
It could also be a CCP ploy to force people out of cars and back to public transport. So reducing the independent mobility of the population, and making it easier to control. If that is the Objective, then they will do it. Not as its Green, but as it give MORE CCP CONTROL of population.
Terrorist problem, take away mobility (cars (also used in attacks)) problem reduces.
With china always look at the political, and other benefits to the CCP of any such announcement.
Take away the cars, reduce: pollution, terrorism, mobility of Social Unrest/Agitators (*), make West look bad, increase control of population, reduce need for imported oil, all wins for the CCP. Under the mask of reducing pollution.
china makes no mention of diesel fueled commercial transport of Goods/People going electric.
(*)
china uses the same swipe cards, we do, for public transport.
These cards also track movement of population, in real time. Public transport in chijna will be cashless, which gives the CCP a, he is here, going there, why is he, live tracking, even when cellphone is off without battery installed.
The more i think about this, the more attractive for the CCP this move becomes. Electric cars will be like Trebants ( in the DDR the Trebant waiting list, was a deliberate state act), a ten year waiting list, with a restriction on imports in china. The Mainland chinese will be told western electric cars are incompatible with the chinese infrastructure. system’s.
Tesla up by 5.5% today as our Ponzi markets rip higher.
http://www.marketwatch.com/investing/stock/tsla?mod=MW_story_quote