Jason Burack (Wall St for Main St) interviews notable Tesla bear, Mark Spiegel. As readers know, I’m in agreement with Spiegel in thinking Tesla stock is worth zero. In fact, I’ve stated publicly that I’m trying to decide if the world’s greatest Ponzi operator award goes to Jeff Bezos or Elon Musk. Spiegel makes a great case that it belongs to Musk.
– “They’re losing a massive amount of money and actually showing negative scale [losing more as sales grow]. They’re losing more money on an operating basis with almost no direct long-range electric car competition. A massive amount of that competition rolls out at the of this year and then hugely in 2018, 2019 and 2020.”
– “No sustainable proprietary technology.” There’s several companies with better technology but they don’t promote the way Musk promotes.
– “Every business Musk has is based on Government subsidies. And they still lose money. He’s the only guy who can pull down billions in Government subsidies and still lose money.”
– “Every business Tesla is in is a shitty business. And when you put together a collection of shitty businesses, you don’t get a good business – you just get a bigger pile of shit”
This is an interview that is a must-listen if you own TSLA and want to hear the truth about the Company and Musk:
TSLA’s market cap now stands at nearly $61 billion. It burns over $1 billion per year in cash and its financials are riddled with what would have been considered accounting fraud 20 years ago. It sold 72.6 thousand cars in 2016. Compare this to GM, which has a market cap of $51 billion and sold over 3 million cars in 2016, and Ford, which has a market cap of $44 billion and sold 2.5 million cars in 2016.
To say that the action in TSLA’s stock price and its market cap is “insane” does not do justice to the word in “insane.” TSLA is the “poster child” for the mass hysteria that fuels investment bubbles. The problem with shorting TSLA is that the hedge funds are chasing its momentum higher, as investors embrace the negative news events as a reason to pay more for the stock. As such, it’s hard to see a catalyst that will “correct” the price, like with retailers for instance. TSLA, along with AMZN, is one of the rare stocks which will continue levitating until it doesn’t – like a Roman candle that eventually burns out falls to earth.
In my opinion, the ride down will be worth the pain and blood-loss of sticking with a short bet on TSLA, which is why I continue to buy small quantities of put options that have been expiring worthless. I know at some point I’m going to catch a $100+ reversal in TSLA stock which will more than make-up for the small losses I’m enduring in the puts while I wait for that big pay-off.
Using puts protects me from the unknown magnitude of upside risk from shorting the stock. Plus, I don’t have to make a “stop-loss” decision because I don’t have the theoretic “infinite upside” loss potential that I would face shorting the stock. With my loss capped, I can hang on to the puts through expiration. With a stock like TSLA, often a stop-loss exit is followed up by reversal to the downside, leaving the short-seller without a short position.
The written analysis just above is from the Short Seller’s Journal. In that particular issue a couple weeks ago I outlined a put option strategy that will keep you exposed to the eventual $100 down-day in the stock that is going to come. You can learn more about the Short Seller’s Journal here: LINK.
On another note, Fidelity – specifically the OTC Portfolio mutual fund (TSLA is 9.2% of the fund’s assets) and the Contrafund – own 15% of the stock. When TSLA stock ultimately fails, those funds will be hammered. If you have money in either of those funds, foretold is forewarned.