Why You’re STUPID For Shorting Tesla

Why You’re STUPID For Shorting Tesla
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

Aw Tesla shorts… are you struggling right now? At the annual shareholders meeting Elon revealed that Tesla (TSLA) will not only meet, but may even exceed its production targets for the Model 3 sedan. Shares jumped nearly 10% from that news, squeezing short sellers. Over a 3rd of Tesla’s float is short, and these sellers collectively lost over a billion dollars on that move.

What we want to do in this video is not necessarily make fun of these Tesla shorts, but instead get to the core of why they feel the need to short Tesla’s stock in the first place. Hint — it has everything to do with ego. So we’ll discuss that and see how you can avoid the same pitfalls.

Everybody wants to short Tesla, and it’s understandable. The company is bleeding cash, has some shady accounting, barely keeps up with production, etc… but even so it’s a terrible short considering how much positive sentiment surrounds it. Elon Musk is constantly surprising the market, and will likely continue to do so. Every time he does, price rockets higher burning short sellers.

There are other short opportunities that are far better than Tesla. So why short it? Well it comes down to ego. A lot of investors want to be the “hero” who called it. They want to be the one of the few that were betting against Elon and actually made money on it.

We don’t only see this in retail traders, but in billionaires as well. Why did Bill Ackman hold onto his Herbalife (HLF) short for so long? Was it really for his P&L or was it his ego? And why do pundits constantly call market tops? They just want to be remembered as the ones who got it right…

We discuss all this and more in the video above. Make sure to watch!

And as always, stay Fallible out there investors!