It is good to question one's views now and then, but be sure to remain firmly convinced of what is up, and what is down.
It is possible that Tesla can pull of a Ford – that is, sell 50 % of motor cars (in America). It is even possible that every single car in the world will be a Tesla in the future. Do I consider it probable? No. Would I bet against it? No – because I don't do enough research. But if I were a short-seller I would look into Tesla, and consider adding it to a basket of overvalued stocks to buy puts on.
And I would absolutely not bet on it – long TSLA, that is – because even if everything works out perfect, there's still no upside. There's a "reverse Margin of Safety" kind of situation. I would call TSLA not a growth stock, but an "inverse value stock" at this point.
Problem is, of course, that when everything is as crazy as it is now, the entire basket goes to hell. That's what's so gut-wrenching about being a bear and backing it up with money. I prefer being a bear in my "opinions regarding the market", but be a bull in the individual stocks I buy. The long side is just way easier mentally, I find.
The late 90's is probably the best example of how bears were squeezed out of the market altogether (I would think). (Probably useful to study that time period, and others like it, if you wanna be a bear.) Maybe that happens in every serious bull market – that there's a stage where the bears get squeezed and the longs become about as long as they can be, taking on margin too.
I would love to read "The Scientific Treatise of Market Cycles", with in-depth descriptions of every stage of the development, and the mechanics of it...
As you are now experiencing, "the market can remain irrational longer than you can remain rational" – that is, if you're explicitly betting against their irrationality (i.e. shorting it.) In that case, they can bid it up from p/e 200 to p/e 400, and no matter how right you are, you'll still be – insolvent. (Just got the original version of above quote – even if you manage to remain rational (which you probably wont), you are still at the mercy of their irrationality, since they can still squeeze you, no matter (in the shorter term) the valuation.)
If, on the other hand, you're long, and the p/e is 1, the probability is smaller that they bid it down to 0.5 – and now the roles are reversed – because if they did, you would be able to squeeze them.
I guess what I'm saying is, don't start doubting your own sanity. You are right about TSLA the stock (although I'm not sure about Tesla the company). Re: shorting, I guess this is the worst possible time to be a bear – so it's a real "putting the Ring into the fire" moment. If you can manage this, you may well be suited for the role of the bear. I threw in my bearish towel a long time ago... |
