There's an old saying that crazy momo stocks don't just go up they get "put up". A smart old guy that was a gazillionaire banker told me this. He was rarely, if ever wrong on these types of things, and he was always right on these types of stocks. Bankers put it up, the media puts it up and now short sellers are putting it up. Don't get me wrong, $TSLA has been a monster and is at the start/middle of an epic short squeeze that may last a while.
There aren't that many $GOOG's or $AAPL's, but the streets are littered with $DCLK's. Doubleclick went from 2 to 200 without ever showing a profit, it then crashed and burned before Google stepped up and scooped them for 3B around the time of the Youtube purchase. There was a lot of pain on the way down though.
Fundamentals don't matter here, the horse is out of the barn, Tesla didn't make any money selling cars last quarter, but they made money selling emissions credits. Goldman then priced a billion in stock and debt. God's work. I give credit to Elon Musk for taking down a chunk of the deal personally and buying stock. It showed balls and a belief in what he's selling. He's a great entrepreneur and may be Jobs-esgue is some ways.
From Patrick Micheals at the Cato Group:
Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements. The competition, like Honda, doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million. Absent this shakedown of potential car buyers, Tesla would have lost $57 million, or $11,400 per car. As the company sold 5,000 cars in the quarter, though, $13,600 per car was paid by other manufacturers, who are going to pass at least some of that cost on to buyers of their products. Folks in the new car market are likely paying a bit more than simply the direct tax subsidy.
This isn't directed to any of you savvy traders. You know what you have here. It's a runaway train for now, and to short this strength in the here and now is silly if not dangerous. This is more directed to the folks that are still waiting for $VRNG to go to a $100. This is starting to remind me of $FSLR at 300 bucks. I thought it would tag 50 and I was mocked by the peanut gallery. It hit tagged 11 bucks. I never got rich with that short though, wish I did.
The shorts have been emasculated in $TSLA. Their pain must be epic. I feel sorry for deep shorts in a bull market. It's a losers game. The percentages say you should be buying heavily shorted names in this type of market. Why? Because bad fundamentals don't matter in this market. Only price and greed matter, and if something is heavily shorted the sharks smell blood and show no mercy.
Experience tells me that shorts are usually right, they do more work than the longs. They are usually guilty of being early though, and as we all know, early is wrong. Right now their faces are in a blender.
I'm long Tesla, but in my heart of hearts, I know it will end in tears.
Here is a different spin on Tesla in the Cato piece.
Come by for a trial here.