Stock play for my garage fund: Short TSLA?

Recognizing this isn't a 'hot stock' or investing forum, forgive the only sort-of automotive related post here. I'm interested to know what you guys think about the short-term (2 year) direction of Tesla Motors stock price. Investors as of late have been driving the price of TSLA up like crazy, presumably on media hype surrounding the 'Model S'. Even if the hype is all true and legit, Tesla has a long way to go before they actually start generating profit at all. And it seems to me that as soon as it looks like electric cars are going to be the next big thing, a "real" auto manufacturer will pick up the technology in ernest and squash Tesla like a bug. I have never been much of a proponent of 'shorting' a stock. The best case scenario when you short a stock is the company goes bankrupt, and you double your investment. In a worst case scenario your losses are theoretically limited only by your own bankruptcy! Sort-of a risky play I would shy away from. But I also beleive in investing with your gut, and my gut tells me that Tesla is NOT going to be a long term (or even short term) success, and their investors are dilusional to beleive that it will be.

Enough that I would risk what little I have tucked away with the intention of one day upgrading my TERRIBLE excuse for a garage?

Feel free to hijack this thread with other stock ideas, as long as they aren't "you shouldn't invest in stocks, they're too risky, blah blah blah." of "You should read Dave Ramsey and just save more money for that garage rather than risking what you have, blah blah blah." cause I ain't listening to that kinda crazy talk.

You do know why stocks are to be invested in, right? And that you usually have to A: own it for a bit to collect, and B: be in on a company that actually pays it out. Any other form of stock ownership is little dim, IMO. It's like buying a 5-star meal and scraping it all into the trash before even smelling it.

So you're risking a ton of money in the hopes that a business is going to fail so you can screw someone else over? Why not just find an investment that you actually believe in?

Javelin wrote: So you're risking a ton of money in the hopes that a business is going to fail so you can screw someone else over? Why not just find an investment that you actually believe in?

I don't think my short selling Tesla is going to screw anyone over (excepting perhaps myself, depending on how it ultimately plays out). We ain't talking Warren Buffet money here. If I had a ton of money, I would spend it on a decent garage, and the discussion about where to invest it would be moot.

Investing in what I believe in is pretty good advice, and that is what the portfolio is primarily made of. In this case, I believe Tesla is going to fail, and looking for a way to profit on that prediction if it turns out to be true, but not used to short selling (actually, I've never done it before, unless you count buying reverse funds).

I might be a little dim.

Sorry man, but there's no conscionable way that buying into a company because you think they will fail is a "good" investment.

Are there any car companies that you think will grow? (And pay dividends?)

Javelin wrote: Sorry man, but there's no conscionable way that buying into a company because you think they will fail is a "good" investment. Are there any car companies that you think will grow? (And pay dividends?)

In reply to Javelin: Not buying it (not hardly), I want to short it. That is, I borrow shares of the stock from the brokerage house, and immediately sell them, and then buy them back to cover the short at a later date when the price is lower. The difference between the sale price and the buy price, minus commissions, is profit.

A short is a common way to profit on a prediction that a company is going to fail. Yeah, it seems a little bit slimy to profit on someone else's failure, but every time there is a trade in the market both the buyer and seller think they're getting the better deal, and only one of them is right. Every trade has a winner and a loser. I argue that in the case of Tesla, the sellers are the winners, and the buyers are the losers. I want to be a winner. I just don't currently hold stock in the company, and as such resort to a short sale to place my bet.

Javelin wrote: Sorry man, but there's no conscionable way that buying into a company because you think they will fail is a "good" investment.

You've over simplified. You short a stock because you feel the stock is over-valued. You're just making a bet that the price of the stock will go down, not that it's going to tank. Stocks go up and down all the time without the company going bankrupt.

I could (and do) short Apple very frequently (pretty much as often as I go long it). Do I think Apple is going bankrupt any time soon, putting thousands of nerds out on the streets of Cupertino? Hell to the no. But at various points, I think Apple is over valued, so I do the logical thing and bet that it's going down. Just like I sometimes bet it's going up. Do my "it's going down" bets make me a bad person? No more so than my "it's going up" bets make me a good one.

I am not a value investor. I don't know anything about value investors, so I don't know how common it is to hold a short as a value investment (which is what we're talking about here).

I don't think your concept of doubling your investment when you sell short and the company goes bankrupt is correct. You may be confusing the short with another financial product. I won't get into that, but I will suggest knowing a hell of a lot more before you call your broker. They're not your friend, no matter what they say.

In reply to sporqster:

I know what a short is, and frankly, it's stupid. (Ask Porsche how that worked out for them on VW shares...). Instead of betting that certain stocks will go down purely for a very-short-term gain (on which it looks like you will be paying 2-3 commissions/fees on), why not actually invest (as opposed to betting) in something?

Javelin wrote: In reply to sporqster: I know what a short is, and frankly, it's stupid. (Ask Porsche how that worked out for them on VW shares...). Instead of betting that certain stocks will go down purely for a very-short-term gain (on which it looks like you will be paying 2-3 commissions/fees on), why not actually *invest* (as opposed to betting) in something?

I really love that you're equating buying and selling stock with morals. Even better is that you think "investing" is not betting. Best yet is that you appear to think stocks can only go up.

In reply to peter:

I am not equating investment with morals, I'm equating it with common sense. You invest because you think a company will gain a profit and give you a return on your investment (profit). "Betting" on a company losing just isn't investing, morals or not. As was explained above, you can bet on a solid company (like Apple) falling in price, it's not just a bankruptcy thing.

And next, yes, I am fully aware that all investments are bets. Good investments have at least some sort of a safety net, and those are what I prefer (bonds instead of stocks, etc).

And finally, I have no idea where you figured out that I only think stocks go up? You buy stocks for the DIVIDENDS. In fact, I pretty much spelled out that all short-term stock ownership was a little dull, regardless of up-or-down. You buy in at a price that you are comfortable with, hold on to it with dividends as your profit every quarter/year, and then sell at the end of your investment. If that base sale is a profit, then all the more better.

Thanks for trying to assume things though.

Javelin wrote: And finally, I have no idea where you figured out that I only think stocks go up?

If you agree that the value of stock might go down, then why would you call the act of selling it "stupid"? Because that's what a short is, selling stock.

Your take is obviously "value" oriented, with your focus on dividends, bonds, and long-term investments. That's fine. But that is not the only way to go and insisting that other people invest in exactly this manner is... amusing.

"But I also beleive in investing with your gut,.."

You should (Probably) not be investing at all, much less in shorts and puts....

BE Careful!

Rog

peter wrote:

Javelin wrote: And finally, I have no idea where you figured out that I only think stocks go up?

If you agree that the value of stock might go down, then why would you call the act of selling it "stupid"? Because that's what a short is, selling stock.

Because the absolute only reason to own a stock is DIVIDEND. Period, the end. Every single other usage of one is wrong. If you want to hang your financial hootus into the wind with no legal recourse (ask GM common shareholders...) for some short-term buy/sell craps game, be my guest, but it's still doing it wrong.

Javelin wrote:

peter wrote:

Javelin wrote: And finally, I have no idea where you figured out that I only think stocks go up?

If you agree that the value of stock might go down, then why would you call the act of selling it "stupid"? Because that's what a short is, selling stock.

Because the absolute *only* reason to own a stock is DIVIDEND. Period, the end. Every single other usage of one is wrong. If you want to hang your financial hootus into the wind with no legal recourse (ask GM common shareholders...) for some short-term buy/sell craps game, be my guest, but it's still doing it wrong.

How is it wrong? That's kinda like saying a 500hp turbo 4 cylinder is wrong because you only like to make 500hp with a NA V8. It's just a different way to get to the same goal.

The only reason to own a stock is to make profit.

Javelin wrote:

peter wrote:

Javelin wrote: And finally, I have no idea where you figured out that I only think stocks go up?

If you agree that the value of stock might go down, then why would you call the act of selling it "stupid"? Because that's what a short is, selling stock.

Because the absolute *only* reason to own a stock is DIVIDEND. Period, the end. Every single other usage of one is wrong. If you want to hang your financial hootus into the wind with no legal recourse (ask GM common shareholders...) for some short-term buy/sell craps game, be my guest, but it's still doing it wrong.

Yeah, buying Ford at 2 and selling at 12 was dumb.

EvanB wrote:

Javelin wrote:

peter wrote:

Javelin wrote: And finally, I have no idea where you figured out that I only think stocks go up?

If you agree that the value of stock might go down, then why would you call the act of selling it "stupid"? Because that's what a short is, selling stock.

Because the absolute *only* reason to own a stock is DIVIDEND. Period, the end. Every single other usage of one is wrong. If you want to hang your financial hootus into the wind with no legal recourse (ask GM common shareholders...) for some short-term buy/sell craps game, be my guest, but it's still doing it wrong.

How is it wrong? That's kinda like saying a 500hp turbo 4 cylinder is wrong because you only like to make 500hp with a NA V8. It's just a different way to get to the same goal. The only reason to own a stock is to make profit.

No, not even close man. It's like buying a Miata to race in SM and selling it before you even drive it. I don't know how to explain it any clearer.

Look, every investment exists only to make a return, we can agree on that, right? Well a STOCK is designed as a vehicle to get dividends from the company, that's it. The company NEVER has to buy them back, you aren't guaranteed anything if they go bust, etc, etc. So buying and selling stocks with no eye to the dividend is an insane amount of risk to let somebody else make the money!

If you want to buy and sell short-term, with no involvement from the actual company, etc, then there are plenty of other investment vehicles to do that with. Do some playing around with securities, futures, and currency exchanges if you really must have the short-term thrill, but don't fool yourself into thinking day trading stocks is correct whatsoever, okay?

mtn wrote: Yeah, buying Ford at 2 and selling at 12 was dumb.

Not dumb, damn lucky. Buying Ford at 2, collecting a dividend for 10/20/50 years and selling at 12 is right. Get it?

So you are saying if I buy a car for $1000 and flip it for $2000 I have done something horribly wrong and should be publicly shamed? The only way to own a car is to buy it and keep it for years, any other way is incorrect and I am stupid?

Javelin wrote:

mtn wrote: Yeah, buying Ford at 2 and selling at 12 was dumb.

Not dumb, damn lucky. Buying Ford at 2, collecting a dividend for 10/20/50 years and selling at 12 is *right*. Get it?

Yeah, dumb. Just like that bunch of guys over on Corner Carvers who invested their kids college funds into Ford at less than $2 as a show of support for the company.

Damn auto industry couldn't have tanked a few months later when I recieved a $20grand insurance settlement check.

Sorry for mucking up the thread further, back to the OP's question.

I agree that the TSLA stock is probably a little overpriced. I don't see anything wrong with shorting it unless you absolutely can't afford to lose any money.

EvanB wrote: So you are saying if I buy a car for $1000 and flip it for $2000 I have done something horribly wrong and should be publicly shamed? The only way to own a car is to buy it and keep it for years, any other way is incorrect and I am stupid?

No, I'm not saying that at all. Please listen/read carefully, okay? Buying a car at $1000 and selling it at $2000 is great! Buying it at $1000, racing it for a year (earning a dividend), and then selling it for $2000 is even better. Buying a car at $1000 to resell immediately for $2000 when you know for sure that the DMV will give you $100 a year to own it for as long as you own it, is dumb. See the difference? One way you just make $1000, the other way you still make the $1000 AND have $100 times x years in your pocket, too.

(Also, the OP will be borrowing your Miata and selling it at $2000 in the hopes that he can find a $1000 one to buy before you want it back is just an odd way to invest regardless of dividends.)

Again, there's nothing wrong with the short-term gains/losses, but it's not what stocks are designed for. Knowingly ignoring that (when there already exists plenty of other ways to make short-term gains, such as actually flipping cars) is what's dumb. The buy low/sell high is just (lucky) icing on the cake.

EvanB wrote: Sorry for mucking up the thread further, back to the OP's question.

OP - you seem to be swinging for the fences with this investment. Figure out how much you're willing to lose and make sure you put in some sort of standing order or what have you to cover your position if the stock goes up that far. I don't do commercial/client stuff, so I have no idea how this works, but make damn sure you know how. Do your homework, especially on safety-valve mechanisms, as I said before, your broker won't do the work for you - they are actively trying to screw you (no matter who they are or what they promise).

Javelin wrote: No, I'm not saying that *at all*. Please listen/read carefully, okay? Buying a car at $1000 and selling it at $2000 is great! Buying it at $1000, racing it for a year (earning a dividend), and then selling it for $2000 is even better. Buying a car at $1000 to resell immediately for $2000 when you *know for sure* that the DMV will give you $100 a year to own it for as long as you own it, is dumb. See the difference? One way you just make $1000, the other way you *still* make the $1000 AND have $100 times x years in your pocket, too.

What about all those stocks that don't issue dividends? How do you feel about them? Why do they exist?

Javelin wrote: (Also, the OP will be borrowing your Miata and selling it at $2000 in the hopes that he can find a $1000 one to buy before you want it back is just an odd way to invest regardless of dividends.)

OP will be borrowing a Miata from his bank. He will then sell that Miata on the market, say in April or May, when he thinks the Miata market is hot. When October and November roll around and Miata prices tank, he'll buy a cheap Miata, give it back to the bank, and if he's made a good bet he'll take some cash home. The funny thing is, in the spring he can sell another Miata and do it all again.

Sell high! $2000

Buy low! -$1000

Pay interest -$200

Take home $800

All without the headache of being exposed to the Miata market over the winter (did rats just eat my wiring? did my Miata rust in half due to road salt?)

Like Miata flipping, doing your research can be the difference between making a buck and losing your shirt. But like the Miata market, sometimes these there are hints that give you an advantage...

Javelin wrote: Again, there's nothing wrong with the short-term gains/losses, but it's not what stocks are designed for. *Knowingly* ignoring that (when there already exists plenty of other ways to make short-term gains, such as actually flipping cars) is what's dumb. The buy low/sell high is just (lucky) icing on the cake.

You have some very interesting opinions. But these are just opinions.

EvanB wrote: I don't see anything wrong with shorting it unless you absolutely can't afford to lose any money.

Yeah, this is my garage fund. Play money, if you will. Not my retirement. Not my kid's college fund. Those sorts of accounts are invested long term exclusively in Greek banking and Chinese penny stocks. ;-)

As for the Spec Miata analogy, if someone offered me much more than I thought the car was actually worth, yeah, I'd probably sell it to them gladly and fund a whole season of Chumpcar with the profits. I'm just that sort of fickle, and the SCCA road racing guys are too bent on rules and BS anyway.

I really didn't mean to start a philosophical argument, just got to noticing that 'car guys' seem to be way less optimistic on the future of Tesla than Wall Street seems to be. Thought this might be an observation to capitalize on.

peter wrote: What about all those stocks that don't issue dividends? How do you feel about them? Why do they exist?

I feel like they are companies that fall into a few definitions. Either they will eventually pay a dividend (Apple, Microsoft, etc), they'll never pay one (Facebook), or they have in the past and are getting back on their feet (GM, Ford). I would buy into the 3rd, might support the first, and think the 2nd group should have their CEO's shot. IMO, if a company issues stock and knowingly will never pay out on it, it should be outright fraud.

peter wrote: OP will be borrowing a Miata from his bank....blahblahblah

I understand how a short works. I was suggesting that the OP invest in a company that he thinks will grow. In your example he'd sell the Miata and all that jazz but he's hoping that nuclear winter will hit and nobody will ever want a convertible again. It just makes more sense to go, "hey, I think that company is doing things right, I'm going to invest in them" than "wow, they suck! I hope to cash in when they implode!".

sporqster wrote: I really didn't mean to start a philosophical argument, just got to noticing that 'car guys' seem to be way less optimistic on the future of Tesla than Wall Street seems to be.

FWIW, I've seen and sat in both the Fisker Karma and the Tesla Roadster, and the Tesla was a far, far better car. If what I've heard about the Model S holds water, I'd call Tesla a company moving up, not down. Elon Musk is a very smart man and PayPal and Space-X are both doing fantastic. Henrik Fisker OTOH is an unknown businessman who's really just a car designer with a closed facility in the NE and lots of Government loan headaches.