Chevy Volt a Failure - GM to Layoff 1,300

If you short this stock (this market in general) you are fighting something powerful -- authorities that have created a massive worldwide credit bubble in the face of a dead economy that needed to be deleveraging instead. The credit has been flowing, and as long as the perception is that it is "free money" and there is no potential price to pay / no risk, the massive misallocations of capital that have been created can blow bubbles beyond what anyone who has remained sane, might believe.

I have wanted to short Tesla going on 3, 4 years now. It is the RIGHT short. It doesn't take a genius to understand it -- just someone with a grasp of basic fundamentals. Thankfully, I haven't done it, because I am more of a trader than an investor, and the trader in me knew that if your timing is wrong, you can get run over by a locomotive -- they can blow a bubble way bigger than my ability to remain solvent waiting for it to crash.

The short interest in that stock is a huge part of the float. Many people have lost money because they had the right trade -- but timing matters, especially when you are dealing with markets that are being administered to a degree we have never seen. There are also people like Jim Chanos, who are going to book a fortune on their shorts -- because they have the deep pockets to withstand the short squeeze for as long as it lasts. Others are getting run over by this stock. It's unfortunate, because they were right about the insanity of this stock -- this is going to be one for the history books. Unfortunately, if you went short anytime over the last several years, you needed to know that you ran the risk of being Mike Burry in 2006 or 2007. ... 100 percent right, but praying you could stay solvent long enough to make the money you deserved for having been right.

 

Worth the watch again. He was on CNBC again yesterday, the poor bastard. He's one of those people who has lost a ton of money on paper sitting short the stock. I know as a fact that he covered some of that loss in April (around the time that Musk did his "Stormy time in shortville" tweet), but he is still hanging in there with a sizable short position. If you watch the video in full, the points he made about the Model 3 were ridiculously obvious -- just on the cost of the car, it is the most insane line of bullshit ever bought by people who want to stay gullible. There is no way he can produce even a crappier version of the $80K car he loses money on at the price point they are talking about. Not to mention that there is no way they will make the BS timetable he promised (and is going to start walking back soon). ... Yet, for every interview with someone like this, though, who is frustrated about having to point out that everyone is staring an emperor wearing no clothing, CNBC breathlessly sticks 5 jackasses on the air telling viewers that fundamentals don't matter anymore -- things are different now. It reminds me so much of circa 1999, it is uncanny.

 

I always wonder how much of that is at play. Take someone like Adam Jonas, at Morgan Stanley. How much of it is Morgan Stanley knowing that the company is going to good for 1 or 2 very high-profile capital raises a year for as long as the insanity lasts. ... and wanting that investment banking business more than it cares about the integrity of a relatively expendable sell side equity analyst.

That said, I honestly don't think that is the only thing at play here. And it goes way beyond the equity markets, which is what most people see. Underlying this are the credit and currency markets that I really watch every day, and we have been in an environment in which there is literally a bid under risk assets all over the place due to "free money." TSLA stock is getting absolutely hammered today. But I am inured to it, because every time the people trading this thing have seemed to wake up to reality over the last few years, it only goes so far before there is a reflexive "buy the dip," push back up. That will happen. ... until it ends with a thud. And it is going to. Central banks can not keep expanding their balance sheets to prop up a house of cards, and in fact, the areas of the world, including China, that were buckling last year, are that much worse right now -- even though people are clueless about it again. Our bubbled up equity markets are ignoring it AT THE MOMENT. But that can (and will at some point) change on a dime. Worth the watch is this interview with Kyle Bass the other day (it's really worth watching the video):

Kyle Bass Sees China's Wealth Management Products as Key Risk

In the mid 2000s, he was warning people about the housing mess here. He has been banging the drum on China for a few years now. He sounds a bit more urgent right now. Whether he has it right or not, he is not talking out of his ass factually about the amount of credit and the insane lack of quality. ... and he has billions (not a typo) of dollars of his own money at risk regarding what he is suggesting. He's worth listening to. At the least, you will be watching a guy with the balls to take on the central bank of the second most powerful country in the world with a huge currency bet. If he ends up right (now or later), it will be bigger than George Soros breaking the Bank of England in 1992. And if he ends up right, we are in 2008 (but with greater amounts of debt behind it) all over again.

 

Tesla's stock has gotten absolutely hammered over the last week. Down close to 20 percent over the last 8 trading sessions. ... as of this morning.

Musk spent a week hyping the delivery date he expects Model 3s to start rolling off the assembly line. ... doing his circus ringmaster act in an effort to distract from the fact that they were going to be announcing really disappointing deliveries for the quarter (and every car they actually sell is at a big loss). His bullshit act has gotten predictable -- when he was doing daily hype on twitter for a few days, I had someone say to me, "What bad news will be following?"

The selloff intensified after those numbers were announced on Monday (the stock has gapped down 3 days in a row), but I am certain that what is really going on has nothing to do with Tesla. This is a cult stock -- it has traded beyond tulipmania levels based on an silliness and an insane amount of liquidity sending risk assets into bubble territory. The company sells a small number of cars, and with little competition it has lost a ton of money, as Andrew Leff put it in an interview yesterday. How are they going to do WITH the coming increase in competition?

What is really happening, though, is that central banks have suddenly gotten spooked by the asset bubbles they have created (the Fed made opaque references to it several times in their minutes yesterday) and they have been trying to jawbone things down -- they suddenly woke up. Less than 2 weeks ago, Mario Draghi spooked the debt markets with a trial balloon about the ECB scaling back on the asset purchases and moving away from the negative yields. The ECB has been taking its turn for the last year as the biggest buyer of debt (tens of billions of Euros a month, including corporate debt), which was what reinflated the bubble after it started to deflate last year. Similarly, the Fed has also been making nebulous comments about reducing the massive balance sheet it created to suppress yields -- what has created a ton of debt that has created serious misallocations of capital, of which Tesla may as well be a poster child.

Tesla only exists because of a combination of government handouts and an artificial environment that has allowed it to keep borrowing to the tune of tens of billions of dollars. It has burned through an insane amount of money. Without our debt markets having been hijacked, this insanity would never have happened.

In any case, bond yields have been spiking globally for the last 2 weeks because of the central bank efforts of jawboning them because they are starting to recognize the bubbles and they think they can manage it down softly. Beneath the surface, the highest flying bubble stocks have been buckling -- Tesla, included. In the past, it has always been hawkish talk from the central banks like this. ... until markets start to freak, and they back off -- so I am prepared for that and for Tesla to do a U-turn reverse to $500 or a gazillion dollars a share. Tesla should be the biggest no brainer short ever, but I can't touch it, which sucks. Until those central banks lose control, the way they did after they inflated the housing bubble, you can get run over by cheap money being injected into risk assets and sending things for a ride. The misallocations of capital don't care if it is a car company selling less than 100,000 cars a year, and losing billions of dollars that it can easily borrow. Just as the housing bubble didn't really care, until the idiots who created it lost control and brought a debt crisis on us.

BTW, that report that @cranberry linked to is speculative nonsense. I'll raise that report with Goldman's report from the other day (which helped precipitate the sell off). Tesla Price Target Cut To $180 At Goldman; Warns Of "Demand Plateau" For Model S/X | Zero Hedge

Here is the Left interview I mentioned from yesterday. He may or may not be right, but he's always colorful.

Why Tesla is short seller Andrew Left's new target