-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
anticitizen13.7
Not posting at TMC after 9/17/2018
This is generally bad advice in my opinion. I would characterize it as possibly fatal to retirement accounts.
When global markets began crashing in October 2008 through early 2009, many investors pulled money out of stock market mutual funds, and stopped contributing to their retirement accounts as well. The S&P500 index fell about 50% during this period. Since then, the S&P500 has risen from about 700 to 1700+. People who got out of the market at the worst possible time often did not recover, and are suffering greatly as a result.
Selling when prices are low means (1) realizing a loss and (2) not being in the game on the upswing. It also means parking cash in bank accounts, money markets, or bonds. Almost none of those alternatives have good yields right now, and will be killed by inflation (2-3% erosion in purchasing power, vs. 0%-0.25% typical interest from a bank account). Just because an asset is "red" does not mean that putting money into it is bad. With respect to Tesla, the company has great technology, a stellar management team, and a long-term plan in place. It's a good bet I think for anyone who (1) can afford the risk (2) can hold for 5-10 years. It only makes sense to sell when one no longer has confidence in a company's management and future prospects.
JRP3
Hyperactive Member
No one knows, of course. You have to place your bets on several companies based on their chance of success, and magnitude of success.
Just stating the obvious, I know.
GSP
Long-term, this is entirely correct. I actually pulled a lot of money out of the market permanently circa 2008, but that was *not* because of the downswing. It was because it had been revealed that all the major banks were run by career criminals and were profiting off of major, systemic frauds, ones reported in the newspapers -- "loss of confidence in management" would be a polite description of that, I suppose. I wanted to stay well away from those stocks, which were, and are still, dominating most of the indexes. The bank stocks have done quite well in the short term but they're still making their profits off of major frauds. I don't like investing in openly criminal operations; they seem very unsafe. Elon is basically honest and well-meaning, which is rarer than it should be in the corporate suites of publically traded companies.
- - - Updated - - -
This. We have separate threads for short-term TSLA speculating and long-term TSLA investing, don't we?. I think with high volatility there's often going to be a solid case for short-term shorting. Long-term shorting is another matter entirely, and I think very few people here think it's sane.
smorgasbord
Active Member
Does anybody every long-term short? Outside of buying Puts, which is something like 2 years out at most, I wouldn't know how to go about it.
To steal Elon's phrasing: There is a non-insane long term argument against Tesla having a rough road to big time success:
1) It starts with a possible recall on Model S to prevent floor-intrusion-caused fires
2) It continues with not being able to scale to tens of billions of batteries a year in time for Gen-3.
These are surmountable obstacles, but they could be hinderances and could impact the stock price for years.
Some very wealthy people have been known to do it. It's insanely dangerous. All you do is short-sell, which practically any broker will let you do on a margin account. And then you sit. And if the stock goes up, you double down. If the stock goes up, you'd better have a hell of a lot of collateral in order to hang on to your negative bet.
Extremely rich people have gone bankrupt doing this.
You can close your position anytime you want. Only real danger in comparison to a long is a sudden gap to the upside. Therefore you need more capital for this bet.
For TSLA many people seem to ignore the risks on the long side. This is a highly speculative stock. In the long term it can go to 300 or 3$. To me the second outcome is more likely.
I know someone who is short since August. And is finally up on the whole batch of shorts.
what do you mean by long term? Days or months or years?
look at all the dot coms in the 90s that went to zero. Many made hedge fund managers millionaires.
JRP3
Hyperactive Member
Months or years, but mostly years.
The market can remain irrational longer than you can remain solvent. The potential loss on an outright short position (as opposed to an options position) is *unlimited*. You can also be in a good short position and be forced to get out of it due to lack of margin when the stock runs too high.
By contrast, if you're in a long position and you're correct in the long run, you can just ride out the stock price -- it can drop to a penny a share for a while and it doesn't matter to you. (Assuming you aren't doing it on margin or with money you need.)
People who shorted those at the wrong time went bankrupt even if they were right in the long run.
- - - Updated - - -
You can be *forced* to close your position when you *don't* want to, which can't happen with a long position.
Infinitely more capital. Literally, infinitely more.
Last edited:
I doubt many people only short-sell (100% short), that is indeed very risky. Shorting can be a combination of short stock and put options to limit the risks. Well known investor Bill Ackman recently had to switch to this strategy on his huge short bet on HLF (Herbalife), replacing some of the stock with OTC puts:
Bill Ackman Repositions Herbalife Short - Business Insider
Most people I know are only short with a small portion of their total portfolio, for example 125% long (using margin) and only up to 10-15% short. That limits the risks.
Long-term shorting profits also depend on borrowing costs for shorting the particular stock, these can be quite high depending on availability and float.
More generally, the "infinite risk" is only there in theory. Beyond the VW-Porsche merger or buyouts, I'm not aware of any large cap moving beyond 200-300% to the upside over a short period of time.
Last edited:
Causalien
Prime 8 ball Oracle
Out of curiosity for Realist,
Did you made back the money you lost from the first big short? Also, how hard is it to borrow the shares?
Did you made back the money you lost from the first big short? Also, how hard is it to borrow the shares?
yeah, I would think if it hit $50, there's no reason it wouldn't just go to zero - I would encourage shorts to just wait until then
disclosure, my long position needs more shorts (to mess with
)I also think there's fair valuation around that level, I will consider going long again around that number (unless the drop into that zone is because of additional severe fire incidents).
If the drop to that level is due to additional severe fire accidents (we haven't had even one of those yet), it won't stop until it reaches zero.
There will definitely be many more fires. As the number of cars on the road double next year, so will the fires. Course if Tesla is producing/selling twice the number, it will take a miracle to convince enough investor market to value at $50, without lots of severe fires. Sounds like 2 miracles needed to me.
I am out for the moment.
Sentiment overly pessimistic, short ratios exploding. There's room to the upside short term.
I beliebe any investigation will result in the Model S being save so there we could see a short squeeze from a positive outcome. I am a Tesla bear but I consider the car to be very save regarding fire.
Sentiment overly pessimistic, short ratios exploding. There's room to the upside short term.
I beliebe any investigation will result in the Model S being save so there we could see a short squeeze from a positive outcome. I am a Tesla bear but I consider the car to be very save regarding fire.
Similar threads
