Update on TSLA; Elon Musk's reckless and immature behavior; Tesla's Overexcited Fans Should Cool Down a Little; Markets Bombed, Investors Carried On; SFO and my JetBlue flights were nearly empty; Home again!

By Whitney Tilson

Tuesday, July 7, 2020

1) With yesterday’s 13.5% jump, Tesla’s (TSLA) stock has now more than tripled this year…

This extends the company’s lead as the world’s most highly valued automaker, despite producing fewer than 5% of the cars as the former No. 1, Toyota Motor (TM), and 5% fewer cars in the second quarter than the same period last year.

While I have to tip my hat to CEO Elon Musk, if I were long the stock I’d be worried that the stock’s incredible run has gone to his head…

Last week, he tweeted a crude taunt at the U.S. Securities and Exchange Commission (“SEC”):

(The first word is “suck” – you’ll have to figure out the third one…)

Then he doubled down, tweeting about Tesla selling red satin short shorts on its website:

Here, Musk is mocking not only short-sellers but, again, the SEC, by pricing the shorts at $69.420 (the 420 being a reference to the $420 per share price at which he considered taking the company private in 2018, according to a tweet that got him sued by the SEC).

As if that wasn’t enough, he said he was going to send the shorts to the SEC, which he called the “Shortseller Enrichment Commission,” in another tweet:

My take on all of this: It’s not only a sign of recklessness and immaturity, but also extreme hubris that, in my experience, almost always ends badly…

That said, I’m not short the stock nor do I recommend getting in the way of this freight train… however disconnected from reality its valuation has become.

I’ve had this view since I wrote on October 24, when the stock was trading for less than $300 per share, that it was no longer a good short after the company surprised investors by reporting a profitable quarter:

Today, I am neutral on the stock. I think it’s a terrible long, but probably also not a good short right now, either. Over the next few months, the company will likely report positive developments regarding the launches of the Shanghai Gigafactory and Model Y. In addition, I suspect it has more kitchen-sink benefits it can use to spruce up its fourth-quarter earnings. So for now, I think the wisest course of action is to sit on the sidelines and perhaps look for an opportunity to short the stock early next year…

It has, of course, been a spectacular long since then, so I sure got that wrong, but: a) at least I got out of a bad short; and b) missing the run-up of a stock like this doesn’t bother me at all.

I don’t understand this stock, but I don’t have to. There are thousands of stocks out there that I can understand, so I don’t need to be a hero on TSLA, long or short. My observation is that people who try to be heroes in the investing world, as in rock climbing, tend to die young…

2) This article captures some of the reasons why I remain skeptical of Tesla’s stock: Tesla’s Overexcited Fans Should Cool Down a Little. Excerpt:

In the second quarter of 2020, Tesla delivered 91,000 vehicles – about 5% fewer than the same period last year. That’s pretty underwhelming for a company whose fans view it as a fast-growing technology company in the mold of Amazon.com Inc., rather than a sluggish metal-bashing carmaker…

Tesla’s valuation remains impossible to justify by any standard metrics. Analysts’ average price target is more than 40% below the current level. Even Musk has suggested that the share price, which has almost trebled since the start of 2020, is too high – although, as with his taunting of the U.S. Securities and Exchange Commission and his comments about “fascist” lockdowns, it’s usually better to tune out what Musk says and focus on his actions instead.

The skeptics might have more faith in Tesla’s new position as the leader of the automaker pack when Musk stops his provocations and his shareholders stop getting giddy over modest good news.

If you’d like to join my Tesla e-mail list, simply send a blank e-mail to: [email protected].

3) It’s easy to dismiss individual investors as day-trading fools, getting sucked into zeros like Hertz (HTZ) and seeing their savings incinerated…

But Jason Zweig at the Wall Street Journal presents evidence that they, not the professionals or the supercomputers, were the calm, rational, and sane investors during the market meltdown earlier this year: Markets Bombed, Investors Carried On. I was surprised and heartened to see this. Excerpt:

Almost 95% of the 5 million investors in 401(k) and similar retirement plans run by Vanguard Group didn’t make a single trade in the first four months of 2020. Fewer than 1% moved their money entirely out of stocks.

All told, including 8 million households with individual accounts, only 12% of Vanguard’s investors traded between late February and early May, says Karin Risi, managing director of Vanguard’s retail investor group. Among those who did trade, two-thirds bought stocks rather than selling.

From late February through the end of March, fewer than 3% of the 2.2 million participants in retirement plans run by T. Rowe Price Group Inc. made any changes to their portfolios.

4) When I flew from JFK to SFO on June 12, I wrote that:

While “total traveler throughput” yesterday exceeded 500,000 for the first time since March 21, it was still down 81% from the same day a year ago. JFK wasn’t exactly a ghost town, but it was pretty close…

My flight was a little more than half-full. I was pleased to see that everyone was wearing a mask – the few people who weren’t were quickly and politely reminded to do so.

Yesterday, 24 days later, not much had changed. While “total traveler throughput” had improved, it was still down 74% from the same day a year ago. This chart shows the tepid improvement – and how far the airline industry still has to go…

The San Francisco airport yesterday morning was a ghost town and my JetBlue flight was, if anything, even less full than the one I took to California three and a half weeks ago, as you can see in these pictures…

Best regards,


P.S. After three and a half weeks away, it was great to be home! Here’s a picture from last night of me with my five ladies…


Whitney Tilson

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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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