Short on Tesla, Long on Gold

by JDH on May 12, 2018

I am short on Tesla.  I am on record as predicting that Tesla will file bankruptcy on or before September 13, 2019, and it would not surprise me if the date is September 13, 2018.  They are bleeding cash like crazy, and more importantly they have no idea how to build cars.  Deliveries are delayed, and cars that are delivered have numerous defects.

Their financial model is also not sustainable.  A friend of mine gets his Tesla next week.  Here in Canada, even after rebates, the Model 3 costs $60,000, and he will have to spend almost $4,000, again after rebates, retrofitting his garage and electrical system to put in the appropriate charging apparatus.  It’s a rich man’s toy, not a mass market vehicle.

The final nail in the coffin for Tesla is that real car companies, like Jaguar and Porsche, are introducing their cars in the next 12 months.  If you drive a Tesla it’s cool, because it’s quiet.  It’s quiet, not because it’s a Tesla, but because it’s electric; there is no combustion engine.  It’s a new experience, so you think “wow, Tesla is great”.  But when you drive an electric Jaguar or Porsche, you will say “wow, this is great, and it’s well built!”

Currently Tesla earns Electric Vehicle credits of around $8,000 for each car they produce.  Each car manufacturer has a limited number of credits, and Tesla’s will run out in the next year.  The new guys, Porsche, Jag, etc., have not used theirs up you, so a year from now the cost of a Tesla will be about $8,000 more, and the new guys will be subsidized for $8,000.  That’s a $16,000 swing in price, and buyers will quickly realize that they can get a better deal on a better car, and that will be the end of Tesla.

I made some money shorting the stock.

I now own the September 21, 2018 $295 puts.  I’ve purchased them over the last week, and my average cost is currently $32.39; they are worth $30.50, so I’m down at the moment, after Elon Musk threatened a short squeeze and drove the price higher, temporarily.

But, when you look at the stock chart, there is a key resistance level at around $309, and even though the stock surged about that level for a few hours this week, it pulled back, and I don’t think there is enough buying appetite to drive it much higher.  I’m staying short, and if the prices ease off I may leg into a butterfly with the options.  We shall see.

More bad news: On Friday it was announced that Doug Field, head of production, was taking a break from the company.  What?  He’s not leaving the company, but wants to spend more time with his family?  At this critical juncture?  Sounds more like the rats jumping off a sinking ship to me.

The point is that, unless Elon Musk can raise a few billion more dollars, this company is dead.  Stay short.


In better news, gold looks poised for a breakout.

I’m not saying we will see $2,000 an ounce in three weeks, but prices appear to be on the rise.

I’m increasing my holdings of NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, which needs to get over $30 to really start moving, but the signs are looking good.  The U.S. dollar has had a good run, and is due for a pullback, and when that happens it is likely that gold will take over.

I’m long.

I’m also holding my gold stocks.

My final big holding: cash.  Cash is king.  A market correction could happen at any time, so I am close to 40% cash at the moment.  It helps me sleep at night.

That’s the update.  Thanks for reading.  More next week.