Is the Tesla Fraud Finally Over?

by JDH on April 27, 2019

For those of us who believe Elon Musk is a charlatan, it was a glorious week.

I understand why people love him.  While there are differing opinions on whether or not man-made climate change is a real thing, everyone agrees that pollution is bad, and everyone agrees that on a hot summers day in the middle of the city, cars belching out gas fumes as they idle in traffic is not good.  There is no debate on that.  So when a dude comes along and says he will make cars that don’t use gas, and have no fumes, of course everyone loves the idea.

(How the electricity is generated is not relevant to this discussion.  Using coal or gas plants to generate the electricity defeats the purpose of electric cars, but I digress).

Everyone wanted to believe that this charismatic guy’s vision of the future was real.

That’s how religion works.  We want to believe.

Sadly, even the true believers are starting to grasp that they have been conned.

It was one thing to say that you know how to build a car; it is quite another thing to actually do it.

Electric car technology is not new.  It has existed for literally a hundred years.  Golf carts are not revolutionary technology.  They didn’t catch on before Elon because they don’t work as well as gas cars.  I can fuel my gas car in 3 minutes, and drive for many hours.  There are gas pumps everywhere.  Electric cars take a long time to fuel, if you can find a charging station on your travels.  They are not that revolutionary, but if you have driven in one, it’s pretty cool, because there is no engine noise, and that makes you feel like you are in the future.

And it’s that “feeling” that Elon, the Master Salesman, has been selling.

The problem, as is now obvious to most, is that it’s all a lie.

He can’t build cars at scale.  The earlier versions have held up reasonably well, but the more recent models, built too fast, in a tent, have numerous and well documented quality problems.

Elon lies.

He said “funding secured” and he would take the company private at $420.  It turned out to be a lie to impress his girlfriend with a 4-20 pot reference.

He says he can build self-driving cars.  He can’t.  The technology doesn’t exist.  We have the technology to control the car 95% of the time, but if you are going to turn the car over to a robot, it needs to work 99.999% of the time, and we are probably 30 years away from that.  But Elon has sold it to people, and now they are realizing he lied.

He tried this week to pump the stock by telling more lies about building a factory in China, and having self-driving cars by the end of this year, and actually making a profit, but smart investors have heard it all before, and they now know he’s lying.

After hitting almost $380 on December 7 (during an epic stock pump), the stock closed at $235 on Friday, a drop of 38% in just under 5 months.  That’s not a growth story, and the stock is now back to where it was in January, 2017.  That’s almost two and a half years of zero growth.

The next support level is $180, and it will likely be reached in short order (no pun intended), because the big institutional investors who have played the momentum upward are obviously quietly dumping the stock.  They know what comes next in the story, and they don’t want to be holding it when the inevitable bankruptcy happens.

I was holding May $250 puts, which I liquidated on Friday, at a sizable profit, and I took half the proceeds and bought June $200 puts.  This is a very small position for me, so if Elon sells the company to Ford at $500 per share and my puts are worthless I won’t card.  I just want to have a position when the bankruptcy happens to make me feel good that I was able to see it coming.

Why did I only take a small position?  Because there is a good chance Tesla will bounce up on Monday.  Apparently Elon the god-king has agreed to have his tweets pre-approved by a lawyer, to avoid further fines (or jail time) imposed by the SEC.  This will be interpreted as good news, the stock may spike up, and that will be a great opportunity for the longs to sell more of their positions to the suckers.

So, I’ll use it as an opportunity to buy more puts.

I take no pleasure in the failure of others.

I do take pleasure in seeing charlatans fail.

Pollution is a real problem, and electric cars may be a real solution, but lying about what they can do sets the EV movement back, and that’s what Elon has done.  Innocent people have paid real money to buy his cars, and invest in his stock, and they will lose real money when this implodes.  That’s what upsets me.

Perhaps in his next company he can stick to being the visionary-salesman, and someone else can actually run it.

Then it may have a chance.

Thanks for reading.  Have a great week.