Open letter to a Twitter follower
Someone Iāll describe as a casual follower on Twitter wrote me the following. The rest of this post is my response.
First of all, let me clarify that I donāt advise people to buy or sell any stock. As it says in my profile and has said for a decade, āplease don't blindly follow trades; do [your own] due diligence.ā I have ongoing open discussions with a few Tesla bulls. I state my opinions and they state theirs. So, thatās all about that part.
It isnāt rhetorically or logically defensible to judge the underlying correctness of someoneās views about an investment choice based on an ex-post-facto review of where the stock went. I believe you understand that statement and its connotations implicitly, given that you have a Ph.D. in physics. If I donāt buy lottery tickets because I think they have a bad expected value financially ā and this is, indeed, what I think about that ā and if I suggest to others they might want to question their desire to buy lottery tickets, well, donāt come to me with accusations when the ticket you didnāt buy because of me ended up being the winner.
People are, indeed, influenced by what other people say. People who present as reasonable and thoughtful can carry a certain weight with interlocutors. If āXā is opposite to and incompatible with āYā and I think āXā, I am necessarily arguing against āYā. I can do so quietly or vociferously; I can condemn āYā if I feel strongly enough about it to want to do that, or I can just keep to my own business and say very little. Deciding what the ethical burdens are for peopleās stating their views and debating a position is the devilās work.
But ultimately, weāre all adults, or should at least be presumed to be such under the (usually) polite social fiction of individuals engaged in discourse and in defending a viewpoint.
My dad spent his formative teenage years under the shadow of the Great Depression. He had always wanted to be an engineer. When he was about 18 and times were tough, a door-to-door salesman came by and tried to sell the family a refrigerator. This would have been about 1933. My dad engaged the fellow in conversation and learned that he was an engineer, but out of work because of the economic slump. My dad thought hard about that and decided heād prefer an occupation less susceptible to the vagaries of the economy. And so it was that after college he went to medical school. He became a surgeon. In any case, lives can take a different course because of something somebody said.
(Click here for Chart source.)
Now letās get down to the nitty-gritty: I believe Tesla is operating under a veneer of legitimacy but is hiding a core built on deception and deceit. Iām not alone in thinking this. I may be a smart investor or I may be a fool, but various notable, wealthy traders of renown share the view. Various other people whose opinions Iāve studied and who Iāve decided are savvy in their appraisal of technology and accounting share the view.
Might we be wrong? Of course. Thatās the whole point of questioning oneself and oneās choices as a, if I may borrow a meme while simultaneously noting the irony of doing so, first principle. Itās what we historically referred to as a dialectic.
The stock is not the car. The company is not the car. I have admired the car publicly. (Iām not addressing quality or service issues here.) I have two relatives who own Tesla Model S vehicles. My cousin Dave bought his after reading a blog article I wrote about the unusual camaraderie of Tesla owners I interviewed at a charging station near my home. He loves the car. He didnāt listen to the part where I told him I wouldnāt buy one.
I have also acknowledged variously over years some of the admirable things Musk has accomplished. Changing the direction of the automobileās development and ultimate impact on Planet Earth was an astonishing thing. But he has long since lost his moral compass. The ends donāt justify the means. A leader who abuses people under him and misleads is not someone I can ultimately judge approvingly. A CEO who has built a latticework of lies and misstatements to prop his endeavors is not someone I can ultimately judge approvingly.
To me, what Teslaās share price has done is inexplicable in a rational analysis. It may cost me money sometimes, but I do prefer to try to analyze opportunities rationally. I am also constantly questioning my own motives and decisions. It is a foolish trader who claims to have unwavering certainty. It is a foolish citizen who claims his certainty is intellectually superior to the inquisitive personās skepticism or doubt or hesitation.
Stocks move in spurts based on fear and exuberance. Sometimes the exuberance grows ā how can I put this ā extreme. Yet there is always an underlying company. We can and, in my view, we should look hard at how well it is operating. We should note that stock prices often move irrationally over long periods of time, but that this does not prove (or disprove) the validity of a thesis that touted that irrational direction.
I can cite various famous cases of stocks that went up tenfold, 25 times, even 100 times or more and ended up collapsing in a dust cloud of fraud. Is Tesla one of those? I think it is. I might be wrong. Itās your choice as to what to believe or whether to give credence to my thesis.
If you want to trade on irrational exuberance ā and many, many traders do, including some whom I debate frequently ā well, be my guest. Many have indeed gotten rich that way. And many others have landed in the poor house. In any case, itās not what Iām interested in doing with my trading or investing.
Moreover, the bull thesis was crushed brutally near the end of the second quarter of 2019 (look at the chart above). Countless investors certainly bailed with huge losses. The falling knife or the flying missile cuts both ways.
Innovation is not equivalent to, nor does it supplant, profit. Dean Kamenās electric two-wheel self-balancing Segway transporterĀ was mind-bendingly brilliant and exciting technology when it was introduced going on twenty years ago, yet the manufacturing company languished financially for years and ultimately shuttered its doors last month.
Iām limiting myself now to discussing some of my reasons why I think I can defend my views about Tesla despite the stockās unprecedented rise and ride on the coattails of exuberance and dreams. I do not wish I had bought the stock. I made lots of money shorting the stock over five years until last summer. Iāve lost money in it since then. But my success or my failure at trading is not the yardstick here.
I have a collection of blog articles here crafted in the general direction of this discussion. You might find them worth a look. Or you might decide to stop interacting with me. Your choice, of course.
