I will cite this example in the future of the fact that the market can stay irrational longer than you can stay solvent. I find it incredibly fascinating that almost all the "smart money" has done hedges and shorted TSLA, while the flood of casual pandemic investors has bought into it.
TSLA as a stock is a fascinating example of how price discovery can fail in times of irrational exuberance and that, in the short-to-medium term, markets aren't efficient nor rational.
In 2014, I saw the opportunity to short a broader sector of the economy, we wrote up a white paper and identified market targets etc that would correlate with my observed trend. But I did not pull the trigger as I lacked the necessary knowledge to understand and time the trades.
My prediction came true. But sadly I was unable to capitalize on it.
The TSLA situation is similar. It's clear that the valuation has become disconnected from reality. But how do you time the inevitable collapse of the bubble? How do you model something as bizarre as this form of irrational exuberance?
Do you induce it through a Pershing Square/Bill Ackman style campaign? Do you fund research into the flaws of the product, highlight it, and hope to induce the correction? Or, do you use other signals to time the purchase and mechanics of your short?
In other words, what do you do when the world around you has gone insane?
TSLA as a stock is a fascinating example of how price discovery can fail in times of irrational exuberance and that, in the short-to-medium term, markets aren't efficient nor rational.
In 2014, I saw the opportunity to short a broader sector of the economy, we wrote up a white paper and identified market targets etc that would correlate with my observed trend. But I did not pull the trigger as I lacked the necessary knowledge to understand and time the trades.
My prediction came true. But sadly I was unable to capitalize on it.
The TSLA situation is similar. It's clear that the valuation has become disconnected from reality. But how do you time the inevitable collapse of the bubble? How do you model something as bizarre as this form of irrational exuberance?
Do you induce it through a Pershing Square/Bill Ackman style campaign? Do you fund research into the flaws of the product, highlight it, and hope to induce the correction? Or, do you use other signals to time the purchase and mechanics of your short?
In other words, what do you do when the world around you has gone insane?