Some people are Optimists. Others are Contrarians and Skeptics. Skeptics naturally look for the mismatch, for what’s wrong or missing from the consensus view and enjoy pricking the balloons of irrational exuberance along the way.
Doug Kass of Seabreeze Partners has widely advertised his short position in Tesla stock and added to it on the earnings pop. I’m sure he’s not the only one who added to a losing position in TSLA last week and he may be right on this trade.
If management announces a secondary offering this week when they reveal their partners in the battery factory project, the stock will take a hit. My downside targets are $196 and $177. That’s where I would be buying more as perhaps Mr. Kass would be exiting. That’s what makes a market.
Skeptics and Contrarians provide a valuable service, especially in the financial markets where irrationality and duplicity are endemic, but often not recognized as such. At the very least, we need to be reminded when the Emperor-du-Jour is under-dressed.
Because skepticism is a persistent character trait, however, Skeptics maintain their cautionary bias regardless of market circumstances, so they tend to underperform during uptrends and outperform during downtrends. Kass called for a top in the S&P 500 early last year and, after many upward revisions, still expected the index to end the year at 1645.
Elon Musk is the opposite of a Skeptic in just about every way imaginable. Rather, he is a paragon of pragmatic Optimism. Musk has a passion for finding practical solutions to intractable problems on the long tail of possibility; like a reusable rocket that can take off and land vertically. (It’s already built.)
I was a skeptic when I first saw a Tesla Model S in a showroom in Scottsdale last April. It took me most of the summer to grok the Tesla phenomenon, if you will, which is the fact that Musk doesn’t consider Tesla a car company, per se, but rather a builder of transport apps. This distinction may seem a bit subtle in 2014, but it won’t in 2020 and beyond.
If you want a tangible experience of Musk’s pragmatic optimism, take a test drive in a Tesla Model S (I have no business connection with the company). I think that experience might convince you that Tesla is indeed a Black Swan, a rare occurrence in the investment universe far outside the normal distribution, but one most likely bearing gifts, not disappointment.
FD: Long TSLA
Learn more: www.teslachronicles.com
