If you're investing with a 5 year time horizon, sure. If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it. Whatever "reality distortion" you are suspecting, is not going to last for 20 years. Eventually, when the promised profits and growth fail to materialize, the stock price will drop back down to its fundamentals and you will make a killing (if you're right)
Every time this discussion happens, people trot out the quote about markets staying irrational longer than you staying solvent. This quote is only ever relevant if you're leveraged, or if you're at risk of someone else forcing you to exit your short position. If you're an individual investor with a 20 year time horizon, shorting a stock with less than 5% of your portfolio, you don't have to worry about either. You absolutely can stay solvent longer than the market can stay irrational.
The real reason people don't go shorting TSLA nearly as much as you would think, is because Tesla's future isn't nearly close to a foregone conclusion. It's a lot more fun to make bold predictions with absolute confidence when you don't have anything to lose.
> If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it.
Do you understand how shorting works? If you had shorted $10k of TSLA stock in May you would have lost $23k by now (it's not just a paper loss, you have to post collateral to avoid liquidation). And you also have to pay to borrow the stock you're shorting, so even if you don't face a margin call time goes against you.
Edit: By the way, if you had opened in May a short position in TSLA that represented 5% of your portfolio it would be 15% of your portfolio now. That's another problem of shorts: as they move against you they get bigger and at some point you may want to worry.
Do you understand how portfolio management works? You run the risk of losses with any investment you make. If the size of your short position is less than 5% of your portfolio, you still have the other 95% that you can use to cover any temporary losses.
Do we agree that if you had a short position in TSLA which was 5% of your portfolio in May now you have a short position in TSLA which is around 15% of your portfolio? (TSLA has more than tripled, the S&P 500 is up "only" 25%.)
I agree that if you have a short position the size of 5% of your portfolio, and the stock then triples in value, the size of the short position would grow to 15% of your portfolio. What's your point? 15% is still nowhere close to insolvency or forced liquidation. If you're right about Tesla's long-term prospects being abysmal, you would still come out ahead.
The 5% number isn't an ironclad rule, it's an arbitrary example. There's nothing bad that suddenly happens if your 5% position later becomes larger.
If you short a company valued at $50B, with 5% of your portfolio, it would have to become a trillion dollar company before you go insolvent.
If that's still too scary for you, you can short it with 1% of your portfolio. Now the company needs to become a $5T company, before you go insolvent.
If you honestly think that Tesla will surge into a $5T company, before crashing back down to <<$50B, then you're the one living in a reality distortion field.
If you claim to be extremely confident about Tesla's stock crashing, but aren't willing to take even a 1% short position, then your actions don't match up to your words.
Note as well that the long term may never come. A company can be acquired at an "irrational" price before reality imposes itself.
Did you short Monsanto in 2015 because you expected Roundup lawsuits to hit the stock? Well, you were kind of right but that's Bayer's problem now. Monsanto (the stock MON) is no more and you position was closed at a loss.
Every time this discussion happens, people trot out the quote about markets staying irrational longer than you staying solvent. This quote is only ever relevant if you're leveraged, or if you're at risk of someone else forcing you to exit your short position. If you're an individual investor with a 20 year time horizon, shorting a stock with less than 5% of your portfolio, you don't have to worry about either. You absolutely can stay solvent longer than the market can stay irrational.
The real reason people don't go shorting TSLA nearly as much as you would think, is because Tesla's future isn't nearly close to a foregone conclusion. It's a lot more fun to make bold predictions with absolute confidence when you don't have anything to lose.