Stock play for my garage fund: Short TSLA?

Javelin wrote: IMO, if a company issues stock and knowingly will never pay out on it, it should be outright fraud.

As I said, you have some very interesting opinions on investing. Thrusting them onto others and screaming that they are the only way is... well, I'll let everyone else fill in their favorite words here.

Javelin wrote: I was suggesting that the OP invest in a company that he thinks will grow.

No, you were belittling anyone who would establish a short position in a stock, or own it for any reason other than the dividend.

As a guy who buys, sells, and shorts stocks all day and finds dividends merely an accounting annoyance, your tirades are both insulting and amusingly narrow-minded.

sporqster - A car guy and Wall Street type whose largess I frequently benefit from owns a Roadster (and let me drive it once... drool) and is on the list for the next car. Frankly, I think if more car guys had driven a Roadster, they'd be much hotter for Tesla than the Wall St types, who I'd think would be very afraid of the possible downsides. But never forget that Uncle Sam may step in at any moment and change the entire game. That said, I didn't buy or short TSLA at the IPO because I couldn't figure out what I thought it would do (and this is after driving the Roadster).

In reply to peter:

Thrusting, screaming, and tirades? If that's what you call answering questions, then I am done here. Good day sir.

Javelin wrote: Because the absolute *only* reason to own a stock is DIVIDEND. Period, the end. Every single other usage of one is wrong.

GROAN SERIOUSLY. Just drop it you; have no idea what you're talking about. You've made your point and it's completely wrong, read a book and learn something instead.

In reply to dculberson:

Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

Javelin wrote: In reply to dculberson: Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

There are any number of websites, books, and experts on the subject; I am not an expert nor do I claim to be one. Buying stocks for dividends is one method of investing, typically reserved for the very risk-averse. Those are usually things like utilities and (historically) bank stocks. Most other stocks will pay out very little to nothing in dividends and people buy those banking on a potential increase in value of the stock itself. They hope to "buy low, sell high," thus increasing the value of their investment. It doesn't always work out that way but traditionally a long term hold of a well researched stock will result in a good return. Ie, $10,000 put into all of the Dow Jones index stocks on May 1st, 1982 and sold May 1st, 2012 would have a sale value of $156,405.80 for an annualized return of 9.5%. That is far better than, say, a savings account or bonds.

Why people buy Facebook stock is beyond me, though. That would take a psychic to understand.

In reply to dculberson:

Thank you. Seriously, honestly, thank you. At least I'm not the only one confused by the Facebook IPO.

What are your feelings on A: Short sales, and B: Specifically shorting when you think the company will go bust, full stop? A I understand doing (I wouldn't personally, but I understand it). The OP wants to do B, and I just don't get that at all, hence my suggestion to find something he believes will increase instead.

^It's really pretty simple. He wants to make a profit.

Betting that X stock is overvalued and the value will adjust down, is one way to make a profit.

Javelin wrote: In reply to dculberson: Thank you. Seriously, honestly, thank you. At least I'm not the only one confused by the Facebook IPO. What are your feelings on A: Short sales, and B: Specifically shorting when you think the company will go bust, full stop? A I understand doing (I wouldn't personally, but I understand it). The OP wants to do B, and I just don't get that at all, hence my suggestion to find something he believes will increase instead.

No problem, I wasn't certain you were serious but decided to treat it as such, thanks for being sincere.

Honestly I think shorting a stock is for the advanced investor. I've never been comfortable with it and think you should really, really know what you're doing before attempting it. Also make sure it's not money you need to buy food with - which is true of all investing really. Morally or ethically I don't think there's a big issue with it as your shorting the stock doesn't actually affect their ability to do business and succeed. If you were shorting a million shares of it that might be noticed and cause problems but clearly none of us are at that level. And yes, there is a place for morals in investing - e.g. buying tobacco stocks is a major no-no to some people and I think that's fine. But shorting stocks isn't, in my mind, a moral issue. It is a very complex transaction and has (theoretically) unlimited loss potential. Realistically a stock like Tesla isn't going to suddenly go up 10-fold but if you've invested all you have in a short position on Tesla and it doubles in 2-3 years, how are you going to recover? Or even if it "only" goes up 50%? It's very dangerous.

Tesla is probably the leading luxury American brand right now. Cadillac would KILL to have their image.

Their business plan appears to work at the volumes they've already got deposits for. They've got a multi-year lead in technology, they've got proven parts and at least know the problems with the product they've just launched, and they went into a market segment where a couple grand per car price disadvantage won't be a life-or-death difference.

Shorting them would be a very bad idea.

z31maniac wrote: ^It's really pretty simple. He wants to make a profit. Betting that X stock is overvalued and the value will adjust down, is one way to make a profit.

Except betting on a company will go full bust leaves the OP with no way to buy the stock back and return what he borrowed. That's the issue I see (not moral or ethical or whatever). Say you shorted GM right before the bailout, when they went bust the stocks froze (end of musical chairs!) and now you owe the broker 10,000 shares and you didn't buy any yet (hoping for every last dollar of profit, or really more likely, got unlucky), so now what?

So shorting a good company (ie - they'll still be in business and out of courts/arbitration/etc) makes sense, but betting on the one to bust the farm (and knowing that the musical chairs game can come to a violent, and sudden, end) is what I don't get. Did I explain that well? Sorry, it's hard to have discussions like this on a forum (especially when people throw out name-calling or read stuff as being arrogant when you're just trying to have a discussion).

Javelin wrote: In reply to dculberson: Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

The only reason i ever play the stock market in any form is to make a profit.

I couldn't give two E36 M3s how it happens.

That's the point of it for me, personally... I don't expect everyone in the world to agree with me after reading this thread, but i also wouldn't expect anyone to tell me i'm dumb for it.

Oh. In the event of bankruptcy, you can buy as many shares as you want for a penny, total, and make your broker whole again.

What you really don't want to happen is to short all the banks going into a general banking collapse, and have your brokerage account frozen by the SEC for possible "insider trading". The dead-cat bounce will take most of your profits before they lift the hold.

In reply to dculberson:

Yeah, I really am sincere. I get that I am more risk-adverse and long-term focused than the majority of investors, but I also try to get handle on why people would intentionally mis-use (maybe not the right word, ignore the potential benefits of???) an investment vehicle, like stocks.

Personally, and again this is just opinion and I'm not trying to convert anyone, I think that stocks on the whole or a lot worse of investment than most people realize. As the risk-adverse person I am (fiscally, anyway) I want to have legal recourse (such as a binding contract like a bond) or some physical stake (preferred shares voting rights and a board seat, yeah right at my income!) or even just an asset I can actually use while I'm profiting (living on real estate, for example). So for me, personally, the idea of buying a piece of paper that represents one trillionth of a company, with no legal recourse, in the hopes that some other guy will pay me more for it just seems, well, odd.

Javelin wrote: Except betting on a company will go full bust leaves the OP with no way to buy the stock back and return what he borrowed. *That's* the issue I see (not moral or ethical or whatever). Say you shorted GM right before the bailout, when they went bust the stocks froze (end of musical chairs!) and now you owe the broker 10,000 shares and you didn't buy any yet (hoping for every last dollar of profit, or really more likely, got unlucky), so now what?

Ohhh, I did not know that was one of your concerns. I also didn't know what would happen in that situation, so I did a bit of googling to find out.

http://www.davemanuel.com/2007/08/19/what-happens-if-a-stock-that-i-am-short-goes-bankrupt/

He covers it pretty well, apparently it works out for the investor holding the short but it will be delayed while the bankruptcy proceeds. If the shares completely "go away," your position gets marked down to zero and you get your money back. But based on how long bankruptcy takes I think you could be out the money for a year or more! That's not the end of the world but would be nerve wracking.

92CelicaHalfTrac wrote:

Javelin wrote: In reply to dculberson: Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

The only reason i ever play the stock market in any form is to make a profit. I couldn't give two E36 M3s how it happens.

So you are okay with making, say, 50% over a month knowing that you are giving up more? If yes, then you are fine. The problem is (at least in my experience) most people that buy stocks (because a talking baby on the commercial told them to) have no idea what a stock is, let alone that a dividend exists. Watching what the really big cats buy, sell, and hold (and for how long) provides a real eye-opener. Those 1%'s? Yeah, they collect dividends.

Javelin wrote:

92CelicaHalfTrac wrote:

Javelin wrote: In reply to dculberson: Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

The only reason i ever play the stock market in any form is to make a profit. I couldn't give two E36 M3s how it happens.

So you are okay with making, say, 50% over a month knowing that you are giving up more? If yes, then you are fine. The problem is (at least in my experience) most people that buy stocks (because a talking baby on the commercial told them to) have no idea what a stock is, let alone that a dividend exists. Watching what the really big cats buy, sell, and hold (and for how long) provides a real eye-opener. Those 1%'s? Yeah, they collect dividends.

Yes. I might not live past this month.

dculberson wrote:

Javelin wrote: Except betting on a company will go full bust leaves the OP with no way to buy the stock back and return what he borrowed. *That's* the issue I see (not moral or ethical or whatever). Say you shorted GM right before the bailout, when they went bust the stocks froze (end of musical chairs!) and now you owe the broker 10,000 shares and you didn't buy any yet (hoping for every last dollar of profit, or really more likely, got unlucky), so now what?

Ohhh, I did not know that was one of your concerns. I also didn't know what would happen in that situation, so I did a bit of googling to find out. http://www.davemanuel.com/2007/08/19/what-happens-if-a-stock-that-i-am-short-goes-bankrupt/ He covers it pretty well, apparently it works out for the investor holding the short but it will be delayed while the bankruptcy proceeds. If the shares completely "go away," your position gets marked down to zero and you get your money back. But based on how long bankruptcy takes I think you could be out the money for a year or more! That's not the end of the world but would be nerve wracking.

Holy cow, that's crazy! So the broker just writes off the IOU as an "oopsie!" and you get a 100% return (although, only when the courts are through, so let's see, GM went under in what, 09? and it's still in court, so 3+ years so far, yeeeesh! ). Kinda makes you wonder what's in it for the broker to lend out stocks at all, doesn't it?

In reply to 92CelicaHalfTrac:

So why not invest in vehicles actually designed for the short term, like currency exchange? Or do you do that as well? Do you hold any long-term investments, or is it all short-term? Seriously, this interesting to me as you are the exact opposite of my investment style, so I don't even know what to use in terms of months/weeks/days that doesn't have tires!

Javelin wrote: Those 1%'s? Yeah, they collect dividends.

Glad the tone here has changed a bunch.

Forget the 1%, they have their own games to play with things where you must be deemed a "sophisticated investor" in order to participate. Dividends are a mere fraction of their game.

More generally:

In terms of a long-term investment portfolio (not what the OP is doing here, but worth discussing), you split your investments into different risk categories: let's make it basic: high risk, low risk. When you start your investment, you put more money in the high risk portion and as you approach the date when you expect to use the money, you transition to having more in the low risk category. Low risk stuff is generally the investment strategy you've advocated: buy, hold, and keep the dividends. High risk stuff is generally (in an extreme case): buy Facebook, Google, and others, some of which you know could be losers. Hope you buy them low and hope you sell them high. Hope that the winners offset the losers. You do this because you earn more on a Google going from $85 to $600 than you earn in the same time period on the dividends from some safe utility company. More risk, but more rewards. You use the long time period of your investment to make up any losses, but as you approach the date you need the money, moving it to safe bets protects what you have, but doesn't increase it as much as when you were more open to risk.

Actively trading a stock, which is what the OP is talking about, is a different animal. Depending on your time scale, which may vary from years to milliseconds, you do research about a company, decide what price you think it's worth, and check where the stock is now. If you think the stock is valued above your valuation of the company (like the OP does about TSLA), you sell any stock you own, (or borrow some so you can sell it), because you don't want to own the stock at that price. If you think it's under valued, you buy it.(see footnote) At some point (again, depending on your time scale), you re-evaluate your opinion of the company and make a new trading decision. You're looking to make the sort of "win" on these trades that make the dividends you might realize on holding the stock look small (otherwise you'd just hold the stock!).

Stocks aren't designed for any specific "term". They're simply a slice of the company. The company sells them to generate cash. Facebook and other companies don't issue dividends because they don't have to. They can sell plenty of their stock to people who want to actively trade it. Stocks like 3M have to issue dividends because they're not about to quintuple in value and people know that. They entice people to buy their stock by offering a dividend instead of the hope for radical value changes. They're shooting for the long-term investor and distributing cash out of the company's coffers to their investors to "thank" them for holding stock.

GOOG went from 85 to 574 because of some pretty radical changes in the underlying company. MMM (3M) has gone from 77 to 88 in the same time period because not much has really changed (I'm assuming...) about their business in that time. They were a major player then, they're a major player now, and they haven't come out with any massive game changers like gmail, or cornered the market like Google search. Google rewarded investors by increasing in share value. 3M rewarded investors through dividends. Different rewards for different risks: big reward for big risk in Google (imagine if you'd invested in Excite instead), small reward for small risk in 3M.

That's about all I've got time for on this lunch break... ask away.

(footnote) Sure, you get hit with fees to buy or sell, but based on your level of trading activity, those vary widely. The more it costs you to buy or sell, the bigger the change in price you have to expect before you realize a gain. If XYZ is at $100.00 and you think it's worth $100.10, but it costs you $0.10 a share to trade it, you're not going to do it. But at $0.000001 or whatever the high-frequency traders are paying, damn right it's worth trading it. Sometimes you even get REBATES from the exchanges for "providing liquidity", but that's a whole other ball game.

Javelin wrote: Because the absolute *only* reason to own a stock is DIVIDEND. Period, the end.

Um. I think... Er, that is... What I mean to say...

Nah, I got nuthin'.

Aaaaaaand this thread wasn't at all what I expected.

Javelin wrote: In reply to dculberson: Educate me then kind sir. What is the point of owning a stock if not for the dividend. Seriously. Tell me why so many people bought Facebook, for example. We're all here to learn.

There are loads of companies that don't pay a difidend. Obviously, 100% of the investors in those companies are in it for something other than a dividend. I understand you have some kind of moral objection to shorting a stock. While I think that is silly, I sort of understand that. But what objection do you have to buying a stock because you think a complany is doing good things and the value of the stock will rise over time?

CAN SLIM.

speculation is purely that: guessing.

If i want to play with some mad money what is the best way to buy stocks? E Trade or something similar? I don't want talk to a broker, just want to gamble a little.

peter wrote:

Javelin wrote: Those 1%'s? Yeah, they collect dividends.

Glad the tone here has changed a bunch.

Be honest with yourself man, you had the only attitude in here.

In reply to fast_eddie_72:

Uh, have you even read any of the discussion past the first 10 posts?