Thread: Why very smart people lose $ shorting some stocks? Take an example of companies like Tesla, assuming you knew nothing about it but the financials and the twitter account of its CEO. It probably would've made you run and short it? Right? But you lost money and time, why?

2/ Disclosure I pick Tesla as it is the easiest example, and I have no positions nor opinions on it, and wish the best of luck to anyone spending time on it.

3/ People fail to grasp the demand of Tesla stock and of similar companies is not entirely financial, it is as well a status-seeking way to be part of something “great” that people cannot find on their own. Owning Telsa’s stock fulfills that need.

4/ So the rules aren't what a normal short seller is accustomed to. Some won't sell a stock or will keep subscribing to new issuances as long as that need continues. People need something to believe that gives them fulfillment (we all do), and owning Tesla does precisely that

5/ But that desire of being part of something great is also happening to the short guys, a lot of fo people want to be part of the end of this or that scam, frauds, etc. This need is exactly the same as above, it has something of status-seeking.

6/ An example from the short-side. Why Ackman lost money on Herbalife? (which is a company taking advantage of people in need). He wanted to be part of the end of a scam (status-seeking). But the people kept coming to the HB system and he lost money.

7/ The people entering the Herbalife system were not looking for status but hope, they needed something that was not tangible but made them wake up hopeful. Shorting these companies have nothing to do with financials or exposing unethical behavior from a management team.

8/ Some politicians (unfortunately) understand this very well. Do people vote based on the most intelligent arguments and take facts to make a decision? No, people (you & I are not exempt from it even if we think we are) act based on emotions (brain chemicals at a point in time)

9/ So you can be endlessly spending a lot of your precious time, money and energy trying to explain how this company cannot be at this valuation or how the low CAPEX at Tesla is, etc and sacrifice to see the opportunities that this behavior brings.

10/ Take any bull or bear’s twits/comments on: yes Tesla. If you are not tired of it then you are made of steel.

11/ When people’s motivations are intangibles, you are not in finance anymore. And if some organizations offer something that is not immediately tangible it can last not centuries but longer (religions ring a bell)

12/ There is no right or wrong in our beliefs but because we think we are doing the right thing we might lose money on our actions. Shorting is hard and not always is about finance.