Michael Burry Just SHORTED Tesla Stock!

[Music] hey guys welcome back to the channel got an exciting bit of news to talk about today um controversial definitely controversial michael bury is shorting tesla stock so michael barry you guys probably know him from the big short he's one of the characters or he's a real person obviously but one of the characters he's christian bale's character in the big short he's the one that bet against the housing mark in 2008 and made a lot of money in the process but recently he has taken to twitter to announce to the world that he is now shorting tesla so this is what he said in his tweet he said so elon musk yes i'm short tesla but some free advice for a good guy seriously issue 25 to 50 of your shares at the current ridiculous price that's not dilution you'd be cementing permanence and untold optionality if there are buyers sell that hashtag tesla souffle so that reference to the tesla souffle came from a leaked elite email from elon musk to tesla employees where what it said i'll just read you the email it's not very long at all at a time like this when our stock is reaching new heights it may seem as though spending carefully is not as important this is definitely not true now this is the article that matters so listen to this one when looking at our actual profitability it is very low at around one percent for the past year investors are giving us a lot of credit for future profitability but if at any point they conclude that it's not going to happen our stock will immediately get crushed like a souffle under a sledgehammer so this is where michael barry gets the tesla souffle hashtag from and boy oh boy i find this news very very interesting because michael bury has now done something that most people try and fail at time and time again one of the rules of investing that i like to follow and that is don't bet against elon musk but he has he has shorted tesla and very quickly if you're not quite up to speed with what short selling is it's essentially betting that the price of a stock is going to go down so the way it works is that you actually sell first you sell high and buy low in that order as opposed to buying a loan selling high the way you do that is by borrowing someone else's shares and selling them for the higher price but at some point in the future you have to buy back the shares to return what you borrowed right so what you're hoping for is that you can sell the shares high you can then the share price crashes you can buy them back low and return those shares and you still profit the difference it's the same as buy low sell high it's just the other way around but the profit remains the same so that's short selling and what i find really interesting with michael bury when he made this tweet he showed a photo and the photo was essentially like a little photo of an excel spreadsheet i guess but this this photo really highlights the core of michael bury's bet against tesla so what he did and i'll chuck it up on the screen right now is he gathered the total revenue the market capitalization and the ebit from 32 large auto manufacturers then he added those numbers together and then he compared them to what tesla's same numbers are right now and these are trailing 12 month numbers so when we have a look at what those numbers actually were you can see for the 32 car companies added together they had revenue of 2.3 trillion dollars you compare that to tesla and they had revenue of 25 billion dollars then you have a look at ebit and you get 102 billion for the for the 32 auto manufacturers added together and then for tesla you get minus 70 million however this is where things get really interesting when you look at the price so the market capitalization essentially the market value of these businesses added together for all those 32 car companies the price the market capitalization 991 billion so almost a trillion dollars and then for tesla 646 billion so to put that in simple terms and this is what hamish was talking about we actually discussed this on the latest episode of the young investors podcast which is coming out on saturday but this is what hamish said you're essentially paying 50 percent more than tesla to get all of these 32 other auto manufacturers and in paying 50 more you're actually getting 90 times more revenue that's pretty insane right 90 times more revenue that's that's quite mind-blowing looking at ebit negative 70 million for tesla or 102 billion for all those 32 other car companies added together and the reason that michael bury points this out is not to maliciously jab at elon musk or at tesla in fact from what he wrote it actually seems like he is a bit of an elon musk fan like he seems like he doesn't mind the guy but he's not trying to take a malicious stab at tesla's business and say oh the business is going to go bankrupt or blah blah blah blah no it's nothing like that michael barry is simply in this case betting against the stock price because if you have a look at tesla stock over the past 12 months tesla stock has essentially gone 10x i don't know if there's a word that is more impactful than skyrocket maybe space rocket to put to put things in the muskerverse but that's what tesla stock has done now personally i kind of have two opinions on this topic call me a fence sitter if you like but i have points for michael barry and against michael barry i think the first thing that i'll try and defend tesla a little bit i do think the comparison that michael bury has made is a little bit unfair because he's saying he quite simply is com straight up comparing tesla to other auto manufacturers we know that tesla is quite different um for example their vertical integration but also think about tesla is equally as much a hardware company as a software company so obviously when you compare a tesla to a general motors you it's not really apples for apples because tesla obviously have the closest thing to autonomous driving that we've seen and that has significant implications to future revenue which should be taken into account and is obviously priced into tesla's stock price and that's also not including the fact that tesla is also i think destined to be one of the world's if not the world's largest battery manufacturer in the future and they also make products like the mega pack and the power wall and they also make solar panels so there are more parts to their business as opposed to just cars however i think it's fair that michael barry for his argument compares these like the apple samples and that is because right now where tesla is not thinking about where they're going to be in 10 years but right now the key thing to tesla's success or failure is quite simply how many cars they can produce and sell so i think that's why he's making the bet because i don't think michael barry is making this short position i don't think he wants to keep this short position open for the next five to ten years right he is making a he's seeing the current situation and he's making a bet on what he sees right now and that's where i go over to the flip side of the argument where i side a little bit with michael bury michael barry remember he is not maliciously jabbing at elon musk or maliciously jabbing at tesla he is quite simply shorting tesla because of what has happened with the stock price i'm sure if the stock price hadn't surged 10x in the last year and it's now got a it's got a p e ratio of 1127. i mean we're usually looking at companies with p e ratios of 20 30 maybe in the current climate 40 50 because everything's so expensive but tesla's got one of over 1 100. so from michael bury's perspective like i said he's not looking to short this over the next like five years he's just seeing the current reality as it is and he's seen what's happened to tesla stock and he's making a bet against tesla stock but he's not one of those classic wall street shorters that's going to come out and spread a big you know misinformation campaign so that's kind of my take on the situation i think there are definitely things where michael bury he might have made too much of a simple comparison but at the same time you can understand the core of his argument is short-term so that's why he's going to compare tesla to the other auto manufacturers as they stand right now and he's not going to consider where tesla might be in 20 years from now as what we would do as long-term shareholders but anyway i find that really interesting because i am you guys know i'm a long-term tesla shareholder but i also definitely look up to michael burry right he is a great investor so it's an interesting one i think that's why i'm sitting on the fence a little bit but anyway i'd love to hear what you guys think have you guys ever shorted a stock personally i've never done it i've never shorted a stock but i'd love to hear what you guys what you guys have done in the past and what do you think about tesla as a business i'd really like to hear from you guys tesla is a business versus tesla as a stock because i think for me personally when i look at tesla as a business i'm like wow next 10 20 years this is going to be what a company this is going to turn into i look at the stock and i start sweating i'm like holy moly it's very overvalued but anyway i want to hear from you guys leave that stuff down in the comments section below that'll do me for today guys um appreciate you guys watching keeping up with the new money advent calendar so thank you very much we're going to keep going i'll see you guys again tomorrow leave a like on the video if you did enjoy it subscribe to the channel if you're new around here and make sure you hit the notification bell so you keep getting notified because i'm releasing a video every single day and they're going to come out at different times during the day so definitely hit the notification bell so you get that notification so you can watch it first anyway guys that'll do me today if you're interested in my personal investing strategy check out profitful links are down in the description below but that's it from me i'll see you guys in the next video [Music] [Applause] [Music] [Applause] [Music] [Applause] you

Channel: New Money

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Keywords: stock market, michael burry, michael burry the big short, the big short, big short, michael burry investments, michael burry stocks, michael burry portfolio, michael burry stock portfolio, the big short michael burry, michael burry tesla, value investing, michael burry 2020, tesla stock, jim chanos tesla, tesla bear case, stock investing, stock portfolio, elon musk, tesla, short, short selling, burry tesla, burry, passive investing bubble, index fund bubble

Id: 8g42EMG_9Dw

Length: 11min 15sec (675 seconds)

Published: Thu Dec 03 2020