NEW YORK (TheStreet) -- The Street's Anton Wahlman recently wrote How the New York Hedge Funds Lost Their Shirts on Tesla, and within the article Wahlman predicts that in a decade half of the cars sold will be electric.
Wahlman's article attempts to explain why bright minds on Wall Street shorted Tesla (TSLA) to the point that short interest rose to nearly one out of two shares. Wahlman is partially correct, but his analysis carries a fundamental flaw as significant as the one he exposes.
In a moment, I will detail the misstep, but let me explain why I read his article first.
I read Wahlman's articles for the same reason you should: he is sharp, does his research and if you don't follow him, you're missing out. But if you hate money, taking the time to click on his follow button isn't worth it.As impressive as Wahlman is, and I do think he is an extraordinary talent, he's human like the rest of us and doesn't always get it right. In the case of his analysis of the electric car market share potential, I think his article wrote out a check that the industry can't cash. Here is the fatal flaw -- "...Tesla will eventually end up with significant premium electric car competition. One decade from now, at least 50% of all new cars sold will be electric -- possibly 70%. Almost per definition, the other car makers..." I'm the first to admit our world can change dramatically in 10 years. If anyone understands how technology will change our lives it's me. Last week I wrote (cue the ACDC music) about self-driving semi-trucks in "Leave the Driving to Us Robots. Transportation will change more rapidly than since model Ts began rolling off the assembly line displacing horses. No one knows if electric vehicles will ever reach 50% (much less 70%) of vehicles sold, but if we assume that eventually it will, we can't use sales in Silicon Valley as a predictor of consumer auto trends any more than you can use New York City. In fact, I would argue that Silicon Valley is worse of a predictor than the Big Apple.
Silicon Valley is unique and likely the singularly best location in the entire U.S. to promote Tesla cars. Imagine the potential for Tesla to sell cars is a dining room table. To prevent the table from collapsing, the legs require strength. We know from General Motors (GM) what happens when the legs are not as strong as needed.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV