Tesla update; Short selling lessons; Question No. 3 to ask before you marry someone; Off to Australia

1) Tesla (TSLA) closed yesterday at $404.04 – an all-time high. After nailing bubbles in cannabis stock Tilray (TLRY) at $300 15 months ago (it's gone from $17 to $300, then back to $17 in 17 months!) and alternative-meat purveyor Beyond Meat (BYND) at nearly $200 five months ago (it's gone from $25 to $240 to around $75 in less than eight months), I've sure been wrong on Tesla.

That said, if you had shorted the stock at $296 when I predicted on March 21 that it would be at $100 by the end of the year, and then covered your position when I changed my mind and wrote on October 24 that it was no longer a good short after the company surprised investors by reporting a profitable quarter, you would have been flat on the short position during a period when the S&P 500 was up 6%.

Here's what I wrote on October 24:

Today, I am neutral on the stock. I think it's a terrible long, but probably also not a good short right now, either. Over the next few months, the company will likely report positive developments regarding the launches of the Shanghai Gigafactory and Model Y. In addition, I suspect it has more kitchen-sink benefits it can use to spruce up its fourth-quarter earnings. So for now, I think the wisest course of action is to sit on the sidelines and perhaps look for an opportunity to short the stock early next year...

Though the stock is up more than $100 since I wrote this and the company now sports a market cap of $73 billion (plus nearly $10 billion of net debt), my advice is the same: Just wait.

2) There are many lessons here related to short selling:

• Shorting is hard and dangerous,
• Shorting battleground stocks with high short interest is very hard and dangerous,
• Shorting the stock of a company with a product or service that its customers love with a burning passion is very, very hard and dangerous,
• Shorting an open-ended situation – in this case, the stock of a company going after multiple trillion-dollar global industries – is very, very, very hard and dangerous, and
• Shorting a stock being promoted by a CEO with a cult-like following, who will say and do anything to pump it up, is very, very, very, very hard and dangerous. 

There are some other key lessons too...

Don't try to be a hero by attempting to short a stock with huge momentum at the absolute peak. There is almost always plenty of time to get in if the fundamentals deteriorate and the investor fever breaks...

In addition, it's important to manage risk. This is especially true on the short side – where losses are unlimited – so size your positions small and trim or exit positions that run against you. I don't use stop losses on the long side, but recommend them on the short side.

Lastly, as I discussed in my e-mail two weeks ago on commitment bias, it's critical not to get emotional about any investment and to keep an open mind to disconfirming information. I was 80% confident that Tesla wouldn't report a profitable quarter this year, but when it did, I immediately recognized that a key pillar of my short thesis had been blown to bits and changed my opinion.

Prudent investors always remember the old maxim, "He who fights and runs away may live to fight another day."

3) Question No. 3 to ask before you marry someone:

Does he or she have high integrity? Is he or she a stable, solid, predictable person who you can count on 100%? Do you trust him or her completely? Are there any issues with anger management, violence, narcissism, alcohol, or drugs?

There can be no compromise in this area. If you don't trust someone with your life – if you're not 100,000% certain that they would never cheat on you or knowingly hurt you, directly or indirectly, in any way – then RUN! If you find yourself rationalizing, "Well, he's great most of the time, but sometimes when he's had too much to drink..." RUN!

One of my friends who's dated a lot of people told me that many of them can't "relax and be themselves" until they've had many drinks. If you observe this, RUN!

4) I spent half my childhood in Tanzania and Nicaragua – traveling all over East Africa and Central America – so I got the travel bug at a young age. I've now visited 70 countries in my 53 years, but there are some huge omissions, including Australia, Japan, and India. I'm fixing one of those right now...

I'm off to Australia this evening for two weeks of vacation with my wife and three daughters. Our middle daughter is a junior at Wake Forest and just finished a fabulous semester abroad at the University of Sydney.

We'll be in Sydney, then Kangaroo Island, followed by Cairns and the Great Barrier Reef, back to Sydney for New Year's, and then the final three days in Melbourne. Fortunately the record-setting heat wave this week will end right as we arrive.

I can't wait!

Best regards,

Whitney