Download now: Oil Price Outlook 2024

Sixty-four Percent Short

Written By Christian DeHaemer

Posted November 18, 2010

Oil prices fell almost $9 this week despite the fact that the U.S. Department of Energy reported stockpiles of oil and gasoline were down last week. 

Yesterday, the price of crude fell $1.90 a barrel to $80.44 before bouncing back this morning.

The fast money is concerned about the action in China. The Chinese banks are halting lending to slow inflation. As I’ve written before, quantitative easing in the U.S. is causing inflation in other parts of the world…

When fund managers get free money, they put it in the high risk/high reward assets. In this case, that means Chinese real estate. 

Time recently ran a photo essay of Ordos, a town in China that was built for a million people and sits empty. 

China Ghost Town 
Regardless of what Wall Street thinks of a housing bubble in the Orient, the DOE said that oil stocks fell by 2 percent to 357 million barrels, which follows a 7.3 million barrel decline the previous week.

Natural gas is finally getting some love as it climbed from $3.80 to $4.03 based on cooler weather and speculation that the DOE will announce an inventory reduction today.  

Government Motors

All eyes are on GM today as the company plans for a second IPO.

It will be the world’s largest share offering, and it comes less than a year after bankruptcy.

According to Reuters: “President Barack Obama hailed what is already the biggest IPO in U.S. history as a ‘major milestone’ for the company’s turnaround and the entire U.S. auto industry. GM raised $20.1 billion on Wednesday after pricing the shares at $33 each — the top of the proposed range.”

The company plans to raise 23.1 billion. The bailout was for $50 billion. The money quote was from T. Boone Pickens, who said he remembers how GM treated its bondholders last year…

He was buying Ford (NYSE: F).

In other Pickens news, yesterday he announced he was scrapping his giant wind farm in the Texas panhandle. He couldn’t get a transmission line to move the electricity out.

This drove shares of General Electric (GE) down 3.4% yesterday; GE was supposed to make the turbines.

Epic shorts for Tesla

But forget about GM. The automotive IPO of the year goes to Tesla Motors (TSLA). 

As you know, Tesla makes an electric supercar that costs six figures.

The San Francisco Chronicle did a “local boy makes good” article on the automaker yesterday:

Number of the day: 81%.

That’s how much Tesla Motors stock has gained since the Palo Alto electric-car company went public on June 28 at $17 per share. The stock rose 96 cents to a record $30.80 on Monday after jumping 22 percent last week — its biggest weekly gain ever. A bullish JPMorgan Chase analyst’s report says Tesla is at the “vanguard of improving battery costs/durability.

What a load of amps… 

So far, Tesla has sold 1,200 Roadsters. But the company’s revenue dropped by a third in the latest quarter, which means they lost $34 million. The ramp-up of its shares has been due to a massive short position.

As of yesterday, Tesla was the most shorted stock in the U.S., with 64% of its float sold short.

For those who don’t know, shorting a stock is a bet that the share price will go down. Sixty-four percent is a huge number.

And to short a stock, you have to borrow it — which drives it up in price.

tesla short

My colleague Jeff Siegel — who has written extensively about Tesla since 2007 — explains, “At some point this stock will wash out. That said, I’d love to pick it up in the low teens or even the single digits.”

All the best,

chris sig

Christian DeHaemer
Energy & Capital

Angel Pub Investor Club Discord - Chat Now

Hydrogen Fuel Cells: The Downfall of Tesla?

Lithium has been the front-runner in the battery technology market for years, but that is all coming to an end. Elon Musk is against them, but Jeff Bezos is investing heavily in them. Hydrogen Fuel Cells will turn the battery market upside down and we've discovered a tiny company that is going to make it happen...

Sign up to receive your free report. After signing up, you'll begin receiving the Energy and Capital e-letter daily.