's up guys and welcome back to wall street millennial on this channel. We cover cover everything related to socks and investing over the course of 2020 and 2021. One the biggest stories in the financial markets. Was a meteoric rise in tesla stock price tesla became something of a cult stock with many individual investors betting everything on elon musk even as a stock price surged to obscene valuations conversely hedge funds who shorted tesla collectively lost tens of billions of dollars and became laughing stocks of wall street one of the most prominent of these short sellers was stanfield capital.

Founder mark spiegel and for full disclosure. We made multiple videos over the past couple years looking at the losses that these short sellers incurred. But with the massive sell off and technology stock since the beginning of 2022. These tesla short sellers have finally been vindicated mark spiegel's hedge fund has massively outperformed.

The market for the first six months of 2022. The s p 500 has fallen by 20 which marks the worst first half performance in over 40 years during the same period. Spiegel's hedge fund increased by 36. Which is probably the best first half performance that he's ever had in this video or podcast.

If you're listening on spotify. We'll look at how this multi year tesla short bet finally paid off and how he's positioning his portfolio. Going forward. Mark spiegel was the og tesla bear.

He first started shorting the stock. All the way back in 2013. And has held the short position on and off to this day. His main points.

Were similar to most other tesla bears while tesla was the first mover in the electric vehicles space. The legacy automakers will eventually pull their heads out of the sand and make their own electric vehicles. Which are just as good if not better than teslas. The legacy automakers have the huge advantage that they can take the profits from their internal combustion engine cars and use this to fund investment in evs tesla.

Was burning cash and would go bankrupt before reaching anywhere close to profitability in 2017 and 2018. It looked like spiegel's bear case was coming true as tesla went through production hell. As they tried to ramp up production of the model. 3 musk.

Himself said that the company came within weeks of bankruptcy over the course of 2020 and 2021 tesla proved all these short sellers wrong in epic fashion with a successful rollout of the model. 3 and opening of the shanghai gigafactory their delivery numbers exploded and despite increasing competition. They have still managed to maintain their dominant ev market. Share within the us as a result.

Tesla's share price started. Skyrocketing increasing almost 20 fold from the beginning of 2020 to its peak in november of 2021 short sellers were absolutely crushed. Jim chanos. Who was one of the biggest and most famous short sellers of this decade.

Saw his fun shrink from 1 billion to 400 million since. The pandemic began mostly attributed to his maximum short position on tesla. Mark spiegel. Was also decimated by his tesla.

Short. And his hedge fund was reduced to managing just a few million dollars. While much of the rise in tesla's share price was undoubtedly deserved in hindsight. It clearly got ahead of itself at its peak in november of.

2021 the automobile company's market cap briefly surpassed 12 trillion dollars. They made five and a half billion dollars of net profit that year giving them a price earnings multiple of over 200 to be fair the p e ratio. Isn't a relevant metric for hyper growth companies like tesla because they have not yet optimized their cost structure for profitability. But on just about any other metric.

You look at tesla was overvalued at the peak tesla's market cap was 30 higher than the next five automakers combined. Which included toyota volkswagen general motors. Ford and honda. But when you compare the number of deliveries.

Things look very different every one of the top five automakers delivered more cars than tesla in 2021. Even ford. Which is the smallest delivered more than four times. The number of cars as tesla combined they sold 33 million vehicles.

Which is 36 times. Greater than tesla's 930. 000 to put this into. Perspective you would have to buy 13.

Million dollars worth of tesla stock to represent one tesla vehicle sold for the legacy. Automakers you'd only need 20 000. Of course tesla should have a higher valuation. Because it dominates a fast growing electric vehicle segment.

But eventually the gap in valuation becomes ridiculous. Part of the reason for the rise in tesla. Stock price was a general bubble in growth stocks. And the fear of missing out.

And as kathy wood's arc. Etfs gained billions of dollars of investor inflows. This money was pumped into buying more tesla stock. The insanity peaked in late 2020.

When tesla announced a 5 for 1 stock split stock splits makes zero difference to the fundamental value of the company regardless in the weeks following the split. The stock surged by almost 50 adding an additional 230 billion dollars in market cap. Despite the horrific losses that spiegel was incurring for his investors he never backed down if tesla was overvalued at a 100 billion dollar market cap. It was 10 times more overvalued at a 1 trillion market cap.

So from a fundamental perspective. The strength of his bear thesis. Only increased. Many big investment banks are criticized for increasing or decreasing.

Their share price targets. Just so they can keep it relatively close to the current share price as tesla stocks swore in 2020 and 2021 wall street banks were quick to increase their price targets even when the fundamentals didn't justify it it looks bad to have a two hundred dollar price target. When the stock is at twelve hundred dollars on the other hand. Mark spiegel doubled down on his tesla.

Short. Expecting. The share price to fall ninety to ninety five percent from its highs. He also shorted kathy wood's arc innovation etf as he thought that all of her stocks were bubbles and spiegel wasn't only bearish on high flying tech stocks he thought that the fed's money printing.

Policies had inflated the largest stock market bubble since at least the 1990s to support the economy through the pandemic. The fed had printed five trillion new dollars as vaccines allowed society to return to normal this money will start entering the real economy and inflation will skyrocket exactly as he predicted inflation starts range steadily upwards throughout 2021 and accelerated even faster in 2022. Thanks to the ukraine invasion by the beginning of 2022. It became obvious that inflation was not transitory.

And the fed would have to increase interest rates. Dramatically. The market started crashing and spiegel's short positions paid off big time for the first half of 2022. He outperformed the s p 500 by a staggering 56 percent.

If you look at mark spiegel's predictions. It's shocking how accurate he was in the summer of 2021. He said that the so called bubble socks like tesla and the ark innovation stocks would be the first to fall. Even.

While the s p. 500. Remains stable. Only once the inflation becomes an obvious problem with the blue chip stocks that make up the s p 500.

Start rolling over and that's exactly what happened the first phase of the market crash happened in 2021. Where the ark innovation etf got crushed. Even as the s p 500. Was making new highs.

The second phase of the market crash began in 2022 and with the s p. 500. Crossing into bear market territory as well and despite the declines. He thinks there is still more downside ahead.

He points to the so called buffet. Indicator which is a total capitalization of the us stock market as a percentage of gdp currently this indicator is 170. Which is far higher than the historical average. He also doubts that the fed will be able to tame inflation.

The federal government has become increasingly dependent on low interest rates to fund ever increasing budget deficits thus. Jerome powell will face political pressure to not raise interest rates too high and inflation will remain above the two percent target for many years to come for all these reasons. He thinks we're only halfway through the current bear market and the s p 500 will fall 40 below its all time highs. While the accuracy of spiegel's predictions has undoubtedly been impressive.

It's also important to remember that a broken clock is right twice a day spiegel has been positioning his portfolio for a market crash for the better part of the past five years. His outperformance in 2022 is completely offset by the massive losses that he incurred in the prior two years since his hedge fund's inception in 2011. He has produced a compounded annual return of eight percent. Which is below the s p 500's 12 annualized gain in the same period.

As the legendary investor peter lynch. Once said far more money has been lost by investors preparing for corrections or tried to anticipate corrections. That has been lost in the corrections. Themselves and on the bright side.

The market crash means. The stock market is a lot cheaper than it was a few months ago the s p 500's forward price earnings ratio of 16 is below 2019 levels and in line with historical averages that's not to say we can't go lower. But we've certainly come a long way from the bubbly levels of 2021 and despite his overall bearish views on the market. There are a few deep value stocks that he likes he owns shares of both gm and volkswagen.

Volkswagen is facing severe challenges as a result of skyrocketing energy costs. Which will reduce its profitability in its german factories. But once the european energy crisis is resolved the company may have a bright future they're making gains against tesla. And recently surpassed them in ev market.

Share for the european market part of the reason for his gm and volkswagen positions is to hedge his tesla short position. Which he still maintains he also owns shares in fuel tech. A deep value. Penny stock.

Which he thinks could become an acquisition target from a larger competitor and finally he owns a small position in new scale power. A speculative nuclear energy company. Which recently went public via spack spiegel took his hedge fund from the brink of bankruptcy to one of the best performers of 2022 while it remains to be seen. How his penny stock long positions will play out.

We have to at least give him credit for sticking to his conviction and holding his tesla short position through to the end alright guys that wraps it up for this video. What do you think about mark spiegel. How much longer do you think the current bear market will last let us know in the comments section below as always thank you so much for watching. And we'll see in the next one wall street millennial signing out.