“The trend signal nailed it. Why do you think I built that signal? Because I used to be like a lot of you and some of your friends that are fundamentalist pigs that short things on valuation. That doesn’t work. Not in a market like this. We saved ourselves a lot of money [not shorting Tesla]. Can you imagine if I stayed bearish because my analyst was bearish on Tesla? No. I have a process for that.” -Hedgeye CEO Keith McCullough on The Macro Show, July 10, 2020

Editor's Note: Our Director of Subscriber Development Robert McGroarty shares some insights below about our investing approach and Keith's risk management process. He uses time-stamped excerpts from a variety of Hedgeye research products including the Early Look to highlight how Keith navigated one of the biggest bubbles ever.

“Great minds discuss ideas, average minds discuss events, small minds discuss people.” – Eleanor Roosevelt

Given the euphoria that has surrounded one of the most popular and widely held #Stahks in recent memory, the quote above certainly felt fitting (I know…I know – feelings is a dirty word around here).

I’ve been a Hedgeye subscriber since March 2020.

I’ve listened closely to countless conversations about $TSLA between our Industrials Sector Head, Jay Van Sciver and Hedgeye CEO, Keith McCullough on #TheCall. There have been times during that period where Keith’s #VASP (Volatility Adjusted Signaling Process) signal did not agree with the analysis from Jay.

No one took it personally because the signal simply IS what it IS.

In fact, we pride ourselves on being able to go #BothWays upon the guidance of the #VASP signal and we’ve done exactly that over the last 15 years but especially over the last 15 months.

Let’s review the tapes and use $TSLA as #ExhibitA of evaluating our #Process as we head into year-end. 

1) September 8, 2021 #EarlyLook: Keith re-iterates #Quad2; TSLA Bullish Trend. TSLA then increases 62% to all-time highs on November 4, 2021.

Buying “risk” and shorting defensive melting ice cubes like Verizon (VZ) at options expiration has been one of the great tactical risk management strategies throughout 2021 with the USA in #Quad2 and #Quad3.

2) December 21, 2021 #EarlyLook: Keith squarely focuses on #VASP signal as the guiding light; TSLA Bearish Trend but turns Bullish Trend on December 23, 2022. TSLA increases 28% to a lower higher on January 3, 2022.

Unlike most people who have been bearish (the whole way up) on things like “valuation”, money-printing, and Variant Narratives that span debts to government defaults and now viruses, I have experience accurately calling bear markets.

*See Hong Kong’s Hang Seng crashing to a 2-year low yesterday for recent details

And it’s not that I have some crystal ball calling these. It’s actually the opposite. I have the humility to not tell either the market or The Cycle what it should do.

Instead, I just do what The Cycles (i.e. The Quads) are doing.

All the while, I let my #VASP (Volatility Adjusted Signaling Process) tell me how much time and space I have left before episodic-and-non-TRENDING Volatility becomes TRENDING Volatility.

3) February 8, 2022 #EarlyLook: Keith focuses on pending DEEP #Quad4 in Q2; TSLA Bearish Trend

When you look at the widely owned #BubbleCaps like NFLX though, the #crash is already full on:

A) Netflix (NFLX) peaked 2-days before NASDAQ did on November 17^th at $691/share… and
B) Still has a #BubbleCap of $180 BILLION… AFTER a -42% crash in the stock price

Yes, in order to be conservative and never talk about the Balance Sheets, Debts, etc. of #BubbleCaps like NFLX and Tesla (TSLA), I promise not to mention the EV, ever (what % of people thought I was talking about cool Electric Vehicles, be honest).

*EV = Enterprise Value (which includes the DEBT!)

Let’s take a gander at the size of Elon’s storytelling #BubbleCap:

A) Tesla (TSLA) peaked on NOV 4^th, 2021, 4 days before both SMALL CAPS (Russell 200) and Bitcoin did at $1230/share… and
B) Still has a #BubbleCap of $911 BILLION DOLLAR… AFTER a -26% crash in the stock price

I’m not randomly mentioning these widely held disasters. Both NFLX and TSLA, like FB, signaled #GetOut (or Bearish @Hedgeye TREND) for many days and weeks before their corrections became double-digit drawdowns… and then crashes.

4) April 27, 2022 #EarlyLook: Keith reiterates Deep #Quad4; TSLA Bearish Trend

What I am going to do is do what I have been doing. I am going to keep building both a better #process and a #BetterWay. Better communication tools, better cartoons, better hair? Whatever it takes!

At this point, a debate as to whether or not Deep #Quad4 risks were going to hit hardest in Q2 of 2022 doesn’t matter. Non-verifiable experts still don’t get it, but it’s here. And when it’s over, I’ll let the greatest expert of all (the market) let me know.

5) July 21, 2022 #InvestingIdeas: TSLA added to Investing Ideas on the #ShortSide. Closing price is $271.71 - If simply held short since then and, as of yesterday’s closing price, TSLA is down 49.3% on an absolute basis.

6) October 20, 2022 #EarlyLook: Keith focuses squarely on Elon Musk + TSLA at the center of “The Mother of All Bubbles”; TSLA Bearish Trend

Tesla’s (TSLA) Bubble Peaked on November 4^th, 2021. Here are some points of context on that day in market history:

1. You should frame it for your kids alongside Tulips and Dot Bomb dates of market cycles past
2. TSLA front-ran the all-time bubble closing highs for both Bitcoin and the Small Caps (Russell) by 4 days
3. TSLA front-ran the all-time bubble closing high for the NASDAQ by 2 weeks (on November 19^th, 2021)

Looking backwards at The Mother of All Bubbles popping:

1. NASDAQ and the Russell 2000 have #crashed -33.5% and -29.4% from their #Quad2 Full Investing Cycle highs
2. Bitcoin has crashed -72% (where Doge Coin at, bro?)
3. TSLA has crashed -46% (as of yesterday’s closing price)

TSLA’s Setup (from here):

1. Bearish on both my TRADE, TREND, and TAIL durations
2. Immediate-term TRADE Risk Range = $199-228
3. Intermediate-term TREND downside to $36?

Oh, never, eh? If it went to $36 it would do what Suck’s META Bubble did, simply retracing to a 3 year low. That could never happen, eh? Coming into this morning, TSLA only has $700 BILLION in #BubbleCap. What a steal!

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Let’s quickly recap and bring it back to the data/numbers. If you stuck with the #VASP signal, the #NOWCAST model as well as the #COACHING from Keith, you’ve had 3 massive #LowerHighs to sell since the #AllTimeHigh of $409.97 on November 4, 2021.

1) January 3, 2022 @ $399.93 (Down 65.54% as of December 20, 2022 closing price).

2) April 4, 2022 @ $381.82 (Down 63.91% as of December 20, 2022 closing price).

3) September 20, 2022 @ $308.73 (Down 55.37% as of December 20, 2022 closing price).

BOTTOM LINE: We focus squarely on the data and numbers to influence our decision making #Process + #Execution within our portfolios. We pride ourselves on our ability to block out the narrative driven/macro tourist events and hold people accountable for sucking in average investors through storytelling and/or fraudulent behavior. 

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Here's some additional research insight from Keith as well as our Industrials analyst Jay Van Sciver.

$TSLA Is A “Pandemic Liquidity Bubble” 10/20/22

This morning on The Call @ Hedgeye, Industrials analyst Jay Van Sciver and Hedgeye CEO Keith McCullough discuss bizarre claims from Tesla’s (TSLA) earnings report and Elon Musk.

“This has gotten to the point of assuming gullibility and stupidity that is painful,” notes Van Sciver. “You’re telling everyone that the value of Tesla (TSLA) stock is going to be two Saudi Aramco’s. I think this is just a pandemic liquidity bubble.”

“This guy is a salesperson for his own stock. That’s it,” explains McCullough. “It’s a cyclical consumer stock that sells a couple cars. That’s not where you want to be in three straight #Quad4’s.”

The Mother of All Bubbles: Tesla Loses Half Trillion in Market Cap 11/23/22

Why is Tesla (TSLA) stock collapsing? Bears point to problems at Twitter, Tesla's 19th recall this year and Chinese demand issues. But yet another issue, and the "elephant in the room" for Tesla, according to Hedgeye Industrials analyst Jay Van Sciver is the Federal Reserve. 

In other words, the rising cost of capital.

"This is another liquidity withdrawal name that's going to get hit as Fed policy becomes less accommodative," Van Sciver explains in the video above on The Call @ Hedgeye.

"Tesla rallied very sharply on policy accommodation in 2020," he adds. "That's where you saw the bubble in EV, new energy and 'planet saving names' hit. Now we're on the withdrawal side."

"I don't know if calling it 'The Mother of All Bubbles' gives due credit to what's happening at Tesla," explains CEO Keith McCullough.