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Short Self-Driving Car Stocks, It Is Way Too Early to Be Bullish

As recently as a few weeks ago, it seemed like full steam ahead for autonomous vehicles (AVs). Analysts were throwing out terms such as "trillion-dollar market." Never one to shy away from hyping new technology, Tesla's (TSLA) Elon Musk hosted an Investor Day at the company's headquarters focused solely on AV technology. Also, on May 7, General Motors' (GM) Cruise division announced a $1.15 billion investment from a group of investors including T. Rowe Price and existing investors Honda (HMC) and Softbank (SFTBY) , valuing that division at $19 billion.

Of course, the only real roadblock for mass adoption of cars that aren't driven by human beings is... human beings. Thus, the torrent of recent bad news for those hoping for the near-term adoption of AVs was actually quite predictable. This doesn't mean that autonomous vehicles are never going to proliferate. It just means that, as so often happens, the stock market was being overly aggressive on pricing in the date of that proliferation.

Exhibit A in the pumping of the market's brakes on AV plays is, of course, Tesla. I have been steadfast in my exposition -- on Real Money -- of Elon Musk's constant stream of hyperbole, half-truths and obfuscation for the past five years. It feels good to be right, and TSLA's plummeting shares have justified all of my warnings and those of other bearish analysts as well.

But why now? Why has the negative momentum that has been evident in Tesla's shares since Musk's "funding secured" tweet of Aug. 7 turned into a torrent that, if pre-market quotes are to be believed, threaten to have TSLA shares bid down a full $200, or more than 50% since that fateful August day?

Because reports emerged last week that Autopilot was engaged during another fatal crash, this time involving a Model 3. Perhaps even more damning, Consumer Reports noted this week that Tesla's Navigate on Autopilot feature is, frankly, not very good at driving. When the single-most important consumer publication in the U.S. is comparing new technology to a nervous teenager behind the wheel, it shows that the automotive world is a long way from fully-autonomous driving.

So, Tesla continues to set the world of automated driver-assistance systems (ADAS) back through its real-world foibles. The endgame though, as I have noted in several Real Money columns, is not ADAS, but MAAS. Mobility-as-a-service has the potential to change the way human beings move around the planet. Again, though, MAAS systems will have to be greenlit by actual human beings.

Thus this week's news -- reported by Reuters -- of damning public comments on GM's Cruise program shows that MAAS is not anywhere near adoption. The Reuters article has all the gory details, but to see the weird coalition of anti-AV forces -- the Union of Concerned Scientists, The Insurance Institute for Highway Safety and the National Association of Mutual Insurance companies -- ganging up on Cruise was telling.

Humans are not going to let other humans produce self-driving cars for mass consumption until they are proven beyond a reasonable doubt to be safe. Note that I didn't write "safer than human drivers," because NHTSA's figure of 37,000 vehicular fatalities in the U.S. in 2016 is just stunning. If computers cannot do better than that, then we need to rethink transportation as a whole.

So, that's what is frustrating and also very expensive for those buying shares of Tesla or Uber (UBER) on the hopes of seeing fleets of self-driving cars. Timing is crucial in investing. Don't ever forget that. Trying to find disruptive technologies can disrupt your personal wealth.

Leave the identification of future disruptive technologies to the venture capital pros, and stick with established companies that have cash flows and earnings. Also, continue to short stocks in companies -- like Tesla and Uber -- that don't.

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