One of the old investing saws against shorting stocks was coined by famed economist John Maynard Keynes: "The market can remain irrational longer than you can remain solvent." 

Billionaire hedge fund investor Jim Chanos recently admitted as much, reportedly telling Fox Business' Charlie Gasparino that it is "impossible" to short Tesla's (NASDAQ:TSLA) stock because of the market's infatuation with the company.

Although Chanos' fund, Kynikos Associates, hasn't completely closed out its short position in the electric vehicle maker, it's reduced it by a significant amount.

Tesla Model 3

Image source: Tesla.

A long fuse

Chanos has been a long time Tesla critic, one time calling the EV maker "a walking insolvency." Though the hedge fund operator says the Tesla position wasn't a bad trade for much of the four years he's shorted the stock, since Tesla's stock largely traded sideways while the market soared, that changed in 2020.

Shares of Tesla are up 600% this year and over 800% from its March low, giving the company a half-trillion market cap. That's more than four times greater than the combined valuation of Ford, General Motors, and Fiat Chrysler.

In the wake of such a rout, he has reduced the "maximum short" position down from the 5% maximum short position allowed by his fund's rules. He continues to see problems with Tesla's business model.

Chanos told Bloomberg, "there's now so many other things to do in the EV space that we found lots of other things that are maybe even crazier than Tesla."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.