2017 Investor Roundtable:General Discussion

[Intl Professor]

Apologies for the off-topic detour. I've never forgiven the US unintelligence agencies for their idiotic and national-security-damaging behavior before, during, and after the fall of the USSR.

Some of the foreign agencies are more competent. The UK agencies aren't competent either, though.

Points well taken; I should have said "sometimes" as "often" is too positive. However, you probably would agree that the US has at least two marks making assessment of the Soviet Union your best example of failure: 1) uniquely hostile to any philosophy that might be favorable to labor and 2) political interference in the assessment process itself. On the latter point Jerry Ford's insistence and Bush one's complicity in the Team A and Team B controversy when he was CIA chief is the best example, along with Bob Gates' appointment to clean up the shop applies to assessment of the Soviet Union. Another example of classic meddling in CIA work is the pressure by Dick Cheney in advance of the Iraq War. That's where Trump's general ignorance misses an effective point. Also I'm sure you know about NSC-68's argument a defense industry stimulus by the Cold War would create sustained American military involvement in the postwar world. Truman deliberately created the forces Eisenhower warned us about in his farewell address. Finally, Trump is doubtless waging that traditional war against any agency opposing his preferred version of reality. What is now unusual is the intelligence bureaucracy is fighting back.

You must be an historian. Just as "My arms are too short to box with God,"...I drop my king.

 

[doctoxics]

I agree with you, but lots of people seem to think that Tesla's demand is heavily driven by incentives and subsidies and that if those go away, demand for Tesla's products will magically dry up. The market is driven more by what people think are risks rather than real risks.

This is demonstrably false, of course, since numerous jurisdictions have changed or deleted their incentive programs without dramatically affecting the deliveries of Tesla products in that region. Sure, it changes demand, but for Tesla right now, demand is outstripping production by such a humongous margin that it doesn't matter.

There are few things that could happen politically anywhere to significantly impact the trajectory of TSLA over the next few years, but the mere perception that there are things is enough to impact the stock.

Its like how there is no particular reason that trading on technicals should work, it simply does because there are so many traders who believe it does that it becomes a self-fulfilling prophecy.

Interesting discussion. We still have states banning Tesla sales. Also, the change in incentives in Hong Kong will likely impact Tesla sales there. Overall, I agree that politics and incentives have little effect on Tesla sales that are primarily driven by a superior product. Of greatest concern is the overall health of the economy. A downturn like the one in 2009 would be devastating to Tesla during this period of Model 3 launch and relatively little cash on hand. Tesla will be much stronger and better able to withstand a downturn a year from now when we can expect net positive cash flow and more cash on hand from Model 3 sales.

 

[Matias]

FYI

Lawfirm seeking for class action participants

 

[Drax7]

Speaking of recession. The health care sector has expanded dramatically and now approaches 20% of the economy.
Its in a bubble state of its own with almost no market competition to keep prices in check.
This sector will eventually will experience a recession, as rate increases are not sustainable.

These types of imbalances were responsible for recessions in the past.
Any suggestions on how to capitalize on this scenario.

 

[Waiting4M3]

The interesting tidbit from the article quoted by Electrek is that the cable to be used in M3 has silicone based insulation which has higher temperature rating, and, therefore, current-carrying capacity than standard cable: 200 Deg. C vs. 90 or 105 Deg. C for standard cables. This allows for a smaller cross-sectional area of the cable for a given current-carrying capacity, reducing weight and cost for active material.

Can the cables be for the new Supercharger that has higher current?
Edit: probably not, SC won't need 3km of cables

 

[Waiting4M3]

I find the aluminum cables interesting. Do any electrical engineers have comments on the possible downsides of using aluminum rather than copper? Apart from thicker cables, that is. The upsides are obvious: it's much cheaper and it's lighter. Given the focus on cost-cutting and manufacturability, I think this is a good move and I wouldn't be surprised to see all-aluminum wiring. But is there any potential problem with that?

Cu conductivity is ~58% higher than aluminum, so Al cable needs to have 58% larger cross section as Cu cable to achieve the same resistance. If the cabe cross section is round, then the diameter of the cable would be 25% larger.

Given the same resistance, heat generated in the cable would be the same, so insulation thickness won't need to be changed much, my guess.

 

[neroden]

Points well taken; I should have said "sometimes" as "often" is too positive. However, you probably would agree that the US has at least two marks making assessment of the Soviet Union your best example of failure: 1) uniquely hostile to any philosophy that might be favorable to labor and 2) political interference in the assessment process itself.

Absolutely, and very good points.

Also I'm sure you know about NSC-68's argument a defense industry stimulus by the Cold War would create sustained American military involvement in the postwar world. Truman deliberately created the forces Eisenhower warned us about in his farewell address.

This has created something else: it's created a new institutional bias, in addition to the hositility to labor -- one which biases against giving advice which says that the military-industrial complex is unnecessary or inappropriate.

This is a massive, and highly problematic, bias in terms of getting good advice. It means that you can't get the (bloody obvious) information that the NSA spying program is damaging our reputation abroad; you can't get the (bloody obvious) information that basing a fleet in Bahrain is simply annoying everyone in the area, and giving the US a reputation for hypocrisy on matters of democracy, while providing no strategic value... because these pieces of information would involve acknowledging that the military-industrial complex can be a *problem* rather than a *solution*. I guess it's the old "if you have a hammer, every problem looks like a nail" problem.

Somehow Trump has managed to buy in fully to the military-industrial-complex hype (every problem looks like a nail) *while* alienating the actual agencies involved, which is *quite an astonishing accomplishment* (in the bad sense) -- I would not have thought it a likely possibility.

You must be an historian.

Only an amateur, only an amateur. I do enjoy discussing these things with you; I've learned a lot.

 

[Waiting4M3]

Aluminum cables will certainly be lighter for the same conductivity. Aluminum has 0.48 the weight compared to copper for the same conductivity. (The cables will be 60% larger in size, however.)
Source:
Copper-Versus-Aluminum Conductors
There is also a cost component as well. Aluminum is cheaper than copper.
Aluminum USD/lb 0.87
Copper USD/lb 2.67
So half the weight at the same conductivity, and 1/3 the price at the same weight means 1/6 the price total compared to copper, assuming you're ok with cables that are 60% thicker.

It doesn't need to be 60% thicker, see my computation above, it only needs to be 25% thicker. or 58% more volume (cross section), assuming a round cross section.

 

[neroden]

Hmm. I think we may expect all-aluminum wiring in Model 3. Could this be a "secret weapon" to lower weight (so increase range), and lower production cost all at the same time?

 

[austinEV]

Interesting article about the Dole company and its stock. Also a highly shorted stock.

https://www.nytimes.com/2017/03/21/...t&contentID=WhatsNext&src=recg&pgtype=article

 

[doctoxics]

Speaking of recession. The health care sector has expanded dramatically and now approaches 20% of the economy.
Its in a bubble state of its own with almost no market competition to keep prices in check.
This sector will eventually will experience a recession, as rate increases are not sustainable.

These types of imbalances were responsible for recessions in the past.
Any suggestions on how to capitalize on this scenario.

My view is that the only economically sustainable health care in the USA is "Medicare for all". To afford health care, we need to cut out the middlemen and gain control of the cost of drugs, hospitals and practitioners. Medicare for all would result in the end of "for profit health care". You might consider shorting a weaker health insurer, pharmaceutical or hospital company. The final collapse of these companies is probably several years away. The inability of republicans to end and replace the affordable care act is symptomatic of the unsustainable cost structure of our current system.

 

[doctoxics]

This excerpt from Electric may help clarify the current Tesla battery types, sources and uses.

"Of course, we now know that they developed a new cell with a bigger 2170 format to be manufactured at the Gigafactory in Nevada, but those cells are currently used for the Tesla Powerpack and Powerwall. They will also be found in the Model 3 later this year, but for now the 18650 cell is the only one used by Tesla in its vehicles."

 

[luvb2b]

agree nero it's bad out there. but not as bad as you think. there are a few brokers that handle trades reasonably well.

you can check the 606 reports and what you want to see is a broker that is sending a lot of orders to primary exchanges.

bofa/merrill is pretty good in this regard, and their merrill edge offering gets you good fills with low commissions (although there are share and contract limits). they do have an internal baml desk that may trade against you, but since banks can't take big risks for their own books those operations are scaled way down and the fills are good. their orders go to primary exchanges like the nyse and nasdaq and have great execution vs. other brokers limit orders.

some people have good luck with interactive brokers. there are other boutique brokers that have routes that bypass market makers and take orders to markets with high end algorithms that are nearly impossible to front run by their design.

i think limit orders are some of the most expensive to execute, but the costs are hidden. here's why: say i put in a limit order to buy 3000 xyz at $5.50. the market maker will post that order on an exchange, but he will have control over that order and he will know the order is in "his" book and is real. now some 3000 share sell order comes through for xyz. instead of filing your order and filling both orders at 5.50, the market maker fills the sell order at 5.501 buying 3000 for his own account. if more sell flow starts coming he will cancel your order off the exchange and sell his 3000 shares to you at a 0.001 loss. if the stock bounces to $7 and you never get filled total cost to you $4500.

on market orders, fidelity and some other brokers have deals with market makers that provide meaningful price improvement for small market orders. a lot of times i will get a far better fill sending "buy 2000 at market" vs. trying to buy that same 2000 at limit, simply because the order goes into the automatic price improvement. in fact at these brokers i almost exclusively trade with market orders which give the market makers no chance to front run. the only issue is that orders can only be done in small size - multiple orders will result in 2nd, 3rd, 4th etc orders getting progressively lousier fills.

YThe thing is, it really is *all* the retail brokerages; the really expensive high-commission "prime" brokerages will front-run you too. So there's no escape from it short of buying yourself a seat on the NYSE....
There is only so much front-running they can do on a firm not-currently-executable limit order, obviously. If I'm not mistaken, the limit order is required to go through to the exchange's order book if it isn't immediately executable, regardless of how it's routed; it's sort of fun *being* the quoted bid or ask, and I can watch the copycat traders following me, but I still get my trade executed first if the price drops/rises through it. .... At this point, I tend to think nobody should ever issue a market order unless they're bailing out of a flaming dumpster fire stock and really don't care how much money they get. And I don't see any way whatsoever to make money on short-term trading because the market makers will eat you alive.

 

[neroden]

bofa/merrill is pretty good in this regard, and their merrill edge offering gets you good fills with low commissions (although there are share and contract limits).

Merrill's an honest-to-god fraud shop. They will outright defraud you by assigning fees they have no legal right to assign, making trades they were not authorized to make, etc. I won't touch them with a ten foot pole. They have a *culture* of fraud and it dates back many decades.

I guess if you're committing outright fraud against your customers, you don't need to fool around with penny-ante bid-ask spread stuff...

Anyway, I'd go with Morgan Stanley or JP Morgan Chase or Citi before I'd go anywhere near Merrill Lynch.

 

[neroden]

Interesting article about the Dole company and its stock. Also a highly shorted stock.

https://www.nytimes.com/2017/03/21/...t&contentID=WhatsNext&src=recg&pgtype=article

Very helpful. I may get more of my shares certificated or put in book-entry form at the registrar due to this sort of nonsense.

Looks like this occured during the 3-day settlement period, though, so those with settled shares should have been OK.

 

[Intl Professor]

I do enjoy discussing these things with you; I've learned a lot.

Absolutely reciprocal.

Intelligent amateurs uncover the appropriate rocks because they have less prejudice as Nasruddin knew when he asked the villagers to ask him the questions the wise men could not answer.

I too missed the fall of the Soviet Union but had been teaching about the nationalities question for at least ten years. The work of the French sociologist, Helene Carrier d'Encausse (sorry I can't do the accents in this format) was very helpful. In her two classic books about the collapse of the USSR she never once mentions the Carter/Reagan military buildup as a causal factor. Apparently the CIA did get that right. According to an Atlantic article in 1989, if I remember correctly, the CIA agreed because Soviet military spending did not in fact rise during the relevant years, at least not beyond historical trends. The Carter/Reagan buildup was just another phony waste of tax dollars propping up an industry uniquely capable of disutility. What is the economic value of a tank in peacetime? It is a very wasteful form of transportation.

We are now making the same kind of mistake propping up the fossil fuel industry. (Ever fearful of Audie's hook!)

 

[JRP3]

Hmm. I think we may expect all-aluminum wiring in Model 3. Could this be a "secret weapon" to lower weight (so increase range), and lower production cost all at the same time?

I'd expect only the higher power cabling to be aluminum. Smaller diameter 12V wiring in aluminum might be subjected to more vibrational stress fatigue and not worth the hassle of extra support and termination methods. Copper is easy.

 

[neroden]

on market orders, fidelity and some other brokers have deals with market makers that provide meaningful price improvement for small market orders. a lot of times i will get a far better fill sending "buy 2000 at market" vs. trying to buy that same 2000 at limit, simply because the order goes into the automatic price improvement.

Yeah, I've noticed that, but sending in at market can also result in true front-running where the market moves away from me and I get a fill at an unacceptable price.

I've therefore taken (in relatively price-stable periods) to sending in limit orders to buy at the ask price. I get the same automatic improvement deal, it turns out, but if the market moves away on me, they can't execute on me at a bad price.

 

[Xorbit]

Interesting article about the Dole company and its stock. Also a highly shorted stock.

https://www.nytimes.com/2017/03/21/...t&contentID=WhatsNext&src=recg&pgtype=article

Interesting. There are definitely a few initiatives under way to make shares true bearer assets and dispense with counterparty risk. Owning the cryptographic private keys to your stock and putting a hash of the certificate on a blockchain will make naked short selling much more difficult.

 

[jbcarioca]

This, I don't in general believe. They didn't notice the fall of the Soviet Union. They had no idea who any of the plotters in the coup were, and knew nothing about the leaders of the component states of the former Soviet Union, and Clinton actually complained about this in public.

CNN knew more than they knew. *I* knew the backgrounds and attitudes of a quarter of these guys.

Before that, they didn't see the fall of the Berlin Wall coming -- and I saw it coming, just by reading Gorbachev's public statements. Let me repeat that: I (and any other hobbyist who followed the "ethnic states" of the USSR) knew more than the entire CIA apparatus about the fall of the USSR, because they had made a misjudgment as to what was *important* to look at.

The areas in which the unintelligence agencies have information seem.... limited. Highly limited. Limited, perhaps, by their blinkered, closed-minded worldview more than anything else. They probably are very good at collecting blackmail information, but they seriously suck at having information *in general*.
....

Clearly, it depends. In some notable cases the political preferences shouted out the actual conditions. One I personally saw was the Iranian Revolution. I was in Tehran then, working for an American/Iranian JV. I studied farsi with a pretty smart young man and met many of his colleagues, who universally hated the Shah and his government. Some pretty senior Iranian government officials at the time (I'll name no names, they're still alive) did not even speak Farsi! Not odd, since the elites of the time were educated abroad for the most part. The foreign intelligence community did not see the revolution, which was NOT about Islam, even though fundamentalists ended out taking control.

The long list of intelligence failures, though, can be exaggerated. In my ancient experience, pre-Iran and there too, the information was all there, presented and advocated, but killed due to politics. Hence, the second Iraq invasion and the decision to stop short on the first one. Those were NOT failures of intelligence but failures of politics.

Now we're in much worse shape than we were inventing the Gulf of Tonkin, Shah's stability and WMD in Saddam Hussein's Iraq. None of those were errors by intelligence, but by their bosses.