2017 Investor Roundtable: TSLA Market Action

[ValueAnalyst]

Ron Baron is a super smart guy
he's been totally right in numerous cases
For example WYNN which he bought at IPO
In case of TSLA he's being conservative
$1000 by mid 2018 is entirely possible
If the market goes crazy in a severe melt up as I strongly suspect
Then sky's the limit
And $2000+ by 2019 is possible
Sorry I'm not a devil's advocate
(I'm the devil)

I agree with the general sentiment of your reply, but I'm trying to understand where he's coming from... how he reached his targets. Makes no sense to me.

I think he's just using 1m cars in 2020, no output from additional gigafactories, no semi, and nothing from Tesla energy...

 

[SBenson]

Okay for what it's worth
Here's my trading/investing philosophy
Fundamentals matter a whole lot
In fact in my 19 years of trading experience I've moved from purely TA to mostly FA
I'm in TSLA due to fundamentals
Technicals are the sort of headlights of our model X
They guide my path on a dark rainy road
But Fundamentals rule and FA is MX
TA merely headlights
However TA gives me added confidence
Possibly an edge
Allows me to hold hugely super leveraged position in a single stock
And sleep well at night
I'm not interested in any debate about First Principles and analogy etc
My method admittedly supremely flawed
And even pretentiously baseless and extremely dangerous
Has served me extremely profitably well over the years
In the end it's all a game
And the best players get their edge from the darkest corners of chaos inside their damned tortured souls
If you have to rationalise or justify your method
Then you're already a loser
Winners don't know what the hell they are doing
They just do it

Thanks... If I may, in your past successes, were you always positioned in huge single stock bets?

 

[Intl Professor]

Elon's superpower is reasoning from first principles. Reasoning by analogy is one reason others don't see the solutions that Elon sees. Feynman was the same -- he figured things out from first principles.

Apparently TrendTrader thinks that stock trading has no first principles so Elon's approach doesn't apply, but I guess that's how TA guys roll. Me, I think saying one chart looks like another is nonsensical as a basis for anything. As is the claim that trading is all psychology. I'm not in TSLA because of anybody's psychology, I'm in it because long term Tesla will rule the energy world. And a guy way smarter than me is going to lead that effort. Smarter, cheaper, faster, better will win in the long run. It's obvious.

By the way, if you haven't looked at the spurious correlation site I link above, do so! Truly hilarious!

Thanks. Loved the site, too.

You and 22522 have helped me to understand my problem, doubtless due to hardening of the brain cells with age.

Obviously if you start with first principles you have many more options than what others have who build only on tried and true previous applications several steps down the road. We think only in wheels since they have been such a success story. In a baby way when I heard the range of the roadster, as first published at 300 mi, I started buying Tsla because range seemed the limiting factor for a viable electric car. Didn't think of the other advantages.

But if you start from first principles of physics, shouldn't that include teleportation or what Einstein called "spooky action at a distance?" Or better yet, folding space and time over itself as in a worm hole or a "blink drive" as envisioned in the TV series "Dark Matter?" Baby steps on the first with greater and greater distances have already been achieved in the labs at the particle level. Practical applications for this means of transport are only a matter of time and implementation.

 

[neroden]

The other thing is that the daily trading of TSLA has developed patterns that we all recognize. Traders do as well. If you are inclined to think you can make some money shorting TSLA, when would you jump in? If you know the stock well, you would jump in early, before the mandatory morning dip. This amplifies the pattern. If you are day trading, you would probably look to cover when you think the stock has bottomed for the day. This contributes to the stock typically rising pretty quickly from the morning dip. Bullish traders know this and look to get in when they think the bottom of the morning dip has been reached. The pattern of the stock rising from the morning dip thus gets amplified.

Positive feedback loop -- causing amplification of any initial pattern. Because traders recognize the "open high, dip in morning, go back up" pattern, they pile in and *exaggerate* the pattern. There are a lot of these in the stock market.

 

[neroden]

zero margin calls despite my being on margin close to $7
my margin equity did fall to 44% but no worries
how much stock are you holding?
don't have to state if you don't want to
it's all good
I am tempted to buy even more but too scared to do so

I know I'm more conservative. I keep my margin equity over 80% (and I avoid paying interest, so going below 100% is entirely due to using margin to secure short puts). Implied Volatility shot up again in the last few days -- good time to sell more puts.

BUT... the silver lining is I don't mess with my DITM and DOTM LEAPs, and I don't mess with my core shares. And I don't use margin (famous last words). Obsessively tracking short term option chains keeps me from doing something majorly dumb. At least that's what I tell myself.

I also tell myself that watching the option chains keeps me out of trouble and prevents me from unnecessary trading.

 

[neroden]

I bought some Jan19 400 calls a few days ago and got hit with a regulation t call, and my broker liquidating some of my shares. Overall, I lost 210 of my shares in exchange for 10 call options.

I'm actually using less margin now and I'm more exposed to TSLA. Previously, I only held stock. Once it returns to ATH, assuming the price of the option will also return to a similar point as before, I'll be up 10% higher than last time it hit the ATH thanks to those options. It's an interesting, and rather beneficial trade, but I can't help but be a little annoyed that I'm only ~150% into TSLA now.

I can't think of a reason why I shouldn't convert all of my shares into call options, does anyone have a reason why I shouldn't?

Expiration dates. Suppose something funny happens around January 2019 causing a temporary dip in the stock price. Holding shares, you sleep soundly. Holding calls...

If you close the calls well before expiration I guess this wouldn't be so much of an issue though.

 

[tander]

Does anyone agree with his SP projections?

I estimate $1,000 is more than likely, defined as more than 50% chance, by mid-18.

Looking for devil's advocates.

I don't know how you put an actual number on it whether it's 600, 1000, or 1600, but it's possible and probable if a) the market holds out and b) autopilot goes level 4 or 5ish (I'm already assuming m3 goes great, solar panels go great, and power systems sell like hot cakes). This makes me think of something interesting; if the market tanks, short interest in tsla will probably go through the roof just because it's overvalued and the stock will be going down, but if short interest is super high and they were able to put level 5 on the table the short-squeezers would probably have their day. If you want a devil's advocate: if the market/economy tanks people are still going to buy Tesla stuff, but the stock is fundamentally overvalued and might tank with or worse than the market. Additionally, things seem to be looking up, but they might not get both feet into China for a while or ever which would basically be worse that not being in the US long-term.

 

[ValueAnalyst]

I don't know how you put an actual number on it whether it's 600, 1000, or 1600, but it's possible and probable if a) the market holds out and b) autopilot goes level 4 or 5ish (I'm already assuming m3 goes great, solar panels go great, and power systems sell like hot cakes). This makes me think of something interesting; if the market tanks, short interest in tsla will probably go through the roof just because it's overvalued and the stock will be going down, but if short interest is super high and they were able to put level 5 on the table the short-squeezers would probably have their day. If you want a devil's advocate: if the market/economy tanks people are still going to buy Tesla stuff, but the stock is fundamentally overvalued and might tank with or worse than the market. Additionally, things seem to be looking up, but they might not get both feet into China for a while or ever which would basically be worse that not being in the US long-term.

Let's assume market won't "tank" - i.e. No more than 10-15% drop in the next 12 months.

Let's assume no Level 4/5 by 2020, which would only increase demand, and Tesla can't even meet half of today's demand anyway.

 

[neroden]

If I had to guess it would be quality standards are not satisfied yet when increasing the production speed. So you have to stop, assess, fix, try again. Rinse and repeat until quality standards are met at new production speed. This process is repeated every time you want to crank up the speed. And since you never really know how it's going to go until you try, it's difficult to predict. This is why Elon (my interpretation) was so hesitant to give an official guidance.

It's worth remembering that if cars do ship with things which need to be fixed -- like the *entire first year of Model S production*, which had a *very long* list of fixes at the first annual service -- it ends up being a large and expensive back-end workload on the service centers. So if Tesla has a choice between shipping almost-perfect cars with a 12v battery problem, or slowing down production until they get the battery problem fixed, it may be the wiser course of action to slow down production.

 

[Alketi]

I estimate $1,000 is more than likely, defined as more than 50% chance, by mid-18.

$500 is possible next year, but is entirely dependent on the Model 3's reception, continuing reservation totals, and its profit margins. If the Model 3 can't make Tesla operationally profitable, let's be real -- the story is over. That's the first hurdle.

To get to $1000 Tesla needs to not just play in other industries, but disrupt them. Successfully. That means exponential sales and profits from solar roofs, energy, trucking, and most importantly the Tesla Network.

The stock doesn't get to $1000 without a successful launch of the Tesla Network, which means Elon either needs to be right about only needing radar and cameras, or Tesla needs to make the fastest pivot to LiDAR that the world has ever seen.

Further Devil's Advocate (warning - avert eyes)

- Tesla has barely equalled Mobileye's single camera, single 2.5W chip autopilot performance with 8 cameras and a supercomputer.

- Powerwall 2s are still backordered and not shipping in quantity

- Tesla filled the Australia order with cells from Samsung, which, coupled with the previous point implies the TE cells and/or Gigafactory production is insufficient to support TE.

- Tesla is still selling full self-driving without a single delivery one year after its introduction (representing a potential liability). And will apparently continue this with the Model 3.

- Tesla is trading on brand and perception, so a recall or other large negative event could shatter either of those qualities.

On the Plus Side

- Tesla is competing in an industry that's been devoid of any meaningful innovation in decades

- Tesla is competing against risk-averse companies intent on protecting their own combustion engine IP and dealer networks

- The Model 3 drastically exceeds the price and performance point of everything on the drawing board at least until 2020.

- No one will have the battery supply for the world-wide deployment of meaningful competition until the same timeframe.

- No one else will have an equivalent Supercharging network until at least the same timeframe

- Musk is not playing by any established rules nor is he limited by conventional thinking. He's Macaulay Culkin from Home Alone being chased by dumb adults who always know better but can never catch him. He's more clever than you, he'll out think you, he's not playing by your rules --- and yet for dinner he just might eat a whole box of Oreos..

tl;dr: If Tesla is $1000 by next June I'll FedEx a bottle of Gran Patrón Platinum to a P.O. Box of your choosing. Next June's not enough time.

 

[Intl Professor]

Winners don't know what the hell they are doing
They just do it

Your thoughts are noble and, of course, you have lots of cred or compassion from most of us here. I love this outburst, much like Dostoyevski, Nietsche, or other heroes I have.

But then that must have also been in the "tortured skull" of the guy in Las Vegas, or Trump as he thinks of himself. It is useless looking for their motives in the mental space you so elegantly describe. In Trump's case he's really not a winner because he seeks so much self-validation. I don't think this thinking is rooted in Nietzsche's concept of the overman which his sister so viciously distorted at the Bayreuth circle. Replies should be in the General arena.

 

[neroden]

Sorry, if you didn't have any margin calls on this drop then you certainly weren't pushing the limits. That's a good thing, but very different from what you've been posting.

Well, TrendTrader used to get a bunch of margin calls due to having a concentrated position but has now apparently switched to a broker who only enforces Fed calls. (Good move!)

Also, I don't know what kind of translation code you are using to describe holdings so I can't describe mine in your language.

Yeah, I can't figure out TrendTrader's translation code either.

In any case, I'm not sure that publicly describing the size of one's portfolio serves any purpose.

Me neither, though I have mentioned it occasionally when describing trades just because I don't see the point of concealing it either.

I can say that it's over triple what it was at the start of this year.

So you're leveraged. My TSLA positions are only up about as much as the stock is up, which is sufficient for me. And I'm *not* 100% in TSLA, only about 30% (or 40% if you include the OTM short puts which I usually don't).

 

[neroden]

This is so freakin obvious when you think about it, but we gripe so much on red days vs. celebrate on green days. Gotta love loss aversion.

To counteract that:

Console me over the fact that I will probably never be able to buy another share at $310.

 

[ValueAnalyst]

$500 is possible next year, but is entirely dependent on the Model 3's reception, continuing reservation totals, and its profit margins. If the Model 3 can't make Tesla operationally profitable, let's be real -- the story is over. That's the first hurdle.

To get to $1000 Tesla needs to not just play in other industries, but disrupt them. Successfully. That means exponential sales and profits from solar roofs, energy, trucking, and most importantly the Tesla Network.

The stock doesn't get to $1000 without a successful launch of the Tesla Network, which means Elon either needs to be right about only needing radar and cameras, or Tesla needs to make the fastest pivot to LiDAR that the world has ever seen.

Further Devil's Advocate (warning - avert eyes)

- Tesla has barely equalled Mobileye's single camera, single 2.5W chip autopilot performance with 8 cameras and a supercomputer.

- Powerwall 2s are still backordered and not shipping in quantity

- Tesla filled the Australia order with cells from Samsung, which, coupled with the previous point implies the TE cells and/or Gigafactory production is insufficient to support TE.

- Tesla is still selling full self-driving without a single delivery one year after its introduction (representing a potential liability). And will apparently continue this with the Model 3.

- Tesla is trading on brand and perception, so a recall or other large negative event could shatter either of those qualities.

On the Plus Side

- Tesla is competing in an industry that's been devoid of any meaningful innovation in decades

- Tesla is competing against risk-averse companies intent on protecting their own combustion engine IP and dealer networks

- The Model 3 drastically exceeds the price and performance point of everything on the drawing board at least until 2020.

- No one will have the battery supply for the world-wide deployment of meaningful competition until the same timeframe.

- No one else will have an equivalent Supercharging network until at least the same timeframe

- Musk is not playing by any established rules nor is he limited by conventional thinking. He's Macaulay Culkin from Home Alone being chased by dumb adults who always know better but can never catch him. He's more clever than you, he'll out think you, he's not playing by your rules --- and yet for dinner he just might eat a whole box of Oreos..

tl;dr: If Tesla is $1000 by next June I'll FedEx a bottle of Gran Patrón Platinum to a P.O. Box of your choosing. Next June's not enough time.

I don't think profitability is needed for $1,000. See amazon/Netflix. Profitability would help with short squeeze, but I don't think short squeeze is needed for $1,000 by mid-18. Continuous short covering would be sufficient.

Let's assume no level 4/5 by 2020. I don't think this is needed for $1,000. For $1T market cap, yes, but that not until later. Tesla Network can launch with level 3 next year, and I think it will.

I note and agree with your comments on FSD (though I don't think the liability you mentioned is much because I don't think many people are paying the extra FSD cash upfront), but I also think we'll get some news around EAP in the next few weeks. So much activity in congress around this. Semi event may have some news; we'll see.

I like Café Patron better. And I will post your offer in Bet ValueAnalyst At Your Own Risk.

 

[neroden]

If our tea-leaf reading is correct, that could mean we're ut of HELL! But don't tell anyone.

Out of 1134 hell and into 1135 "sell"... model 3s as fast as they can? ;-)

 

[neroden]

When Warren Buffett started his operation decades ago, he went through lots of stocks and put them into three buckets: good, bad, and the ones hard to understand. He focused on the good and stayed away from the other two buckets. This approach is very powerful in investment and trading.

The main reason I have totally different investments from Buffett is that I understand different stocks than he does. I understand computers (he doesn't), and I don't understand soda (he does).

 

[neroden]

I am not talking about consumers, Im talking about manufacturers. China is more of a threat to traditional automakers then it is to Tesla, in part because they are a very large market. But if you where a Chinese consumer, would you want to buy a BYD or Bolt?

The numbers say they're choosing BYD.

Don't underestimate the Chinese carmakers. They make good stuff. They haven't bothered to expand outside China for the most part (BYD in the bus market and Geely in the taxi market are exceptions), because the Chinese market is huge. But don't count them out.

There's room for several carmakers in the world, though. Of the non-Chinese carmakers, Tesla is in by *far* the best position, and if they end up splitting the world automobile market with 3 major Chinese carmakers... that's OK. 20% of the world market is OK.

 

[doctoxics]

Does anyone agree with his SP projections?

I estimate $1,000 is more than likely, defined as more than 50% chance, by mid-18.

Looking for devil's advocates.

My thought is TSLA is on upward trend, but not sure the slope would get us to $1,000/share by the end of next year. The most important variable, yet to weigh in, will be the impact of tens of thousands of Model 3s in the public and in show rooms. My understanding is that the quality and value of the Model 3 is far under appreciated, even with 500,000 reservations. We'll likely have the answer within six months. Models S and X, Tesla semi and Tesla energy will all contribute to the uptrend, but will have less impact. Expecting the stock price to move past $500 by next summer.

 

[ValueAnalyst]

My thought is TSLA is on upward trend, but not sure the slope would get us to $1,000/share by the end of next year. The most important variable, yet to weigh in, will be the impact of tens of thousands of Model 3s in the public and in show rooms. My understanding is that the quality and value of the Model 3 is far under appreciated, even with 500,000 reservations. We'll likely have the answer within six months. Models S and X, Tesla semi and Tesla energy will all contribute to the uptrend, but will have less impact. Expecting the stock price to move past $500 by next summer.

I agree with your post that $1,000 by mid-18 depends primarily on Model 3, but you haven't quite argued why it won't be $1,000. Are you saying model 3 will not be enough?

By my estimate, if Tesla is on track for 500,000 cars in 2018 by mid-18, then $1,000 is "more likely than not" based on how I believe institutional investors value Tesla.

The two-to-three week delay in model 3 production is a major risk to my forecast, but I'm not including any semi or model y or exceptional Tesla energy growth etc. in my estimate.

 

[Lump]

The main reason I have totally different investments from Buffett is that I understand different stocks than he does. I understand computers (he doesn't), and I don't understand soda (he does).

Coco-cola is #4 behind #3 Apple in Berkshire Hathaways portfolio ranked by market value.