2017 Investor Roundtable: TSLA Market Action

[sundaymorning]

And also something about nuclear war, I believe I read this morning.

The irony of all this is that the US is much more concerned than the South Koreans, which hears threats from North Korea on a daily basis for decades:

Analysis | South Koreans ask: Crisis? What crisis?

Let's put it this way, if the North Koreans are going to attack Guam, it would be classified information to everyone, including the NK population until the strike actually occurs. One would not scream on top of their lungs of imminently attacking an enemy unless it were a bluff.

The NK have been bluffing for decades, they want the US to negotiate and then send them tributes to stop testing, like we once did for "fat boy's" father during the Clinton years.

Much of the fear factor has been created by the inexperienced US media, which naturally harps on fear anyway. The other factor was Trump speaking about "Fire and Fury", which was also a rookie mistake in that he was speaking on a whim without even thinking it through.

 

[Mkorpal]

The irony of all this is that the US is much more concerned than the South Koreans, which hears threats from North Korea on a daily basis for decades:

Analysis | South Koreans ask: Crisis? What crisis?

Let's put it this way, if the North Koreans are going to attack Guam, it would be classified information to everyone, including the NK population until the strike actually occurs. One would not scream on top of their lungs of imminently attacking an enemy unless it were a bluff.

The NK have been bluffing for decades, they want the US to negotiate and then send them tributes to stop testing, like we once did for "fat boy's" father during the Clinton years.

Much of the fear factor has been created by the inexperienced US media, which naturally harps on fear anyway. The other factor was Trump speaking about "Fire and Fury", which was also a rookie mistake in that he was speaking on a whim without even thinking it through.

The risk though is Trump acting on a whim without even thinking it through. Obviously North Korea isn't going to attack anyone, it would be suicide. But there is a risk of Trump doing something rash.

 

[sundaymorning]

Obviously North Korea isn't going to attack anyone, it would be suicide.

Trump is already very unpopular, dragging us into a war without N.K making the first move would not be prudent to his already sinking popularity. The rhetoric alone has already damaged his credibility.

The whole threat that NK issued on Guam does not make any sense. First it was countless threats directed to South Korea, which was largely ignored, they then turned their threats to Japan, firing missiles towards the island, and now Guam somehow is at risk?

They've already made too many enemies by the onslaught of meaningless threats, attacking Guam would also mean endangering the security of South Korea, which was a very large ally to the US during the Vietnam War with over 300,000 troops deployed. Japan would likely be in the fray with the addition of the U.N. pulling all stops to eliminate NK.

If NK was confident in its ability to wage war, they would have already launched it at the South Koreans to unify the country without bothering Japan, and now Guam.

 

[neroden]

As I outlined in my post (and before that for years) wait until 2018-2021 for all large car makers to release long-range EVs based on dedicated platforms (which means many cars coming for each car maker).

The operative word there is "wait". By the time these other companies make competitive cars, Tesla will have a large share of the market and the most desirable brand name. I watch all of them. By the time any of them have a Supercharger network (none yet), Tesla will be selling *semis*, which aren't even on the horizon for anyone else with funding with the exception of BYD.

PS: Before someone shouts "missing SC network" that will also be taken care of with 450+ stations in just the first cycle over the next 30 months:

https://www.electrifyamerica.com/downloads/get/38726

(i.e. both CCS and Chademo charging at 150kW+ for highways and slower charging for urban areas).

You've wildly overstated it. They expect to have 150 highway sites done by mid-2019, with the rest being urban.

 

[neroden]

And the competition is just warming up. The market will be flooded with long-range EVs in 2020-2025, as outlined above.

So, tftf, you're saying that Tesla will grow massively, make lots of money, and the stock will go way up until 2020? That's what you're saying?

Seriously?

My Tesla investment thesis only extends to early 2019 at which point I reevaluate based on whatever the new situation is.

So you're as bullish as me?!!

 

[neroden]

Bond price talk is at 5.25%

Even that is being considered as pretty aggressive pricing for the given rating. However, it seems like all but done at that price.

Bloomberg has a discussion. The lead reporter for corporate finance, Nabila Ahmed, says it's oversubscribed by 2.5 to 3 times and it'll price below 5%.

Tesla Revs Up Bond Buyers to Support Model 3

Wow.

 

[neroden]

Do you think these 150kW+ chargers for both CCS and Chademo will just be installed for fun?

For fun? No. They're being installed as part of a legal compliance settlement over the diesel emissions fraud. Which makes it even more likely that they won't be done properly.

 

[madodel]

Bloomberg has a discussion. The lead reporter for corporate finance, Nabila Ahmed, says it's oversubscribed by 2.5 to 3 times and it'll price below 5%.

Tesla Revs Up Bond Buyers to Support Model 3

Wow.

They obviously haven't checked with Troll the Future and his far more knowledgeable brethern about the horrible risk Tesla is.

 

[neroden]

Yeah. China trade embargo and sanctions are key.

Without any oil and other commodities, North Korea can't do anything.

If Kim does initiate war, he'll lose his life. I don't think he wants to die

I'm mostly worried about the *other* unstable strongman initiating war with North Korea. This would be horrible but would probably not be completely disastrous.

The nightmare scenario is that the orange-haired strongman manages to stumble into a war with China.

Spoiler: the US would lose. Catastrophically. (Our military is entirely dependent on Chinese equipment, as well as being woefully unprepared for modern warfare with a real power; the Chinese military is designed explicitly to stop our military.) The question is basically whethere there would be a US left.

Given that China is very unhappy with the Kim regime after Kim started *murdering all their contacts in North Korea*, this scenario is highly unlikely, but it is the worst one.
China's North Korea problem is worse than ours

 

[neroden]

Trump is already very unpopular, dragging us into a war without N.K making the first move would not be prudent to his already sinking popularity.

Yes, but he's also demented. Just because it would be a completely self-destructive and idiotic thing to do doesn't mean he won't do it. Haven't we learned that by now? He's not known for "prudence".

 

[FredTMC]

Bloomberg has a discussion. The lead reporter for corporate finance, Nabila Ahmed, says it's oversubscribed by 2.5 to 3 times and it'll price below 5%.

Tesla Revs Up Bond Buyers to Support Model 3

Wow.

Ya. Great news if true.

I watched. Citing sources would've been nice

 

[Bgarret]

The irony of all this is that the US is much more concerned than the South Koreans, which hears threats from North Korea on a daily basis for decades:

Analysis | South Koreans ask: Crisis? What crisis?

Let's put it this way, if the North Koreans are going to attack Guam, it would be classified information to everyone, including the NK population until the strike actually occurs. One would not scream on top of their lungs of imminently attacking an enemy unless it were a bluff.

The NK have been bluffing for decades, they want the US to negotiate and then send them tributes to stop testing, like we once did for "fat boy's" father during the Clinton years.

Much of the fear factor has been created by the inexperienced US media, which naturally harps on fear anyway. The other factor was Trump speaking about "Fire and Fury", which was also a rookie mistake in that he was speaking on a whim without even thinking it through.

Agree, This is a tempest in a tea cup. The dance between the West, China and N. Korea has been about 2 decades of:

N. Korea - "we are a failed state and can't feed our people, let's threaten the west/S. Korea so they will pay us off with food"
West/China "We will impose sanctions unless you behave."
N. Korea - " we will behave if you give us food."

- West gives N. Korea about $1Billion in food

N. Korea "We will behave"

I know there is the Donald factor, but war with N. Korea creates and economic mess for his fellow Billionaires and he has a couple salty Generals that have played this game before. This is why investing in August and September can be dangerous, steady hands are in the Hamptons.

 

[Intl Professor]

But there is a risk of Trump doing something rash.

He's already done it with North Korea (and with Europe and China as well). It won't be truly catastrophic unless our military carries out his rash wishes or makes an innocent mistake on its own. Despite Nixon's theory of "madness at the top," president's don't normally get into a game of chicken with a nuclear armed chicken. In the case of Nixon as is well known the military took precautions. One hopes the same has been done in advance this time as it surely must be implemented since we're only six months into Trump's first term. It is truly amazing for those of us who are fact-smocked to see one man do so much serious damage to the institution of the presidency. If we survive, the world may be much better off. Wasn't it Bush II who said all the great president's had a war?

It's almost like Nietsche's lament, something to the effect: "the thought of suicide is a very comforting thought; one can get through many a rough night with it." I've often wondered about the psychology of bullies, what happens when they meet and truly engage?

As most of the pundits point out Kim can't back down, it's a real matter of survival for him. One can imagine Hitler's last thoughts: "Well, it was a great run for awhile, wasn't it my dear Eva?" There is so much puerile romanticism in Götterdämmerung. The wisdom of Sun Tzu and probably Clausewitz too is lost on our bumbling bully. One can defeat an enemy by letting him win a round or so. Let his hubris work to defeat him.

Today's BFO: Hubris is always self-defeating. But then, I'm always long.

 

[vgrinshpun]

I don't know what you were told.

I find it hard to believe. You actively participated in the discussion about whether margins will take a "hit" due to sale of "discounted" cars, so you certainly were aware of the argument.

I do know you were telling me that quarter Tesla doesn't discount.

Not quite. What I was arguing is that "discount" is misleading term when discussing reduction in price of demo cars due to usage and/or obsolescence. My point was that this depreciation is cost of doing business, i.e. selling cars. Apparently you agree with me on this:

Here is how it works : classic P90D rolls off the line in February, wheeled to a showroom. By the end of that quarter, the car is not sold. $0 is recorded in revenue for that quarter (of course) and $0 is recorded in cost of automotive revenue for that quarter (of course) margins of that quarter are not influenced at all by that car. Let's say that car took $100k to manufacture : that amount goes in finished goods inventory. Car is listed for $150k or gross margin of 33%

At the end of the second quarter, the car is still not sold. Meanwhile, it is now 3 months old and has driven 5000 miles for demo purposes. Tesla considers that car to have lost $8000 in value. Finished goods inventory is updated and the record there goes from $100k to $92k. That $8k is recorded as sales expense (which it really is, the car was used to sell other cars). List price of the car as a 'newly used' on the website is lowered to $138k

In July the facelifts are now widely accepted and known as the new Tesla look. Customers aren't even looking at the classics anymore. Therefore Tesla must recognize additional lost value. It makes a good effort to estimate that lost value as $21k. It drops the list price of the car from $138k to $117k. At the same time it records $14k in SG&A and removes that amount from the finished goods inventory, just like it did the last quarter with regular depreciation (leaving $78k on the books).

In August the car finds a buyer for $117k. That amount is added to automotive revenue, finished goods inventory is lowered by $78k and it is added to the cost of automotive revenue that quarter. Gross margin is calculated on that car as being : ($117k - $78) divided by $117k or 33%.

See, if a car is not sold the same quarter as it is manufactured, discounts due to depreciation show up in SG&A and not gross margin.

 

[DragonWatch]

Tomorrow, Friday, please wake up in a better mood. If this was a few years back, based on my enlisted and officer Cold War knowledge, I would tell you to take two aspirin and see you in the am. That was the old army, and I thought I would never ever say that As whacked out as you may see me from time to time here, you might just wish I still was one of the "red lever toggle pushers." That's kinda cool, I just made up the "red lever toggle pushers." My platoon performed an air mobile to launch site firing a training nuc round once upon a time. Did I say they were going to melt my butter bar, but found it was the guidance system that failed and wiped out one of the national monument white sand dunes and not my platoons preparation and launching of the Lance missile. The Lance missile system went the way of the chop shop back in the early '90s.

NK need not look too far for how things might go today. I spent the better part of the day hand painting Thompsons WaterSeal on my recently rebuilt deck, and trying not to fall of my ladder laughing about the loving relationship between tweeter and the senate, house of represenatives, attorney general, and of course all the litter along the way. It is about time for round two. Late night comedy just does not get any better. Bottom line, I still think NK should ask itself what a crispy critter tastes like, because if our "red lever toggle pushers" are ordered, I do not think it will be just one. Remember now, we were getting our butts kicked the first time around on the ground with NK. Lesson learned, do not get involved in a ground conflict again with NK.

Now, about tomorrow, well I will be back up on the ladder again laughing my butt off based on some new tweeter storm. Man, politics were never this entertaining back in the day. But I digress. Tesla is buying bonds, the semi is about to be unveiled, and the over all fundamentals are sound. Oh yeah, the other automakers are still dreaming about their soon to be produced Tesla killer ~ this is were the bucket of ice water come in on that dream I am sure there is more good stuff to add, but other than NK, nothing has changed at the moment for Tesla.

Oh yeah, and Presidents with low approval ratings like war to make themselves feel better. Remember the guy that attacked an island to save a veterinary college and won with our military ~ man those were the days

Try not to live your life in fear ~ there are better things in life like your family and your Model S, X, or 3 ~ until the rest get here Get a charge out of life

 

[Robertj]

Thought this chart of the Cuban missile crises , for those that can remember 1962 is interesting

 

[GoTslaGo]

China to be Neutral If North Korea Attacks U.S.: State Media

Quote:

China should remain neutral if North Korea launches an attack that threatens the United States, a Chinese state-run newspaper said on Friday, sounding a warning for Pyongyang over its plans to fire missiles near the U.S. Pacific territory of Guam.

The comments from the influential Global Times came after U.S. President Donald Trump stepped up his rhetoric against North Korea again on Thursday, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

China, North Korea's most important ally and trading partner, has reiterated calls for calm during the current crisis. Beijing has expressed frustration with both Pyongyang's repeated nuclear and missile tests and with behaviour from South Korea and the United States, such as military drills, that it sees as escalating tensions.

"China should also make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral," the Global Times, which is widely read but does not represent government policy, said in an editorial.

End quote.

 

[Tslynk67]

You know, we had all this rhetoric and sabre-rattling in the past with Saddam and Gadaffi, which ended up in a US-led regime change against both dictators.

Isn't it time to do the same? Only question would be whether Trump is impeached, persuaded to resign or removed on the grounds of insanity...

 

[Starno]

An other red day I guess

 

[DragonWatch]

An other red day I guess

Yes, it is a really red day for anyone ordering or having delivered a RED Tesla today!