General Discussion: 2018 Investor Roundtable

[Zhelko Dimic]

...

The reason why the predictive strength of technical analysis is limited to the point of being useless, is that any mechanism that could cause a stock price to move in a given direction is canceled out by changes in supply and demand, when the market tries to cash in on that mechanism causing an equally sized movement in the opposite direction.

This is second time you made pretty much the same error. I've corrected you first time, and you didn't answer, just to repeat this blunder again. So here we go: that bolded part above? you are wrong, these mechanisms are self-reinforcing, and not self-cancelling. Eventually they do get exhausted, but not before SP overshoots what should have happened if they were not in place.
And if you are not practitioner of technical analysis, I don't see how can you so confidently claim it's useless. You definitely have less experience than many practitioners, and they seem to think it's useful.
You are right that technical analysis cannot predict price with any precision, it can just give you confidence bands for possible future SP movements, but that is not useless if you are an active trader. If you are investor, yup, it's mostly useless.
And technical analysis is based on (human) psychology of the crowds, greed and fear patterns, not star gazing. As with any overtly complex systems that we can't model (like weather forecasting), it is not precise and it never will be. It's also a harder problem than weather forecast as it involves humans, that are less predictable (or better said: harder to model) than physics of the atmosphere. So, yes, it is less precise than weather forecasting, but in it's nature is very similar.

 

[Yggdrasill]

No. It’s the electric ones that don’t compete. For example: the local Jaguar dealer will place the I- pace next to the E-pace which sells for $25000 less and is bigger, and ask the question, How much gas can you buy for $25000?

The E-pace is *smaller*:

E-pace - I-Pace - F-Pace

And if you go for an E-Pace or F-Pace, you'll be stuck with a shitty ICE. Reviews even say the I-Pace is likely the Jaguar SUV with the nicest interior. And many say it's the nicest driving BEV, period, which is hard to believe, but it doesn indicate that if anyone would test drive one, they should be impressed.

 

[hobbes]

Elon clarifies his long-term plans for his TSLA shares:
Elon Musk plans to sell ‘major’ stake in Tesla in ‘about 20 years’ to finance SpaceX’s Mars plans

That was what I always expected, but up to now he always said he´d be the last to sell. But I think 20 years from now is good, fits well with my retirement plans .

 

[Yggdrasill]

The E-pace is *smaller*:

E-pace - I-Pace - F-Pace

And if you go for an E-Pace or F-Pace, you'll be stuck with a shitty ICE. Reviews even say the I-Pace is likely the Jaguar SUV with the nicest interior. And many say it's the nicest driving BEV, period, which is hard to believe, but it doesn indicate that if anyone would test drive one, they should be impressed.

I had to rush out the door, so I wasn't quite finished. To continue - the big downside with the I-Pace is the charging network. No supercharging is quite limiting in the US, and is also bothersome in Europe (even though we have pretty good coverage of 50 kW CCS.)

Even so, it wouldn't surprise me if there ends up being a 1 year wait for a new I-Pace. Especially when Waymo starts receiving theirs. My understanding is that they have ordered 20k over 2020 and 2021, with options for more. So, that's about 50% of the production volume, and then you can divide 10k between the rest of the world. The market in Norway alone could be 2-5k per year. (And yes, it will take some sales from Tesla here.)

The I-Pace simply isn't planned to be produced in sufficient volume to make any difference. So even though the I-Pace is competitive with Tesla on a lot of points, it doesn't really matter for Tesla. Even so, Tesla should definitely continue refining the Model S/X, when it comes to quality and options. (HUD and cooled seats are easy additions, for instance.)

And even when you add all planned volume in the segments of the market Tesla operates in until 2020, I think we're still not talking about sufficient volume to really affect Tesla. Even if the competition is great, the wait time will increase to the point where buying the competition simply isn't an attractive proposition.

 

[NicoV]

I don't think this ban should be underestimated. Should have a very chilling effect indeed....

Milan’s New Diesel Ban To Cause Ripple Effect | CleanTechnica

In Belgium there is already a LEZ in Antwerp for over a year. After a year, air quality measurements have shown that this indeed has a positive effect on air quality. Other big cities in Belgium already have decided to also introduce a LEZ. The results of Antwerp will make it easier for other cities to approve similar rules.

Personally, I have an 18 year old Corolla that I keep just so that we have a car for the kids for the couple of times a year they need to be in Ghent by car for their studies, but as of next year it won’t be allowed in Ghent anymore due to the introduction of an LEZ. Luckily by then It will be replaced by a Model 3 (my kids will then get my wife’s car for those trips).

 

[Bet TSLA]

This would be an excellent time to break ground on the Shanghai GF for sure.
Robin

No, that would be last year. This would be an excellent time to announce that Tencent has already completed 50% of the new GF and will be leasing it to Tesla, with tooling for battery and car production to follow shortly.

 

[lklundin]

This is second time you made pretty much the same error. I've corrected you first time, and you didn't answer, just to repeat this blunder again. So here we go: that bolded part above? you are wrong, these mechanisms are self-reinforcing, and not self-cancelling. Eventually they do get exhausted, but not before SP overshoots what should have happened if they were not in place.
And if you are not practitioner of technical analysis, I don't see how can you so confidently claim it's useless. You definitely have less experience than many practitioners, and they seem to think it's useful.
You are right that technical analysis cannot predict price with any precision, it can just give you confidence bands for possible future SP movements, but that is not useless if you are an active trader. If you are investor, yup, it's mostly useless.
And technical analysis is based on (human) psychology of the crowds, greed and fear patterns, not star gazing. As with any overtly complex systems that we can't model (like weather forecasting), it is not precise and it never will be. It's also a harder problem than weather forecast as it involves humans, that are less predictable (or better said: harder to model) than physics of the atmosphere. So, yes, it is less precise than weather forecasting, but in it's nature is very similar.

I have Like'd your post for the opportunity it gives me to expand on my reasoning.

First, in Numerical Weather Prediction as it is formally called, one waits for each forecast to elapse after which its accuracy is objectively measured. Thus, everyone using Numerical Weather Prediction knows exactly how accurately it has historically performed. Until stock price prediction based on technical analysis does that, it is not even in the realm of science and cannot and should not be compared to weather forecasting.

Secondly, yes, stock prices are heavily influenced by psychological factors (such as greed and fear), but the underlying nature of what causes stock prices to move is in itself irrelevant when considering the predictive strength of the technical analysis. Except maybe that the predictive strength of psychology based sciences in general is rather weak.

Thirdly, do not mix up the predictive strength of stock price prediction with analysts that may influence the stock price. For the sake of argument, let's assume that it is universally true for any stock that its price will increase by 1% the moment its quarterly results are published. In anticipation of this, the demand for the stock will go up prior to this event exactly to the point where the effect would be canceled. This was a (hypothetical) example of a mechanism illustrating how technical stock price prediction cannot work. This is completely different from someone influential publishing a technical analysis, predicting for example that the stock price of e.g. TSLA will go up tomorrow. While it is correct that this can in fact cause demand for the stock to the point where the prediction becomes self-fulfilling, this has nothing to do with the technical analysis itself. Were such a published analysis to cause a stock price movement to happen, it would merely be the effect of the market placing faith in the assertion, regardless of its actual reliability (established by committing to it, but only publishing it after the fact). Actively influencing the market by publishing a technical analysis is different and more similar to a holder of a short position publicly predicting a stock price reduction due to e.g. executive turnover.

EDIT: The above 1% example should ideally be based on some analysis only of the historic stock price (e.g. 'candles' 'Bollinger bands' etc), but that changes nothing in the reasoning.

 

[SPadival]

Porsche Cross Turismo Concept review.

I feel they should have productionized this instead of the Trashcan.. umm.. Taycan.

 

[Nightshifter]

nice review: Interesting the jaguar people comment about air and high speed with the model X
Jaguar I-Pace, off road and on track | Fully Charged

 

[ValueAnalyst]

50 million by 2025? When you say there are no fundamental reasons why these things can't happen, its worth reflecting on the fact that global market is around 70 million and I very much doubt, however good the car is, that they'll capture 2/3 of the global market in the next 7 years.

I admire your enthusiastic outlook

Thank you for your reply. What would fundamentally prevent one company comprising majority market share in the s’improvise industry? Demand? Supply? Regulation? Other?

There is a reason ramp ups go in an S curve and not a hockey stick. The top auto companies in the world top out around 10 million vehicles a year. VW, GM, and Toyota have global manufacturing operations that they have built over decades. It took a lot of effort to build up that level of production, transport, and support for that many cars.

The logistics of scaling up production can't scale at the rate Tesla has done thus far. For one thing Tesla had the advantage of inheriting a final assembly factory in Fremont that is just now beginning to reach capacity. Anything they do from here on out is likely going to be built from the ground up and will be on a time scale closer to the GF 1 in Nevada, which still isn't done.

50 million cars a year by 2025 is logistically impossible. 10 million is impossible unless a global car company goes bankrupt and they pick up everything for a song. If they say took over GM and all its facilities, they would have an outside chance of reaching 5-10 million a year by 2025, but probably not even then.

The existing GF 1 is going to get them to 500K cars a year. They need to build the equivalent of another GF 1 for each 500K increment in production. That's $5 billion per 500K battery capacity. It's billions more for the final assembly plants. To get to enough batteries to make 10 million cars a year is going to cost is going to cost $45 billion. If they were going to go for 50 million a year would cost close to $0.5 trillion. Apple has the most cash of any company and they only have $285 billion.

The logistics of making enough batteries alone is staggering.

I do expect Tesla to be a major player by 2025. Their sales volume could put them somewhere around the middle of the pack of auto makers outside of China (China's car market is its own thing that works differently from the rest of the world).

Thank you for your reply. My responses in order:

1. Players often comprise smaller market shares in a competitive market, before a disruptor arrives. See Blackberry/Motorola/Nokia unit volumes before Apple grew the entire market by multiple times, for example.
2. Subsequent Gigafactories, which will include final assembly, will take less time to build, as limitations of the past do not necessarily apply in the future: capital, lack of experience, need to invent new technology for cell/module/pack production etc.
3. The market today delivers nearly 100 million vehicles, so I’m not sure why delivering 50 million units, seven years from today, after further innovation in automated manufacturing, artificial intelligence, machine learning, and other areas would be impossible. Seven years is an eternity in Elon Time.
4. “They need to build the equivalent of another GF 1 for each 500K increment in production.” - GF1 will build enough batteries for one+ million vehicles, but even that will likely prove conservative, as one of Elon’s primary strengths is improving CapEx efficiency. This strength keeps catching Wall Street and bears by surprise, year after year, and some bulls fail to keep up too.
5. Batteries can be recycled.

I also expect Tesla to be a major player, but if we extrapolate the 10x growth every 3 years, which Tesla is about to achieve for a third time against all odds, and combined with higher use efficiency due to FSD, Tesla could go beyond what Apple achieved, which is capturing the most profitable 20% of its market. Bulls dismiss this possibility.

 

[Reciprocity]

This is investor relevant because it is from the Financial times:
Subscribe to read | Financial Times

The end with Lutz. Two out of his last 4 statements are false based on first hand knowledge (I have owned both Mercedes and BMW vehicles). This leads me to believe the statements I have no first hand knowledge about are also false. Let's see what this implies:


Subscribe to read | Financial Times

“He doesn’t have any unique technology — none,” says Mr Lutz, who predicts a much tougher future for Tesla. He says luxury marques such as BMW and Mercedes, with better reputations for quality, will come to dominate a market that Tesla has so far largely had to itself. That will provide the sternest test to Mr Musk’s dream of profitability.

#1 Tesla battery technology is better and also unique resulting in a huge cost and delivery advantage. So statement #1 is false.

#2 He predicts a much tougher future.

#3 Luxury marques with better reputations for quality... I don't think that is true.

#4 Will come to dominate and provide a stern test to dreams of profitability.

So if #2 and #4 are as false as #1 and #3, this means:

A. The future gets easier (rather than tougher) as customers recognize that Tesla delivers a better car and a better value than Mercedes and BMW.

B. Tesla dominates and destroys Mercedes and BMW profitability.

I don't like being lied to. But knowing where you are being lied to can guide future behaviors.

Very useful financial times article.

I agree with Lutz that Tesla does not have some crazy unique tech. It will be copied with ease. Tesla doesn't care about that and they can't really stop it nor do they really want to stop it. Tesla's tech advantage is much simpler than that. Tesla has the will and the balls to invest billions in scale battery manufacturing. That simple thing. The will to do it and the balls to risk everything are what Tesla had that no one else does. It's actually a bigger advantage then some battery tech lead.

The reason Tesla can't and won't partner in China is that the factory is their only real valuable IP. The code not the robots so much. Anyone can buy a bunch of robots, not many can make those one armed, dumb and blind machines smart and ultimately useful. It's very hard for a spy to copy the brains of the machine that builds the machine.

There is zero doubt in my mind that Daimler and BMW and VW could build millions of EVs. Their problem is that they don't want to and it will be excessively painful to the bottom line. Tesla investors are paying for growth, GM investors are paying for dividends. They don't want GM to lose money ever. They won't tolerate it. Every EV those companies sell is a lost, profitable ICEv sale at a loss, so they will never fully commit until it's too late. But don't you fret, the government will step in and bail some of them out and force them to make EVs at a loss.

The tech advantage is real the will to do things at massive scale which is hyper risky and brains in the machine that makes the machine.

They other advantage Tesla has that is easily copied and you're started to see it. Tesla knew they had to make the EV sexy. It had drive people to pay more then the vehicles were worth. That worked for the S, but the model 3 is actually worth what you pay and still will pull people up market from Camry and Accord and even Hyundai and kia. This brand value is very hard to copy, but autos can make sexier EVs. Again, it will hurt their profitable ICEv business, but that is their problem.

Last, Tesla doesn't have all the legacy chart and bankruptcy is the only way around those issues for traditional autos. In many cases the government's will not allow that and will bail then out, which doesn't really fix the problem. They are basically doomed, because they lose either way and may never be able to catch up. My guess is VW and Toyota will survive with help, the rest will be subsidiaries like Audi and Porsche are today.

 

[Reciprocity]

Elon clarifies his long-term plans for his TSLA shares:
Elon Musk plans to sell ‘major’ stake in Tesla in ‘about 20 years’ to finance SpaceX’s Mars plans

That was what I always expected, but up to now he always said he´d be the last to sell. But I think 20 years from now is good, fits well with my retirement plans .

Sounds about right. I'll meet you on the beach.

 

[SwTslaGrl]

Perhaps AP is interpreting this wrong?

BEIJING (AP) — China fired back Saturday in a spiraling trade dispute with President Donald Trump by raising import duties on a $34 billion list of American goods including soybeans, electric cars and whiskey.

China hikes tariffs on US soybeans, electric cars, fish

 

[Hogfighter]

I don't think this ban should be underestimated. Should have a very chilling effect indeed....

Milan’s New Diesel Ban To Cause Ripple Effect | CleanTechnica

I completely agree. Millions of people have been purchasing diesel cars thinking they were more ‘green’ than gas powered cars, and now feel duped. When analysts talk of competition, they totally miss the concept that in 5-10 years it will be very inconvenient to own a diesel car, and very convenient to own an EV.

 

[Reciprocity]

Thank you for your reply. What would fundamentally prevent one company comprising majority market share in the s’improvise industry? Demand? Supply? Regulation? Other?



Thank you for your reply. My responses in order:

1. Players often comprise smaller market shares in a competitive market, before a disruptor arrives. See Blackberry/Motorola/Nokia unit volumes before Apple grew the entire market by multiple times, for example.
2. Subsequent Gigafactories, which will include final assembly, will take less time to build, as limitations of the past do not necessarily apply in the future: capital, lack of experience, need to invent new technology for cell/module/pack production etc.
3. The market today delivers nearly 100 million vehicles, so I’m not sure why delivering 50 million units, seven years from today, after further innovation in automated manufacturing, artificial intelligence, machine learning, and other areas would be impossible. Seven years is an eternity in Elon Time.
4. “They need to build the equivalent of another GF 1 for each 500K increment in production.” - GF1 will build enough batteries for one+ million vehicles, but even that will likely prove conservative, as one of Elon’s primary strengths is improving CapEx efficiency. This strength keeps catching Wall Street and bears by surprise, year after year, and some bulls fail to keep up too.
5. Batteries can be recycled.

I also expect Tesla to be a major player, but if we extrapolate the 10x growth every 3 years, which Tesla is about to achieve for a third time against all odds, and combined with higher use efficiency due to FSD, Tesla could go beyond what Apple achieved, which is capturing the most profitable 20% of its market. Bulls dismiss this possibility.

#2 is very under estimates by many. Time is the key here. Tesla can in fact fund expansion with revenues because payment on new capex will come due around the time finished goods are rolling of the line. These factories will come online generating enough margin to pay off the capex in a few quarters rather then no revenue from capex for a year or more. Model 3 capex was paid off before profitability. In the case of subsequent gigafactories, the cars will start rolling of in thousands per week before the parts and capex payments start. Certainty there will be some up front capex, but I'm taking about the most expensive parts. Also remember that half the battery production capex will be paid for by Panasonic, Tesla will just ship new grohmann and perbix lines and fire then up in weeks instead of months.

Now that Tesla had invented the machine that builds the machine, they can just copy it in China, Europe and the East coast. All from profits generated by model 3 in Fremont. Now having said that.. Tesla wont take the easy way, they will redesign the entire thing I'm sure, but they are much better at it now then they were, so it should still go much quicker.

 

[mongo]

Perhaps AP is interpreting this wrong?

BEIJING (AP) — China fired back Saturday in a spiraling trade dispute with President Donald Trump by raising import duties on a $34 billion list of American goods including soybeans, electric cars and whiskey.

China hikes tariffs on US soybeans, electric cars, fish

Looks correct.

From Google Translate version of list:
http://images.mofcom.gov.cn/www/201806/20180616015345014.pdf
Line: 542 87038000 Electric vehicles
Harmonized code maps to
870380 Vehicles; with only electric motor for propulsion

 

[Mader Levap]

That's why I qualified it by saying "on the millisecond level". I believe that at any time you have complete information on things that might affect you in the next millisecond. If you string enough milliseconds together....

Since car cannot do 60-0 in one millisecond, that does not matter.

However you handwave it, driving deals with incomplete information. Get over it.

 

[Reciprocity]

Looks correct.

From Google Translate version of list:
http://images.mofcom.gov.cn/www/201806/20180616015345014.pdf
Line: 542 87038000 Electric vehicles
Harmonized code maps to
870380 Vehicles; with only electric motor for propulsion

That must be a mistake, US EVs are made in California and not a pro Trump state. The target appears to be products from Trump states and Trump voters.

 

[RubberToe]

No, that would be last year. This would be an excellent time to announce that Tencent has already completed 50% of the new GF and will be leasing it to Tesla, with tooling for battery and car production to follow shortly.

This news would encourage me to resume drinking heavily in the morning, just because...

RT

 

[DragonWatch]

In Belgium there is already a LEZ in Antwerp for over a year. After a year, air quality measurements have shown that this indeed has a positive effect on air quality. Other big cities in Belgium already have decided to also introduce a LEZ. The results of Antwerp will make it easier for other cities to approve similar rules.

Personally, I have an 18 year old Corolla that I keep just so that we have a car for the kids for the couple of times a year they need to be in Ghent by car for their studies, but as of next year it won’t be allowed in Ghent anymore due to the introduction of an LEZ. Luckily by then It will be replaced by a Model 3 (my kids will then get my wife’s car for those trips).

Very good information here ~ thanks for the input

I live on the dark underbelly of a flat world

What signs should we be looking for here as tipping points? You mention that you have an ICE vehicle that will be forced out by LEZ. Here long range thinking went the way of the dodo bird Is there a recycling or dumping ground for these older cars that have no resale value? If so, who runs it? Government or private? Since LEZ is a mandate by the state my assumption is the state. What is actually happening to the older inert technology?

Sadly for me I retired from active military duty in 1994 and thus missed the growth of solar energy in Germany Rapid growth of new homes was in the early stages though, and that was cool to see. I first arrived in Germany in 1969, which was on the verge digging itself out of poverty. In those days (1969~1972), one US dollar bought four German Marks I’ll have a chance to see some of the current development in October/November this year as my wife and I take our first ever boat cruise in the Mediterranean.

I was especially excited reading your comment about the noticeable improvement in air quality I am afraid our poor air quality here has dulled our senses

Recapping your comments, a by product of EVs will be better air quality and in tern, better living conditions for all