Short-Term TSLA Price Movements - 2016

[Fast Laner]

Watch Sen Mahans feet and see how relaxed he feels during his statement. And by the way, get him a new dressing suit cause he is waiting for the flood.
In case this is snippy move it to snippiness.

 

[DrJohnM]

You got it. A result like this should be robust changing assumptions as you have shown. A more subtle point is that a Model S displaces more oil per mile than a LEAF does. One is displacing a large luxury sedan with low MPG while the other is displacing a small fuel efficient car with high mpg. So for maximal oil displacement it is best of EVs to target the least fuel efficient segments first. High performance, trucks, and SUVs should top the list.

Note that the whole dispacement argument is based on 1000 miles per barrel or about 25 miles per gallon. If EV makers targeted displacing vehicles with an average of 20 mpg, that would be a 800 miles per barrel. Thus, you would need 20 million EVs to displace 1 mb/d of oil. This shortens the time it takes to disrupt the oil industry by about 6 months. However, displacing low MPG vehicles requires more kWh per vehicle, so from a battery supply point of view, you run into the same constraint. Essentially, it's the GWh of batteries time on the road times cycle frequency that displaces the oil not the count of vehicles.

Regarding my cheap midday charging hypothesis, there is an economic argument for charging EVs directly from excess solar (and wind) rather than bumping that excess into stationary batteries so that EVs are charging in the evening drawing down stationary batteries. So I certainly expect the grid to have lots of storage in ten years, but it is best not to charge any batteries from stored energy. So the logistical opportunities are midday charging for surplus solar and early morning charging from surplus wind. The latter is easily done with overnight charging at home, but the former may require additional charging infrastructure. So the question for the utilities will be whether it is cheaper to set out a little charging infrastructure to tap into dispatchable EV load or to buy dedicated batteries. Granted utilities have incentives that do not always lead them to do the most economical thing, but there are multiple pathways to midday fleet charging whether the utilities lead on it or not. For example, a third party could build out and operate the infrastructure and participate in the wholesale electricity market as a wholesale buyer of power.

The oil industry is simply going to have to change its expectation about future demand. As the price of batteries along with solar and wind decline, this will put a cap on the value of a barrel of oil. I am currently working on some metrics for this, and my rough impression is that a barrel of oil may only be worth around $20 in 2020 compared with a combination of batteries and solar energy. I'll share the details as my ideas crystalize, but the essential idea is that batteries plus cheap electricity are a substitute for oil, and this implies a declining price cap. This is very critical for oil investors to understand. If a particular oil play requires oil prices in excess of this substitution value of oil, it is an extremely risky play. Just ask Kodak how much film was worth. The industry can deny and spin all they want, but it is their investment to lose.

Also to be considered is that the cost of the oil is starting to become insignificant against the cost of transporting and processing it. Apparently, you get 19 US gallons of gasoline and 23 gallons of other stuff out of a barrel of oil. So taking the price of a barrel of oil from $30 to $20 only takes 24c* of the price of gasoline (ca $1.70 to $1.56) or about an 8% reduction in price. Have we effectively hit the floor for the "at the pump" price?

* bistromathics - assuming that all products from the barrel of oil sell for the same price.

 

[Julian Cox]

I don't see what the confusion of Indiana Bill HB1254.

It has been effectively tabled for this session by moving it to a summer study committee.

Tabled. Not exactly. It was passed, unanimously (when it should have been defeated unanimously - but the senate just argued with the witnesses opposing the bill and Tesla's lead representative did a terrible job). Yes it is in a summer session to study implementation but to deal with it from here would require it to be repealed.

 

[The Blue Owl]

So the max pain theory doesn't seem to apply today, at least so far. Has anyone ever relied on this indicator and made money with any sort of consistency? It seems quite unreliable to me (not just based on today, speaking in general).

 

[doctoxics]

First, EV are inevitable technology likely to reach 50 million vehicles within 8 to 13 years.

We must credit Tesla with having the foresight to know that battery production will limit the future sales of electric cars. Assuming that Gigafactory1 supports production of 500,000 cars in 2020, how many additional gigafactories are on the drawing boards? None that I am aware of. And when they are, another 5 years to reach full production. So even with a superior car and an endless line of consumers waiting to buy, battery production will limit the entire process.

Time for another moon shot. We need massive amounts of capital and commitment to start the construction of many gigafactories as soon as possible. Tesla has been an important catalyst but is only able to be a small part of the rapid growth in battery manufacturing that needs to happen. Only governments and a few large corporations have the resources to make this happen.

Reaching 5 million electric cars in 13 years may be possible at current trends. Reaching 50 million electric cars in 20 years will require a major World-wide commitment in battery production. Such a commitment is not evident at this time.

 

[sunhelm]

...Time for another moon shot. We need massive amounts of capital and commitment to start the construction of many gigafactories as soon as possible. Tesla has been an important catalyst but is only able to be a small part of the rapid growth in battery manufacturing that needs to happen. Only governments and a few large corporations have the resources to make this happen.

Reaching 5 million electric cars in 13 years may be possible at current trends. Reaching 50 million electric cars in 20 years will require a major World-wide commitment in battery production. Such a commitment is not evident at this time.

Except that this time it will not be a moonshot. You may have overlooked the power and momentum of the S curve. By the time 500K cars have been reached, Tesla has proven the demand and superiority of pure EV's over ICE. Investors would line up to get in on the next build or builds of Gigafactories everywhere. Indeed, if the limiting factor is battery production, then this is a problem that can be solved by literally throwing money at it!

 

[eloder]

Except that this time it will not be a moonshot. You may have overlooked the power and momentum of the S curve. By the time 500K cars have been reached, Tesla has proven the demand and superiority of pure EV's over ICE. Investors would line up to get in on the next build or builds of Gigafactories everywhere. Indeed, if the limiting factor is battery production, then this is a problem that can be solved by literally throwing money at it!

I agree whole-heartedly with this.

There's going to be an increasing number of investors looking to bail out of fossil fuels and jump in on gigafactories, EVs, and renewables--we're seeing an awesome confluence of both of the EV revolution and the renewable revolution, basically coming at the same exact time while simultaneously fossil fuel and oil will be in deep trouble within the next decade--if it even survives the current energy glut today.

Just keep in mind that stationary battery storage too will help out here. Investors aren't going in just for EVs, they're going in to take advantage of renewables which are hands-down becoming vastly cheaper than existing energy production methods.

When major investors notice this, however, is anyone's guess.

 

[Curt Renz]

REGARDS DEFEAT OF CORRUPTION IN INDIANA - THIS IS FALSE POSITIVE NEWS! THE CORRUPT BILL HAS BEEN PASSED THERE.

I have just looked at the second video. All Indiana have done is stripped out an amendment that gave Tesla some breathing room and restored the Anti-Tesla bill to its full force. Passed it unanimously and turned it over to their legislature to turn it into law.

Julian, the bill simply requests that an interim study committee takes up the issue later this year.

Link to Bill

 

[Causalien]

So the max pain theory doesn't seem to apply today, at least so far. Has anyone ever relied on this indicator and made money with any sort of consistency? It seems quite unreliable to me (not just based on today, speaking in general).

It's hard to make money with Max pain because the best strategy that goes with max pain is an iron condor. but Iron condors are extremely stressful for investors. Most of the time the strategy fail because the investor is forced to make a move after a large deviation from max pain during one of the expiration.

 

[Julian Cox]

Julian, the bill simply requests that an interim study committee takes up the issue later this year.

Link to Bill

OK, now there is a funny side to all this.

The one time I have been openly bearish about some element of the Tesla business, I am the one that gets shut down by the facts!

That is what it must feel like to be a TSLA short. Rather them than me.

Explanation: In the first video I heard someone early on make an amendment to the bill. In the second I heard them take an amendment out, pass the bill unanimously in what they actually said on camera was 'in it's original form as received from the house' and send it off to summer camp. I had not appreciated as Curt has kindly pointed out that the entire bill was the amendment they were referring to and they deleted the entire contents and then sent a blank sheet of paper to summer camp except for the notes stating that this is where it was being sent.

Many thanks Curt Renz for sticking with this.

 

[Papafox]

So the max pain theory doesn't seem to apply today, at least so far. Has anyone ever relied on this indicator and made money with any sort of consistency? It seems quite unreliable to me (not just based on today, speaking in general).

I've seen the greatest apparent manipulations for max pain during the last hour of Friday trading. You can sometimes tell because the stock will be gaining and then suddenly levels out for a prolonged period of time. There may be too much volume for max pain manipulation to take place today, but if you see TSLA level at 190 and stay there for an hour you have a pretty good idea that market-makers are at work. The other possibility is a drop to 187.50 or so in the last few minutes of trading.

 

[CyberDutchie]

I wonder to what extent the Bloomberg work on the rise of electric vehicles is impacting investors. The piece changes the narrative in at least two important ways.

First, EV are inevitable technology likely to reach 50 million vehicles within 8 to 13 years. Investors who take in this narrative will naturally start to think about which investments are best positioned to benefit from this trend. Naturally Tesla will loom large on this short list.

Second, the impact of 50 million EVs is enough to put the oil industry into an extended glut and displace oil demand forever. This narrative allows investors to disconnect the oil and EV markets. The conventional thinking has been that cheap oil eliminates demand for electric vehicles, but this new narrative reverses that to say that increasingly less expensive EVs will displace demand for oil. As this happens, oil will become cheap because it is losing marketshare. So the value of Tesla and oil will be inversely related in the long run.

So both of these narrative shifts are critical for Tesla to get a fresh appraisal from the market. As some investors turn away from oil investments, others will turn toward Tesla for the purest play in the emerging EV market. So while Tesla's stock price has been crushed by declining oil prices over the last 18 months, this new narrative explains why things will be quite different going forward.

Usually, this long-term perspective has little day to day relevance for trading TSLA, but Bloomberg is injecting this corrective narrative right now. So we should watch how other media outlets pick up on it. So far the conventional oil investment site oilprice.com has ignored it. That would be the first line of defense from those who are vested in the old narrative. When such sites attempt to discredit the new narrative, we will know that serious progress in shifting the narrative has taken place. I can hardly wait.

Well, have you seen the "feel good about oil" commercials from the American Petrolium Institute starting to appear on the TV?

American Petroleum Institute

More abundant oil and gas means more affordable energy, and good paying jobs are the current naratives.

 

[Curt Renz]

...I had not appreciated as Curt has kindly pointed out that the entire bill was the amendment they were referring to and they deleted the entire contents and then sent a blank sheet of paper to summer camp except for the notes stating that this is where it was being sent.

Many thanks Curt Renz for sticking with this.

You’re welcome, Julian. Indeed the abandoned amendment was the only matter of substance that the bill might have contained. A similar bill was passed last year requesting the formation of a summer study committee. It never convened. Hence the process is being repeated this year.

The lesson from this Indiana episode is for TMC members to be equally vigilant with all state legislatures trying to force Tesla to sell through middlemen.

Fortunately my state of Illinois presents no problem. (Or unfortunately if I am to be a more effective activist.) The president of the Illinois Senate owns a Model S and cut the ribbon for the opening of the first Tesla Supercharger in Illinois. I’ve become friends with my state representative whom I ran against in 2012. He sponsored a bill requiring charging stations on major highways in Illinois.

 

[SBenson]

You’re welcome, Julian. Indeed the abandoned amendment was the only matter of substance that the bill might have contained. A similar bill was passed last year requesting the formation of a summer study committee. It never convened. Hence the process is being repeated this year.

The lesson from this Indiana episode is for TMC members to be equally vigilant with all state legislatures trying to force Tesla to sell through middlemen.

Fortunately my state of Illinois presents no problem. (Or unfortunately if I am to be a more effective activist.) The president of the Illinois Senate owns a Model S and cut the ribbon for the opening of the first Tesla Supercharger in Illinois. I’ve become friends with my state representative whom I ran against in 2012. He sponsored a bill requiring charging stations on major highways in Illinois.

All this silliness will go away once Model 3 is unveiled. As jhm points out Model-3 will be perceived as people's car. If politicians dare peddle these sort of bills, people will throw stones and slippers at them.

Crooked GM and dealers have maybe a month or two max for this sort of misbehavior. Pretty soon it's game over. Back to continuation of obsolescence for them.

 

[madodel]

But why is TSLA up yet again? Based on what? Magic oil futures? I see no news other than that Indiana didn't force them out so they can sell a few dozen more cars. I've been busy today so I skipped a few pages. What is going on?

 

[Tenable]

But why is TSLA up yet again? Based on what? Magic oil futures? I see no news other than that Indiana didn't force them out so they can sell a few dozen more cars. I've been busy today so I skipped a few pages. What is going on?

If we are all honest with each other, I don't think we know. I am long on TSLA, those of us that are bullish will likely say the market is catching up to what we all believe to be true. But I for one, have no idea why the share price has moved up recently, I also have no idea if its going to stay up. I am expecting a spike based on the M3 reveal and reservations, but in terms of this week.. I'm confused, and pleasantly surprised.

 

[jhm]

Also to be considered is that the cost of the oil is starting to become insignificant against the cost of transporting and processing it. Apparently, you get 19 US gallons of gasoline and 23 gallons of other stuff out of a barrel of oil. So taking the price of a barrel of oil from $30 to $20 only takes 24c* of the price of gasoline (ca $1.70 to $1.56) or about an 8% reduction in price. Have we effectively hit the floor for the "at the pump" price?

* bistromathics - assuming that all products from the barrel of oil sell for the same price.

Fun new word for the day. Of course it is sufficient to assume the cost per volume is equal even if the selling price of the product is not.

Check out "refinery crack spreads." There are established investing practices around valuing the cost contribution to gasoline and other products at 1/42 of the barrel price.

 

[sub]

But why is TSLA up yet again? Based on what? Magic oil futures? I see no news other than that Indiana didn't force them out so they can sell a few dozen more cars. I've been busy today so I skipped a few pages. What is going on?

Why did TSLA drop $100+ from it's recent ATH to below 140 recently? Nobody really knows, I think it's fairly obvious at least part of that was Macro. I notice how some people like to post in this thread, maybe cherry pick one model X with one seal problem or delay, and claim that the "ENTIRE MARKET" is going to sell based on a singular issue like this. The truth is that there are many reasons that any given person decides to sell or buy TSLA, not one single reason at any given time like some people here like to claim.

 

[jhm]

We must credit Tesla with having the foresight to know that battery production will limit the future sales of electric cars. Assuming that Gigafactory1 supports production of 500,000 cars in 2020, how many additional gigafactories are on the drawing boards? None that I am aware of. And when they are, another 5 years to reach full production. So even with a superior car and an endless line of consumers waiting to buy, battery production will limit the entire process.

Time for another moon shot. We need massive amounts of capital and commitment to start the construction of many gigafactories as soon as possible. Tesla has been an important catalyst but is only able to be a small part of the rapid growth in battery manufacturing that needs to happen. Only governments and a few large corporations have the resources to make this happen.

Reaching 5 million electric cars in 13 years may be possible at current trends. Reaching 50 million electric cars in 20 years will require a major World-wide commitment in battery production. Such a commitment is not evident at this time.

We discussed this upstream. I estimate an investment on order of $250B to kick off 1500GWh/yr capacity. This does not need any government intervention. Rather this is a smaller investment than the oil industry makes in a typical year just to grow supply by a percent. I think Gigafactories have a much better return on investment than oil. It's a capex cost of $10 per kWh of battery produced. Oil spends about $10 capex per barrel produced. But here's the rub. An EV battery with 2000 cycle life can displace 8 barrels of oil. So if you can get $10 capital for 1 barrel, you should be able to get the same for displacing 8 barrels. Of course, there are other investments to be made as well, but the economics are favorable.

 

[Electrifying]

Why did TSLA drop $100+ from it's recent ATH to below 140 recently? Nobody really knows, I think it's fairly obvious at least part of that was Macro. I notice how some people like to post in this thread, maybe cherry pick one model X with one seal problem or delay, and claim that the "ENTIRE MARKET" is going to sell based on a singular issue like this. The truth is that there are many reasons that any given person decides to sell or buy TSLA, not one single reason at any given time like some people here like to claim.

Totally, that's why besides my core holdings, I trade purely on technicals. 180 had been strong support, when it broke those algorithmic trading computers (or human traders who couldn't care less about fundamentals) smelled blood and most likely shorted the hell out of it and stock promptly plunged to 145. Now 180 is reclaimed, I expect TSLA goes back to 230 gap resistance in no time.