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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

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Stating the demise of an American company is "is going to be fun to watch" really isn't warranted. If it does happen an awful lot of good people get hurt.

Change is always painful, but change is necessary to move forward. Fast change is called disruption. We have a climate crisis on our hands and what we need is disruption. Not everything that causes pain is bad, it's the balance of good/bad that matters. Yes, it requires looking at the big picture.

The word "fun" might not be the best word to use here, how about "satisfying". I know I won't be satisfied until I see positive and meaningful progress on our promises to combat climate change and I don't think it's realistic to think GM is going to become an EV manufacturing powerhouse - they are making the wrong kind of noises for that to be very believable. However, if they surprise me, I'll be the first to tell you that's a good thing. If they don't surprise me, I'll cheer their demise. Good riddance. Out with the old, bloated, corrupt, inefficient and overly expensive, in with the newer, cleaner, more cost effective and more efficient.
 
So do we think Elon has accelerated his sales to get them all done before the end of the year. In the reconciliation bill our there new taxes that make it advantageous to get all the sales done by year end?
Two different things. The acceleration of option selling prior to year end determines how many total shares he get to keep from this. Higher taxes=less shares for Elon.

The twitter poll sell came from appeasing to his critics about not paying taxes so he purposely picked core shares vs new shares to sell to maximize tax payments. He could have picked newly acquired shares and pay barely any taxes as they have no/little unrealized gains. Either way he still ends up with exactly the same amount of shares by picking core or newly acquired shares.

So one is to maximize share gain, the other is to maximize tax payment while not sacrificing number of total shares.
 
Q: Looking at all these other OEMs "investing 10s of $B" over next x years for electrification. Where are they getting funds from? Surely they're not generating FCF, operating margin and cash pile, are they?

The legacy announcements of how much they will spend over the next decade on electrification are aspirational. They hope to have access to that amount of capital. But when it becomes apparent to all involved just how quickly the change is coming, everything will snowball, and they won't have profits or access to capital.

Aspirations are nice but they are forward looking statements, not actual fact.
 
The argument should not be about whether a "wealthy" person pays tax or not, but rather the timing of when the tax is paid. My limited understanding of the current tax code is: when a person passed away, the estate tax is triggered. When the heirs withdraw money from the estate (except from the ROTH account), income tax is triggered. It is kind of double taxed already

The longer delay in taxing the person, the wealthier the person gets to, and the government collects more tax eventually.
Over the last 40 years it's been made fairly easy to pass on hundreds of millions of dollars(if not billions) to your heirs without triggering an estate tax. Google Mitt Romney, his old firm specializes in it. When he was running for POTUS he had something like 5 tax-free transferable "retirement" accounts with hundreds of millions of dollars he was actively transferring to his dbag kids. Lord knows how much is in there now.

Hell, Peter Theil is sitting on a $5B Roth IRA. A completely tax free retirement account. Five billion dollars. Again, it's astonishing we're even having this conversation, but I guess it speaks to the times were in. Peak scarcity is a bizarre reality for sure.

It's no coincidence we'll be moving from fossil scarcity to sustainable abundance as the boomer generation fades. No offense to all the lovely boomer TMC members, but on the whole that generation loves starting expensive wars then telling their grandkids to pay for it. Not their fault, they were spoiled at a young age.
 
I mean... This could still close the day at $1000. Crazier things have happened, right?

Right?

I know you’re being funny, but it honestly seems pretty impossible without news of Elon being done or close to done leaking out, Fed walking back hawkish stance, or other unexpected Tesla-specific news. Til then we’re in a downward drift with everyone waiting to pounce on the bottom.

Even then I suspect a contingent of HFs and MMs will have a plan for a contrarian play on the assumed and highly anticipated reversal.
 
Mod: I remind all that we have a trial rule that you can't post about specific politicians by name or reference, and the reason has just been demonstrated: 11 off-topic posts have been deleted.
-- posts about existing tax rules influencing Elon's selling schedule are at least vaguely relevant, although we think enough has been said.
-- posts about some mythical possible future tax rule are not.

--ggr (o.b.o. Mod team)
 
Interesting price movement past half hour. Looks like MM’s are a little confused which direction they are taking it from here….

It‘s actually a hilarious situation if you think about it. Elon is the market maker right now, and the folks who are used to having all the control suddenly have much less. In a way, Elon’s selling plan is herding everyone like cattle into an upside position.

What can you possibly do if you’re a HF? Sure, ride the wave down along with Elon’s selling as long as you can, which is basically making the world’s hottest and biggest growth stock into a value play. But what comes after? You’re either herded, along with everyone else - into a very obvious upside position or you try to conjure up further downside…inflation worries, maybe the 10y note makes a roaring comeback out of nowhere, stuck ships, clean energy disasters, you know the drill. So yes, I think there’s quite a bit of confusion on the part of the entities who are used to calling the shots and creating random movement…instead we have a very predictable downside due to our new market maker followed by what seems to be a predictable upside and they’re not sure what to do with the situation.
 
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Two different things. The acceleration of option selling prior to year end determines how many total shares he get to keep from this. Higher taxes=less shares for Elon.

The twitter poll sell came from appeasing to his critics about not paying taxes so he purposely picked core shares vs new shares to sell to maximize tax payments. He could have picked newly acquired shares and pay barely any taxes as they have no/little unrealized gains. Either way he still ends up with exactly the same amount of shares by picking core or newly acquired shares.

So one is to maximize share gain, the other is to maximize tax payment while not sacrificing number of total shares.
Not referring to the twitter poll. I am talking about the options that he needs to exercise or lose them. Is there a reason for him to exercise all the options by the end of the year. I believe they expire in March. So he could choose to exercise those after December 31st.
 
Paraphrasing Musk on dividends: It means that a company does not have innovative products to invest in. Not the case with TSLA and will give me pause to exit if they start one.
That’s not entirely true.

Dividends means a company has more cash flow coming in then ways to effectively spend it.

There is a significant difference between the two ideas. It is entirely possible Tesla will develop a massive cash pool and run out of ways to spend it effectively. Likely not for some time, they have lots of projects which could benefit from huge amounts of cash.
 
Elon is planning to provide an updated Tesla product roadmap on the Q4 Conference Call. Yet we all know that Tesla's REAL product is the factory, which is evolving rapidly. So, I think its time that we make a list of future Innovations planned for Giga Texas: (the new mothership)
  1. Plaid Model Y - f/r castings, structural 4680 bty pack, carbon overwrapped SRPM motors == low volume, high margin car to start production (Jan 2022) - this is just a teaser, produced by integrating exisiting tech which is now spread over several products and facilities
  2. Cybertruck - monsterous performance, outrageous tech, ultimate overlander (Jan 2023) - hardcore smackdown to pickup trucks; makes them eat quiche
  3. Cathode plant - not yet under construction, though factory footprint already layed out on East side of Main Plant, beyond the current main parking lot. Brings another critical component in-house, essential for exponential production ramp (possibly 2023/24; may depend on separate Piedmont Lithium hydroxide source, and/or Tesla lithium brine extraction process); could be associated with Redwood Materials recycling plant due in 2025
  4. Texas Institute of Science and Technology - where else would you put the new campus but within sight of Giga Texas? With over 4 square miles of contiguous land owned by Tesla, and with easy access to the City of Austin and its Int'l Airport, this will be a very attractive site for post-secondary students, and with nearly assured internship and work experience opportunites. (Date pending an announcement and possible endowment from Elon to fund this new institution)
  5. Robots. Lots of Robots. Sorcerer's Apprentice level of Robots, and the Factory that builds them. Built with assistance of robots.
  6. Integration with SpaceX (Starlink terminal manufacturing) and Boring Company (anybody else notice there's no obvious place for a Logistics lot at Giga Texas, other than perhaps the existing East employee parking lot)
I'm sure you can think of more. Share your ideas with the group. :D

Finally, I draw your attention to the parallels between Giga Texas and the fictional Industrial Campus described in the Tom Swift series of novels. Elon was inspired by many works of fiction in his boyhood; I believe this was one of them. Paging @Prunesquallor

Tom Swift and His Electric Runabout (1910) | Wikipedia - in this story, Tom creates a nickel bty giving a 500-mile range to his home-made electric car, at a time when Henry Ford had just started building his "Model T" 2 years earlier.

Tom_Swift_and_His_Electric_Runabout_%28book_cover%29.jpg


Cheers!
 
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That's not blaming Musk. That's blaming the tax code.

A Senator cannot change the law without support of 49 or 50 other Senators, plus a majority of Representatives.
Do you expect them to say nothing rather than campaign for change?


Musk dodged the question at the shareholder meeting. He's supposed to be a visionary and refused to set out his vision.
So you're stuck in a recursive investment loop.
When do you think Tesla will pay a dividend and how much?
I don’t expect a Senator to ‘say nothing’ when they want to raise awareness of an issue important to them. But I do expect them to say it with a display of statesmanship and a level of professionalism commensurate of their position and their experience, and most importantly - aligned with the expectations they have demanded of others.

Ms Warren was a presidential candidate and a member of both parties in the past. And her campaign included public shaming of the previous administration for its lack of professionalism with its communication, with a call by her to raise awareness for the need to more respectfully communicate to achieve greater good. Yet here she is, taking to Twitter to demand the Man of the Year - the person who has done more than any politician, party, state, or country to fight climate change and advance many of the issues she ran on in her campaign - “stop freeloading off everyone else.” Unbelievable. Those last 5 words of hers were chosen for effect. And I predict she will be effected for using them in the long run.

In one single tweet Ms Warren has shown the world that she is as hypocritical and as vile in her communication as everyone else in politics. She didn’t fall off the High Road, she jumped. All by herself. Attempting to stay relative by lowering herself to all the things she accused the previous administration of when she had hoped to run against them. A complete 180 about face.

Elon is moving the Climate needle - she isn't
Elon is creating jobs - she isn't
Elon is changing our culture by raising awareness with efficient, effective, and affordable products that he has to struggle to bring to market while she is participating in transforming the Green New Deal into corporate protectionism and shouting ‘Success’
And Elon is deploying large amounts of Capital Monies far more efficiently than the US government could do - which is resulting in Tesla moving far faster than this administration or UAW or anyone else ever expected them to.
So she steps up and takes the Low Road to smear him on Twitter in the manner she once campaigned against.

There is a lot more wrong with her Tweet than simply her misguided tax attacks. I would rank her hypocrisy, lack of good character, and extreme lack of good judgment well above her tax claims.

We aren’t going to move forward if people insist on being binary thinkers, and consistently refuse to be critical of their own team - even when a member of their team is playing very poorly. Nobody gets better when they don’t know when they are behaving or playing poorly. I look forward to 64 million Elon followers on Twitter helping Ms Warren ‘improve her game’. And I thought it was awesome that TMCs own @ZeApelido was one of the first
 


And you ignore the interest charge that is 100% related to Automotive? Yet you include pension obligation gains that are entirely a future expenditure reduction (assuming investments in their portfolio don't drop)?

One thing is for certain - American OEMs employ an army of financial engineers. Strip away the noise and you'll quickly see that their operating margins for automotive are awful.



Back out the stuff that has nothing to do with F's vehicle sales and you have a structurally non-profitable business. At least based on their current volumes. If they manage to get production back to 2019 levels, then maybe that perspective changes…

Their segment disclosure is financial engineering at its finest. It's taking large expense buckets and putting them in stand-alone categories in an attempt to frame that as unrelated to the vehicle business.

To tie this back to Tesla, it's one reason that I appreciate the transparency and simplicity of their quarterly and annual disclosures. This is coming from someone who deals with public company disclosures for a living. F and GM remind me of legacy GE. Layers of financial engineering interplay all to try to paint things in rosy lights, when the underlying data clearly shows you structural issues.
Over the last years on TMC we have done similar evaluations over and over. Clearly, as you demonstrated so well, we still must do this. I would add only a few points:
1. Legacy OEM have all large contingent liabilities from unfunded obligations for employee benefits ( cut in 2008-2009 BK but still exist);
2. Excellent financial engineering allows understating lease obligations, capex, losses from discontinued operations etc. They are hidden in footnotes that refer to very obscure obfuscated data.
3.,Much risk is offloaded to Tier One suppliers, who then recoup through higher prices.
4. The dealer, fleet and distributor structures can be and are used to obscure material events.

I suspect every one of us who have worked with OEM financial issues has many anecdotes, mostly NDA covered. I know I do.