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

[jbcarioca]

Implying that playing options is like playing slots is silly. If you said poker, I would not disagree. Even though the house always collects their share, disciplined and skilled poker players will, over time, consistently beat fellow players who are less skilled.

Although the total options market is less than a zero sum game relative to the underlying stock because the MM always takes their cut (aka premiums), this is not unlike auctions where the house always takes a cut.

People are competing against each other, not just against the house. Every dollar someone gains above the rise in SP comes at the expense of someone else, after paying the MM. Although this means the options market as a whole cannot come out ahead, individuals can come out ahead if they can better invest than their fellow participants.

Between the disinformation on Tesla, impulsiveness of most WSBs, and lack of research by the average investor, making money in options is not implausible. Although participants will come out behind in aggregate, that is not the case for individuals.

There is a reason why options have outperformed stocks for many well informed investors on this forum, and it’s not due to utter blind luck.

You do make a plausible argument, but we still may disagree. Because the Market Makers and their associates play both sides of the market they also can directly influence every trade and not only take their 'cut' but also shift the odds while you're playing. That makes it quite different from a legitimately run casino with games that also depend on skill. In the derivatives markets an individual player cannot rely on the odds that seem to apply when they place a bet.

In essence, by design, derivatives are a 'rigged' game. The only exceptions are those, topically commodities and FX, when producers can hedge their future sales or purchase price. Otherwise, the inside players always can destroy an individual position quite as a matter of whim.

 

[StealthP3D]

Exactly! Until Elon makes power walls that can FSD themselves to deliver groceries or something when not providing backup power, I’d like my model X to do a little off hours duty as autobidder or distributed power provider and home power backup.

The battery’s plenty big to always have enough for the occasional unplanned trip to the grocery store or whatever.

There's a reason Tesla management has a dim view of VTG. It's because Tesla management uses first-principles thinking like a guided laser to arrive at the truth of things better than most people can in their wildest dreams. Tesla's success is a direct result of thinking about thousands of things correctly and avoiding the temptation to use fuzzy thinking to arrive at non-optimal solutions

Sure, VTG might seem like a great thing to one with less ability to fully parse the necessary considerations, but that doesn't mean that person is thinking more clearly than Tesla management or that they have more information at their disposal than Tesla management or that Tesla management has a conflict of interest that leads to a non-optimal position. In a nutshell, here's why widespread VTG does not make sense:

An EV's battery must be sized taking all relevant considerations into account. Too big and the owner is wasting money on seldom used capacity while packing around excessive weight that reduces the efficiency of the vehicle and wears the tires unnecessarily quickly.

There are two primary use cases for VTG; (1) Emergency energy storage of each EV to draw upon in the event of power failure and (2) The collective storage of all EV's in a region to buffer grid demand and reduce the need for peaker plants. The least desirable place to put batteries for emergencies is in a vehicle that has an indeterminate location. If the EV's battery is sized properly for daily needs then by the time you get home and find your power is out, there is precious little storage available to use as backup power, especially if you don't want to disable the remaining functionality of your car during a power outage of indeterminate length that prevents you from re-charging it. For the reasons already given, it would be silly to oversize the vehicle battery to achieve a certain kWh buffer of capacity that you normally wouldn't have purchased, just for emergency needs. That money should be put into batteries purchased for that purpose that don't have to be lugged around everywhere you go and that are always available for use when the need arises.

VTG for buffering grid demand. This use case is no more compelling to the individual car buyer than the scenario for emergency storage because the primary benefit to the car owner is simply a small arbitrage on the price electricity. Any energy used for grid storage is not available for range. Therefore, the battery must be sized larger than optimal for transportation alone. If the arbitrage profit makes it worthwhile to pay for more batteries than you need for transport alone, then it makes sense to buy those batteries, using a loan if necessary, and mount them in a stationary location, not lug them around with you wherever you go.

In both of these use cases the common principle is that the car battery should be sized for transportation, not stationary storage. If either of these use cases appear to make sense, they should also make sense with stand-alone storage batteries. You are paying for that capacity in both dollars and weight when it's installed in the car. It's fuzzy incorrect thinking to say, "Yes, but I already have the battery, I might as well make it do double duty." That's because there is not a good correlation between when you have a power outage and when you have lower transportation needs. Nor is there a good correlation, for most people, between when the grid needs storage capacity and when you have reduced transport needs.

In short, don't drive around with your unneeded battery capacity. It wastes tire life, reduces handling, increases the cost of the car and reduces driving efficiency. It also puts a more expensive battery at risk in the event of an accident and doesn't ensure the extra capacity is available when it's needed.

Batteries are of great benefit to any grid system, but they should be sized for the use case, located where needed and reliably available.

 

[StarFoxisDown!]

That's why I don't think it happens the way you describe, and for the very reasons you've been talking about. Predictability. It's not in anyone's interest to let retail sell 15% OTM weekly BPS from now til year end making 1.5-2%. I think we see a LOT of zigging and zagging as volatility in both directions keeps us on our toes until the market picks a direction.

For now I find it hard to believe folks are OK with the likes of GOOG and APPL having a 28 PE and 70% earnings growth. Was just looking at the GOOG info on Yahoo and it's just like Tesla. 1Q "consensus" is so far out of whack that it'll be hard to imagine it's not up by billions within a couple weeks.

We shall see! Definitely a huge battle going on. I just think the fundamentals clearly show big tech should steamroll the bears.

I've kinda thought about this over the past month and especially since earnings, but maybe they're getting ready to "close the curtains" as they say on TSLA being "go to" as the biggest options activity/play in the market.

I mean it was going to have to happen at some point. Eventually Tesla's earnings would grow to a scale on the likes of Apple/Nvidia/etc...where as the earnings grow in scale and have a certain level of predictability that more pools of buying power come in because the fundamentals are so good. Things like investment grade rating alone allows a huge amount of money to start buying into TSLA that can't today. So then the trading action becomes more and more one sided to the buy side.

Even though I was expecting P/E compression, I would have never thought that Tesla's Forward P/E would ever come close to dropping below 100 in 2022 or even 2023. And I know Wall St can do the math in that Q4's GAAP EPS was artificially lower by about $.50 than it should have been. So the Forward P/E is actually lower than 90 right now. In order for Tesla's Forward P/E to even stay at 90 and not go lower after Q1's earnings, the stock will need to go up 30% from here before mid April.

 

[Singuy]

I think the TSLA market is reacting negatively to Cruise doing limited Robotaxi service in SF and just raised $1B+ from Softbank.

Man all these autonomous companies are such cheaters. Didn't know cruise is only avaliable from 10pm to 3am around a limited geofenced area. Tesla sees disengagement every so often because it actually attempts to drive real roads and scenarios.

 

[woodisgood]

Some of the headlines today are beyond bonkers. I won’t link anything, but article by an Ananya Bhattacharya:

“Why Does Tesla Keep Recalling Cars?”

First paragraph:

“ If you buy a Tesla, there’s a good chance the company will need it back to fix a serious problem. Nearly 1 million cars have been recalled in the company’s history.”

Are you kidding me with this nonsense?! And we can pretend it has no effect, but many of my non-Tesla owning friends would say otherwise.

Starts to become a little clearer why NHTSA would insist on calling OTA changes “recalls,” eh?

 

[ZachF]

A recession is defined as two consecutive quarters of negative growth. So you're suggesting Q1 is flat, Q2 and Q3 will be negative, therefore Q4 will be significant to offset the contractions in Q2 and Q3 and get us to 2% for the year. Personally I don't see this happening. Growth may slow, but that isn't a recession.

You have to remember that annual GDP figures are the entire year averaged together.

Economic output during Q4 was 2.8% above the average for 2021. If economic output shrank by 0.4% per quarter every quarter this year, the annual average of 2022 output would still be 2% higher than the annual average output of 2021.

So yes, the economy could shrink every quarter this year but still grow on the year. Counterintuitive, but true.

 

[capster]

In US terms since the Buttonwood tree market makers have manipulated. technically the system(s) were not "set up to trust them". They were developed to improve liquidity and standardize tools of the trade. It is only by inference and political positioning that any reference to individual shareholders exists at all.
That may not be a popular view, but it is true. Worldwide financial systems were all developed to benefit financial institutions and institutional investors. I understand the previous sentence is absolute. A little more than 40 years ago I led a project for a very large financial institution to assess the structure and character of more than 170 individual financial markets, from the smallest at the time, the Seychelles to the physically largest, China (at that time they did not have a national system, and much intra-China trade ran on, believe it or not, bankcard debit settlement systems. That changed very, very quickly, but 1978 was the real beginning of their economic development).
That paragraph simply explains that the roelfo market makers and financial transactions is no monolithic at all. Almost none of it has much to do with individual consumers. There is a lesson that is unequivocal:

By design, participation in most securities or other financial markets does not have individual consumer benefits except from the typical Consumer Protection feature that are always designed to appear to have consumer benefits that are actually quite toothless.

The absolute classic example is in the present day. TSLA, represents more than half the total derivatives market. Why should that be? It si quite simple and transparent. TSLA is inordinately popular among active consumers who are self-directed. That means that those investors (US, if you please) are probably the most profitable single class of individuals. The result is that the TSLA individual investors devour large quantities of highly 'sophisticated' ...

note: I am using the 15c definition for the word:

sophistication (n.)​

early 15c., "use of sophistry; fallacious argument intended to mislead; adulteration; an adulterated or adulterating substance,"

...tools. Those tools are quite explicitly designed to generate r4venue from volatility, the more extreme the better.
Most fo us know that, but persist in trying to game a system designed to strip them of their money. In short, playing with derivatives as an individual consumer is roughly equivalent to using a 'system' to play slot machines. It cannot be successful long term and will not be.

Of course @StealthP3D is largely correct except for the purpose. Quite a few people here are using FINRA data:

Short Sale Volume Data

Short sale trade data is publicly available for off-exchange (OTC) trades in exchange-listed securities reported to a FINRA Trade Reporting Facility (TRF), Alternative Display Facility (ADF), or Over the Counter Reporting Facility (ORF).

www.finra.org

Given the interplay between DTC...

The Depository Trust Company (DTC)

DTC brings efficiency to the securities industry by reducing costs, immobilizing securities and making 'book-entry' changes to ownership of the securities.

www.dtcc.com

...FINRA and the reporting entities much short selling and consequent Fails to Deliver may never be reported at all.

This all sounds to be deeply conspiratorial. I don't really think that is true. factually very few people understand how this system works. Those who do are likely to be very, very 'nerdish' and some have very well developed analytic skills. Those few devise the various operational tools that end out being called 'bots', 'algorithms' or something else. Those are the automated tools that end out manipulating markets, quite often in ways that avoid regulatory reporting.
To my knowledge virtually no ostensible corporate leaders have any idea at all how this works. They only know they make tons of money until something goes wrong, whereupon they are perfectly equipped to deny responsibility, take their Nobel Prizes and/or $billions and retire into the sunset. In short, the system probably is mostly not corrupt but it is wide open for corrupt actions that are plausibly deniable.

This repeats regular warnings, that will invariably be ignored by people who are convinced they can beat the system. They're better off going to casino slots where they might at least get 'free' drinks when they lose enough.

I nominate this post for Posts of Particular Merit.

"In short, the system probably is mostly not corrupt but it is wide open for corrupt actions that are plausibly deniable."

Pithy and apt.

 

[MD70]

Another surprisingly good write up from Dana:

Tesla, Who? Biden Can't Bring Himself to Say It — and Musk Has Noticed

President Joe Biden calls himself a union guy and a car guy, and he’s embraced electric vehicles as vital to his economic and climate ambitions.

www.bloomberg.com

“Tesla has done extraordinary things for electric vehicles and that's a big part of why the whole industry now knows EVS are the future," WH spox Emilie Simons said in a statement. “

At least they acknowledge reality.

 

[Cherry Wine]

Another surprisingly good write up from Dana:

Tesla, Who? Biden Can't Bring Himself to Say It — and Musk Has Noticed

President Joe Biden calls himself a union guy and a car guy, and he’s embraced electric vehicles as vital to his economic and climate ambitions.

www.bloomberg.com

“Tesla has done extraordinary things for electric vehicles and that's a big part of why the whole industry now knows EVS are the future," WH spox Emilie Simons said in a statement. “

At least they acknowledge reality.

Dana has been refreshingly willing to call out the Biden's administration's reluctance to acknowledge Tesla. From just this morning on Twitter:

https://twitter.com/x/status/1488915810508673028

 

[jerry33]

There's a reason Tesla management has a dim view of VTG. It's because Tesla management uses first-principles thinking like a guided laser to arrive at the truth of things better than most people can in their wildest dreams. Tesla's success is a direct result of thinking about thousands of things correctly and avoiding the temptation to use fuzzy thinking to arrive at non-optimal solutions

Sure, VTG might seem like a great thing to one with less ability to fully parse the necessary considerations, but that doesn't mean that person is thinking more clearly than Tesla management or that they have more information at their disposal than Tesla management or that Tesla management has a conflict of interest that leads to a non-optimal position. In a nutshell, here's why widespread VTG does not make sense:

An EV's battery must be sized taking all relevant considerations into account. Too big and the owner is wasting money on seldom used capacity while packing around excessive weight that reduces the efficiency of the vehicle and wears the tires unnecessarily quickly.

There are two primary use cases for VTG; (1) Emergency energy storage of each EV to draw upon in the event of power failure and (2) The collective storage of all EV's in a region to buffer grid demand and reduce the need for peaker plants. The least desirable place to put batteries for emergencies is in a vehicle that has an indeterminate location. If the EV's battery is sized properly for daily needs then by the time you get home and find your power is out, there is precious little storage available to use as backup power, especially if you don't want to disable the remaining functionality of your car during a power outage of indeterminate length that prevents you from re-charging it. For the reasons already given, it would be silly to oversize the vehicle battery to achieve a certain kWh buffer of capacity that you normally wouldn't have purchased, just for emergency needs. That money should be put into batteries purchased for that purpose that don't have to be lugged around everywhere you go and that are always available for use when the need arises.

VTG for buffering grid demand. This use case is no more compelling to the individual car buyer than the scenario for emergency storage because the primary benefit to the car owner is simply a small arbitrage on the price electricity. Any energy used for grid storage is not available for range. Therefore, the battery must be sized larger than optimal for transportation alone. If the arbitrage profit makes it worthwhile to pay for more batteries than you need for transport alone, then it makes sense to buy those batteries, using a loan if necessary, and mount them in a stationary location, not lug them around with you wherever you go.

In both of these use cases the common principle is that the car battery should be sized for transportation, not stationary storage. If either of these use cases appear to make sense, they should also make sense with stand-alone storage batteries. You are paying for that capacity in both dollars and weight when it's installed in the car. It's fuzzy incorrect thinking to say, "Yes, but I already have the battery, I might as well make it do double duty." That's because there is not a good correlation between when you have a power outage and when you have lower transportation needs. Nor is there a good correlation, for most people, between when the grid needs storage capacity and when you have reduced transport needs.

In short, don't drive around with your unneeded battery capacity. It wastes tire life, reduces handling, increases the cost of the car and reduces driving efficiency. It also puts a more expensive battery at risk in the event of an accident and doesn't ensure the extra capacity is available when it's needed.

Batteries are of great benefit to any grid system, but they should be sized for the use case, located where needed and reliably available.

The beetles in the pudding with VTG is that there will need to be a house to grid disconnect to prevent harming electrical utility workers when they are repairing the power lines. By the time this infrastructure is paid for, you might as well have purchased Powerwalls.

 

[Cherry Wine]

I don't think macro's will matter actually because TSLA has been getting weaker and weaker when compared to the macros.

The chart on TSLA is already starting to show a future wedge that points to the meeting of the uptrend and downtrend lines around mid March at around 905-915/share. Seeing how Wall St loves to make their trend lines reality through superstition, I'd say that's exactly where the stock is going to be in mid March before we get a clear uptrend going. And even then, the uptrend might be a gradual increase like how we saw in May through Sept.

Maybe you're right, but I'm not willing to throw in the towel just yet.

 

[StarFoxisDown!]

Maybe you're right, but I'm not willing to throw in the towel just yet.

If it makes ya feel any better, I'm very confident this is the last "hurrah" from a rather desperate/pathetic group of hedge funds/MM's/shorts. They know the writing is on the wall in terms of they're going to lose their volatility/options volume "golden goose" that is TSLA.

Might as well hammer it down as much a possible in the short term before Q1's earnings compress the P/E into a value play

 

[AKAlex]

Very true. I worked for GM from 1980-94 as an engineer (80-85 as a co-op student), most of that time in manufacturing engineering on the production floor. UAW rules were a joke. Machine goes down? Machine repair is called-they show and determines some guards must be removed to access the problem. OK, removing sheet metal guards is a tinsmiths job, sit until they show (or the MR disappears before they show). Guard removed, MR (and engineer) determine that the problem is a damaged limit switch-so an electrician gets called to bend a LS arm back into place. Putting everything back together is the reverse. Things that should take minutes to do take hours. All while the operators sit around-and when the machine is back up, it's within two hours of the end of shift so they won't run any parts anyway. It was a joke. Fortunately as a manufacturing engineer, I got along well with skilled trades and got away with more than I was supposed to-but still very frustrating.

Remember... this is the competition. The folks who take hours to fix a problem that should take minutes to fix are going to build and tune lines for a completely revolutionary product? I think the competition has arrived, however it is Tesla, not legacy, union auto.

This is very true...This reminds me when I was interning in the electrical engineering department at a Union manufacturing plant (auto industry) years ago. One of the engineers was explaining/teaching me an electrical engineering concept (as it relates to one of the products being manufactured) and then decided to bring me to the "shop" to show me the concept in practice by using some electrical test equipment, etc. Couldn't have been 10 minutes later when one of the union shop guys came up with one of the union bosses and demanded that he immediately stop what he is doing. I guess the protocol is if any of the electrical engineers wanted anything done they needed to submit a work order and wait until one of the union guys gets around to it. Could take weeks.

I spent a few summers prior to this internship in the manufacturing plant on one of the assembly lines (great college summer job that paid a lot) so I was familiar with how unions work on the manufacturing floor. However, this experience in the electrical engineering department completely surprised me as I assumed the engineers, in the engineering department, wouldn't have been under such restrictions.

That experience cemented the idea that I would never want to be an engineer in a union shop. Things moved way too slowly. This would never fly at Tesla and would completely go against the culture at Tesla.

This is key. A good engineer learns by being part of the process that they oversee (Or do good engineers come from being part of the process they oversee?). The more organizational layers between the engineer and their product, the longer iterations take. Without these rapid iterations, it is very difficult to innovate as the feedback cycle is too slow.

 

[TheTalkingMule]

I've kinda thought about this over the past month and especially since earnings, but maybe they're getting ready to "close the curtains" as they say on TSLA being "go to" as the biggest options activity/play in the market.

I mean it was going to have to happen at some point. Eventually Tesla's earnings would grow to a scale on the likes of Apple/Nvidia/etc...where as the earnings grow in scale and have a certain level of predictability that more pools of buying power come in because the fundamentals are so good. Things like investment grade rating alone allows a huge amount of money to start buying into TSLA that can't today. So then the trading action becomes more and more one sided to the buy side.

Even though I was expecting P/E compression, I would have never thought that Tesla's Forward P/E would ever come close to dropping below 100 in 2022 or even 2023. And I know Wall St can do the math in that Q4's GAAP EPS was artificially lower by about $.50 than it should have been. So the Forward P/E is actually lower than 90 right now. In order for Tesla's Forward P/E to even stay at 90 and not go lower after Q1's earnings, the stock will need to go up 30% from here before mid April.

And stepping back even further, what will define success for 2022 in the hedge fund world? Looking at actual 4Q earnings it nearly has to be big tech. How else will one beat the S&P?

These guys already made a killing shorting TSLA and other QQQ components in January, logically now they can turn around and put those winnings to use acquiring shares in the companies most likely to show insane earnings growth at year-end.

Certainly not everyone will do it, maybe just a few at first, but I think we'll see a stampede rotating back into tech once a certain percentage of hedge funds reverse course. I think it's already happening and will end when these GOOG numbers trickle into everyone's models by Monday.

You'd be hard-pressed to convince me it's not everyone's #1 goal to acquire cheap shares in big tech companies in early 2022.

 

[SmokyPeat]

So the Washington Football Team announced their new name today (Commanders), and decided to celebrate by buying a small fleet of at least 9 wrapped Model Ys:

https://twitter.com/x/status/1488895107944402950

I wonder how much free advertising Tesla is going to get each time the Commanders play.

Excellent! Let that be a message to the Commander in Chief.

 

[CLK350]

This really misunderstands a lot about Starlink. Nobody, and I mean nobody, that depends on custom-fiber-install HFT trade info is moving to starlink, which still has brief but intermittent service drops that most users don't care about but these guys literally run their business around not having. That's apart from them usually being in high density spots like NYC where needing line of sight to work well is highly challenging.

Even Elon Starlink is NOT for dense areas that already have high speed options.

It's for rural, sparse, and heavily underserved areas that don't.

The killer use cases for this new offering is two things
-
1) things like cruise ships and aircraft where you have to share the bandwidth of one receiver across hundreds of people and existing satellite offerings are terrible in comparison.
and
2) Providing rural/remote backhaul for telco companies where again they need to serve multiple users but running physical wires doesn't make sense.. Elon remarked specifically on that a while back

Of course Tesla doesn't own or operate starlink so probably should move further discussion to the existing thread for it-

SpaceX Internet Satellite Network: Starlink

Not sure I agree... a "pre-order" doesn't provide said service, it primarily gauges interest. The article says:"“Starlink has neither applied for nor obtained any license from PTA to operate and provide internet services” They aint doing that yet, but are in the process of getting the license...

teslamotorsclub.com

Thanks for reminding us what Elon has said about obvious base case uses.

It still is true that this will also be a Master Plan Part 1 - bringing higher margin product to accelerate Starlink's growth

Re HFT trading uses - not being 100% reliable is not a problem, why not use Starlink as second provider, when it runs it runs faster, when it's down fiber takes over - overall result is faster than fiber alone. Am sure traders are taking a look at it.

Re Starlink for dense areas - sorry if I was a little short on explanations - the notion of extending Starlink to cities is not about providing airborne internet to that urban population, it is the notion of extending the same separate network that Starlink has to that part of the urban population for whom censorship/ security /redundancy are important enough to justify the price.

 

[Sofie]

Maybe you're right, but I'm not willing to throw in the towel just yet.

Sell your long term holdings?

 

[mrmage]

You do make a plausible argument, but we still may disagree. Because the Market Makers and their associates play both sides of the market they also can directly influence every trade and not only take their 'cut' but also shift the odds while you're playing. That makes it quite different from a legitimately run casino with games that also depend on skill. In the derivatives markets an individual player cannot rely on the odds that seem to apply when they place a bet.

In essence, by design, derivatives are a 'rigged' game. The only exceptions are those, topically commodities and FX, when producers can hedge their future sales or purchase price. Otherwise, the inside players always can destroy an individual position quite as a matter of whim.

The insider players could destroy a particular position, but they won't - because a specific position by a retail investor that's valued in the millions is just noise in a trillion dollar market. The large players or manipulators will optimize across positions that have highest overall profit, but they cannot do that on individual trades without creating opportunities for arbitrage.

Thus, the difference between individual investors and investors in aggregate. As a group, I agree options traders will lose. At the individual level, we very much disagree.

 

[Cherry Wine]

Sell your long term holdings?

No way! I mean just writing off Q1'22 as a lost cause in terms of stock price appreciation.

 

[Rammstein]

So my buddy and I are in a heated debate. He’s of the opinion that’s it’s impossible to beat S&P long run and that if you do it’s just dumb luck. What would you say to him? Oh and on top of that he’s saying that it’s not dumb luck if you are a professional investor.