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

[nativewolf]

The thing my broker doesn’t know if how much money I have in my secret account. Only my wife knows, because she it trying to spend it all on a new whole house renovation!

but do you know how much your wife has in her secret account?

 

[Captkerosene]

Not sure about US, but for Europe is a nice car. Not the best one in terms of efficiency, but a nice urban car. They are selling well in Italy, of course, and it can be used for short trips in the highway too.

I learned to drive fifty years ago in the "Cinquecento."

 

[unk45]

Speaking of Tesla Energy opportunities - TMC members are one of the very few groups that will immediately recognize the connection between Michael Cannon-Brookes and Elon, and Hornsdale’s epic battery plant that proved to the world what was possible. Now imagine what they could accomplish if they had access to AGL Energy - Australia’s largest CO2 emitter. Well look what just happened……….. exactly that. This is massive news IMO, and it’s only a very small leap to envision those two implementing the ‘Hornsdale on Steroids’ project in the near future. The status quo has just changed:

https://twitter.com/x/status/1593819713871781890

https://twitter.com/x/status/1592396814992674818

Nominate for "Moderator's Choice: Posts of Particular Merit'

I had missed that. This will be far more consequential than people imagine. The first issue will be how to find supply of storage closely followed by how to scale generation capacity quickly. Solar, wind (on and off shore), VPP's mirroring 'Hornsdale II'

Tesla virtual power plant in South Australia first to lift FCAS capacity to 10MW

Tesla virtual power plant in South Australia can now commit 10MW to FCAS markets, meaning that batteries in more than 2,000 homes will be providing crucial grid services.

reneweconomy.com.au

With Cannon-Brookes in charge this will be wildly interesting.

Suddenly I'm elated! TE simply cannot scale quickly enough.

I really want to rate your post both 'informative' and 'Love'. I had to pick one.

 

[2daMoon]

It's too bad that Tesla is only a car company.
If they were ever to get into the Energy business it might just be...

B. A. F.
​

... obligatory /S for the sarcasm impaired

 

[Skryll]

Meanwhile out in the world beyond the USA, the Fiat 500 is viewed as a fantastic little car. Not necessarily highly profitable, but that's a different matter. The USA has a seriously skewed view on this sort of thing.

Maybe as a German used to autobahn speeds stability on highway is even more important to me than an average American.... also shopping for this as a parent for their new driver I look at more than cute and affordable

 

[joh01652]

People who have lived through past recessions tend to be quite risk-averse about capital adequacy. Despite the Tesla cash reserves that seem excessive to some, the prospect of major supplier disruption is very high, as is shipping instability. Because Tesla is also making major new investments that should not be deferred, it is simply foolhardy to assume all that cash flow will continue to accumulate unabated. Despite undervalued shares, doing a buyback does reduce cash irrevocably.

Think back only to 2008 as major banks went broke including the largest ones, so forced mergers provided cosmetic cover. Bank of America had a forced merger into Nations Bank. Merrill Lynch added to the new behemoth. The list goes on.

Many of us have serious myopia and assume Tesla is immune to the coming challenges. It is NOT. Luckily Tesla financial management has been very conservative so will be unlikely to answer the call to irresponsible liquidity reduction just when it might most be needed.

"...if you have 6b free cash flow..." is indeed the point. If developments in Europe and much of Asia flow exceptions...if the Ukraine war continues beyond the next six months... if trade tensions between China, the EU, the US are exacerbated... That wonderful free cash flow could quite quickly reduce.

Please, please don't pressure Tesla to reduce the cash cushion just as we are entering very challenging times. Were that to be done I would understand Tesla is abandoning the very prudence that has allowed the success we have seem. That would be one of the very few things that would make me sell all my shares.

I find it to be appalling that many of us are ignoring all the financial management discipline that has allowed Tesla to thrive. Paying back debt has been wise.

I've had to help liquidate too many major companies which followed such follies just as the good times stopped rolling. Those who want to do it should ignore those of us who have seen the perils first hand. Obviously you know better because you've never had to cope with disaster.
I apologize for my stridency. I do not apologize for the opinion.

Agree 100%. The current global economic situation does not give me confidence. Absolutely Tesla should be hoarding cash at this time, in my humble opinion.

The trillions spent on covid stimulus shortly after the pandemic was announced, and the subsequent massive rise in equity valuations and following sell-off reeks of Wall Street fraud of epic proportions. And governments have added so much debt to their balance sheets in the past two years, with rising interest rates, I think we're going to see defaults and margin calls soon for both governments and financial institutions. In fact, I think we're already seeing the margin calls, the FTX crash and falling stock market the early indicators. I think a 2008 style unwinding is upon us.

Don’t get me wrong, I feel as bullish as ever about Tesla and where the company is headed; indeed, I think Tesla will be much better positioned than others due to industry leading profit margins, vertical integration, pricing power, minimal debt, etc. But the astronomical rise in the dollar (DXY) we’ve been seeing these past few months is indicative of a global margin call of our over-leveraged, non-productive financialized economy, and major institutions of all colors cashing out as central banks raise interest rates into an ongoing recession. The bubble is popping. Governments/institutions simply cannot finance their debt any longer, and when one systemically important country or financial institution finally defaults, a chain reaction of defaults could occur that will drop the markets lower. FTX is a perfect example of non-productive financial wizardry gone bad, like Enron 2.0. How many hedge funds will FTX alone take down, and who is going to step in and stop the bleeding this time and how? Everyone is drowning in debt (except Tesla).

Yeah Tesla should hold on to its cash. People can shake their fists all they want at Elon, as if he and he alone is responsible for TSLA dropping so hard in 2022. But if one steps back and takes a look at how sharply everything has dropped, it seems to me that something very different is going on.

 

[Drax7]

Agree 100%. The current global economic situation does not give me confidence. Absolutely Tesla should be hoarding cash at this time, in my humble opinion.

The trillions spent on covid stimulus shortly after the pandemic was announced, and the subsequent massive rise in equity valuations and following sell-off reeks of Wall Street fraud of epic proportions. And governments have added so much debt to their balance sheets in the past two years, with rising interest rates, I think we're going to see defaults and margin calls soon for both governments and financial institutions. In fact, I think we're already seeing the margin calls, the FTX crash and falling stock market the early indicators. I think a 2008 style unwinding is upon us.

Don’t get me wrong, I feel as bullish as ever about Tesla and where the company is headed; indeed, I think Tesla will be much better positioned than others due to industry leading profit margins, vertical integration, pricing power, minimal debt, etc. But the astronomical rise in the dollar (DXY) we’ve been seeing these past few months is indicative of a global margin call of our over-leveraged, non-productive financialized economy, and major institutions of all colors cashing out as central banks raise interest rates into an ongoing recession. The bubble is popping. Governments/institutions simply cannot finance their debt any longer, and when one systemically important country or financial institution finally defaults, a chain reaction of defaults could occur that will drop the markets lower. FTX is a perfect example of non-productive financial wizardry gone bad, like Enron 2.0. How many hedge funds will FTX alone take down, and who is going to step in and stop the bleeding this time and how? Everyone is drowning in debt (except Tesla).

Yeah Tesla should hold on to its cash. People can shake their fists all they want at Elon, as if he and he alone is responsible for TSLA dropping so hard in 2022. But if one steps back and takes a look at how sharply everything has dropped, it seems to me that something very different is going on.

Tesla should buy back stock if and only if they get a triple A credit rating ,
that’s my view.

 

[FielderJones]

And governments have added so much debt to their balance sheets in the past two years, with rising interest rates, I think we're going to see defaults and margin calls soon for both governments and financial institutions.

Governments cannot default. They can inject hyper-inflationary amounts of currency into their financial systems, but they cannot default.

 

[nativewolf]

Now that there is a baseline for B,A, and S+, we need to see whst happens to GM as they ramp.
Zach said on the Q3 call:
"Operating margin is one of our best yet, with improvements in operating leverage. However, Austin and Berlin ramp costs weighed on our margins, particularly if you compare it to Q1. Removing regulatory credits and Austin and Berlin, our operating margins would have been our strongest yet and auto gross margin would have been nearly 30%. Note that while small and growing, each car we build in Austin and Berlin is contributing positively to profitability."

But you have all of that, it would be like GM saying if we didn't have pension obligations our margins would be better. Not just do you have Austin and Berlin but Tesla needs another 1-2 GF to hit production forecasts later this decade.

Governments cannot default. They can inject hyper-inflationary amounts of currency into their financial systems, but they cannot default.

they can also repay bonds early

 

[bkp_duke]

Tesla should buy back stock if and only if they get a triple A credit rating ,
that’s my view.

Problem is the credit rating system is a sham and is completely gamed by the insiders. With the exception of AAPL and GOOG, TSLA has one of the best balance sheets there is, yet their credit rating is not remotely reflective of that.

 

[bkp_duke]

Governments cannot default. They can inject hyper-inflationary amounts of currency into their financial systems, but they cannot default.

Not quite true. The US, you are essentially correct. But countries with LARGE debts to other countries can definitely default (a la Greece).

 

[ZeApelido]

Reason #387 You Might Be Thinking Too Much About Tesla

I was falling asleep on the couch after a long day while my wife was looking at some ancestry DNA results. She asked me a question and I just mumbled:

“Autopilot can help”

 

[mongo]

But you have all of that, it would be like GM saying if we didn't have pension obligations our margins would be better. Not just do you have Austin and Berlin but Tesla needs another 1-2 GF to hit production forecasts later this decade.

The point (as I see it) isn't the specific margin number, it's the reason behind the number.
Reduction in gross margin due to reduced demand and ASP (poster 2's implication?) is a different beast than reduction due to new facilities coming on line (reality of the situation).
Drop Berlin and Austin and the Q3, 2022 number becomes 29-30% showing no reduction. Thus Fremont amd Shanghai are not getting pinched in terms of GM. One could perhaps claim that is a leveling; however, given the Oct shutdowns for upgrades, it doesn't seem a good data point for that conclusion.

 

[traxila]

Governments cannot default. They can inject hyper-inflationary amounts of currency into their financial systems, but they cannot default.

Correction:

Governments can default in two ways:

-Their economy and debt is denominated in a currency they cannot print (e.g. the Euro Zone, and Greece agrees to being a slave debtor state so as not to default).

-Mad politicians that somehow equate defaulting on the country’s debt with a form of fiscal discipline.

We can add barbarian hordes trashing your infrastructure and the purity and quantity of your precious metals currency declining, but then I am showing my age….

 

[traxila]

Problem is the credit rating system is a sham and is completely gamed by the insiders. With the exception of AAPL and GOOG, TSLA has one of the best balance sheets there is, yet their credit rating is not remotely reflective of that.

Yes. I would still feel a lot better about pouring corporate cash into stock currency when we can officially say the FED looks done with interest rate hikes.

 

[betstarship]

https://twitter.com/x/status/1537156295362351104

Bill Gurley is one of the best investors on the planet. Wise words in this tweetstorm. Worth a follow too

 

[Gigapress]

But you have all of that, it would be like GM saying if we didn't have pension obligations our margins would be better. Not just do you have Austin and Berlin but Tesla needs another 1-2 GF to hit production forecasts later this decade.

This is a transient phase where Tesla has two factories in mature volume production and two that are ramping. It’s unlikely we’ll ever reach a point again where half of Tesla’s factories are new and dragging on overall margins. At some point in the future Tesla’s exponential growth rate will slow down and thus most of the vehicle production will be coming from mature facilities, as was the case in Q4 and Q1 before Ber&Tex came online with their depreciation and amortization expenses.

Investors (who are rational and also not shortsighted) want to know the net present value of the cash flows from each additional factory Tesla builds to estimate the return on investment, and thus it’s critical to know the gross margins for mature lines even in a rough quarter filled with headwinds. The factory is the product. I’m very glad Zach gave that info on the call because it increases my confidence in this model:

100% Annualized Return on Investment?

Stunning Gigafactory CapEx Efficiency

globaloptimization.substack.com

Pension obligations for GM is a bad comparison because GM has those obligations irrespective of any investments in future growth. It’s a built-in part of GM’s cost structure.

 

[Featsbeyond50]

Reason #387 You Might Be Thinking Too Much About Tesla

I was falling asleep on the couch after a long day while my wife was looking at some ancestry DNA results. She asked me a question and I just mumbled:

“Autopilot can help”

I called my daughter Tesla a few weeks ago. Out loud in a public group.

 

[insaneoctane]

I'm watching the GM Investor day.

GM President Mark Reuss is making a point they have serviced 11,000 Tesla's because GM dealers are so trusted. It's a growing business for them!

He did not say what service they do but my best guess buying tires?

Maybe he was referring to employee owned Tesla's that charge via outlet while at work? /s

 

[unk45]

Governments cannot default. They can inject hyper-inflationary amounts of currency into their financial systems, but they cannot default.

That statement is incorrect. Countries can and do default.
"147 governments have defaulted on debts since 1960."
russia-default-debt-crisis

The World Economic Forum

The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Incorporated as a not-for-profit foundation in 1971, and...

www.weforum.org

You are misunderstanding in a very common way, the assumption that countries can avoid technical default by inflating their currencies. If the debts are fixed rate in the countries own currency that is possible theoretically. That is not a common solution. The US can default quite easily if Congress does not approve a deb ceiling increase. Perhaps you have not noticed the panic set off periodically when one party controls the Executive branch and another the Congress, precisely to avoid default.