Pop Quiz!
No cheating. Which line is AMZN and which line is TSLA? With so many
very important factors having affected TSLA in particular I'm sure it's very easy to tell the difference on sight.
Here’s the same data in scatter plot format instead of a time series line chart. That’s a very strong correlation even with the time element totally removed. Please excuse the bad chart format, as I’m working on my phone.
Here’s the scatter plot for daily changes. Even this shows strong coupling.
You keep comparing TSLA’s performance to every POS stock out there while expressing how strong the fundamentals are. If TSLA is supposed to just follow AMZN and/or QQQ, what is the purpose of this board may I ask? I have looked at every financial metrics and TSLA beats everything else out there with the exception of maybe ENPH and yet here we are -60% for the year.
I have shown that TSLA’s performance has been tightly correlated to the macros and every POS stock out there because that’s a very relevant empirical fact because it falsifies the hypothesis put out by many investors that TSLA’s movements in the last year have been primarily caused by other factors. You can randomly pick any day in the last six quarters, tell me the S&P 500 price but not the date, and I’ll have a high probability of being able to guess the TSLA price on that date to within 10% error. I could even do about as well just by knowing the AMZN price instead of the S&P, as shown by the graphs above. This is the reality no matter what other theories anyone wants to invent. The numbers don’t lie.
I am not claiming it’s
supposed to be this way. This is a statement of what has been, not what ought to have been. In fact, I think it’s been completely irrational market behavior, except for some reasonable adjustment to discounted cash flow analysis to reflect the higher interest rates which have affected the entire market. I believe the PE compression has been so extreme and the upcoming earnings and free cash flow growth will be so extreme that we’re quickly approaching a point where the reality will be undeniable, and a share price anywhere close to $160 will seem absurd to even the most daft and poorly informed investors. I discuss this extensively in blog posts
here,
here and
here.
TSLA has underperformed the macros in the last six weeks, but so has AMZN which is an important covariant with TSLA largely because both are the prime targets for short-term options market manipulation, due to them combining for something like 70% of the entire US options market, if I remember correctly.
Also, I am not claiming that this tight correlation will persist forever. That has not been universally true across Tesla’s overall history as a publicly traded company. If I believed that TSLA would passively track with the macros forever, then the obvious move would be to divest from TSLA and TSLA call options and just go 100% on index funds again like I used to do. The fact is that TSLA’s tremendous outperformance of the S&P 500 since IPO has been
overwhelmingly concentrated in just two explosive rallies in which the stock price soared by an order of magnitude. These rallies were in 2013 and late 2019 to mid 2020. Both seem to have been mass awakenings to the company’s potential combined with gamma squeezes and rampant retail investor FOMO, with the first rally happening in apparent response to the early success of the Model S program and hints of profitability, and the latter apparently in response to Tesla’s rapidly improving financials and sustained strong profitability after 17 long years of bankruptcy fears.
This very well could happen again, and I expect that it probably will, and if it does then I don’t want to miss out. The longer the spring keeps winding tighter, the more explosive the eventual release is likely to be. I see a perfect storm brewing with a massive tsunami of positive news coming next year that I anticipate the market not ignoring for long.
I think Q4 results are likely to start precipitating this kind of rally, and if not then the rest of 2023 and 2024 will and my LEAPS are ready and waiting. I could be dead wrong, but I’ve put all of my life savings where my mouth is including quite a lot of leverage in OTM call options between January ‘23 and Jan ‘25. Stocks do not stay decoupled from their fundamentals forever. A stock with a clear and extreme disconnect with the company’s financial reality is not a whining opportunity nor a moping opportunity nor a fear opportunity, but rather is a buying opportunity. Maybe that means reining in spending to withdraw less of the retirement nest egg of have more income to save. Maybe it means reallocating capital from other investments. Maybe it means finding a way to increase income. Maybe it means increasing leverage. Maybe selling a house and going to renting. That’s not investment advice but possible logical tactics to consider for anyone seeing a share price they think is deeply undervalued.
The purpose of posting this stuff is:
1) Attempt to use science and clear presentation of the data to help people, myself included, calm down and see what’s really going on so they don’t make a major mistake or get tricked by evil people spreading fear, lies and deception
2) Demonstrate that the market has been apparently ignoring Tesla’s business performance all year and then some, with market-wide factors dominating the action
3) See if anyone can reasonably critique my projections for the financial fundamentals so as to help find out if I’ve lost my mind with this contrarian investment plan and fix mistakes before I permanently lose more capital and need to make up for lost ground by going back to paid employment
4) Fun and enjoyment
