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

[neroden]

Re: Twitter tactics: Careful.

Given the significant overlap between $TSLAQ and alt-right, there's a long-standing pattern with Twitter moderation that I've seen in action.

Essentially, trolls (or their bots) will threaten someone. Report them, and Twitter will "investigate" and often do nothing (because so much of their moderation is actually automated, reports are often not actually read). Say so much as a swear word back at the trolls, and you'll get mass reported by the bots, and auto-banned based on the report volume plus a keyword being present.

It's something that the alt-right (originally as GamerGate) has been doing to leftists, women, and queer people on Twitter for years now, so I wouldn't be surprised to see the tactics applied to TSLA investors, too.

The "alt-right" are mostly people who, in another era, would have signed up for the Sturmabteilung. The thing to do is to track them quietly (keeping records) until they cross the line of criminality, and then file police reports. It's not always possible to get the police to respond but this is the appropriate thing to do. They are actually dangerous -- they've committed violent acts against innocent people -- and need to be arrested when they make threats.

 

[neroden]

How so?

The risk of buying options is, fundamentally, timing. You have to know something about the timing. If you're right about the big stock price move but you've got the timing too early, it doesn't work; you lose on expiration.

Selling options is a little different because you make money as time runs out.

When you buy very deep-in-the-money (DITM) call options, you pay very little premium over the current stock price. The way to use options instead of margined stock is rolling it over every year or two into DITM calls dated a year or 2 further out. Yes a tiny premium you pay for these calls, but then you aren’t paying any margin interest costs. Of course you also have the advantage of not being at the whims of your broker changing the margin requirements on you as they see fit. And another obvious advantage with calls is that you can only ever lose the money you initially paid for the calls, with no risk of any additional losses beyond that.

Another big benefit from using DITM calls, is that in the event of a big downwards move in the stock price, the call value will not fall as far as the margined stock value. As the stock price falls closer to the call strike price, the call starts to gain a larger & larger premium value as it nears at-the-money price.

As an example if you have a $100 Jan 2020 call, and tomorrow for some inexplicable reason TSLA drops $100 in value. The call price will not drop by the same $100 amount, instead it will drop by something closer to ~$70. Meanwhile if you instead had shares bought on margin, they would of course fall by $100 in value.

In the reverse situation, if the stock price instead increased by $100 tomorrow - the $100 call will appreciate in value by essentially the same amount, maybe a dollar or so less perhaps.

So there you have: less of the downside, and the same upside as margined stock.

—- NOT INVESTMENT ADVICE / do your own due diligence etc —-

This is all correct, but if Tesla is in the doldrums when the option expires, and then skyrockets later, you've lost money -- a risk not present with margin loan purchase of stock. So different risk.

I do tend to think buying options is less risky than margin (because all you can lose is the full value of the options, whereas they can come after you and make you sell your house if you get in deep on margin loans). But options do have unique risks which margin does not have, almost entirely related to timing.

 

[KarenRei]

The risk of buying options is, fundamentally, timing. You have to know something about the timing. If you're right about the big stock price move but you've got the timing too early, it doesn't work; you lose on expiration.

Selling options is a little different because you make money as time runs out.



This is all correct, but if Tesla is in the doldrums when the option expires, and then skyrockets later, you've lost money -- a risk not present with margin loan purchase of stock. So different risk.

I do tend to think buying options is less risky than margin (because all you can lose is the full value of the options, whereas they can come after you and make you sell your house if you get in deep on margin loans). But options do have unique risks which margin does not have, almost entirely related to timing.

To put it more succinctly: with margin, you pay interest. With calls, you pay theta. Either way, you pay for amplifying the motion of the stock, beyond taking on the risk of amplifying negative movements.

 

[Nocturnal]

Elon Musk: Tesla's pickup will be 'a better truck than Ford F-150'

I really enjoyed reading (well, perverse enjoyment) the comments on FB from Motor Trend and Car and Driver. So many idiots.
"Who cares if it's fast, an RC car is fast too! (translation, I'm sad that these are faster)
"OH yeah, but can it tow 30k pounds for 700 miles like I can?" (no you can't)
"It won't be able to tow anything and will run out of power in 5 minutes hurrr lol" (my performance sedan has more torque than your V8 F150.)

People that spend their time hating a particular product live really sad lives. There are plenty of products I'd never buy, but I have a life and don't spend time whining about them online.

 

[Swampgator]

The "alt-right" are mostly people who, in another era, would have signed up for the Sturmabteilung. The thing to do is to track them quietly (keeping records) until they cross the line of criminality, and then file police reports. It's not always possible to get the police to respond but this is the appropriate thing to do. They are actually dangerous -- they've committed violent acts against innocent people -- and need to be arrested when they make threats.

I assume you would do the same with antifa?

 

[neroden]

Don’t play with margin. Buying shares on margin doesn’t even support the stock since you would have to sell in the short term. It’s gambling. Margined TSLA traders are easy pickins for the market makers too

Especially avoid margin if you're highly concentrated.

If, for example, you have a huge pile of easily marginable highly secure government bonds which you plan to never sell (maybe 30-year munis or something), borrowing against those to buy TSLA isn't totally crazy. I wouldn't do it, but it's not crazy. Even if the brokerage suddenly raises the margin requirement on TSLA to 100% and the TSLA stock price drops by 50%, you can set yourself up to have enough equity to ride it out.

Suppose you have $1 million in government bonds, and they have a margin requirement of 50%. If you then buy $250,000 of TSLA with that money, you'll be paying margin interest, but your chances of being margin called are very, very low no matter what happens to TSLA; you'd have to have the value of the government bonds crash simultaneously with having the value of TSLA crash.

The problem comes when you use margin on TSLA, or something correlated with TSLA, to buy TSLA. Then when the stock price goes down, your collateral drops meaning that your allowable loan size drops, and the margin requirements typically go up simultaneously, meaning your allowable loan size drops.

You then have a problem, like the people who bought TSLA on margin from TSLA and got shaken out by the recent bear raid.

 

[neroden]

I assume you would do the same with antifa?

With *Black Blocs*, I would. (BTW, reporting violent, abusive activity also frequently exposes police agent provacateurs.)

But the anti-fascists for the most part simply have not done the same sort of thing as the alt-right. Most anti-fascists have been proper self-defense groups.

Go look up the *numerous* death threats and "SWATting" cases related to Gamergate alone, committed by the "alt-right".

 

[neroden]

I will take the risk that I won't be too popular here with my opinion but... If you want to invest all your money, diversify.

Disagree

Greed and FOMO are never good advisers.

Agree

You might end up earning a lot of money, but nobody sees into the future and nobody really knows what will happen next.

Disagree

There are a lot of very experienced long time investors here, most of them are very bullish on Tesla. Let's see what they say about your position.

As long as he's not using margin and has a future earned income coming which will cover his college debts... seems like a reasonable investment to me.

My Mom still remembers the friends who pooled all their money to put into G D Searle, the only manufacturer of birth control pills, when the first birth control pill came on the market in 1960. The damn broker claimed it was a risky stock and talked them into diversifying which was a humungous mistake. When you *know* the future of a product and one company is going to make a bonanza on it for at least 5 years, you bet big on the winner. It doesn't happen often.

 

[neroden]

Good plan!
I've also been really tempted to sell everything else I have (some etfs and stock) and go all in on TSLA.. but haven't yet been able to make myself do it. Currently about 50% of my portfolio is TSLA, wont need the money for 10 years or longer.

I'm less than 50% in TSLA, and that's my limit, but *that's because I do need money in the near term*; I live off my investments. I'd invest more if I had another income.

 

[Pezpunk]

I assume you would do the same with antifa?

antifa are merely people who oppose fascism. the fact that conservatives ache so badly to demonize them speaks VOLUMES about where the right is at today.

 

[neroden]

There's going to be an ~18 month period of transition where those in power shift their money from financing oil to financing renewables and we're certainly within sight of that period. The oil markets are flashing indicators of peak finance approaching.

Good phrase! "Peak finance"

I have been trying for years to figure out when "peak oil finance" will happen. It is perplexing to me because oil discoveries flatlined back in 2008 -- money spent on oil exploration has been a net loss since then. And yet the money KEEPS FLOWING. I don't understand the psychology of the oil financiers, and I don't know how to tell when they're actually going to stop throwing their money down holes in the ground. (If you have further thoughts on this please go over to the "Shorting Oil" thread!)

US oil production is so high that we can take up almost any slack until global demand peaks in 2023/24/25. Half the US fracking industry is teetering close to bankruptcy if there's any significant stretch of low pricing. Saudi Arabia is having a tough time selling bonds. China has bought up most distressed assets(Venezuela, Africa, etc).

It's much more difficult to maintain wealth in the zero-marginal-cost reality of renewable and sustainable energy, but the pretty soon they'll need to give in and move from active sabotage to support. The shift will be quick and painful just like with coal, one day business as usual and the next they're all done.

All that to say......I think think Jan2021 $400 calls are cheap right now for those looking to gamble. I think the next big leg up will be similar in magnitude to 2013. Maybe it starts 6-16 months from now, maybe not.

 

[Spacemanspliff]

I’d assume they are loading fewer cars to China.

The average number of days loading for EU bound ships has bumped up slightly, where as the average for China has gone down significantly.

I know what Kirkhorn said but so far there is no evidence for that.

Also if anyone disagrees with this (@kuggerrand) go check the last carrier they just sent to China, .48 of a day, lowest carrier by far to date.

For China carriers:
1.12 avg days spent loading in Q1 vs 2.12 avg days spent loading in Q2.

 

[neroden]

To put it more succinctly: with margin, you pay interest. With calls, you pay theta. Either way, you pay for amplifying the motion of the stock, beyond taking on the risk of amplifying negative movements.

Good summary. The difference between interest and theta here is that interest compounds but allows you to keep the position option; theta doesn't compound but your position goes to zero at the end.

 

[Nocturnal]

It is starting to feel like Teslas are reaching critical mass in the public. I know the CA folks have seen that for a long time, but here in KC, which I think is a pretty average market for a suburb/city area they are becoming really pervasive. For the longest time there was only one at my kid's daycare, then I got mine, recently an S and another 3 are around.

removed OT food stuff

Good phrase! "Peak finance"

I have been trying for years to figure out when "peak oil finance" will happen. It is perplexing to me because oil discoveries flatlined back in 2008 -- money spent on oil exploration has been a net loss since then. And yet the money KEEPS FLOWING. I don't understand the psychology of the oil financiers, and I don't know how to tell when they're actually going to stop throwing their money down holes in the ground. (If you have further thoughts on this please go over to the "Shorting Oil" thread!)

Just because you have money doesn't mean you understand the idea of sunk costs. But just as likely it's because the executives in charge of those decisions don't give a crap about the long term. They just want to collect their yearly/quarterly bonus.

 

[neroden]

Also if anyone disagrees with this (@kuggerrand) go check the last carrier they just sent to China, .48 of a day, lowest carrier by far to date.

For China carriers:
1.12 avg days spent loading in Q1 vs 2.12 avg days spent loading in Q2.

I really do not see any evidence that "days spent loading" is an accurate correlate to "number of cars loaded". Prove me wrong. Isn't it possible that they got more efficient at loading cars?!?

 

[VValleyEV]

I keep reading in articles about Tesla, even the positive ones, that in spite of the good signs they have a long way to go because they are “not profitable”.

Isn’t this, at least for now, a conscious choice, to forgo short-term profits for flat-out growth? Even the big loss in Q1 is in large part due to costs of expansion of the M3 into Europe. They chose growth in spite of an expected short-term loss from inventory buildup and delivery logistics issues. Of course other factors made it worse - the late ramp-up to Raven and leaks about it tanking the 100D sales, for example.

If the margins on Teslas are truly so much better than those of ICE OEMs, and even better than the EVs manufactured by ICE OEMs, and EV sales are climbing while ICE are falling, and FSD is the icing on the cake (or maybe a new cake), why is there any question about profitability?

Maybe I am just a TMC cult fanatic investor, impervious to the “real” facts.

 

[mongo]

I really do not see any evidence that "days spent loading" is an accurate correlate to "number of cars loaded". Prove me wrong. Isn't it possible that they got more efficient at loading cars?!?

Yah, many potential factors.
It may be similar to aircraft, you don't take off till you have a landing slot. So the longer times may not have been due to loading, but rather port availability or weather en route (or getting the last cars from Fremont).

 

[BOBTHEJOCKEY]

That's just sad - hopefully they're borrowing for a Model 3 to get some "career" growth there.

As they say, "In a gold rush, sell shovels." I think Tesla has the nicest by a long shot, and it's still early. The surge to have clean energy and locomotion is still sinking in for many... might even take a few more floods for some. Fortunately, these people are the car drivers that make our 2X FSD safety goal for the "average driver" so easy to hit

Floods, hurricanes and wildfires don't matter to Evangelicals. They will change their attitude about Climate change when one of their heroes tells them to change like their pastor at their local church. If you can believe that Jonah lived in the belly of a wave for three days, and the mother of God was a virgin you are by definition not rational.

 

[dqd88]

Also if anyone disagrees with this (@kuggerrand) go check the last carrier they just sent to China, .48 of a day, lowest carrier by far to date.

For China carriers:
1.12 avg days spent loading in Q1 vs 2.12 avg days spent loading in Q2.

So what's your estimate for total Q2 deliveries?

 

[Nocturnal]

Good phrase! "Peak finance"

I have been trying for years to figure out when "peak oil finance" will happen. It is perplexing to me because oil discoveries flatlined back in 2008 -- money spent on oil exploration has been a net loss since then. And yet the money KEEPS FLOWING. I don't understand the psychology of the oil financiers, and I don't know how to tell when they're actually going to stop throwing their money down holes in the ground. (If you have further thoughts on this please go over to the "Shorting Oil" thread!)

Just because you have money doesn't mean you understand the idea of sunk costs. But just as likely it's because the executives in charge of those decisions don't give a crap about the long term. They just want to collect their yearly/quarterly bonus.

I keep reading in articles about Tesla, even the positive ones, that in spite of the good signs they have a long way to go because they are “not profitable”.

Isn’t this, at least for now, a conscious choice, to forgo short-term profits for flat-out growth? Even the big loss in Q1 is in large part due to costs of expansion of the M3 into Europe. They chose growth in spite of an expected short-term loss from inventory buildup and delivery logistics issues. Of course other factors made it worse - the late ramp-up to Raven and leaks about it tanking the 100D sales, for example.

If the margins on Teslas are truly so much better than those of ICE OEMs, and even better than the EVs manufactured by ICE OEMs, and EV sales are climbing while ICE are falling, and FSD is the icing on the cake (or maybe a new cake), why is there any question about profitability?

Maybe I am just a TMC cult fanatic investor, impervious to the “real” facts.

Yes it's a weird metric. When you are rolling out new products, new tech, new factories then profits don't matter as long as you have growing revenue and a clear path to profitability once you slow expansion.

Floods, hurricanes and wildfires don't matter to Evangelicals. They will change their attitude about Climate change when one of their heroes tells them to change like their pastor at their local church. If you can believe that Jonah lived in the belly of a wave for three days, and the mother of God was a virgin you are by definition not rational.

They have been told that since God gave us the earth then it is impossible to damage it. Literally insane. There is no room to disagree there. Objectively it is obviously possible to damage the environment.