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

[Bet TSLA]

Here’s a long but worthwhile discussion about the many things Tesla is doing right when it comes to building cars, and some of the things it does poorly. Some interesting insights about the “competition”, battery chemistry, hybrid battery/ultracapacitor systems, , and who and what to be looking out for.

Robin

Didn't seem to have much new. Now that I've listened to him a few times, Munro strikes me as well informed but not too bright. He's got a bunch of stuff he believes and can't see outside of that. So I can see how he ended up being a take apart and criticize guy rather than somebody who ever created anything new.

Not that he doesn't have valuable stuff to say, but I think it should be taken in context.

 

[Chunky Jr.]

Of note, Etrade raised their margin requirements on tsla from 45% to 55% and just called me to make sure I'm aware, even though I'm in little danger

Dumb question - is that a bull or bear signal? I'm not familiar with buying things on margin

 

[Chunky Jr.]

I wonder if anyone at the ICE companies have similar feelings to what people at Kodak must have felt when digital cameras first started to appear on the scene. At first they seem underpowered and a passing fad. But technology moves quickly and next thing you know the party's over.

 

[SpaceCash]

Dumb question - is that a bull or bear signal? I'm not familiar with buying things on margin

It's an ambiguous signal. In a straightforward and honest world it might indicate they are afraid TSLA is going to drop in value soon, and want their clients to derisk. In the actual world we live in, it could indicate that there are few shares available and they have some incentive to get their clients to relinquish some shares.

The phone call was interesting because the guy said he was reaching out because I'd been flagged for a potentially large margin call, but in his own review of my account he admitted he didn't see what the big deal was. I could go into more detail but don't want to reveal my sum holdings at this time.

 

[Artful Dodger]

But that's not 'naked short selling' - it's part of the defined mechanism to short a stock. It only becomes 'naked' if there's a "failure to deliver" - which is rare according to Ihor (who worked at the trading desk of a broker-dealer) and according to market statistics.

Yeah, that's where you're wrong. It's naked short selling ANYTIME the borrow is not located before the short sale occurs:

"Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale."​

The short selling exception is exploited by market makers who know they will either:

1. buy back at a artificially lower price within 3 days (meaning they NEVER have to locate regardless of volume), or
2. they blanket ASSUME they will be able to locate shares without regard to market conditions so again excuse themselves from the problem of locating shares

Ask yourself why bear raids (sudden slumps in the SP) almost never last longer than 3 days. It's because market makers have to either cover or report unlocated shares. They choose to cover since they've already driven the SP down and can take tangible profits.

As for why a market maker would do this, I am frankly surprised you don't know: GREED. As I've said above, the market maker KNOWS they can short and then buy back at a much lower price. There is almost no risk to them in doing this, and it is guaranteed free money. The SEC cleared the way for market makers to do this when they cancelled the uptick rule on July 6, 2007 with Rule 201 Regulation SHO. This change in policy did not occur in a vacuum. Let's see which market makers lobbied for the new policy.

Yet you appear to want to give market makers the benefit of the doubt. In fact, the reporting rules for short sales now are configured so that it's nearly impossible to find out how much naked short selling occurs by market makers (c.f: Ihor's dilemma).

Allowing naked shorting by market makers is like turning the lights off at night in the prison, but not locking the cages.

 

[Artful Dodger]

Pardon, too late to edit my comment, but link fixed below to my May 25, 2019 analysis.

I wrote a full take-down of Ihor's position regarding naked shorting by market makers in this comment here on May 25, 2019. At that time I wrote that Ihor's argument:

• seeks to trivialize the issue by introducing 3 strawmen
  
• drags in Red/Blue dogwhistle politics to polarize opinions into "us/them"
  
• ignores actual issue, which is naked shorting by Market Makers

 

[30seconds]

https://www.businessinsider.com/tesla -model- x- outselling -jaguar-i-pace-audi-e-tron-2019- 8

First Bloomberg, now BI .... Herd mentality Deja Vu' ..All over again

Come on, some dude named Wolfgang on the Internet says that the e-tron is winning, that’s its game over, that they already have 50% of Tesla volume.

I love how all these morons can continue to be wrong for so many years running. It really is stupendous.

 

[mrdoubleb]

A little off topic, but goes into market perception...

I find it odd, that the IIHS has elected to crash test the e-tron only a few (3?) months after its introduction despite the low (2500) sales figures, yet it has not tested the Model X in 4 years with 130k+ being on the road globally. And they are only about to test the Model 3, a car with about 300k units on the road.

So now Audi can claim first EV that is a "Top Safety Pick".

 

[kengchang]

A little off topic, but goes into market perception...

I find it odd, that the IIHS has elected to crash test the e-tron only a few (3?) months after its introduction despite the low (2500) sales figures, yet it has not tested the Model X in 4 years with 130k+ being on the road globally. And they are only about to test the Model 3, a car with about 300k units on the road.

So now Audi can claim first EV that is a "Top Safety Pick".

IIHS will test sooner if manufacturers provides fund to acquire the vehicle. Nothing odd, Model X has never been tested by IIHS

 

[BioSehnsucht]

A little off topic, but goes into market perception...

I find it odd, that the IIHS has elected to crash test the e-tron only a few (3?) months after its introduction despite the low (2500) sales figures, yet it has not tested the Model X in 4 years with 130k+ being on the road globally. And they are only about to test the Model 3, a car with about 300k units on the road.

So now Audi can claim first EV that is a "Top Safety Pick".

I don't expect IIHS to give Tesla any top safety picks. They'll complain about the lack of magic headlights or something.

 

[RobStark]

Tesla has managed to grow their market without paid advertising. Not sure why you think that suddenly needs to change now that word of mouth and social media exposure keep increasing.

Because sales of Gen II vehicles keeps going down.

Because price cuts or effective prices by bundling more features for the same price keep happening to sell the number of Model 3s being produced.

Because gross margins are not 25% plus.

Some small advertising budget is surely more cost effective than some portion of these price cuts. The position to not do some paid advertising seems ideological not rational. As an example the recent $35k price cuts in China to move pre-Raven Gen II vehicles that pissed off current owners so much they protested in front of Tesla stores because it hurt their resale values. Surely targeted web ads promoting $10k price cut would have been more effective without pissing off current customers.

Too many potential customers think that Teslas are $100k plus. Too many potential customers think Teslas are $70k plus. Too many potential customers think Teslas are more expensive to own than a comparable ICEv. Too many potential customers think Tesla are less safe than ICE cars or are more fire prone. Too many potential Tesla customers think ICE powertrains will last longer than Tesla powertrains. Too many potential customers think Cadillac SuperCruise is superior to AutoPilot. Too many potential Tesla customers think the reason Tesla doesn't do advertising is because they can't afford it and are about to go bankrupt; for these customers Tesla tv commercials baptize Tesla as a real car company no longer "fledgling." A company that can be counted on to back their warranty for the next 8 years and continue to offer parts for repair more many decades to come.

 

[ggr]

It's safe... although I get the irony.

Not the point. Bloomberg gets revenue from the click. Whether you want to support the headline or not matters. That's why we want something that tells us to (or not to) click through.

 

[wipster]

Not the point. Bloomberg gets revenue from the click. Whether you want to support the headline or not matters. That's why we want something that tells us to (or not to) click through.

Here I thought it was about the robot...

 

[RobStark]

I don't expect IIHS to give Tesla any top safety picks. They'll complain about the lack of magic headlights or something.

Articulating LED headlights do in fact exist and are based on science/engineering not magic.

And they do reduce accidents at night.

 

[MC3OZ]

Because sales of Gen II vehicles keeps going down.

Because price cuts or effective prices by bundling more features for the same price keep happening to sell the number of Model 3s being produced.

Because gross margins are not 25% plus.

Some small advertising budget is surely more cost effective than some portion of these price cuts. The position to not do some paid advertising seems ideological not rational. As an example the recent $35k price cuts in China to move pre-Raven Gen II vehicles that pissed off current owners so much they protested in front of Tesla stores because it hurt their resale values. Surely targeted web ads promoting $10k price cut would have been more effective without pissing off current customers.

Too many potential customers think that Teslas are $100k plus. Too many potential customers think Teslas are $70k plus. Too many potential customers think Teslas are more expensive to own than a comparable ICEv. Too many potential customers think Tesla are less safe than ICE cars or are more fire prone. Too many potential Tesla customers think ICE powertrains will last longer than Tesla powertrains. Too many potential customers think Cadillac SuperCruise is superior to AutoPilot. Too many potential Tesla customers think the reason Tesla doesn't do advertising is because they can't afford it and are about to go bankrupt; for these customers Tesla tv commercials baptize Tesla as a real car company no longer "fledgling." A company that can be counted on to back their warranty for the next 8 years and continue to offer parts for repair more many decades to come.

Fair points, there are a lot of misconceptions to counter...

I think it is broader than "advertising", so I prefer the term "marketing" a lot of what needs to be done is simply communication and "content creation". And the "content creation" part ends up costing next to nothing... it is simply web videos, web sites and blog posts...

All "advertising" and "marketing" need to do is point people to the relevant websites, and/or get them to do test drives.

However, it has never been proven that advertising would have prevented the Model S/X price drops ... we will never know..
It is ancient history now, prices are in the right ballpark and I only expect small regular adjustments from here..
I expect Model S/X to improve rather than drop further in price...

I think Tesla is striving hard for profitability and the focus is on cost control at present, that is stopping them doing a few things they should ideally be doing and "marketing" is one of them, I hope that changes... regular profitability will change it..

 

[dqd88]

The economic cycle is not dead, but Catherine Wood of ARK Invest makes perfect sense explaining why conditions are ripe for a deflationary boom, lifting the top of the cycle to a new position.

The key ingredient, my interpretation, is a technology that is highly desirable which reduces the cost of energy. (lol, know any?) We saw that happen in 1900 with deployment of electricity grids.

Today we have wind, solar, batteries, EVs. Lazard latest figures put wind and solar at half the cost of fossils and one third the cost of nuclear. We all know that EVs halve the cost of transportation. The conditions are uniquely deflationary, meaning people can buy more with less, which stimulates the economy a little more, all while putting downward pressure on the oil price.

Lots of people on YouTube are saying it’s different this time, but few have worked out why. ARK is the exception.

Inverted Yield Curves Are Signaling a Deflationary Boom

I thought I was understanding her, but then at the end:

'Given the context of the past 100 years, economists generally do not believe that “this time is different,” or that an inverted yield curve actually is good news. Yet, in the context of disruptive innovation, this time is not different.'​

This is confusing. Economist don't believe this time is different, yet "this time is not different"? Odd phrasing, almost sounds like a mistype. Anywho, I think she may be right about the deflationary boom.

EDIT: ok, after re-reading a few times, I think I get it (yeah I'm a little slow). I think she is saying that Economists don't believe this time is different than the past inverted yield curves (because they aren't looking far back enough and seeing the macro trend). And well, this time isn't different when looked at from a longer (macro) perspective.
In other words - this time is different than what economists think, but it's not different from a wider perspective (one that looks at the turn of last century).

 

[Sean Wagner]

...

And just about noone knows about the new, improved range of S & Xs.

 

[j6Lpi429@3j]

Articulating LED headlights do in fact exist and are based on science/engineering not magic.

And they do reduce accidents at night.

they have been out for a while. Audi has em. TBH I was surprised my 2015 model S didn't.

 

[Fact Checking]

It's naked short selling ANYTIME the borrow is not located before the short sale occurs:

"Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale."​

That's wrong, your own quoted source disagrees with your interpretation (see my highlight): the 3 days to locate shares is granted and it's not naked short selling when the broker is sure shares can be located - which is true for large cap stocks.

I.e. it only becomes naked short selling if the broker runs out of the 3 days window to locate borrowable shares (which is proof that the assumption was wrong that there would be borrowable shares) - which as Ihor said almost never happens, because shares are either readily located if it's a long term short position, or the position is closed out within 3 days.

Ask yourself why bear raids (sudden slumps in the SP) almost never last longer than 3 days. It's because market makers have to either cover or report unlocated shares. They choose to cover since they've already driven the SP down and can take tangible profits.

This is a naive misunderstanding of how the market works. Let's assume a big bear raid requires 10 million TSLA shares and results in an average price drop of $20 - profits of around $200m.

Let"s assume the cost to borrow TSLA is around 2% (in reality it's much cheaper), which for 10 million borrowed TSLA shares at an SP of $230 is a daily borrowing cost of around $0.1m.

Three days of borrowing cost is around $0.3m - which is mouse nuts compared to the profit of $200m.

So what you are complaining about is at worst a difference between whether whoever executes the bear raid earns $200m or $199.7m...

If someone has the market power to reliably move the price of a security, they are neither enabled nor inconvenienced by whether they have to pay the borrowing cost.

The "great Tesla naked shorting conspiracy" makes no economic sense whatsoever, even if it's fully true.

BTW., the reason why Tesla bear raids are often short in duration is relatively simple: most of them are based on lies or exaggeration with a short half life measured in hours, or at worst days.

 

[LN1_Casey]

they have been out for a while. Audi has em. TBH I was surprised my 2015 model S didn't.

I thought Tesla had these features? I remember stalking their site a bit back and reading about it, but I've since not seen mention for a while.