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

[MFranc123]

Yeah, so I used the FINRA "Monthly Short Sale Transaction Files", which can be accessed at:

TRF Regulation SHO - 2019 | FINRA.org​

These are monthly releases on a 1 month delay - the September 2019 data is available, the October one not yet. The September short sales transaction log is a large 450 MB file:

http://regsho.finra.org/FNSQsh201909.txt.zip​

The 2018 September one I used for the figure above is:

http://regsho.finra.org/FNSQsh201809.txt.zip​

If anyone has a cool idea for analysis to do with this data you can ping me (I think just quoting this message should send me a notification).
We can match this up with Quantopian's free minutely data and maybe make some cool charts.

 

[Hock1]

It is true that trading is very fragmented into secondary markets - but note that this is primarily working against short sellers: they'll statistically have fewer chances to hit buyers in the pools they might be using, and even if their trades are aggregated and effectively anonymized, their broker/market-maker is required to mark the transaction as a short sale and there's few incentives for market makers to break regulations for short sellers, only for the very sparsely reported, low value short sales data is distorted even more ... So the fragmented dark pools make it more likely that a short sale ends up being posted to the main NASDAQ trading book. They don't really care, because they are never identified individually.

Shorts are perfectly fine with the current regulations, which doesn't require the identification of short sellers and where the 'uptick rule' was eliminated. In Europe short selling hedge funds were up in arms (and lost against the regulator) when they were required to report short interest above ~0.2% levels a couple of years ago.

Yes, short sellers are the bogeyman in Tesla circles, and it's partly justified due the Chanos/Cramer style negative news fabrication machine - but in the general scheme of things they are maybe 10%-20% of the daily transaction flow - the other 80%-90% of Wall Street generally watches over their own interests and has plenty of influence at the SEC and FINRA too.

I think you underestimate the effect of being able to short on DOWNticks. There was a reason why, in 1938, the SEC instituted the uptick rule. It was to "protect investors against manipulative short-selling". Deja vu all over again.

 

[NakedLong]

Almost a mea culpa by Babycharts. First 30 mins or so is worth listening before it goes down into RussiaGate conspiracy theory land

How is this worth listening to? These guys are delusional - I'd rather get financial advice from a toaster.

 

[Fact Checking]

I think you underestimate the effect of being able to short on DOWNticks. There was a reason why, in 1938, the SEC instituted the uptick rule. It was to "protect investors against manipulative short-selling". Deja vu all over again.

I agree, but there's a similar ability of longs to mark up the price: buy shares visibly to pump the price, then quietly sell those shares by the end of the day. The primary reason why shorts are able to manipulate TSLA more is because apparently there's more of them willing to use trading to mark down the price. The clock is always ticking against shorts, so they have more incentives to create volatility than longs. But the trading tools are basically equivalent: a shorts are able to mark down the price in a similar fashion as longs are able to mark up the price.

I.e. the 'uptick rule' created a disadvantage for the shorts, and its removal effectively put them on equal footing with longs. Which I agree is bad policy, but it's not the end of the world, and if longs have the conviction about a price level there's very little the shorts can do in the long run - with or without the uptick rule.

But my primary argument in this thread was the truth of the 10-20% of short seller initiated daily volume that I calculated based on the transaction data.

 

[Artful Dodger]

Nio's CFO just resigned for personal reasons, effective in two days. They're releasing earnings next week..

NIO Inc. (NIO) Reports Resignation of CFO Louis T. Hsieh

Pre-market 1.37 −0.14 (-9.27%)

 

[KarenRei]

How is this worth listening to? These guys are delusional - I'd rather get financial advice from a toaster.

 

[Fact Checking]

Just a friendly reminder to fellow Europeans: due to yesterday's switching on of daylight saving time in most of Europe, NASDAQ opening hours moved up one hour earlier when measured in local time.

I.e. NASDAQ trading will open in ~45 minutes from now.

TSLA pre-market volume up to 101k shares traded so far - which is brisker trading than the average, but not as heavy as on Thursday or on Friday.

Macros are green.

 

[Hock1]

I agree, but there's a similar ability of longs to mark up the price: buy shares visibly to pump the price, then quietly sell those shares by the end of the day. The primary reason why shorts are able to manipulate TSLA more is because apparently there's more of them willing to use trading to mark down the price. The clock is always ticking against shorts, so they have more incentives to create volatility than longs. But the trading tools are basically equivalent: a shorts are able to mark down the price in a similar fashion as longs are able to mark up the price.

I.e. the 'uptick rule' created a disadvantage for the shorts, and its removal effectively put them on equal footing with longs. Which I agree is bad policy, but it's not the end of the world, and if longs have the conviction about a price level there's very little the shorts can do in the long run - with or without the uptick rule
.

OK. Apparently, we have differing experience and views.

 

[jbcarioca]

Yes I am aware this is accounted as financing cashflow. My point was that if you want a true understanding of the cash generating ability of Tesla’s business, it’s reasonable to also look at sales by direct leasing, which show up in financing cashflow rather than operating cashflow.

Not only is that reasonable but in credit risk analysis of auto manufacturers/distributors/dealers that have lease assets on their books the normal process is to extract the components of leases so as to show vehicle sales, interest margin and residual value estimated risk. That was the norm during the decade when I was responsible fir such analysis. FASB revisions during the last years have made GAAP reporting of lease originations much less realistic than they were before. Under current rules there remains a fairly easy way to extract these through the multiple financing components. To calculate this appropriately IMHO one needs to reconcile the following: leased vehicle transactions, warehousing credit lines, securitization transactions. Given that most of this data will be readily available in quarterly reports it is quite feasible to establish a close analogue for financial results including margins. Such will not be exact because there will not be an exact ASP reconciliation.

My preliminary Q3 guess is that earnings would rise by >$140 million were leases to have been treated as cash sales. Obviously the 10Q detail is needed to be accurate.

A couple people have posted that Tesla has been unable to obtain third party lease offerings. That charge is untrue. They have had several offers for the US. In the EU several countries have active and thriving third party lease offering that are outright sales from Tesla to the lessors. The US offers were apparently considered to be unattractive. The effects of direct distribution play an influential role in this.

In the current environment the money factor for US Tesla leases is higher than it might be by a third party, mitigated to some extent because the warehousing terms have been improving, further mitigated because residual values have not been producing losses on lease termination. Third parties in the US have been insisting on Tesla assuming residual value risk, minimal though it has been. Due to that fact there ceases to be any financial advantage in originating through a third party.

in my opinion we will see some significant developments in lease practices for both automotive and solar in North America. For anybody who might tend to believe in my forecast on this issue might recall that last year I really thought this would happen.

I was wrong, with the residual value issue as the first issue, disposal of vehicles as an equally material issue and credit policy as a third issue, but much less material. A year ago there was not a Model 3 track record and that changes the outlook. Unless the residual value issue can be removed entirely from TSLA they will still be forced to treat leases as conditional sales. We would do well to understand just how important leased vehicle disposal on termination is to Tesla.

 

[KarenRei]

Just a friendly reminder to fellow Europeans: due to yesterday's switching on of daylight saving time in most of Europe, NASDAQ opening hours moved up one hour earlier when measured in local time.

I.e. NASDAQ trading will open in ~45 minutes from now.

TSLA pre-market volume up to 101k shares traded so far - which is brisker trading than the average, but not as heavy as on Thursday or on Friday.

Macros are green.

I was confused, because 45 minutes from now is when it normally opens for me.

Then I re-read your post and realized you weren't talking about US daylight savings time, but European. Yes, most of Europe uses daylight savings time... but not all, and I'm in the "not all" section

It'd be totally pointless here. We lose 6 1/2 minutes of daylight per day this time of year. The "gain" would be gone after just nine days.

 

[Fact Checking]

Ok. Apparently, we are talking past each other. We have differing views and experience.

I'm open to being convinced otherwise: in what way is a short-seller in advantage over a long-buyer, without the uptick rule in place?

Both are able to mark up or down the price in a similar fashion via LIMIT or MARKET orders, and both have to provide similar trading power to back their transactions:

• a long has to post 100% of the cash of the shares purchased (either via real cash or via margin borrowing),
• a short has to post 102-105% of the mark-to-market value of the shares sold, in cash (either via real cash or via margin borrowing) - and also has to secure the borrowed shares within ~5 trading days (which I agree is too long and too lax).

I agree with you that adding the uptick rule (which would forbid it for shorts to actively bid down the price) would be good policy - but I don't see it giving them any tools that longs couldn't be using.

 

[Artful Dodger]

I agree, but there's a similar ability of longs to mark up the price

You group 'longs' together into one homogeneous group, as if they all share the same benefits from any individual's action.

The difference between Shorts and Longs is that ALL Shorts benefits when the price goes down, while only Longs on the sideline benefit when the price goes down.

C.F. why individual investors don't like to catch a falling knife. The proportion of Longs that stay out of an equitity due to fear is asymetrical vs the Shorts that pile in.

 

[Fact Checking]

I was confused, because 45 minutes from now is when it normally opens for me.

Then I re-read your post and realized you weren't talking about US daylight savings time, but European. Not all - most, but not all - of Europe uses daylight savings time

See those little red regions, around Eastern Europe? Those millions of people do think of themselves as Europeans, not Asians.

The boundary is somewhere on the line of the Ural mountains - deep inside the "red" region in Russia where clocks don't change.

Which is why I said "most of Europe" - the continent.

 

[electracity]

How is this worth listening to? These guys are delusional - I'd rather get financial advice from a toaster.

IMO the major take away is that these two have given up on insolvency and are focused on profitability. Which seems problematic in that I doubt most larger longs are particularly interest in steady profitability at this time.

 

[KarenRei]

See those little red regions, around Eastern Europe? Those millions of people do think of themselves as Europeans, not Asians.

The boundary is somewhere on the line of the Ural mountains - deep inside the "red" region in Russia where clocks don't change.

Which is why I said "most of Europe" - the continent.

Note that red island east of Greenland? That's where I am So when you started a post addressed to "fellow Europeans"...

(I know you slipped a "most" in there, but only in one place, and I missed it. I only ever pay attention to DST in regards to the US, because we don't do it here, and EU DST doesn't affect my interaction with Tesla)

 

[Artful Dodger]

I created this custom candlestick chart to illustrate where we are, and were wer'e going. $347 is next resistance IMHO. Not advice (no matter; as you know, I'm HODLing).

P.S. NASDAQ-100 is up pre-market (as of 09:00:23 ET)

8,076.62
+40.87
+0.51%​

EDIT: TSLA climbing in the Pre-market:

$329.00
+0.87
+0.26%
*Real-Time - data as of 07:23 10/28/2019​

 

[Fact Checking]

You group 'longs' together into one homogeneous group, as if they all share the same benefits from any individual's action.

The difference between Shorts and Longs is that ALL Shorts benefits when the price goes down, while only Longs on the sideline benefit when the price goes down.

C.F. why individual investors don't like to catch a falling knife. The proportion of Longs that stay out of an equitity due to fear is asymetrical vs the Shorts that pile in.

Agreed mostly, but my point was that the trading tools of longs and shorts are pretty similar even without the uptick rule, and if longs perceive a shift in the fundamentals and a mis-pricing in adequate numbers there's very little the shorts can do to counter that.

The legendary @luvb2b in the finance thread has been making this point since last year: stop obsessing about the shorts, that problem will self-eliminate once Tesla starts executing robustly.

Secondly, my primary point was that shorts are apparently only 10-20% of the daily trading volume.

 

[mongo]

How is this worth listening to? These guys are delusional - I'd rather get financial advice from a toaster.

A toaster is quite an accurate representation of TSLA. Someone pushes it down, but then it pops back up, goes higher and then stabilizes. Rarely, it pops clear out of the toaster and stays there.

It'd be totally pointless here. We lose 6 1/2 minutes of daylight per day this time of year. The "gain" would be gone after just nine days.

Yes, you would have the same light level after 9 days, but shifting clock back an hour gets you dawn one hour earlier (chronologically) every day it is in effect.
Accelerated change with made up sunrise:
Original DST
8:00 7:00
8:15 7:15
8:30 7:30
8:45 7:45
9:00 8:00

 

[Singuy]

IMO the major take away is that these two have given up on insolvency and are focused on profitability. Which seems problematic in that I doubt most larger longs are particularly interest in steady profitability at this time.

Giving up insolvency is giving up the short thesis. If Tesla is never going under than what else is there? Time is the enemy to any bear for a tech company. Especially if the TAM of said company is in the trillions.

 

[Fact Checking]

Pre-market TSLA has briefly spiked over Friday's closing price of $328.13, on increasing volume. Edit: has just touched $329.

NASDAQ index futures are looking good and are driving a good chunk of the pre-market trading I think.