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

[Stretch2727]

The caveat below IMHO is the repetitive phrase, "and you think"...

Agree, although Fact Checking lays out a viable strategy this is a lot of work and you could miss some upside. Also, as Tesla matures the option prices will drop along with volatility and could be difficult to get sufficient income from the premiums. One of those benefits of being in the S & P 500 that has been discussed here. Tesla could start paying dividends buy I doubt it would be much.

My retirement funds are 30% in Tesla. My hope is with some minor trimming of my TSLA portfolio I can be comfortable living off the balance. Or maybe I don't need to trim to live off the balance if the rest does well. I am 3-8 years from retirement based on a number of things that are not all investment related.

Betting on one company to get you to retirement has enough risks depending on the percentage you bet.

Living off of one company in retirement is a whole different level of risk I would never take if you want to stay retired!

 

[bhtooefr]

Musk setting the record straight on the emerald mine FUD isn't why he should stop tweeting, even if it has an effect on the SP. Honestly, I'm actually glad he's debunked that one.

Musk making enemies of urbanists by crapping all over mass transit and the science of induced demand is why he should stop tweeting, as this directly goes against the mission of sustainable transport, even if it doesn't have an effect on the SP.

There are areas where induced demand has less effect, true - remote rural areas. But induced demand even happens in closer-in rural areas - especially as road infrastructure is built out towards them, they build up as exurbs of a major city, and then they get the city's traffic problems. The faster transport is, the more an urban area can sprawl, further reducing sustainability through increasing transportation energy requirements (and making it harder to get around the area for those who can't afford the fast transportation technology).

Basically, while he debunked FUD about his background, there's been a lot of FUD going around that Tesla is part of the problem because they're still making cars. While replacing ICE cars with EVs for those that are unable to eliminate car usage does improve sustainability, we do need sustainable non-car transport, and Musk's stance isn't helping. (It's still FUD even if it's true, though, because... let's face it, while Volkswagen and Toyota do make buses for some markets including their home markets, do you see either of them truly promoting mass transit? Basically, Tesla beating the ICE incumbents leaves us better off than not beating them.)

 

[CorneliusXX]

Musk setting the record straight on the emerald mine FUD isn't why he should stop tweeting, even if it has an effect on the SP. Honestly, I'm actually glad he's debunked that one.

Musk making enemies of urbanists by crapping all over mass transit and the science of induced demand is why he should stop tweeting, as this directly goes against the mission of sustainable transport, even if it doesn't have an effect on the SP.

There are areas where induced demand has less effect, true - remote rural areas. But induced demand even happens in closer-in rural areas - especially as road infrastructure is built out towards them, they build up as exurbs of a major city, and then they get the city's traffic problems. The faster transport is, the more an urban area can sprawl, further reducing sustainability through increasing transportation energy requirements (and making it harder to get around the area for those who can't afford the fast transportation technology).

Basically, while he debunked FUD about his background, there's been a lot of FUD going around that Tesla is part of the problem because they're still making cars. While replacing ICE cars with EVs for those that are unable to eliminate car usage does improve sustainability, we do need sustainable non-car transport, and Musk's stance isn't helping. (It's still FUD even if it's true, though, because... let's face it, while Volkswagen and Toyota do make buses for some markets including their home markets, do you see either of them truly promoting mass transit? Basically, Tesla beating the ICE incumbents leaves us better off than not beating them.)

The argument being made is not that induced demand does not exist, it's that it can be overcome when a 3rd dimension is added to potential transportation options.

If you take the idea back to its basic proposition, more people will travel the easier it is to travel. Which is true to a point but is non-linear. To take the idea to it's extreme - if teleportation were real and free you wouldn't spend 24 hours a day teleporting around the world just because you could, but you would travel far more than you do now.

Historically, increasing road capacity has gone some way towards fulfilling inherent demand for travel but it has not been attempted to provide so many transportation options that all your travel wants are met. Which is orders of magnitude more than currently available.

The assumption for many levels of tunnels is that with near infinite levels of tunnels the supply of transportation will, for the first time in history, meet the inherent demand for travel.

 

[bhtooefr]

The problem is that that simply isn't sustainable, especially when we already have ways to get around that don't require point-to-point tunnels for everything. (Some level of tunneling absolutely helps, but the "just build tunnels underneath tunnels until your traffic problems are solved" method ain't it.)

 

[gerebgraus]

Nope, seat are made locally. I saw a picture a while ago where the seat manufacturer celebrated the start of the production.

Seat manufacturerer?! Tesla makes its own seats.

 

[RubberToe]

Two hours till Midnight 12-30-19 in China. I wonder who will be getting the first Model 3 made in China? Should be hearing about the handover well before end of day today here in the U.S. if not in the next couple hours

Does anyone know if there is a website that tracks daily auto registrations there like they have for Norway?

Tesla Registration Stats

RT

 

[CorneliusXX]

The problem is that that simply isn't sustainable, especially when we already have ways to get around that don't require point-to-point tunnels for everything. (Some level of tunneling absolutely helps, but the "just build tunnels underneath tunnels until your traffic problems are solved" method ain't it.)

None of us know that as it's never been attempted in earnest because the cost of tunneling has been prohibitively expensive.

If Elon can genuinely reduce the costs as much as hoped we should see this experiment play out.

Why don't you think it's sustainable?

 

[gerebgraus]

They seemed to have been on track to get at least 10,000 packs to Shanghai by now. That means only 1000 a week to build about 20,000 by end of Q1. LG and CATL should be delivering some limited cells at some point in Q1. The pack assembly building is t done yet, but appears a couple to a few weeks from the exterior being complete. good point though, hard for Shanghai to build more then 20,000 without local pack supplies.

How do you know that they have been or track to 10,000 packs to Shanghai?

 

[Unpilot]

Elon saying to long-term investors/employees:
HOLD YOUR SHARES, this stock will be much higher


Happy New Year everyone! See you next year

Here is the relevant part:

“Ultimately, I think Tesla will be worth considerably more than it is today, but there is a constant debate as to whether that means the value should be higher now or later.”

 

[CorneliusXX]

Here is the relevant part:

“Ultimately, I think Tesla will be worth considerably more than it is today, but there is a constant debate as to whether that means the value should be higher now or later.”

FWIW, I vote for now.

Next week is ok too.

 

[Unpilot]

Printing it right now. Thanks for your efforts! I will have other income too. And maybe Tesla will even pay some dividends some day.

Person A Has 1000 shares. The stock does a 4/1 split. Person A now has 4000 shares. SP rises back to original Share price (that exponential growth thing) Person A sells 10 shares or so every few weeks and lives a happy life.

Stock splits again....lather rinse repeat.

I am person A and that is my plan.

 

[bhtooefr]

None of us know that as it's never been attempted in earnest because the cost of tunneling has been prohibitively expensive.

If Elon can genuinely reduce the costs as much as hoped we should see this experiment play out.

Why don't you think it's sustainable?

You start running into geological issues (each tunnel risks weakening the ground above it, and as you stack tunnels...), as well as issues with tunnel elevators and the time they take to get cars to tunnel level (especially as you go further and further down). Additionally, if you're building enough cars for everyone (even if you use them all as robotaxis in a sharing system), that'll be significantly higher environmental impact - and higher usage energy, which means more wear on batteries and more solar panels needed and subsequently higher impact there - than electric trains or electric bicycles. Oh, and there's still all of the space concerns that we have today with parking all of these cars (and further energy usage if you instead have them drive somewhere else to park when they're done).

 

[Unpilot]

Plus I kind of like the sun....tunnels don't have access to that.

 

[jerry33]

Plus I kind of like the sun....tunnels don't have access to that.

Just think of all the skin cancer you're not getting.

 

[PeterJA]

A viable strategy for a conservative individual investor with a substantial Tesla stake and a desire to 'live off' the shares is IMO to always have both free cash besides having the majority invested in the stock, and decide situationally whether to write calls or puts:

• When the share price is rising and you think it will go up more in the short term, write a few (cash covered) puts but don't deplete cash:
  • best-case (TSLA goes up as you expected) you keep the premium and much of your portfolio goes up in value,
  • worst-case (TSLA goes down and your puts get exercised) you'll increase your portfolio size on a down-leg and keep the premium.
• When the share price is rising and you think it will go down a bit in the short term, write a few (shares covered) calls:
  • best-case (TSLA goes down a bit as you expected) you keep the premium,
  • worst-case (TSLA goes up against your expectations) you get exercised and get cash for a part of your portfolio (you keep the premium), which cash you can either store or use up to write puts (see above)
• When the share price is dropping and you think it will go down more in the short term, write a few (shared covered) calls:
  • best-case (TSLA goes down a bit more as you expected) you keep the premium,
  • worst-case (TSLA goes up against your expectations) you get exercised, you get cash for a bit of your portfolio but you keep the premium.
• When the share price is dropping and you think it will bounce, write (cash covered) puts up to your cash limit:
  • best-case (TSLA goes up as you expected) you keep the premium and the rest of your portfolio appreciates,
  • worst-case (TSLA goes down further than you expected) you get assigned shares and you max out your stake, but you keep the premium.

Also note that there's a few limits and special cases to observe:

• Don't go negative cash (margin) - if your cash dedicated for this position is gone your position is maxed out and you ride out the bottom. Once you think there's a temporary top you can start writing calls again, maybe even re-balance into cash a bit.
  
• Don't divest shares below a 'core shares' percentage - which, if you are otherwise a long term Tesla investor, should be at least ~50% of your assets. Even if you timed everything wrong you'd still ride out the past 6 months with 50% of your assets in TSLA, and you'd also earn quite a bit of extra cash writing puts all the way up.
• Never write naked options. Always cover the worst-case with cash or shares.
  
• You can also, obviously, whenever you think the time is right, buy shares from cash at any moment you think is appropriate. Increasing your stake by buying shares is not a problem, but divesting shares should never be panic or price drop driven, it should be by writing calls.
• A special exception if you think there's a rock-bottom reached, then you can sell shares to buy straight call options and leverage up without the risk of margin.
• Obviously there's plenty of tail risks remaining: a recession might wreck havoc, and single-company investments are always risky: near really high price levels you could consider buying wealth insurance against black swan events, covering your position: for example the 2021 $250 puts are just around $15 right now - you only pay Theta in essence. Just 6 months ago these were going for $100 ... $200 puts go for half of that and $150 puts go for $4, and you could buy 200% of them to protect against a black swan event at $300 effective protection price. These kinds of per year wealth insurance costs would normally be much lower than option writing premiums earned.

Note how in every single case you get to keep the premium, even if you are wrong, and that none of the outcomes will reduce your stake below your limit or will deplete your cash below zero. So you can take advantage of big breakouts and big drops as well, in accordance with your bullish thesis, which hopefully you'll be able to subscribe to for yours.

"Being wrong" won't have a wealth decreasing effect if the stock otherwise goes broadly up according to your bullish thesis - the worst effect is that you might run out of cash to write puts against, or run out of non-core shares to write calls against. You can still always write the other type of options to recover your ability to swing-trade, and to earn premiums.

(I suspect this trading plan is similar to what the unmentionable Tesla investor who left this summer was doing in essence, with millions of dollars worth of TSLA position.)

Selling covered calls when you think the stock will go higher in the short term is a bad idea - selling calls is effectively a profit taking method.

Nevertheless, not advice.

Interesting, thanks. I believe I understand it except this part:

...$150 puts go for $4, and you could buy 200% of them to protect against a black swan event at $300 effective protection price.

How would this work if the black swan occurs? Sell your shares to exercise half your puts, then borrow shares to exercise the rest?

How does this strategy give "$300 effective protection price" if the stock goes to $200 and you can't exercise any puts?

 

[Silent Ludicrosy]

Traffic jams are economically unsustainable Traffic jams cost US $87 billion in lost productivity in 2018, and Boston and DC have the nation's worst

I-10 carries a ton of interstate traffic right through downtown Phoenix. Thousands of semis are delayed by Phoenix rush hour every day. A new downtown bypass was recently opened, but the construction has caused its own traffic jams while entire stretches of highway were closed. One benefit of tunneling is the construction zones are separate from existing traffic.

 

[Krugerrand]

I wish I had bought more AAPL back then and not sold half my shares because a broker kept telling me I had too much AAPL.

This is really starting to irritate me. So many people getting told by ‘professionals’ to do this or do that because ‘they’ know better, are supposed to know better, should know better, but don’t. It makes it so hard for people to know which professional to listen to and when.

My tax guy, who’s been incredible over the years, for the first time told me earlier this year to consider selling some TSLA because I’m too heavy in it and taking a huge risk.

Of course this was after it had hit $180s and was hovering in the low $2s. (I was adding a share on every ‘there is a demand problem’ post I read - yes, I really did that).

He was genuinely concerned I was putting myself in a bad spot and he told me straight up the SP was going to continue lower. I smiled and then ignored his advice.

I have recently talked to him and jokingly asked him, ‘Now what?’ His advice was ‘At this point, I can’t advise you. Assess your situation and do what you think is best for you.’ He gets props for trying to look out for me and then quickly realizing he was wrong.

The lesson for people is that professionals are;

a) people just like everyone else and therefore not perfect and make mistakes

b) not all equal; somebody graduated at the top of the class, somebody at the bottom, and everyone else are shades in between - additionally their graduation placing has no baring on their future abilities to be good at their chosen profession, it’s far more complicated than that. Some of the most brilliant (at their chosen profession) people I know never graduated from college/university, some never even finished high school

c) not necessarily impartial and can tend to project their personal beliefs and realities onto others

d) not necessarily honest, good, or on your side - sometimes they are for themselves at your expense

e) people just like everyone else and sometimes they don’t know better than you (and their poo stinks just as much as yours)

 

[wnorris]

While this was true at times in the past, and Elon indeed got into trouble in the past for defending himself, this time he and his mother Maye Musk handled it elegantly and powerfully:

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The only tool to correct vile lies about his childhood that garnered tens of thousands of "likes" on Twitter and form the backbone of smear attacks against him and Tesla is for Elon and his family to correct the record in a few specific cases.

I do agree with you that Elon should not try to be defensive about everything, and I do think he learned this lesson, his tweeting has been top notch over the past couple of months.

The TSLAQ crew has not grasped that the personal attacks on Elon (especially the early years) essentially create more support. He had to endure a rough childhood and made extremely tough choices to leave South Africa on his own to make his way. Tough AF. Why on earth would you use that as a disinformation tactic? What I see from detractors is bush league at best.

TSLAQ (TSLAQQ ?) has already lost. The ability to manipulate sentiment to the point where the future is drastically changed is past. We are in a period where Tesla (all employees, not just Elon) will determine the level of success of Tesla.

2020 has (since 2016) been my inflection point year. 2019 was the chit year where the groundwork was laid for future revenue growth. Now we should start to see that initial curve of the hockey stick. It will happen slower than most hope, but will happen.

If there is any pullback or recession then take advantage. Having worked (briefly) at Amazon in 2001 and sold shares early I am seeing a very clear replay of what transpired during those years. I am (and have already) started to cash in. ;-)

Ignore the noise, remember most that everyone is an idiot, and enjoy today.

 

[Krugerrand]

Plus I kind of like the sun....tunnels don't have access to that.

Non issue and irrelevant. You can choose to drive above ground while others can choose to avoid the traffic and drive in the tunnels.

People have such a hard time adjusting to change for a variety of reasons, but the one above is that you automatically assumed you’d have to give up something you think is better.

Change is not all or nothing. It’s definitely not static. And change can always go back to what it was before if that was indeed better.

The idea is to try, to experiment, to move forward, to learn, and to do so without fear. Otherwise we remain immobile, stagnant, ignorant and fearful.

 

[Fact Checking]

How would this work if the black swan occurs? Sell your shares to exercise half your puts, then borrow shares to exercise the rest?

How does this strategy give "$300 effective protection price" if the stock goes to $200 and you can't exercise any puts?

This is a hypothetical case that looks less and less likely as Tesla diversifies their operations geographically, but in case of some catastrophe such as a Richter scale 10 earthquake at Fremont and Shanghai at the same time, you'd just sell the (now in the money) puts and recover a good chunk of the wealth.

By buying twice the low strike price puts you can enhance the black swan returns without having to buy higher strike price options.