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

[dakh]

Something that bugs me a bit about this "market makers option expiration related price manipulation". If the stock was artificially held within a certain range, why would that not go to where it wants to go after hours? MM's are keeping even after hours price to a certain range? Not enough interest to move anything? Something else?

 

[SoGA Fan Club]

Watch this video of the GM president and tell me you aren't thanking God you aren't a GM investor/fan.

Dont these guys know their business and products well enough to not need a script? I mean this guy reminds me of my preacher in 1975, flipping pages and the whole 9 yards.

After seeing that video, I'm doubling down Monday. There truly is no competition.

 

[Skryll]

In over my head. Like many on this forum i now have more gains than i ever thought possible. And i would like to thank everyone for their insights that helped provide me the confidence to stay long all of these years. I am still long but am questioning what the best approach is going forward.

I have a LOC secured on the house, which i have invested in Tesla in a margin account, all shares. I sell the odd PUT for some weekly cash flow. I am quite leveraged. I was wondering if the following strategy made sense.

For purposes of this example... sell 1000 shares ($650k), reduce margin, pay off LOC, pay off mortgage. [...]

This all seems to good to be true, so i'm wondering what i'm missing.

Why pay off mortgage? No more interest to deduct? Would be last thing for me to pay down.

 

[Curt Renz]

CNBC - late this afternoon: An 'electric' Tesla trade

 

[Cosmacelf]

Watch this video of the GM president and tell me you aren't thanking God you aren't a GM investor/fan.

Dont these guys know their business and products well enough to not need a script? I mean this guy reminds me of my preacher in 1975, flipping pages and the whole 9 yards.

After seeing that video, I'm doubling down Monday. There truly is no competition.

Ugh. And people say that Elon is a bad presenter. Reading a script is the worst way to give a presentation. The worst.

 

[dakh]

The part that really sticks out to me is the "I don't know ..... or something"

So casual, like "you know, just a couple thousand GWh a year, no biggy."

We know in the past he has said he wants 2TWh/year by 2030. Now he says that battery day will not just blow people's minds, but it already blows his mind too. Announcing a path to 2TWh capacity by 2030 wouldn't blow my mind. I'm expecting this. And it certainly wouldn't be blowing Elon's mind. So what is? I think it's clear:

We know Maxwell tech is supposed to be 16x production density increase. Let's be conservative and go with 10x. So in the same space GF1 does ~35GWh now, they could do ~350GWh. Now add in similar sized production at the Cell Factories in GF3/4, and we could have ~1TWh/year. As soon as GF4 is up and running. Not by 2030, by next year. This would blow my mind. The only limiting factor would be raw material supply.

Do they need this many cells now? Sure they do. Semi will require a huge amount if they want to produce it at any sort of volume. Also, assuming these cells are 20% cheaper, Powerwalls and Megapacks would sell like hot cakes. Fossil fuel peaker plants would be replaced everywhere. Any extra, they would sell to other automakers, they sure need them, and this aligns with Elon's eventual goal.

By 2030, the world will need dozen's if not hundreds of TWh's of capacity. A couple TWh's is nothing. I believe battery day will basically change the course of history. A shot through the heart of ICE and FF. With this level of production capacity, the change to a sustainable future will be immediate.

Or, am I dreaming too big? What else would "blow people's minds"?

Whatever it is, I'm expecting the market to react big in April.

Thank you for that perspective, I think it is very compelling! I'm glad we started this conversation. Oh, man - my thinking about this case had become very uptight!

 

[Highway2Heel]

Don’t know who your broker is (if any) but I’d pursue a revolving line of credit against your securities. You’d get an interest rate likely better than a HELOC. That’s what I have to maintain liquidity and not touch shares.

 

[vwman111]

Why pay off mortgage? No more interest to deduct? Would be last thing for me to pay down.

I live in Canada so mortgage interest isn't deductible. But that was a very valid point.

 

[anthonyj]

Listen, I am bullish af on Tesla. I think we can see $1,100 by early April before any major pullback. But ValueAnalyst on Twitter is beyond delusional. She makes TeslaCharts seem reasonable sometimes (okay not really). She's always saying that Tesla should buy back stock (wtf?) and uses the most annoying hashtags with a higher price target everyday. Sheesh, rant over

 

[Causalien]

In over my head. Like many on this forum i now have more gains than i ever thought possible. And i would like to thank everyone for their insights that helped provide me the confidence to stay long all of these years. I am still long but am questioning what the best approach is going forward.

I have a LOC secured on the house, which i have invested in Tesla in a margin account, all shares. I sell the odd PUT for some weekly cash flow. I am quite leveraged. I was wondering if the following strategy made sense.

For purposes of this example... sell 1000 shares ($650k), reduce margin, pay off LOC, pay off mortgage. Take out a new LOC for $100k and buy Jan 2022 leaps (1000s or similar). I could then have ~15 contracts and access the growth going forward on more shares than i originally had (1500 vs 1000). I have reduced debt (margin, LOC, mortgage) at the cost of increasing my risk investing in options. For this example this is not 100% of my TSLA holdings, the remainder are still in shares.

I feel like it is prudent in terms of paying off debt, while allowing me to access more growth through LEAPS than simply holding shares.

I have $100k at risk in the LEAPS, but i have locked in gains and paid off ~$550k of debt. And still in a position to enjoy growth.

While on the other hand, something terrible happens in the market or the stock, and it dips by $100 and i would still have lost $100k of paper gains on those 1000 shares.

This all seems to good to be true, so i'm wondering what i'm missing.

There are too many types of question like these now.

I recommend interviewing 3 accountant and pick one you are comfortable with.

 

[vwman111]

There are too many types of question like these now.

I recommend interviewing 3 accountant and pick one you are comfortable with.

That would be like interviewing 3 investment advisors....

Can't beat the advice and experience on this site.

 

[Causalien]

Watch this video of the GM president and tell me you aren't thanking God you aren't a GM investor/fan.

Dont these guys know their business and products well enough to not need a script? I mean this guy reminds me of my preacher in 1975, flipping pages and the whole 9 yards.

After seeing that video, I'm doubling down Monday. There truly is no competition.

I am sometimes surprised that these ppl at the top need to read off a script. Don't they get trained in public speaking and presentations?

 

[Causalien]

That would be like interviewing 3 investment advisors....

Can't beat the advice and experience on this site.

Tax issues are local and your new fancy accountant knows more loopholes for rich ppl.

I forgot to mention, it automatically came to my mind that what you are suggesting has huge tax implications which is why I mentioned accountant.

 

[goinfraftw]

"But you’ll tell me if it ever starts getting genuinely insane, right?" - Elon Musk to Chris Anderson at TED a little over 2 years ago.

Elon Musk on Boring Company, Semi-Truck, Mars - TED Talk [transcript] - Electrek

2.667 years...

...Battery Day is in April. So, that'll make it ~3 years then.

 

[Prunesquallor]

Yes, I can see that now, thanks. Still don't get the purpose of this column though, as in - what is it supposed to tell us?

It’s what let them construct their probability distribution graph. They changed the scaling from 0-100 to 0-50-0 to let them build their bear case (SP at which there is a 25% probability of being at that level or worse) and bull case (SP at which there is a 25% probability of being at that level or higher).

 

[Mad@gascar]

A friend of mine used to be wealthy. Ranked at #8 in the world, he dismissed fears the investment community had about one of his business projects, saying that if it turned south he would bail it out with his own assets.
The problem was, when it turned south, his $30 billion of assets also disappeared and his creditors had zero recourse. In this case, he didn’t so much sell his shares as simply had them dissolved away (it was some of both, in fact).

I have mentioned this before but the joke almost bears worth repeating. I’m now worth $1 billion dollars more than he....not because my TSLA has done that well but because his net worth is now -$1 billion.

@jbcarioca can confirm the generalities of that little story.

The takeaway is not, of course, that Mr Musk is a Mr EB, but that his shares are not encumbered: they are a part of free float.

Eike Batista is your friend? That's quite a story!

 

[Spksmp]

Thank you for that perspective, I think it is very compelling! I'm glad we started this conversation. Oh, man - my thinking about this case had become very uptight!

I obviously had some facts mixed up in my head, the 2030 date, and the 16x actually only being for the electrode, not the whole cell production.

But I still think it's the timeline to 2TWh which is going to blow our minds. The main 'wow' factor has to be the sheer number of cells they are going to pump out, not the price, energy density or longevity. Right?

April can't come fast enough.

 

[Fact Checking]

"Here's a real important point that is not well appreciated, this is a point that should be advanced by short-sellers, but I've not seen it articulated - but it should be: the incumbent car companies make most of their money by selling spare parts to their existing fleet at high margins. And they sell the new cars at a de-facto zero margin or even at a loss. It's kind of like printer cartridges and razor blades: you sell the razor at a loss and the blades at a profit, or the printer at a loss and the cartridges at a profit, or video game consoles - the actual cost of say, an X-box may be $600 but you can buy it for $300-400 because they make up for it on the games that are bought. So if you're a new company, you do not have a fleet. You have no fleet from which to subsidize the sale of your new cars. This is the primary reason there has not been a successful car company startup in the United States. Most car companies have 80%, 70% of their fleet out of warranty. ... Even if they stopped selling new cars, they would still... (laughs) their profits would increase!"

I suspect Elon's observation is primarily for US carmakers - European and Japanese carmakers have quite good EBIT on just new car sales, especially in the premium and luxury segments where Tesla is present. Japanese cars also have excellent reliability and build quality, which reduces the out of warranty service stream.

I'm wondering what @jbcarioca's take is on this.

I found this the most interesting comment. What is not stated is how Tesla managed around this financial and structural business barrier?

I think their solution was the development of SW as a monetized revenue stream that could be front loaded in place of the back loaded service revenue of their competitors.

Thanks so much for doing this summary!

Beyond software margins, there were a couple of other factors helping Tesla become the only successful new automaker startup of the past 100 years:

• Financing, insurance and leasing are the underappreciated gold mines of the car business, and Tesla made good use of this to improve both the owner experience and margins. Other U.S. carmakers have ceded this source of income to the dealership cartels.
• Aggressive vertical integration forced upon Tesla by an ICE OEM friendly supply chain distrustful and dismissive of Tesla. This improved margins, increased flexibility and seeded in-house innovation. Today Tesla probably already has more in-house automotive and tech talent that understands the entire car and is able to perform whole-system innovation and optimization than any of the other major carmakers. With a system consisting of thousands of parts this is an underestimated factor.
• As a Silicon Valley startup, equity compensation was always a natural and major component of Tesla's labor costs. This reduced cash outflows, while attracting and retaining top talent. It also protected Tesla from union influence like the UAW, who'd have sabotaged Tesla from within. (UAW prefers to structure members as contractors and avoids equity compensation, knowing that strikes are harder to sustain if the stock price is tanking and members get nervous due to equity exposure.)
• Tesla equity and debt investors risked well over $10b of their money to help Tesla past its first 15 years, against an unprecedented barrage of disinformation, lies and direct malicious interference with Tesla's business.
• Sheer dumb luck. There's just so many alternative universes where:
  • Elon would have been noticed by one of the attentive VCs in the roaring 90s who'd have snapped him and Kimbal up into one of the software companies of Silicon Valley and he'd never have become an entrepreneur himself.
  • Or one of the alternative universes where Tesla made just one more critical mistake somewhere in the early stages.
  • Or one where McCain won over Obama and the Republican establishment would have suffocated all this green economy nonsense in its infancy, to protect coal and oil "jobs".
  • Or one where SpaceX wouldn't have been bailed out by NASA, which I'm sure was a factor to Tesla credibility and early VC investor sentiment as well.
  • Or one where Mercedes (and Toyota) didn't invest $50m in Tesla at a critical stage. Btw., that stake would be worth over 6.5 billion dollars now, had Daimler not sold their ~10 million shares they bought for ~$5/share for about ~$70/share. They cashed out thinking it a genius 14-bagger, only to lose what is now a 130-bagger ...
• Tesla's mission was and continues to be a significant benefit as well, because it helped retain both employees and investors: "even if I'm wrong and all this money is gone, I gave a worthy cause a fair shot to help save the planet". The ratio of #NeverSellASingleShare Tesla investors is significant I believe.
• Finally, unlike other founder-CEOs, Elon never cashed out of his Tesla shares, not even in small amounts - which is unusual and which supported the TSLA price as well. He did this at a considerable personal risk.

All of these were IMHO important factors to Tesla's success.

 

[JustMe]

Oops, I seen now he didn't say 2030. In the Q2 2019 Earnings CC he said "Battery Day will be kind of like a Master Plan Part 3".... "How do we get to like 2 terawatt-hours a year".

And in this cleantechnica article it seems they made the a case for it being possible by 2030.

"...Tesla could achieve its Master Plan Part 3 goal of 2 TWh of annual production capacity by 2030..."

Elon Musk Talks Tesla Terawatt-Hours. We Run Some Numbers. | CleanTechnica

So we really have no idea when Elon hopes to have 2TWh capacity, do we?

As far as I know, Tesla has not announced a target date for that capacity level. However, I believe that Elon Musk said on the Q4 earnings call that they were targeting a continuous growth rate of 50%. Clearly, batteries and autos must grow at comparable rates.

 

[Intl Professor]

I live in Canada so mortgage interest isn't deductible. But that was a very valid point.

New tax law in US eliminated it for many.