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

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For instance, they'd buy TSLA in one fund now and transfer the shares over to the index fund later. What do they tell the people in the first fund? "Sorry, but we just bought TSLA in your fund to give the shares over to people holding our other fund. You chose the wrong fund, bub." Hardly.

Or, fund owners have billions of dollars not in any fund lying around to speculate on TSLA before Q2 earnings were even announced. Of course, there is speculation, but there's probably more done with options or other derivatives than actual just buying stock.
If they had to tell them anything, which I highly doubt, they would tell them we bought this stock that had an better than average chance of going up because of likely index inclusion and made a 50% profit in a month. Now we are moving on to other hot stocks so we sold them.

And there are trillions of dollars on the sidelines so I doubt finding capital would be a problem. Again for a better than average likelihood of a short term profit.
 
But it doesn't much matter if they would sell them on the open market. It would mean a number of shares are already designated to be sold at the time.

Example
26 million shares needed out of 100 million potential (can't remember the correct number) = 26%

A total of 10 million shares have already been bought up (part of the reason for the rising price in July). Then you have

16 million remaining shares needed out of 90 million = 18%

It changes what percentage of further shares have to become 'available'

The only way that makes sense is if a fund could speculate on TSLA in July (or today now that earnings are out) AND if that fund's intention was to sell to the Index Fund after announcement OUTSIDE of normal trading, but at the current prices. Because the speculative fund's managers wouldn't want to leave any money on the table and the index fund's managers wouldn't buy at anything higher than the current price they could get on the open market.

The only thing that does is potentially reduce the trading volume we see. Can you identify what these speculative funds might be?

I believe the largest S&P 500 funds are:
VFIAX (Vanguard)
SPY (SPDR)
FXAIX (Fidelity)
IVV (iShares)
VOO (Vanguard)

I'd immediately exclude the Vanguard funds - that brokerage doesn't do speculative.
 
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I am skeptical that because some committee adds a company to the S&P 500 and drops another that the index funds immediately sell all of the latter and buy all they will need of the former ah suspect they take weeks if not months to make the adjustments.
 
If they had to tell them anything, which I highly doubt, they would tell them we bought this stock that had an better than average chance of going up because of likely index inclusion and made a 50% profit in a month. Now we are moving on to other hot stocks so we sold them.

And there are trillions of dollars on the sidelines so I doubt finding capital would be a problem. Again for a better than average likelihood of a short term profit.

See my previous post and suggest who might do this in a big way. And remember, this is NOT the Index fund pre-buying, it's some other more speculative fund pre-buying with the intent to sell to the Index fund when it's time for that Index fund to buy TSLA.

The only thing I think that's possible is that a large enough brokerage would have the speculative fund "sell" to the index fund as an internal transfer instead of an actual sale, to reduce trading costs. Because if the intent was to reduce trading volume on TSLA in order to keep the price down, that would be hurting the shareholders of the speculative fund. Again, I don't see these funds owners intentionally hurting one class of holders in favor of another. Reducing buy/sell fees make some sense, but I'm still skeptical this is going to happen in a big way.
 
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Yup- there's been adds on multiple dates in the same month in the past




Figured that was exactly the dark pool idea being mentioned by jhm.... there's dozens of such pools including by the folks who also have large index funds that will need a supply of stock.

I looked into dark pools a little bit when I wrote my S&P 500 blog. Everything that I found on google seems to point to all trades in dark pools having to be reported to and added to the official ledger of trades. Iirc, the maximum amount of time one can wait before officially reporting a dark pool trade is 8 seconds. If somebody has more insights, or knows this to be incorrect, please correct me, but this is what I found after some Googling.

Note that, as dark pool participants do not disclose their trading intention to the exchange before execution, there is no order book visible to the public. Trade execution details are only released to the consolidated tape after a delay.

They are added to the consolidated tape (ledger of all trades).

Dark Pools - Investopedia

Generally, members must submit tape reports of transactions in NMS stocks and OTC Equity Securities (including non-exchange listed foreign securities, ADRs, Canadian issues and direct participation program (DPP) securities) as soon as practicable, but no later than 10 seconds, following trade execution during the hours that the FINRA Facility to which the member is reporting is open.

Effects of Dark Pool traded volume on current tape - Stackexchange
 
It's good to hear Elon himself thinks of Gali first when he wants to point out a Tesla retail investor/analyst that has good insight. If anyone would know what constitutes good insight into Tesla it would be Elon. Back in October, when the share price was under $250, I posted this:



I received quite a bit of push-back with people saying he was a "hype-man", fanboy, over-enthusiastic and unrealistic, etc.

Now, only 9 months later, the share price is over six times that and Elon himself has listed Gali as a prime example of someone with good Tesla insight.

Yes, I feel vindicated! :cool:


Who is Gali, and what is Gali's SP target ?
 
And, of course, they can't resist disliking how Musk operates:
"However, important additional risks are posed by Tesla's governance structure. There is considerable latitude to the company's CEO, Elon Musk, with a board that has a mix of inside and outside directors. In addition, Mr. Musk's executive responsibilities with outside ventures such as SpaceX could tax his ability to adequately focus on Tesla's challenges..."

In other words, they're worried about the one thing that has made Tesla successful so far - Elon Musk.

Crazy stupid if you ask me.

This is akin to calling Jobs a liability to Apple...
 
Quick note on today's action. In my opinion there were 3 factors.
  1. There was lot of speculative positioning in the options space ahead of earnings and the profit taking on these snowballed. For any option holders not taking profits, their deltas were eroding pretty quickly. As a result, market makers had to sell ~5 million shares to stay flat. That's a lot given the volume was 24 million for the day
  2. Macros were poor and obviously dragged down Tesla
  3. I believe there was net buying which partially compensated for the above 2. If not it would have been even lower
Clearly the 24 million volume was not enough to push through the ~5 million in sales and the after hours continued the drop even as macros recovered.

In terms of what it means, I guess we'll pin at 1500 and start the next week fresh and strong without the options overhang.

All in all, great report and remember time is on our side. Here's to all the longs.

Edit: this is assuming neutral macros, which may be problematic
 
I'm still not seeing how you think "dark pools" fit into this scheme. If the goal is to profit as much as possible due to greed, wouldn't you want to sell all the shares to the passive index funds on the open market so the price would run up? Also, I don't believe anyone "knows" Tesla would be included regardless of whether they made a profit. The whole scenario doesn't make a lot of sense to me.
Look, we are talking about contracts that are big enough to move the market is traded in a public exchange while having the option to trade privately in a dark pool. So imagine putting out a contract to sell a large number of shares at market price on a certain day. If you buy all the share on the public market you pay too much for all the shares. But suppose you buy say 80% in a dark pool without driving up the cost of acquisition. Then with the remaining 20% you go into the public market and drive up the price. So the market price you sell at is pumped up from the dark pool price you bought the bulk of the order with.

For a different sort of example, suppose you are large scale short. You borrow a great number of shares. You want to sell them in the public market is such a manner to drive the price down as hard as possible. But then the need to buy back the shares without driving the price back up again. One option is to buy back in a dark pool with minimal impact on the market price. Then the next day you sell those shares all over again. So you're trying to exploit two different markets to keep driving down the stock in the public market. We've all witnessed shorts grinding down on the price day after day.

The same sort of algorithmic trading tactics that can drive the stock price down can also be redirected to drive the price up or to minimize price impact. Dark pools are part of the tool kit.

So the question in my mind is why the market moving machinery has not been bearing down so much on Tesla lately. Sure, Tesla is an awesome company and deserves a generous market valuation. But it sure feels like these tools have been flipped into reverse lately. Could it be that dark pool trading has been flipped by anticipation of S&P inclusion? Instead of dark pool traders selling in bulk to Tesla short, they are accumulating for index funds. I'm not sure. I have no particular visibility into this space. But I am suspicious the Tesla has risen so far so fast. I does not feel natural to me. It does not seem Tesla has climbed a wall of worry. We'll see.
 
Nasdaq futures down 0.75%. Tomorrow could be ugly.

Deteriorating Chinese-US relations most likely. It'll be interesting to see where the U.S. goes from here; Trump is under growing political pressure to be "tough on China" after attacks from Democrats. However, he can ill afford a steeply correcting stock market heading into the election. Quite the box he's in.

China orders U.S. consulate in Chengdu closed in growing spat

BEIJING — China on Friday ordered the United States to close its consulate in the western city of Chengdu in an increasingly rancorous diplomatic conflict.

The order followed the U.S. closure of the Chinese consulate in Houston.

The Chinese foreign ministry appealed to Washington to reverse its “erroneous decision.”

The Trump administration on Tuesday ordered the Houston consulate closed within 72 hours. It alleged Chinese agents tried to steal data from facilities in Texas including the Texas A&M medical system.
 
Ford raising $8 billion of junk bonds after virus spurs loss | Auto Finance News | Auto Finance News

This was back in April, after announcing a massive Q1 loss of $2Billion and after previously tapping existing credit lines of $15.4 Billion in March. The junk bonds are expensive, yielding 9.625%.

The article goes on to say:
Ford has so far been the biggest beneficiary of an expanded program by the Federal Reserve to buy some bonds recently downgraded to high yield from investment grade. That addition has further propelled a rally in credit, first triggered by the Fed’s initial announcement on March 23 to buy some high-grade debt.

So much for Tesla relying on government funds, it's now ICE's turn. Tesla paid their loans back early. What will Ford do?

BTW, Ford is trying to march ahead with both its Mach-E EV, and its new Bronco, which apparently sold out the first production run in a few days. I guess there is still demand for ICE vehicles...
 
Deteriorating Chinese-US relations most likely. It'll be interesting to see where the U.S. goes from here; Trump is under growing political pressure to be "tough on China" after attacks from Democrats. However, he can ill afford a steeply correcting stock market heading into the election. Quite the box he's in.

China orders U.S. consulate in Chengdu closed in growing spat
OT: China is simply waiting on Trump to lose so tensions can deescalate. Unlike the U.S, the CPC plays the long game and can sometimes exercise patience because they don't answer to a voting public.

IMO, Biden's China policy won't be much different from Trump's but diplomacy and maturity will replace unnecessary bluster and public rhetoric. Biden will reconnect with traditional U.S. allies and present a coordinated, united front to China.
 
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Deteriorating Chinese-US relations most likely. It'll be interesting to see where the U.S. goes from here; Trump is under growing political pressure to be "tough on China" after attacks from Democrats. However, he can ill afford a steeply correcting stock market heading into the election. Quite the box he's in.

China orders U.S. consulate in Chengdu closed in growing spat

while Dems want Trump to do more for the Uighurs the push to be “Tough on China” is coming from the hyper nationalist GOP mainly. People like Pompeo, Hawley and Cruz. Trump himself seeks to blame them for his virus woes.

macros could get ugly esp next week when the economic data for July is likely to signal that the recovery has stalled in the US, could be counteracted by a new stimulus deal tho
 
Moody's - this afternoon: Moody's upgrades Tesla's ratings including CFR to B2 and senior unsecured to B3; the outlook is stable.

Germane Excerpt:

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Tesla's progress in establishing a more profitable and competitively sustainable domineering position in the BEV car market, balanced against the challenges of: a global economic slowdown due to the coronavirus; increasing weak competition in the BEV car space from established OEMs; and the need to transition profitability away from the heavy dependence on the take full advantage of the rapidly increasing sale of regulatory credits gifted to Tesla by noncompetitive incompetent competition and this will increase massively with Tesla's increase in toward the sale of vehicles and stricter pollution standards to counter stinking death causing LICE.

Tesla's rating could will be upgraded if when the company continues to make operational progress through the ramp-up of its Shanghai facility, 2 million capacity Berlin site and new Terafactory operation in Texas, continues a successful launch of the Model Y, and continues steady progress towards making the Tesla product lineup more affordable and profitable.
I felt the need to change some of the words for clearer understanding.
 
"Jay in Shanghai" is stating that Tesla has announced an "infotainment upgrade" for S/X at a price of 25,550 yuan, or ~$3500.

https://twitter.com/JayinShanghai/status/1286537943918743554

BREAKING: Tesla's 'Infotainment Upgrade' for Model S and Model X has just been announced in China

This upgrade is available for 25,550 yuan, if without FM radio, you can enjoy a discounted price of 21,500 yuan.
 
Moodys and the other rating agencies are very stingy with their upgrades. I worked for a public company that objectively and comparatively deserved an investment grade rating, but it took years and lots of time spent with the analysts to achieve it. Moodys is very risk adverse and insists on an incremental upgrade approach. It’s tough because interest rates and even some covenants are tied to ratings so they are important, but not necessarily essential.