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

[OrthoSurg]

No, that is backwards. He looks for companies today with futures he understood 5 to 10 years ago. Excluded by definition are those tech stocks today like TSLA. That is his blinder bus approach compared to Cathy Woods at ARK.

From the 26 staff at his small office, looking at everything on paper, no computer in his office, I really don’t get how he finally understood AAPL. TSLA will never be understandable from his team.

 

[UnknownSoldier]

SCTY had many problems. Their inability to raise additional money was one of them, but that wasn't solely or even primarily due to "short attacks," it was due to its poor business model.

If Solar City's business model was half as good as some of you here claim, Tesla would have doubled down on it, not completely changed it by firing all of its (commissioned) salespeople and gutting the company. It's silly to be happy spending billions of dollars on a company in which you end up throwing almost everything away, and is clear evidence that the merger wasn't about wanting SolarCity's business.

This was an expensive acquisition for a failing business model and for technology that didn't exist (solar roof tiles).

I know it's been 4 years, but are you really that forgetful? Go take a peek at the "Short-Term TSLA Price Movements - 2016" thread and see what happened to TSLA and Tesla's need to raise additional capital.

As for the "short attack," you don't get those on your IPO day. Read this article about SCTY's IPO and the problems with its business model even then.

Basically there was one time almost ever the pundits and analysts were right: Buying SCTY was Elon bailing his cousins out. Elon is ultimately human and he cares about his family. It should be no surprise that they left SCTY shortly after the acquisition was completed, Elon probably saw the state of the company after the buyout and told them to take a hike and never talk to him again.

 

[JRP3]

When the subject of supersonic VTOL aircraft came up in a published interview of Elon on other aerospace topics, Elon said he would reduce weight and drag by eliminating unnecessary items like wings, elevator and rudder!

I hope he includes a parachute in case a high power contactor fails.

 

[Tes La Ferrari]

From the 26 staff at his small office, looking at everything on paper, no computer in his office, I really don’t get how he finally understood AAPL. TSLA will never be understandable from his team.

He took a call on his rotary dial phone from Bill Gates who was calling from his flip phone, to tell him to buy AAPL.

 

[UkNorthampton]

He took a call on his rotary dial phone from Bill Gates who was calling from his flip phone, to tell him to buy AAPL.

It wasn't Buffet or Monger. It was someone younger. They weren't convinced but let him do it. They were surprised.

 

[UnknownSoldier]

WB keeps saying in interviews he is only investing in what he understands. I guess it is hard to accept Elon Musk might be doing things too complex for a coca investors driving an old ICE car to understand what EM is trying to achieve.

Buffett is absolutely not wrong about only investing in what you understand. In fact he's right. Everyone needs to come to terms with the fact that if you throw money at ticker symbols hoping to hit the jackpot, your success rate is going to be very bad. Most people are not willing to put in the time and effort to do research and understand something before throwing money at it.

I've always been a tech sector investor, from day 1. It is what I understand. I don't muck around with pharma companies, biotech, financial firms, consumer durable goods and commodities, or any of this stuff. I have no interest in weed stocks, purple mattresses, or whatever meme it is this week. I've always followed the Buffett principle, investing in what I understand. It has paid off multiple times now, first in NVDA and now in TSLA.

 

[hobbes]

sad part is I tried but only ships to the USA

Someone designed that as a non commercial project a while ago and it is now available at thingiverse for 3d printing.

 

[mongo]

I doubt it. Dojo will probably be a custom board with the exact same chip as HW3 or the next version of the silicon. It could have two to twenty chips per board, and higher connectivity between boards. Or it could be a trailer park cluster style and have exact HW3 boards Slightly depopulated Of the video processing parts. It will probably not be a custom silicon Or FPGA just for Dojo only. The current HW3 silicon is NOT hardwired in such a way it can’t be used for neural training.

Dojo will be an Exaflop FP32 system
HW3 is a hard wired, single cycle 96x96 element 8x8 multiply 32bit accumulator. It is not FP32, nor capable of any other processing function in high OPS.

Read the tweet I linked.
Or these quotes from Elon

A truly useful exaflop at de facto FP32

A lot of work remains. Technically, we have it working in sim with FPGAs at ~0.01% capability. This will be a true supercomputer.

Dojo, our training supercomputer, will be able to process vast amounts of video training data & efficiently run hypersparce arrays with a vast number of parameters, plenty of memory & ultra-high bandwidth between cores. More on this later.

Tesla is developing a NN training computer called Dojo to process truly vast amounts of video data. It’s a beast! Please consider joining our AI or computer/chip teams if this sounds interesting.

A Beowulf cluster of HW3 might be handy for model validation (though sort of redundant), but that is about it.

 

[Chickenlittle]

Buffett is absolutely not wrong about only investing in what you understand. In fact he's right. Everyone needs to come to terms with the fact that if you throw money at ticker symbols hoping to hit the jackpot, your success rate is going to be very bad. Most people are not willing to put in the time and effort to do research and understand something before throwing money at it.

I've always been a tech sector investor, from day 1. It is what I understand. I don't muck around with pharma companies, biotech, financial firms, consumer durable goods and commodities, or any of this stuff. I have no interest in weed stocks, purple mattresses, or whatever meme it is this week. I've always followed the Buffett principle, investing in what I understand. It has paid off multiple times now, first in NVDA and now in TSLA.

What nonsense. Berkshire is not a single person operation. He has many many advisors that can educate him on tech and industries. You don’t believe he sits in front of his computer and single handed lay makes his investments? He is risk adverse guess I would be in his situation too

 

[Tes La Ferrari]

No and Yes.

It would have been absolutely the right thing to sell AMZN and MSFT in 1999/2000 because they didn't reach those levels again for a decade (Amazon) or decade and a half plus (Microsoft). That's a long time for dead money.

It's even worked on TSLA already. I sold all my TSLA in tax-advantaged accounts in late Feb 2019 at $319, bought back a few months later at under $200. I'll admit that was luck as much as anything, but I know other investors who have done this a few times in individual stocks. It's true you can't time the market, but you can time individual companies if you know them well enough. And if you're in a tax-deferred account, the penalty for being wrong isn't so severe (in a normal account you have to pay taxes on previous gains, which reduces the money you then have available for re-investment).

It's also worth pointing out that companies like Amazon, Microsoft, and Tesla are rare. These are companies with no just a great business model, but with multiple great businesses. Amazon got its second wind through AWS, Microsoft went from operating systems to Office to Azure, Tesla will go from automobiles to energy. Sometimes this is only apparent in retrospect - I would have had a hard time arguing to buy Microsoft in the first decade of the 21century - think about its missteps with mobile, and even Amazon in 2004 looked like it was over-valued until AWS came along. Heck, even Amazon execs didn't think that would be a big business for them, it was just to sell some server time unused between XMas and the next Thanksgiving. Tesla, however, is the rarest of them all - a company whose expansion into new markets is clear as day to anyone paying attention.

But, that doesn't mean the stock won't be appropriately priced, which is something astute investors can take advantage of. An S&P 500 inclusion pop could be one of those moments. The difficulty will be in discerning which part is a temporary forced buying squeeze versus something like Battery Day fundamentals.

Well written post, @Lycanthrope .

The key is to determine where the boundary between Battery Day / upcoming fundamentals and temporary short squeeze buying is - and if that delta is wide enough to act on.

ie. If everyone here went for a colonoscopy at the same ( time which would obviously cause the stock price to go to $10K post split ) - some HODL'ers might become sellers

 

[Thekiwi]

Buffett is absolutely not wrong about only investing in what you understand. In fact he's right. Everyone needs to come to terms with the fact that if you throw money at ticker symbols hoping to hit the jackpot, your success rate is going to be very bad. Most people are not willing to put in the time and effort to do research and understand something before throwing money at it.

I've always been a tech sector investor, from day 1. It is what I understand. I don't muck around with pharma companies, biotech, financial firms, consumer durable goods and commodities, or any of this stuff. I have no interest in weed stocks, purple mattresses, or whatever meme it is this week. I've always followed the Buffett principle, investing in what I understand. It has paid off multiple times now, first in NVDA and now in TSLA.

But one REALLY needs to understand individual stocks and the markets/industries they operate in, otherwise they are likely to fair worse than the broad market returns:

Order of success:
1. Stock pickers who really know a few companies really well
2. People who don't pick any stocks and just invest in S&P500
3. Stock Pickers who really know a few companies really well, but get "black swanned" on their highly concentrated investment.
4. Stock pickers who don't really know much about the companies they invest in (don't even read earnings reports and instead rely on TV/Online talking heads)
.
.
.
.
99. TSLAQ

 

[Rarity]

Supersonic EVTOL requires energy density in the thousands of Wh/kg (I am not making guesses, aero performance engineer here).

Elon Musk @ MIT @ 30:20: WHAT??!! NO! . . . To have a compelling aircraft, you only really need about 400 Wh/Kg.

 

[Singuy]

Well written post, @Lycanthrope .

The key is to determine where the boundary between Battery Day / upcoming fundamentals and temporary short squeeze buying is - and if that delta is wide enough to act on.

ie. If everyone here went for a colonoscopy at the same ( time which would obviously cause the stock price to go to $10K post split ) - some HODL'ers might become sellers

Good luck figuring that out. Especially bulls on the forum. We will guarantee over value battery day(vs consensus), and then yell at the computer screen when every analyst is not bullish enough.

 

[Papafox]

This action is very natural and almost follows as a corollary. This is the standard pinning action. if more calls are sold off at expiry, it creates a downward draft and if more puts are sold off, it creates an upward draft.

In Tesla calls certainly outnumber the puts, especially after weeks like what we just saw, creating a downward pressure. If the stock generally takes a dive during the week, the newly in the money puts get sold on Friday creating an upward pressure. All of this is a somewhat delicate dance and sometimes instead of converging into a pinning equilibrium, the stock takes off into a Friday close, going up or down. This is the exception though.

There is no point going into detail of why pinning happens, because others have gone into a good bit of detail around this. A good example is here.

@generalenthu , thanks for engaging on the topic of whether pinning on Fridays is a systematic response of the market to options expirations or whether some manipulations are likely thrown into the equation. I'll refer to a market-induced pinning at a large nearby strike price as "auto-pin". I reproduce below the paragraph on pinning from the article you cited:

Mechanism of Pinning
As the market approaches its close on expiration day, ITM call holders may sell their positions to lock in a profit. OMMs are obligated to buy these calls, but do not want to take on the price risk associated with holding the calls. Therefore, OMMs will hedge away this risk by short-selling the underlying stock into the close, thereby neutralizing price risk — the short stock position loses value as the long option position gains, protecting the OMM from price moves in a strategy known as delta hedging. Short selling tends to depress prices by increasing supply, so stock prices that were above the strike price are pressured downward toward the strike. The reverse situation occurs for put holders when stock prices are just below the strike near expiration: if the put holders sell their options, the OMM will neutralize price movements by buying underlying stocks, resulting in upward stock price pressure. The see-sawing of offsetting pressures is why stock prices get pinned to option strike prices at expiration.

As I read this article, the impression I'm left with is that auto-pinning occurs when we see substantial quantities of expiring calls and puts at a strike price near the stock's current price on expiration day. If the stock price moves in an upward direction above the strike price, then call buyers are likely to sell and take some return. The market makers who buy these soon to expire and slightly in the money call options don't want to be burned by losing their delta-neutrality, and so they short some shares in order to become delta-neutral again. I would concur that such short-selling by MMs would indeed place some downward pressure on the stock price, and it may account for some of the "whack the mole" effect in which we see any TSLA rallies above the prevailing strike price get sold off fairly quickly.

So far, so good with the theory of auto-pinning. Now let me introduce a few wrinkles to the theory.

The auto-pin theory relies upon puts sold at that strike price to balance negative movements in the stock price. If the price falls below the strike price of the puts and calls, put buyers will start selling some of those puts in order to recoup some of the money they have on the table, and MMs will buy the puts and then immediately buy some shares to compensate for the liability of holding those puts until close. The problem with TSLA last Friday was that even though there were over 4300 calls with strike of 1650, there were barely 100 puts at that strike, making the effect of put selling a non-event for market forces (see chart above). Some other force was needed to hold TSLA at 1650 and keep it there.

Another complication is that because of TSLA's volatility, there were multiple strike prices in play Friday afternoon. We had nearly double the quantity of 1600 calls vs. 1650 calls, and 1700 calls greatly exceeded 1650 calls in number, as well. Further, there were lots of intermediate priced calls, especially at 1630, 1640, and 1680. These too would influence the behavior of MMs as Friday got closer to expiration time on Friday. My point is that TSLA lacked the balance of puts vs. calls at 1650 on Friday, thus the balance of up and down forces keeping TSLA pinned at 1650 were not there in the traditional model. Further, the effects of all these nearby strike-prices complicates the situation and works against the theory that systematic forces were holding TSLA at 1650 on Friday afternoon.

Now, let me introduce another potential shortcoming of the auto-pin theory. Let's say that auto-pin is a thing, that it really works and it has a substantial effect upon the strike price. If this were the case, one could make money by manipulating the system on Fridays. Here's how. Notice that TSLA rose above 1680 in pre-market trading (see chart below). If you were a hedge fund with lots of money and really didn't care whether TSLA rose or fell on Friday, you could nonetheless make money by shorting the stock to bring the price down from 1680 to a more sustainable 1650. The auto-pin would then take over and work to hold TSLA near 1650. This would allow you to slowly and methodically cover your morning shorting below 1650 because the auto-pin mechanism would be covering your back during the cover period.

My overall impression is that you brought up a mechanism that can indeed result in auto-pin with the right circumstances. I would question how often you would get the right circumstances with TSLA, however, because the volatility of the stock results in calls and puts being located quite some distance from each other, there not being just one dominant price where calls and puts are located, and the opportunity for manipulators to use any auto-pin mechanism as part of their manipulations of the auto-pin mechanism had some real strength to it. Overall, I think because of the volatility of TSLA, the high percentage of trading that is done via options vs. shares in this stock vs. others, and the track record of some very flagrant manipulations having happened in the past, I would say that TSLA is a unique stock that requires a unique understanding. Nonetheless, the explanation you linked to is indeed helpful for understanding one of the many mechanisms that is affecting TSLA's price, and so I appreciate your bringing that mechanism to our attention.

 

[Christine69420]

WB keeps saying in interviews he is only investing in what he understands. I guess it is hard to accept Elon Musk might be doing things too complex for a coca investors driving an old ICE car to understand what EM is trying to achieve.

WB probably should declare FIRE soon and start withdrawing 4% yearly. I think he probably made it.

 

[GSP]

I hope he includes a parachute in case a high power contactor fails.

The original Crew Dragon was designed for propulsive landing with parachute backup, so Elon likely would do just as you suggest for his supersonic VTOL electric aircraft.

The plan was for a short test of the super Draco thrusters at parachute altitude over water. If successful, then proceed to LZ-1.

However, I doubt TSLA is going to branch into BEV aircraft soon, so not a relevant subject for investors.

GSP

 

[UncaNed]

No, that is backwards. He looks for companies today with futures he understood 5 to 10 years ago. Excluded by definition are those tech stocks today like TSLA. That is his blinder bus approach compared to Cathy Woods at ARK.

You mean Blunderbuss?

 

[dc_h]

They are going to vertically partner up with the biggest player out there, Nikola, instead of doing everything themselves.

Anything themselves!

 

[Etna]

You are making guesses. It appears you just decided that battery energy density had to equal jet fuel density and thought you were good to go.

‘Elon, who’s the top Rocket Designer in the world, did a ground up redesign and calculated a Supersonic VTOL Jet becomes feasible once batteries hit 500 Wh/kg. Time will undoubtedly show that you will join the legion of experts who incorrectly thought Elon wrong and reasoned by analogy from an existing obsolete framework.

He undoubtedly started with an absolute clean sheet design and only put in necessary things rather than you, who apparently took a current obsolete traditional jet and just tried to swap the fuel tank with batteries.

I remember one key enabler was how much more efficiently it would cruise because of the much higher altitude capability.

I am not making any guesses. Been developing clean sheet designs for the past 20 years, several of which flew, most of them jets, some military. My performance models are generally dead on. And for the past few years, entirely dedicated to electric propulsion, and working on some disruptive things.

Elon Musk @ MIT @ 30:20: WHAT??!! NO! . . . To have a compelling aircraft, you only really need about 400 Wh/Kg.

So if you really had an interest on this topic, I ran the numbers on how Elon came up with his 400 Wh/kg on the Electric Airplane thread, and if you are curious to see what kind of design compromises are required:
Electric planes

Look, I am Elon's #1 fan (on equal ranking with many others I suspect) and all I have been doing is clean sheet aircraft designs and out of the box thinking, which even got me fired from Textron at one point (pretty proud of that) because I was too disruptive.

 

[printf42]

Updated institutional holdings report is out.
This Boothbay Fund opened new position of almost 10B. Anyone know who they are? Are they hedging or front running or long term holder?

Oh btw, Renaissance increased their holdings by 44%, I thought they were going to close it out, I guess their Algorithms says not yet.