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

[Sunlight]

Watching this corona drama from afar - on a farm at the tip of Africa (and even then we have started having cases here in South Africa)

Was pondering last night at what point is the medicine/cure more of a problem than the illness? If the world economy is trashed while the emergency measures are in place, how many people will die or suffer long term from this versus how many will die or get sick if the situation is just managed on a more ad hoc basis?

My problem is that I just don't believe much of what is 'news' so I end up speculating on 'common sense' and 'facts' (which may not be facts...). Corona is reported as the new black plague or just bad flu.....

It's all a bit bewildering. If the world economy is seriously compromised it may hurry up the introduction of Universal Basic Income as a necessity so people don't die of starvation

 

[mongo]

The travel ban to the EU is a double whammy dumb decision: not only is it a near-irrelevant channel of transmission now that the outbreak is in the U.S. already, but it also brings a lot of business activities to a screeching halt and is hindering the medical response and supplies as well.

The implementation is different than the speech:

Coronavirus: Trump suspending travel from Europe to US, though US citizens and others are exempt - CNNPolitics

But immediately afterward, his administration made clear it was not as drastic as the President stated: The ban will apply only to foreign nationals and not to American citizens who had been screened before entering the country, mimicking restrictions he applied to China last month.

Trump was also forced to clarify he was not blocking goods from Europe, despite saying his ban would "apply to the tremendous amount of trade and cargo" across the Atlantic. He tweeted the ban would apply to "people not goods" after stock futures tumbled on the prospect of a trade freeze.

Mini-ban?
Ban light?
Diet ban?

 

[ProfTournesol]

The implementation is different than the speech:

Coronavirus: Trump suspending travel from Europe to US, though US citizens and others are exempt - CNNPolitics

They guy is a lunatic, most of the air transports are going by passegner plane. Prices of air transport have surged extremely and this will continue, so this has a real effect on profitability (if this is still possible). I expect most companies will change their outlook and roadmap drastically. Apple wanted to introduce the new iphone on a new schedule (instead of sept.) they changed it back to september.

What concerns me most is the deliveries of Tesla. Deliveries are lagging, because all paperwork and delivery of the vehicle must be complete to count, I expect some lag on the Q1 reports. Q2 might be fine, but if happens in the US what most people (except....that lunatic) think there might also be an issue with Q2 deliveries, and a bigger impact on production.

No advice, but I have my buy orders in the $3xx range. We've seen nothing yet.

 

[Dr. J]

Just in case it hasn't been mentioned yet, Dow futures have been halted due to hitting the -5% circuit breaker earlier today - there might be a bounce on open, or a further fall.

My understanding is that it's not a true halt--trades above that level can occur. So it seems unlikely to result in a bounce up at the open.

 

[j6Lpi429@3j]

No advice, but I have my buy orders in the $3xx range. We've seen nothing yet.

This feels like ridiculous overreaction to me. The whole world is going insane. The global death count from this thing does not justify a twentieth of the impact it has had on market already.
I feel like the markets are run by ignorant chimps hammering the SELL button in a frenzy with zero idea what, or why they are selling. Its nuts.
I'm not selling anything. This is being vastly accelerated by a media hungry for clicks, who don't give a damn about the facts or reality.

 

[ProfTournesol]

This feels like ridiculous overreaction to me. The whole world is going insane. The global death count from this thing does not justify a twentieth of the impact it has had on market already.
I feel like the markets are run by ignorant chimps hammering the SELL button in a frenzy with zero idea what, or why they are selling. Its nuts.
I'm not selling anything. This is being vastly accelerated by a media hungry for clicks, who don't give a damn about the facts or reality.

True, I agree completely. But the markets are known to have some borderline personality and overreacting on everything. Oil is also falling, and Trump can't do anything about it (other than trowing money against companies that otherwise won't survive). this doesn't make the economy better.

Italy is in lockdown, we will follow soon in NL. I live in Breda, near the Tilburg factory. In Tilburg the hospitals are overloaded and cannot treat patients any more on the intensive care. The system is at it's limits. We expect that our province will be on lockdown soon. Schools are expected to close for two weeks. And if you go shopping, there is nobody in the streets. This will have an impact.

[edit] the expectation was that when the virus is gone, the economy will continue to run. This is not possible anymore. The reserves are drying up really fast (very happy Elon did get some money from the market before it all started).

 

[theschnell]

This feels like ridiculous overreaction to me. The whole world is going insane. The global death count from this thing does not justify a twentieth of the impact it has had on market already.
I feel like the markets are run by ignorant chimps hammering the SELL button in a frenzy with zero idea what, or why they are selling. Its nuts.
I'm not selling anything. This is being vastly accelerated by a media hungry for clicks, who don't give a damn about the facts or reality.

I’ll take the other side. I’m in all cash since Friday and building a large put position in a specific stock I’ll keep unnamed for now because I am not done building the position.

Due to the incompetence of our government (USA), this thing is just getting started. We’ll be getting near the bottom (hopefully), when both our crisis and our response to the crisis starts looking like Italy.

 

[mongo]

They guy is a lunatic, most of the air transports are going by passegner plane. Prices of air transport have surged extremely and this will continue, so this has a real effect on profitability (if this is still possible). I expect most companies will change their outlook and roadmap drastically. Apple wanted to introduce the new iphone on a new schedule (instead of sept.) they changed it back to september.

What concerns me most is the deliveries of Tesla. Deliveries are lagging, because all paperwork and delivery of the vehicle must be complete to count, I expect some lag on the Q1 reports. Q2 might be fine, but if happens in the US what most people (except....that lunatic) think there might also be an issue with Q2 deliveries, and a bigger impact on production.

No advice, but I have my buy orders in the $3xx range. We've seen nothing yet.

No one in automotive ships air freight unless an OEMs plant is down. FedEx and UPS are still flying. Airlines need to move planes to keep landing slots.

Where you getting "deliveries are laggging" from? They are always lower at the start of a quarter. The only paperwork they hold up on after delivery is final payment.

F, all time low on 5 year chart
GM, all time low on 5 year chart
FCAU back to Jan 2017 pricing
TSLA, still above Jan 28, 2020

 

[ProfTournesol]

No one in automotive ships air freight unless an OEMs plant is down. FedEx and UPS are still flying. Airlines need to move planes to keep landing slots.

Where you getting "deliveries are laggging" from? They are always lower at the start of a quarter. The only paperwork they hold up on after delivery is final payment.

Yes, airlines are not used in automotive (or almost not).
Deliveries: they try to reschedule and reassign the cars. It will have some impact on the Q1 numbers.

 

[Unpilot]

Airlines need to move planes to keep landing slots.

Both the FAA and European authority's have waived this requirement

FAA rule waiver will make it easier for airlines to cancel flights at O’Hare, other big airports

 

[KarenRei]

Was pondering last night at what point is the medicine/cure more of a problem than the illness? If the world economy is trashed while the emergency measures are in place, how many people will die or suffer long term from this versus how many will die or get sick if the situation is just managed on a more ad hoc basis?

This feels like ridiculous overreaction to me. The whole world is going insane. The global death count from this thing does not justify a twentieth of the impact it has had on market already.

On one hand, I have the immediate reaction of: what price tag am I supposed to put on my mother with chronic lymphoma? My uncle with a severe heart condition? My elderly grandmother? My cousin who has so little immune system that she was already wearing a mask when going out in public, on doctors' advice?

On the other hand, I fully realize that there is a price tag on everyone's head. That everyone could have better medical outcomes if spending was unlimited (hey, get your weekly MRI!), but it can't be, so it isn't. Everything must be cost-justified. And the money for these costs comes from the global economy. Hurt the global economy, that dollar figure on everyone's head goes down, and more people die, from all causes.

And ultimately, in the longer term, the global economy will be made stronger by this. The elderly and people with chronic health conditions will die early, saving medical insurance from having to pay out a fortune in long-term costs. But at the same time... "the elderly and people with chronic conditions" includes my mother, my uncle, my grandmother, and my cousin. And I don't want that to happen, for really obvious reasons.

 

[j6Lpi429@3j]

I suspect if tesla still go ahead with a cybertruck factory, they may be able to get some VERY sweet deals from the state they choose to build it in. Its likely the only new manufacturing investment people will see for a while...

 

[UCF3]

Maybe, but maybe stellar Q1 delivery numbers and/or earnings come out before the market is able to drag TSLA below $500 into the $400s.

If Tesla shows a strong Q1 in spite of the virus situation in China and now elsewhere, which it's looking like it might, it could brush off a lot of the virus panic that is affecting the rest of the market.

$568 premarket now. We might see your $400s today

 

[Sancho]

So it would be nice to be able to 'call the bottom', but there's some really big factors of uncertainty that make it particularly hard:

• Real-world economic impact of the virus will be significant - China is still not fully back up running and they had a 2 months head-start. There will be economic data release after economic data releasing showing a worsening economic scenario. Housing activity will probably go down, unemployment will keep ticking up, consumer and industry optimism metrics will keep going down.
  
• Democrats are not going to make it easy for Republicans to enact an economic stimulus of the required magnitude to counter the supply and demand shock - if they do it will be on their own terms, and I just don't see Republicans bowing to that. They'll start blaming the Democrats (this has already started ...), and this will only make the slump deeper.
• I think there's a chance the U.S. will be the worst hit among developed countries, and here I'm including China, South Korea and Italy too...
• Fed rate cutting dry powder is low and QE doesn't have enough credibility.
• Tesla might be affected more directly as well. With 40,000 workers it's only a matter of time until there's an infection at Fremont. Will they stop production lines? Will everyone be wearing masks? How about the end of Q1 delivery rush, when people don't want to go to crowded delivery centers? How about suppliers?
• Good Tesla news might keep arriving, with an unknown effect on TSLA.

So IMO it will be very hard to call the bottom, both on the macro and on the Tesla specific level. Looks harder to call this bottom than in 2008-2009.

I believe a good trigger condition would be when daily infections start slowing down in the U.S. too - and we are probably still far away from that:

# "United.States" daily new infections log:
Feb 29:     3 new cases,     62 total cases ( +4.7%)
Mar 01:     5 new cases,     67 total cases ( +7.3%)
Mar 02:    15 new cases,     82 total cases (+18.0%)  #
Mar 03:     7 new cases,     89 total cases ( +7.7%)
Mar 04:    27 new cases,    116 total cases (+23.0%)  ###
Mar 05:    59 new cases,    175 total cases (+33.5%)  #######
Mar 06:    75 new cases,    250 total cases (+29.8%)  ########
Mar 07:    99 new cases,    349 total cases (+28.2%)  ###########
Mar 08:   137 new cases,    486 total cases (+28.1%)  ################
Mar 09:   120 new cases,    606 total cases (+19.7%)  ##############
Mar 10:   233 new cases,    839 total cases (+27.7%)  ###########################
Mar 11:   171 new cases,   1010 total cases (+16.9%)  ####################

As I believe the lack of widespread testing means that the real number of cases is several factors higher and is currently spreading freely within the U.S.

By the time we hit max virus fear in the US, I think stock prices will be so low that investors will feel that the economic consequences of this, however real, are already baked into the discount. There will be some very attractive entry points on a lot of big name stocks then.

But there are no guarantees in this game. It’s possible that the economic fallout will be so big and long lasting that macros continue to fall, even when the virus is mostly contained.

This is certainly a time for great caution. But when I have a sense that market participants understand the worst that the virus is going to look like (medically) in the US, I will start placing a few bets.

 

[Right_Said_Fred]

The virus scare is coming at a very inconvenient time for Tesla. Last year 50% of all Q1 deliveries happened during the last two weeks of the quarter. This quarter it will be less concentrated because China deliveries are more evenly spread, but the deliveries in Europe and the US could suffer somewhat if places go in lockdown. And if people have other things on their mind there may not be enough takers for the cars in inventory.

Small ray of light: now that the dollar has rallied it will provide some forex tailwind for the earnings report. Every car delivered in Europe in March (and that is the big delivery month) brings in a few thousand more dollars than if it had been delivered in February.

 

[Wooloomooloo]

You are not understanding that the death toll is an incomplete metric.
First, against everything Elon taught us, you're thinking linearly: you have a number of deaths that doubles every 3-4 days, do you really want to underestimate that?
Second, percentage of death cases over Corona cases are increasing in Italy: it's not still clear why (antibiotic-resistance is one of the possible culprits) but failure of health system is not something you want to see. Health personel gets sick, it's overworked and overstressed, and so people with conditions that were very curable one month ago die.
Let 20% the medics and nurses in one country to get very sick and than tell me how it goes...
Also, the more this thing stays, the more the real economy is hurt (jobs lost, etc.)
Don't f**king underestimate this, or you'll regret it.

As Paul Graham says: When you're dealing with exponential growth, the time to act it's when it's feels too early.

The response of the US Government and agencies has been absolutely awful, and we're following your growth trend pretty much. In S Korea they have drive-through testing stations FOR FREE for anyone who wanted it, and subsequently they beat the curve. Here, where profit comes before anything, we've failed miserably.

The markets are in for another kicking today thanks to the insane announcements yesterday. But, this correction was coming one way or another, it's just happened far more quickly than anticipated.

 

[Wooloomooloo]

Major Indexes today, as of 6:30am EST

Stocks, today.

China: -1.5%
Saudi: -1.5%
Hong Kong: -3.6%
South Korea: -3.8%
Turkey: -4.3%
Indonesia: -5%
Portugal: -5%
Italy: -5%
Switzerland: -5.1%
Germany: -5.5%
France: -5.5%
UK: -5.5%
Spain: -5.7%
Netherlands: -5.7%
Austria: -5.8%
Russia: -6.7%
Australia: -7.2%
India: -8.1%

 

[KarenRei]

Small ray of light: now that the dollar has rallied it will provide some forex tailwind for the earnings report. Every car delivered in Europe in March (and that is the big delivery month) brings in a few thousand more dollars than if it had been delivered in February.

Wouldn't it be just the opposite?

Regardless, I'm not focused on the ER right now - just deliveries. Right now, no signs that anyone here in our Icelandic group has any interest in backing out of orders because of the virus, but I imagine there might be some headwinds in new orders.

Tesla thankfully has a ton going for it going into Q2. Chinese order books are huge - they can support a high cancellation rate and low new order rate for a quarter, and still steam ahead. Plus, the government really wants them to succeed. Tesla also now has the Model Y, and they can move up deliveries to new markets that they had expected to be later if needed. Plus, their margins are so huge that they can cut prices if need be to boost sales. Also, the UK BIK incentive starts at the beginning of April, which should significantly boost demand, even in a bad economy.

And lastly, Tesla is flush with cash.

It's not that Tesla doesn't face headwinds. But proportionally, the headwinds could have been way worse.

 

[FrankSG]

$568 premarket now. We might see your $400s today

Like I said: maybe, maybe not.

 

[Right_Said_Fred]

Wouldn't it be just the opposite?

In February for every car sold for €50,000 Tesla would receive $54.000 (€1 = $1.08). Now it's more like $57,000 (€1 = $1.14)