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

[Mo City]

Isn't it reasonable to assume that most of the S&P inclusion is priced in by now as far as SP is considered? It will create helpful pressure, but...

Was it reasonable to assume the 5:1 split was already priced in prior to Monday's volcanic eruption?

I thought it was. Consider also Tuesday's pre-market was well over $500 before the $5 billion stock sale announcement .

 

[engle]

If it wasn't for possibly imminent S&P 500 inclusion, Battery Day, and the next P&D report, I definitely would have sold 10% of our non-taxable holdings around $500 on Tuesday. If we bubble-up higher, I'd still capture 90% of those gains, while having 10% in cash to take advantage of any later downturn. (The wife wants to do a home addition anyway. Here in Silicon Valley, our home is worth almost $1,000 per SF, while cost of construction is $300 per SF max, so it would be profitable - just not $TSLA profitable!)

Barrons.com published several leading indicators Tuesday that the stock market (including $TSLA) is in a bubble (below). If they are correct, I wonder what kinds of macro events would trigger a huge sell-off and how rapidly it would occur? Would it drop off a cliff like March's overdone panic selling, or not?

Some ideas in rough order of relative probability:

1. A horrible second wave of US Covid-19 cases and deaths in Fall/Winter 2020 along with normal flu season overwhelms hospital ERs.
   
2. Major vaccine delays.
3. Economic recovery is much slower than anticipated.
4. China massively retaliates economically against Trump's US ban of "Tik Tok", "WeChat", and all other apps that are made in China (said Peter Navarro). For example, China bans all iPhone sales in China.
5. US election results and/or Trump's reaction to them if he loses. If Trump wins again, I expect riots in the streets will be much worse than the protests the first time.
   
6. Major earthquake hits Silicon Valley - the Hayward Fault is way overdue for a big one.

I'm sure the brain trust here can think of several more.

Of course, the only worry specific to $TSLA is that Elon unexpectedly quits, has a serious illness, or worse. Long term I predict it will be a generational transition since he now has 6 children with the oldest (twin sons) ~16 years old.

"The stock market is not a bubble.

Sure the Nasdaq Composite climbed 1.4% to 11939.67 on Tuesday, while the S&P 500 gained 0.8% to 3526.65, and the Dow Jones Industrial Average rose 215.61 points, or 0.8%, to 28645.66. The Dow has ticked up 0.4% year, while the S&P 500 has risen 9.2, and the Nasdaq has gained 33%. The ratio of the Nasdaq 100 to the S&P 500, meanwhile, is now highest on record.

But the stock market is not a bubble.

Zoom Video Communications (ZM) jumped 41% after reporting earnings that were more than twice what analysts had been expecting. It's now worth $129.1 billion, more than International Business Machines' (IBM) $109.9 billion. Zoom had sales of $663.5 million during its second quarter, while IBM had sales of $18.1 billion.

But the stock market is not a bubble.

The ratio of bulls to bears in the Investor Intelligence Sentiment Index, at 3.7, is higher than 3, the level that has led to selloffs in the past. Citigroup's Panic/Euphoria index hit 1.13, almost three times 0.41, the level that signifies euphoria. The stock market has been down 100% of the time after reaching that level of euphoria.

But the stock market is not a bubble.

Apple (AAPL) stock gained another 4% on Tuesday, and has gained 157% over the past year; its sales have increased by 5.7% during that period. Tesla (TSLA) dropped 4.7% after announcing a $5 billion secondary offering, but is still up 953% during the past year. Its sales have increased by 3%. " simply cannot believe how far the growth in their market caps have exceeded the growth of their overall business," writes David Rosenberg of Rosenberg Research, referring to the "'Great Eight' growth stocks of which Apple(AAPL) and Tesla are but two.

But the stock market is not a bubble.

There are perfectly good explanations for all these things. Low interest rates, quantitative easing, future growth, disruption, the coronavirus, and on and on and on. A bubble is not one of them.

Until it is."

 

[jpsgoneev]

Speaking of which, kinda pleased about creating this one about 10 days ago (I couldn't find it on Google Maps, thought I'd take the initiative)

View attachment 583278

I also see a “Tesla GigaTexas”.

 

[Jack6591]

I hope when I’m gone that in some way I’ve made the world a better place. Jack Rickard did. Jack’s endeavors to advance sustainable transportation will ripple in time. His efforts will empower mankind’s fight against climate change for years, for decades. Great job Jack. Thanks fo a life well lived.

 

[Curt Renz]

Tesla Daily - hour ago:

 

[CapitalP]

Totally agree. Tesla’s customer service is the worst of any car company by a country mile

I do worry that eventually, this bad customer service will catch up to the stock price. There's only so long a company can keep treating its customers badly. I myself don't have any personal experience with this because I don't own a Tesla... yet. But I always see people posting about Tesla's lousy customer service. I hope Elon is listening and does something about this.

 

[ggr]

The relationship between (A) and (B) is a simple debt. There's a few ways this could be resolved:

1. (A) asks (B) to pay back his share before the split so he will get the 4 dividend shares. But (A) will no longer receive interest on his lent out share.
2. (A) asks (B) to pay him 4 shares post-split. In this scenario (A) will now receive 80% less interest, because he is lending out only 1 share @ $500 instead of 1 share @ $2,500.
3. (A) and (B) simply agree to change the debt between them from 1 share @ $2,500 to 5 shares @ $500. (A) continues to receive the same amount of interest on the now 5 shares lent out to (B).

Although I haven't heard anyone confirm this, in all likelihood #3 is the standard way to deal with short positions during a split like this. Even if some of the (A)'s asked their (B)'s to do things in way #1 or #2, it's likely that those (B)'s just borrowed shares elsewhere from an (A) willing to go with #3. There are currently plenty TSLA shares available for borrowing.

1. (A) might have no idea that his shares have been loaned out, if he has a margin account. In any case, he has no idea who (B) is, so how does he ask?
2. In which case (B) has to come up with the other 4 shares.
3. see (1), but remember that (A) doesn't have the other 4 shares.

The real answer is that it was the broker who did the actual lending, and is on the hook to make (A) whole. Somehow. But (A) does not have the dividend shares, so anything that involves him lending extra shares to (B) whether via the broker or not, doesn't work.

I say again, look at the big picture. Tesla issued about 196M*4 new shares, but at the time they did that, there were about (196+10.5)M shares out there in people's accounts. 10.5M is about the known short interest at the time of recording the split. There is a deficit of about 42M (10.5M * 4) new shares that should have appeared in people's accounts. Where do they come from?

 

[ggr]

Isn't it reasonable to assume that most of the S&P inclusion is priced in by now as far as SP is considered? It will create helpful pressure, but...

No, it can't be priced in, because the funds that actually track the S&P 500 can't buy before the announcement but must buy after.

 

[Nuclear Fusion]

Totally agree. Tesla’s customer service is the worst of any car company by a country mile

I’m guessing the people who disagreed with my comment also think Elon Musk was a founder of Tesla (a lie) & that he personally designed the Neuralink device & that it doesn’t build on the ton of existing neuroscientific research

 

[Artful Dodger]

This is factually incorrect. This is not how S&P weighting works.

Lol, TSLA doesn't have a weighting in the S&P 500, tt hasn't been added yet. Duh!

The 70% runup since Aug 11th will increase TSLA's intial weighting upon S&P 500 entry, full stop.

 

[Artful Dodger]

Isn't it reasonable to assume that most of the S&P inclusion is priced in by now as far as SP is considered? It will create helpful pressure, but...

How could it be priced it when passive index funds are not allowed by buy yet per their own bylaws, but will need to acquire ~45*5 = 240M shares after the announcement comes.

It's more reasonable to specuate IMO that Tesla works out some kind of deal for a special equity offering for the individual funds to avoid a large SP runup, and then Tesla pockets the cash. Kinda like today's $5B offering, but at a much more massive scale. The maginitude is on the order of $500/share * 240 shares = $120B

So Tesla doesn't need that much equity or want that much dilution, but I'd guess they offer up another few 10s of $billions to help the market transition to a new equilibrium SP after TSLA is added to the S&P 500.

Imma HODL'ing.

Cheers!

 

[Criscmt]

From all-in LEAPs back to all-in Stocks

I moved to all LEAPs in July, the returns overall are good.
I have more shares than when I started in July.

I am trying to figure out the plan to unwind this, get back to shares.

Two aspects that I thought should be considered while I am on this LEAPs path and later complete the unwinding are

1. Timing of the transition, not all-at-a-time, but staggered. What are reasonable transition points. Example, convert 10% when SP reaches certain price.
2. Tax considerations during the LEAPs journey and the transition timings.

In short, can you guys share your thoughts on '1' and '2'?

IF YOU ARE GENEROUS OR CURIOUS ENOUGH to read further...
Tax considerations: Miscalculations, apparently:
Return calculation:

• My statement on me having more shares now than when I started isn't as appealing after I learnt that even for LTCG, the tax can be > 35% considering state taxes.

LTCG? Maybe not:

• In taxable account I always had LEAPs at least an year out, 13-15 months out.
• I have been switching my LEAPs, moving to ATM and 25% OTM as the SP kept moving up.
• "Switching": I cash out the option by selling a vertical spread, sell the option right at the next strike.
• The tax event triggers when the option is closed. Since my LEAPs are at least an year out, I thought I would be paying only LTCG.
• Tax straddle rules might mean my calculation on the 1 year holding of the long call might be inaccurate. I need to read more on this. I didn't buy pairs/spreads but sold the short call later. For options like I had the categorization would be long-term if the long call tax event is triggered 1 year after I sold the short call?
  
• I plan to very soon consult a tax pro. That said, I appreciate any inputs.

Timing (Transition points)

• One plan I thought about was to convert to shares once I hit a target count of shares. I might have to calculate taxes, account for this money and use the remaining to calculate if that remaining gets me to the target share count.
• The other plan is to convert to shares at certain points like when current SP being some x% (say 6%, no strong reasoning for this number) below ATH seen so far during regular trading hours.
• One other approach is to go by SP, x% converted at SP 500, so on.

If the SP goes to 600-700, there's a good chance (depending on tax part), my portfolio value would reach a point where I will have the freedom to spend time in my life on something I am passionate about, doing things that will have positive impact on those who are less fortunate.

Thoughts?

@Lycanthrope @StealthP3D @FrankSG Tagging you as I found some wisdom in your posts, related to the topic of this post of mine.

 

[mickle]

Barrons.com published several leading indicators Tuesday that the stock market (including $TSLA) is in a bubble (below). If they are correct, I wonder what kinds of macro events would trigger a huge sell-off and how rapidly it would occur? Would it drop off a cliff like March's overdone panic selling, or not?

This years flu season will be the lowest on record due to social distancing and mask wearing. Covid-19 will probably be with us for 2-3 years and have a very long tail. People will just get used to dealing with it and life will continue. Things will be roughly the same as they are now, good for tech and the rich, bad for the poor. Rich will get taxed more to help the unemployed.

Now, based on my extensive analysis, here are the Top Ten most probable sell-off events, in reverse order:

#10. Alien invasion.
#9. "Escape from New York" becomes real.
#8. Bitcoin hits $100K.
#7. Internet crashed by commie hackers.
#6. Cold fusion discovery.
#5. Covid-21.
#4. 3rd Great Toilet Paper Shortage.
#3. New compact Tesla Gremlin introduced.
#2. Internet pornography outlawed.
#1. Stupid tweet by Elon.

 

[PeterJA]

Lol, TSLA doesn't have a weighting in the S&P 500, tt hasn't been added yet. Duh!

The 70% runup since Aug 11th will increase TSLA's intial weighting upon S&P 500 entry, full stop.

Of course the runup will increase the weighting, but not the number of shares required to be bought, because the share price has increased (proportional to the increase in weighting).

 

[gabeincal]

It seems like a genius plan: the timing, the split, the offering...

Create the scenario where you control all the variables and your outcome is guaranteed.

Wonder what’s the outcome that Elon and the team is looking for. Any guesses? /s

A strong positive price movement with the stability that the s&p committee and ultimately pension funds desire long-term.

 

[bpjod]

I’m guessing the people who disagreed with my comment also think Elon Musk was a founder of Tesla (a lie) & that he personally designed the Neuralink device & that it doesn’t build on the ton of existing neuroscientific research

Nope. Simply that I’ve owned Acura, Toyota, Nissan, Subaru, VW, Dodge and GM and the best service has been Tesla, and it’s not even close. Granted I don’t live in California. Even better, the cars hardly ever require service, which is also vastly better than any competitor.

 

[EV forever]

I’m guessing the people who disagreed with my comment also think Elon Musk was a founder of Tesla (a lie) & that he personally designed the Neuralink device & that it doesn’t build on the ton of existing neuroscientific research

Nope. So far needed to contact service about 4 times. Each time received prompt and excellent service. Last two services were done at home. That includes HW3 upgrade which was also done by mobile technician. Each time we found the service rep to be knowledgeable, respectful and competent.
Compare that to service experience at Toyota, Nissan and Honda dealerships- continuously trying to sell you additional items, giving you long lists of ‘recommended service’ checklists and requiring you to sign a document saying that we refused dealer recommended service. Ugh how can you even compare

 

[CorneliusXX]

This years flu season will be the lowest on record due to social distancing and mask wearing. Covid-19 will probably be with us for 2-3 years and have a very long tail. People will just get used to dealing with it and life will continue. Things will be roughly the same as they are now, good for tech and the rich, bad for the poor. Rich will get taxed more to help the unemployed.

Now, based on my extensive analysis, here are the Top Ten most probable sell-off events, in reverse order:

#10. Alien invasion.
#9. "Escape from New York" becomes real.
#8. Bitcoin hits $100K.
#7. Internet crashed by commie hackers.
#6. Cold fusion discovery.
#5. Covid-21.
#4. 3rd Great Toilet Paper Shortage.
#3. New compact Tesla Gremlin introduced.
#2. Internet pornography outlawed.
#1. Stupid tweet by Elon.

I know this is tongue in cheek, but I think there's a pretty good chance of #8 happening in the next 24 months. The halvening occurred a little while ago, and this little DeFi concept feels like it has the potential to be just as hyped as the ICO craze in 2017.

It will then drop to $50k and people will call it a failed experiment.

 

[CorneliusXX]

The reason why $TSLA is light years ahead with their OTA updates:

View attachment 583425

Hopefully Volkswagen are actually gaining some institutional knowledge so that all future vehicles come with OTA updates. We need them to make more EVs to speed up the transition.

 

[mongo]

1. (A) might have no idea that his shares have been loaned out, if he has a margin account. In any case, he has no idea who (B) is, so how does he ask?
2. In which case (B) has to come up with the other 4 shares.
3. see (1), but remember that (A) doesn't have the other 4 shares.

The real answer is that it was the broker who did the actual lending, and is on the hook to make (A) whole. Somehow. But (A) does not have the dividend shares, so anything that involves him lending extra shares to (B) whether via the broker or not, doesn't work.

I say again, look at the big picture. Tesla issued about 196M*4 new shares, but at the time they did that, there were about (196+10.5)M shares out there in people's accounts. 10.5M is about the known short interest at the time of recording the split. There is a deficit of about 42M (10.5M * 4) new shares that should have appeared in people's accounts. Where do they come from?

Yeah the broker facilitates the transactions and acts as an intermediary. A is made whole by having their account (internally) track 5 new shares lent instead of 1 old share. A can sell these shares at any time, they are no less whole than when only 1 old share was lent.

5 lent new shares is just as valid a journal entry as 1 lent old share.