Heck,
@Gigapress sold 15% of his TSLA shares yesterday. Now that one deserves attention and a caution never to buy on margin, and
@Gigapress is one of the most prolific posters here on TMC.
I would like to explain my rationale more on my aggressive investment strategy to get feedback from the TMC hivemind and to maybe give useful perspective for people.
Not that I'm giving advice anyway, but I want to say that
I would absolutely not recommend that most people copy this strategy. I am doing things and thinking about things radically differently than most people, my situation is different than most people, and presently I have neither dependents to support nor a long-term partner whose feelings I need to consider when making investment decisions.
First of all, I should mention that the majority of my TSLA shares are safely tucked away in tax-advantaged retirement accounts with no debt or options shenanigans. I could liquidate these accounts in an emergency. The countless margin calls (literally...I have lost count of how many happened this year) are only occurring in my regular brokerage account. I checked in today and calculated that my net debt-to-equity ratio for my investment portfolio is about 40%, which is tolerable risk for my current preferences. If I were really
fully leveraged on margin this D/E ratio would be much higher.
My overall personal net debt is probably much lower than most people here, because I don't own my residence and I have no student loans, medical loans or anything like that. I do have a car loan because I finally bought a Model 3 a couple weeks ago, but that debt is low-risk because it is approximately canceled out by the resale value of the car, which is quite stable compared to assets like TSLA, and the car itself is insured against catastrophic loss of value from stuff like damage and theft. I also have a few credit cards I'm maxing out, because I kept getting mail advertisement for no-strings-attached 0% interest for 18 months and I decided it would be irrational not to take advantage of that. Presumably they hope I'll just not pay the debt off at the end of the intro period.
Also, I still think people generally misunderstand something fundamental and crucial about the risk of margin, which is that you can lose extra money on the way down, but as long as the asset price eventually increases, then the same process works in reverse. As the stock price rises, the market value of my margin equity would increase in proportion to the TSLA price, which then increases my margin credit, which enables me to buy more shares to replace the shares I sold on the way down. This is a bit of an oversimplification and one important factor is that forced sales have tax consequences; I'm locking in a huge amount of long-term capital gains this year, which is not very tax-efficient, but oh well. Except for the tax stuff, I haven't identified any reason to care about margin calls
as long as I am extremely confident that the underlying asset is eventually going back up to where it was and beyond.
That's why I don't complain or fret about Wall Street manipulation and misunderstanding; they are serving me a Golden Opportunity on a Silver Platter and I intend to exploit it hard. I will gladly take their capital because I have big ambitions for philanthropy projects I'd like to do when I'm older and I don't think the hedge fund managers would spend the money as well as I can. Alternatively, it's not the end of the world if my projections are totally wrong and I lose everything and end up as a washed-up 28-year-old engineer with good health, around $10k or $100k, and an employment history gap of one year in which time I put out 1000 investment analysis posts that are allegedly pretty impressive. I could do a lot worse than that, and I think I could recover quickly in such a scenario.
My overall financial risk is mitigated when I take into account other assets with less-tangible value that I can use to acquire more money in the future at the expense of the unemployed freedom I currently enjoy, such as:
- Health
- Engineering degree and employment history
- Knowledge & skills about all kinds of things
- US citizenship and passport
- Native English language fluency
- Boeing network (I know they would like me to come back)
- TMC network (If I needed a job, I think probably someone here would be able and willing to help)
- Being a white male
- Ability to get into good grad school
- No criminal record
- Enjoying working with computers
- Living in the 21st century with all its technological and infrastructural wonders like indoor plumbing, smartphones, cheap ubiquitous broadband internet, electricity, etc.
My net investment portfolio value is down approximately 80% since the peak last year. My assets as of today are definitely not enough to sustain this semi-retirement indefinitely with a 4% withdrawal rate. Back in January, I didn't anticipate this when I handed over my badge and laptop to my manager and said goodbye. However, with the way I have chosen to play this craziness, the 2022 TSLA market irrationality will actually end up being
by far the best thing that ever happened to my finances, because TSLA call options have gotten so ludicrously freaking cheap (in my estimation) that the temporary annoyance we are experiencing may pay off by one or two orders of magnitude over the next two years. The more irrational the pricing error gets, the more aggressive I get. If actual bad stuff threatening the earnings explosion were happening then I would not be doing this, but I've concluded that the market doesn't understand what's coming and in many cases the market seemingly misinterprets very good news as disappointing. I mean, the stock dropped hard after Battery Day and after AI Day. Come on.
I think my risk of being wrong on TSLA/Tesla modeling is greatly mitigated by:
- Specialization. I know a lot about this one thing and related subjects due to obsessively researching it and spending thousands of hours crunching numbers and thinking.
- Formal educational background in electrical/computer engineering and economics and career in manufacturing/quality, which seems to be very important for deeply understanding this one thing.
- Past history since 2017 of generally understanding Tesla the company and the EV market and making generally accurate predictions about how the business would work out. (Actually, I underestimated Tesla in 2018 when I bought most of my shares.)
- Living in Seattle/Bellevue for the last several years and seeing the staggering growth with my own eyes
- TMC community. I learn things here every day. I hope I've successfully communicated that I want critical feedback and y'all follow through on that. This makes me less concerned that this place is an echo chamber where I'm just getting dopamine hits from likes for saying stuff merely because we all like the conclusion and want to rationalize it. Also, here at TMC the quality of the critiques, from those who aren't trolls, is much better than Reddit or real life or wherever else I try to have discussions. It's not efficient to debate with someone whose mind is filled with basic misconceptions about the topic at hand, like talking about orbital mechanics with a flat-earther.
teslamotorsclub.com
