TSLA Market Action: 2018 Investor Roundtable

[aubreymcfato]

Regarding UAW, there's a new article on Bloomberg:
Terms of Service Violation
Not sure if I read it well, but this is good news to me: basically Musk said "I don't think it's good for anyone, you'll just lose money, but if you really want it you can unionize".

 

[dqd88]

I had to think on this a while. The backdrop of Elon saying the shorts were about to get burned made things look suspicious.

But taking a step further back, it all makes sense.

1) Elon says shorts will be burned.
2) Elon buys more shares of TSLA
3) They achieve their goal of building 5,000 Model 3s in 1 week.
4) Saudi’s once again offer to help him take company private.
5) Elon begins to think about that seriously and mentions to Board. They tell him to research with shareholders.
6) Saudi’s investment becomes public
7) The stock starts to take off
6) Elon decides it’s time to act before stock price runs away from him, so in fairness to all shareholders, tweets his intentions so no one can insider trade on the deal.
7) Funding was secured via the Saudi’s et all
8) Shareholders convinced him it was a bad idea and was going to force many of them out of their investment.
9) He realizes most shareholders would be forced out and gives up on idea.

I believe that’s what happened. And here in a few weeks or months, the stock will be back where it was pre tweet and all will be well with the world again.

I agree mostly, but I think worst case is SEC/DOJ decide that Elon made an honest mistake. There was no mal intent. But he did use the wrong words in "funding secured", and they slap him on the wrist. Does that bring other repercussions around raising money or limiting his power/standing? idk... but again I think that's just worst case, maybe 30% chance of that happening. Certainly would increase SP volatility

 

[Tslynk67]

Norway looking nice - on track for 2000+, currently 1440 with 4 days to go - maybe 5 as they've been doing Saturday deliveries that last few weeks - which only happens when they're overloaded.

 

[Fact Checking]

Weekly $TSLA options chain post. Here's the current options open interest summary:

2018/Sep/28:  PUTs:    44,493 ; CALLs:    53,359
2018/Oct/05:  PUTs:    19,987 ; CALLs:    22,651
2018/Oct/12:  PUTs:     8,518 ; CALLs:    16,073
2018/Oct/19:  PUTs:   200,749 ; CALLs:    75,201
2018/Oct/26:  PUTs:     4,007 ; CALLs:     2,642
2018/Nov/02:  PUTs:     2,340 ; CALLs:     1,538
2018/Nov/16:  PUTs:    70,290 ; CALLs:    40,419
2018/Dec/21:  PUTs:    70,251 ; CALLs:    47,649
2019/Jan/18:  PUTs:   459,920 ; CALLs:   209,682
2019/Feb/15:  PUTs:     7,013 ; CALLs:     9,918
2019/Mar/15:  PUTs:    55,009 ; CALLs:    34,830
2019/Jun/21:  PUTs:    59,181 ; CALLs:    34,277
2019/Aug/16:  PUTs:    18,170 ; CALLs:    12,633
2020/Jan/17:  PUTs:   191,014 ; CALLs:    70,467
2020/Jun/19:  PUTs:     2,158 ; CALLs:     1,339
      total:  PUTs: 1,213,670 ; CALLs:   633,740

Last week it was:

2018/Sep/21:  PUTs:   353,566 ; CALLs:   171,979
2018/Sep/28:  PUTs:    29,545 ; CALLs:    43,110
2018/Oct/05:  PUTs:    15,514 ; CALLs:    19,121
2018/Oct/12:  PUTs:     7,210 ; CALLs:    15,223
2018/Oct/19:  PUTs:   188,546 ; CALLs:    72,724
2018/Oct/26:  PUTs:     3,586 ; CALLs:     2,284
2018/Nov/02:  PUTs:     1,879 ; CALLs:     1,157
2018/Nov/16:  PUTs:    65,619 ; CALLs:    35,972
2018/Dec/21:  PUTs:    75,741 ; CALLs:    46,707
2019/Jan/18:  PUTs:   458,235 ; CALLs:   209,081
2019/Feb/15:  PUTs:     6,889 ; CALLs:     9,536
2019/Mar/15:  PUTs:    53,099 ; CALLs:    34,513
2019/Jun/21:  PUTs:    59,075 ; CALLs:    34,407
2019/Aug/16:  PUTs:    18,125 ; CALLs:    12,503
2020/Jan/17:  PUTs:   190,491 ; CALLs:    70,491
2020/Jun/19:  PUTs:     2,137 ; CALLs:     1,346
      total:  PUTs: 1,529,764 ; CALLs:   781,144

Last week (September 21 expiry) was a bloodbath for shorts: 353K PUT options (35.3 million shares-equivalent) expired, 303K of them, over 85%, expired worthless. Longs fared better, but only because their short interest was much lower: of the 171K options 145K (85%) expired worthless.

Most shorts did not roll forward their short positions, so far: total open interest dropped from last week's 1,529K to 1,213K, a net reduction 316K PUTs, which should help reduce downward volatility. CALL open interest was reduced by 148K options.

In terms of growth in the open interest of future expiries: Oct 19 seems to be the favorite one with +12K growth. Nov 16 saw a net increase of 5K, Dec 21 a net reduction of 5K.

Long term expiries were mostly flat, with small increases overall, 2019 Jan 18 is still expected to be a record expiry week with high stakes: 458K PUT open interest and 209K CALL open interest.

 

[KarenRei]

As a former semi truck dispatcher there is simply no current way to not use diesel for the semi itself. Even Tesla's electric semis would be helpful but you'd have to set them up in a chain so the loads could keep moving. I ran team drivers 24 hours a day...the trucks never stopped moving while one driver slept. So the Tesla semi is not quite where it needs to be unless it can do 3500 miles in a few days. Plus I think the prototype was using like 3 superchargers every time it stopped l recharge with crazy amount of cables. Infrastructure not quite there yet but close. I see alot of Tesla semi for daily routes that return to a station after a few hours but long haul (delivery centers) will take a bit more time. Also, trailers don't pollute at all, so doesn't matter that Tesla builds them. Eventually they probably will be hauled by their own electric semis, just not right away my guess.

Semi can charge during the driver's mandated 30-minute break. With 30 minutes of megacharging factored in, you have to average driving faster than something like 70 mph at 80k lb GVW to burn energy fast enough so as to need more than the mandated break time within the driver's legal daily driving window. Easy to beat 70mph if you're in Texas, I guess, but in half the US, 70 is the maximum truck speed limit, and it gets as low as 55mph (CA)

The actual problem is, of course, there's only two semi prototypes and zero deployed megachargers You're absolutely correct that trying to do cross country freight trips with today's hardware and infrastructure would not be practical when you're rushing to deliver. Maybe they might haul some trailers of cars around the bay area for a show, but obviously they're not going to solve anything, and - just being prototypes, not refined production vehicles - might even complicate deliveries.

 

[Fact Checking]

Since a few years ago I have always been very pro Tesla. Only recently have I started letting some of the shorts fear mongering influence my thinking. I'm trying to be objective, gather all facts, and go from there. But there are so many facts, it's impossible to analyze it all. This is perhaps why people take sides; they have no choice; the information that they are exposed to, that occupies their mind, that they analyze, that is what determines their stance. They don't have the time to fully vet the other side's thesis.
In a nutshell, what I'm seeing is that the shorts are analyzing this from inside out (traditional eps/financial statement analysis). While the longs start with a big picture view and work down from there - the short term financials are less important as long as Tesla's moving in the right direction and moving toward a fully zero emissions future. The shorts think like pragmatic accountants, the longs think like idealists and economists.

Note the following, important difference: at this point (end of Q3/2018) most Tesla shorts are pretending that they are thinking like pragmatic accountants, they are projecting a (false) image of knowing the truth behind the numbers.

Most of the loudest ones are doing this for several reasons, none of which derive from an honest contrarian viewpoint:

• Firstly, it's part of a Wall Street type affinity fraud pattern targeting money managers globally: "Look I'm this reasonable but level-headed guy who knows his way around Wall Street financials, I looked over the latest numbers and sadly they don't add up."
• Note that many of the same trolls, when active in global warming discussions, try to project the image of a concerned scientist, making scientific arguments. It's affinity fraud, part of a con artist act of deception.
• Secondly, if your goal is to raise doubt dishonestly, it's easier to do this via small details that 99.9% of the general public, 99% of the investing public and 90% of the analysts are not intimately familiar with, unless you are a neutral sector expert specialized in Tesla. Talking about obscure details gives the argument an air of expert authenticity, and it's always much easier to raise doubt than to remove doubt, and this principle of asymmetric warfare underlies much of the modus operandi of Tesla short communications these days.

I'm familiar with many short thesis variants, and I can tell you with a high confidence level that various popular short thesis cornerstone claims are fraudulent:

• The claim that Tesla is losing money on every EV made is false.
  
• The claim that finished Model 3's need to be worked on a lot at large expenses is false.
• The claim that Tesla SG&A scales linearly with revenue (and thus guarantees insolvency) is false.
• The claim that Tesla never turned a profit is false.
• The claim that Tesla is hiding new unsold units in inventory is false.
• The claim that credible Tesla competitors are just around the corner is false.
• The claim that Tesla is overvalued (while they are ignoring huge intangible assets in their valuation), is false.

Each and every one of these accounting-style claims is false and dishonest, and often a technically true variant of it is stated in such a misleading way that makes it worse than false. (I'm also willing to defend/discuss any of these assessments, should anyone be of the honest opinion that they are true.)

For example a common framing is that 'Tesla never had a profitable year in its history', which is technically true, but highly misleading, because Tesla had two profitable quarters, which were always followed by impatient quarters spent on (insanely high-)growth projects.

Also note that shorts keep manufacturing new variants of these arguments, often based on the latest financials, to make it harder to find a current critique of that latest thesis. Generating a new variant of a previous lie is cheap, debunking it while making sure that everything you say is true is expensive. If the critique makes even a small mistake or includes a debatable claim then the argument gets turned around into a 'gotcha' moment and gets turned into a he-said-she-said argument which is a win for the troll/FUDster.

There are honest Tesla bears, but they are neither certain about their analysis nor are they loud activist shorts, and their overall negative Tesla view mostly comes out of a more pessimistic reading of the same trends that bulls are interpreting - and for a debt-leveraged company like Tesla it doesn't take a huge shift in parameters to turn the story negative.

One of my favorite recent examples of a Tesla short unintentionally exposing his flawed understanding of accounting and market realities is this Seeking Alpha article from a Tesla short who announced that he went long Tesla for this quarter, because he is projecting a billion dollars in ZEV credits:

"Is Tesla Counting On A Billion Dollar Regulatory Credit Bonanza?"​

This billion dollar estimate is IMO far out to lunch that ignores the demand limited nature of the ZEV/GHG market - here's a bullish financial model that that estimates $100m of ZEV credits for Q3, while noting that $200m might be possible but is optimistic. I.e. there's a factor of 10 smaller ZEV estimate from a bullish Tesla analyst, compared to a Tesla-short who turned long temporarily... How accurate could his previous short opinions have been?

Anyway, I believe you have to keep all these dynamics in mind when following topics/companies that get trolled, and generally assume that the 'social media' and 'financial media' sentiment about a company can be both artificially positive (gets hyped undeservedly) and artificially negative (gets bashed unjustly), and that it's hard to cut through such smoke screens ...

 

[KarenRei]

Regarding UAW, there's a new article on Bloomberg:
Terms of Service Violation
Not sure if I read it well, but this is good news to me: basically Musk said "I don't think it's good for anyone, you'll just lose money, but if you really want it you can unionize".

Moran again? Amazing how they keep trotting this one guy forward over the years.

Time for Tesla to Listen – Jose Moran – Medium
Terms of Service Violation
Inside Tesla’s Audacious Push to Reinvent the Way Cars Are Made
Elon Musk’s Tesla: Cars of the future with labor practices from the past
Tesla auto workers worry increased production sacrifices safety
NLRB finds merit to charges filed against Tesla, issues complaint and sets trial date for June 11

Sometimes it feels like the number of people UAW can find to support them at Tesla can be counted on one's fingers.

 

[Xenius]

Moran again? Amazing how they keep trotting this one guy forward over the years.

Time for Tesla to Listen – Jose Moran – Medium
Terms of Service Violation
Inside Tesla’s Audacious Push to Reinvent the Way Cars Are Made
Elon Musk’s Tesla: Cars of the future with labor practices from the past
Tesla auto workers worry increased production sacrifices safety
NLRB finds merit to charges filed against Tesla, issues complaint and sets trial date for June 11

Sometimes it feels like the number of people UAW can find to support them at Tesla can be counted on one's fingers.

I'd be real interested to hear from anyone who actually wants the UAW. Workers, or otherwise. In theory I'm pro-union. In practice, I'm anti-UAW.

 

[JRP3]

Anything stopping Tesla workers from starting their own union and shutting out the UAW?

 

[theschnell]

Anything stopping Tesla workers from starting their own union and shutting out the UAW?

That is an interesting idea

 

[KarenRei]

Anything stopping Tesla workers from starting their own union and shutting out the UAW?

Initiative.

Also, the presence of UAW assets at Tesla works against that goal, since it divides the potential pro-union base. And UAW obviously has financial resources behind it.

 

[Words of HABIT]

Last week's much awaited crash test results were released for the Tesla M3. 5 star rating in every category and every sub-category. Effectively the safest car on the planet. This positive news was picked up by Mass Media for a few hours and then promptly dropped to the discarded bin.

When I was a kid and up to present day, I associate Volvo with safety. Their add campaigns for the last 40 years go something along the lines of "We know it's boxy, but it's safe". For Volvo, safety trumps design and everything else.

Tesla - a few hours of good Media coverage

Volvo - 40+ years of good Media coverage (understanding most was paid for)

The 5-star safety rating is a HUGE deal. Baring nothing else, there is an entire new segment of the car buying population that puts safety first and will now buy a Tesla EV (not because it's an EV, not because of environmental reasons, willing to overlook any perceived risks by a newer manufacturer) simply in order to get the safest car on the planet for their spouse, their kids, their family and themselves. After all, they are worth it.

 

[theschnell]

Note the following, important difference: at this point (end of Q3/2018) most Tesla shorts are pretending that they are thinking like pragmatic accountants, they are projecting a (false) image of knowing the truth behind the numbers.

Most of the loudest ones are doing this for several reasons, none of which derive from an honest contrarian viewpoint:

• Firstly, it's part of a Wall Street type affinity fraud pattern targeting money managers globally: "Look I'm this reasonable but level-headed guy who knows his way around Wall Street financials, I looked over the latest numbers and sadly they don't add up."
• Note that many of the same trolls, when active in global warming discussions, try to project the image of a concerned scientist, making scientific arguments. It's affinity fraud, part of a con artist act of deception.
• Secondly, if your goal is to raise doubt dishonestly, it's easier to do this via small details that 99.9% of the general public, 99% of the investing public and 90% of the analysts are not intimately familiar with, unless you are a neutral sector expert specialized in Tesla. Talking about obscure details gives the argument an air of expert authenticity, and it's always much easier to raise doubt than to remove doubt, and this principle of asymmetric warfare underlies much of the modus operandi of Tesla short communications these days.

I'm familiar with many short thesis variants, and I can tell you with a high confidence level that various popular short thesis cornerstone claims are fraudulent:

• The claim that Tesla is losing money on every EV made is false.
  
• The claim that finished Model 3's need to be worked on a lot at large expenses is false.
• The claim that Tesla SG&A scales linearly with revenue (and thus guarantees insolvency) is false.
• The claim that Tesla never turned a profit is false.
• The claim that Tesla is hiding new unsold units in inventory is false.
• The claim that credible Tesla competitors are just around the corner is false.
• The claim that Tesla is overvalued (while they are ignoring huge intangible assets in their valuation), is false.

Each and every one of these accounting-style claims is false and dishonest, and often a technically true variant of it is stated in such a misleading way that makes it worse than false. (I'm also willing to defend/discuss any of these assessments, should anyone be of the honest opinion that they are true.)

For example a common framing is that 'Tesla never had a profitable year in its history', which is technically true, but highly misleading, because Tesla had two profitable quarters, which were always followed by impatient quarters spent on (insanely high-)growth projects.

Also note that shorts keep manufacturing new variants of these arguments, often based on the latest financials, to make it harder to find a current critique of that latest thesis. Generating a new variant of a previous lie is cheap, debunking it while making sure that everything you say is true is expensive. If the critique makes even a small mistake or includes a debatable claim then the argument gets turned around into a 'gotcha' moment and gets turned into a he-said-she-said argument which is a win for the troll/FUDster.

There are honest Tesla bears, but they are neither certain about their analysis nor are they loud activist shorts, and their overall negative Tesla view mostly comes out of a more pessimistic reading of the same trends that bulls are interpreting - and for a debt-leveraged company like Tesla it doesn't take a huge shift in parameters to turn the story negative.

One of my favorite recent examples of a Tesla short unintentionally exposing his flawed understanding of accounting and market realities is this Seeking Alpha article from a Tesla short who announced that he went long Tesla for this quarter, because he is projecting a billion dollars in ZEV credits:

"Is Tesla Counting On A Billion Dollar Regulatory Credit Bonanza?"​

This billion dollar estimate is IMO far out to lunch that ignores the demand limited nature of the ZEV/GHG market - here's a bullish financial model that that estimates $100m of ZEV credits for Q3, while noting that $200m might be possible but is optimistic. I.e. there's a factor of 10 smaller ZEV estimate from a bullish Tesla analyst, compared to a Tesla-short who turned long temporarily... How accurate could his previous short opinions have been?

Anyway, I believe you have to keep all these dynamics in mind when following topics/companies that get trolled, and generally assume that the 'social media' and 'financial media' sentiment about a company can be both artificially positive (gets hyped undeservedly) and artificially negative (gets bashed unjustly), and that it's hard to cut through such smoke screens ...

This is excellent. I also used to read shorts thesis to try to avoid an echo chamber.

It got to the point where their position was generally so ridiculous I couldn’t be bothered anymore.

Now with the Model 3 ramping like it is, even the one metric where I have historically agreed they had a potentially legitimate argument, valuation, is now becoming a super weak argument.

Which is why their current arguments now primarily depend on the complete vaporware of OEM competition, expectations of a significant and imminent drop of Model 3 ASP (as if there will be very little demand for current versions in Europe and Australia etc,) and expectations of extremely high Model 3 warranty costs. It’s amazing the cognitive dissonance between the current reality and the “reality” that they anticipate given huge amount of evidence that contradicts their thesis.

 

[KarenRei]

This is excellent. I also used to read shorts thesis to try to avoid an echo chamber.

It got to the point where their position was generally so ridiculous I couldn’t be bothered anymore.

Exact same story here. I still drop in from time to time just to make sure that it remains as ridiculous as always. It's important to know what your "opposition" believes and why. It's often like listening to the Pizzagate crowd. Any random trivial detail becomes the cornerstone of a new story about how Tesla is A) lying and B) DOOOOOOMED!!!!!

Also, the funniest part is the blatant "nothing Tesla does can ever be good news" aspect . For example, recently one of the most famous shorts on SA (CoverDrive) wrote this recently:

I’m seeing an explosion of inventory listings. Some incentives are being offered, but they’re not nearly as strong as they were a year ago. It won’t be enough to move them. I think the Model S is particularly in peril, as there is no longer a waiting list for North American Model 3s.

Got it? Low incentives = bad. But I've also seen CoverDrive argue many, many times when incentives are high that that's bad, because it means that nobody wants the cars!

Essentially every piece of Tesla news works like this over there.

 

[ggies07]

You mean besides the fact that it's illegal to do so, and the technology is not yet reliable to deal with unforeseen incidents?

I only brought it up because Elon said they could do a cross-country trip if it was hard-coded now. So I took that to mean they have the capability if they wanted to hard-code specific major highways for access to maybe the bigger service centers.

 

[Singuy]

With Audi now anti-selling their newest EV and couldn't even afford to have dealership sell them, I am now more convinced than ever that the only way currently to have an EV profitable is with vertical integration + minimalist design. Apparently the hardest part is now creating a competitive EV to Tesla, but how to make it profitable AND be competitive to Tesla. Legacy car manufactures will end up spending a boatload on battery packs due to the inevitable world wide shortage if every company wants to make EVs at scale. The advantage Tesla has in this aspect is ridiculously ahead of the competition that I think the game is already over before it started. Don't even mind the 600 miles+ range Tesla is making for 2020 while everyone else are stuck at 200 miles range. If Elon says today that making a 200kw pack is doable but incredibility expensive..just think about the cost for legacy car makers if they want to match this.

 

[vigleik]

This is probably the wrong place for this, but we’re up above $300 again in pre-market trading. On low volume, so it doesn’t mean much. But I have a good feeling about the rest of this week.

I’m having a hard time understanding the market action lately. It just seems that every piece of evidence points to Q3 being a huge beat, yet the stock price does not react. Two theories:
1) The market is just being stupid, and this is an example of how it’s possible to beat the market by simply paying attention.
2) The collective wisdom of this board is wrong. We’re in an ech chamber, and Tesla is about to disappoint.

I’m in it for the long haul, so for me the short term volatility is just noise. (Actually that’s not 100% true: some day the Model 3 will come to Australia and then I might have to sell some stock to help pay for one.) But I am curious about this apparent market failure.

 

[Xenius]

This is probably the wrong place for this, but we’re up above $300 again in pre-market trading. On low volume, so it doesn’t mean much. But I have a good feeling about the rest of this week.

I’m having a hard time understanding the market action lately. It just seems that every piece of evidence points to Q3 being a huge beat, yet the stock price does not react. Two theories:
1) The market is just being stupid, and this is an example of how it’s possible to beat the market by simply paying attention.
2) The collective wisdom of this board is wrong. We’re in an ech chamber, and Tesla is about to disappoint.

I’m in it for the long haul, so for me the short term volatility is just noise. (Actually that’s not 100% true: some day the Model 3 will come to Australia and then I might have to sell some stock to help pay for one.) But I am curious about this apparent market failure.

Just look at events over the past few weeks. I posted this graphic on twitter the other day:

Stock crosses 300, and then a recycled story about a DOJ investigation comes out and gets spread around? I'm sure that's just a HUGE coincidence.

TSLA if anything, is artificially LOW.

 

[uselesslogin]

This is probably the wrong place for this, but we’re up above $300 again in pre-market trading. On low volume, so it doesn’t mean much. But I have a good feeling about the rest of this week.

I’m having a hard time understanding the market action lately. It just seems that every piece of evidence points to Q3 being a huge beat, yet the stock price does not react. Two theories:
1) The market is just being stupid, and this is an example of how it’s possible to beat the market by simply paying attention.
2) The collective wisdom of this board is wrong. We’re in an ech chamber, and Tesla is about to disappoint.

I’m in it for the long haul, so for me the short term volatility is just noise. (Actually that’s not 100% true: some day the Model 3 will come to Australia and then I might have to sell some stock to help pay for one.) But I am curious about this apparent market failure.

It is either number 1 or 2 and my money is on 1. If it makes you feel any better the market was being pretty stupid in 2013 as well, right before Tesla increased deliveries 100% from Q4 to Q1. Either way just sit tight.

 

[mongo]

This is probably the wrong place for this, but we’re up above $300 again in pre-market trading. On low volume, so it doesn’t mean much. But I have a good feeling about the rest of this week.

I’m having a hard time understanding the market action lately. It just seems that every piece of evidence points to Q3 being a huge beat, yet the stock price does not react. Two theories:
1) The market is just being stupid, and this is an example of how it’s possible to beat the market by simply paying attention.
2) The collective wisdom of this board is wrong. We’re in an ech chamber, and Tesla is about to disappoint.

I’m in it for the long haul, so for me the short term volatility is just noise. (Actually that’s not 100% true: some day the Model 3 will come to Australia and then I might have to sell some stock to help pay for one.) But I am curious about this apparent market failure.

Pet theory: during the time frame between the tweet and the reconsideration, there were a lot of share that traded hands (I picked up way more for way more than I planned too, at least). These shares may be held by, if not strong longs, at least people who want to get back to where they bought it. So the number of shares in play is much lower than before and 300 is a nice number to trade around.

1) Partly cautious, party already having positions, partly tapped out.
2) Nah, never disappointment, there is always next quarter (disappointment left my repertoire after two drops from 380). If they cancel the pickup, then I'll reconsider that emotion...

P.S. Almost rated your post funny for the first paragraph.

Currently green and above 300 in premarket.