TSLA Market Action: 2018 Investor Roundtable

[dqd88]

I watch this stuff because the people that link it I respect. But man these people in the videos just stammer and struggle to admit there is a MASSIVE sea change coming.

It's like the titanic they cant change course...they just can't.

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I've noticed that many shorts have trouble doing projections and thinking about paradigm shifts and stuff that requires more abstract type thinking. On SA once I asked some shorts simply for their estimates on global EV sales at 5, 10, 15, 20 years out. Several replied. And, they couldn't do it. They said they'd not thought of it, and that's impossible to do, etc etc. Was an insightful exchange.

 

[Right_Said_Fred]

Boy I bet we go right back to -100 on Nasdaq futures just like yesterday. Why do I get the impression the illuminati are working their thing to manipulate the Fed? We're gonna need a VIX spike to 30 probably before this is over.

This SP run up during a market correction (and hopefully more in the next two days) is probably an ideal scenario. The expected good report is making TSLA pretty immune to macro’s. And when the market recovers SP can ride along.

 

[ThereAre4Cars]

TaaS needs to be grown from zero and might have some roadblocks. I'm optimistic about FSD and if Tesla wins that race combined with their newfound chip manufacturing prowess then I think most of these valuation discussions are immaterial, we'll be arguing about whether a single TSLA share will be worth $100k or $150k.



I'm pretty sure they'll do it. Reading between the lines I got the impression that they already have their cobalt-free li-ion chemistry, but are iterating it to maximize thermal stability vs. performance, which needs 1-2 years to complete.

Also, after the tear-downs earlier this year everyone else started copying Tesla's and Panasonic's NCA chemistry, which has put significant pressure on cobalt prices this year:

That's a price reduction from ~$42 to ~$27, a nice %35% reduction this year alone. It appears the market doesn't think that cobalt is going to be a problem.

Cobalt price got ahead of itself when even certain hedge funds were literally buying it up and storing it. I think that likely had a larger effect on spot prices than contracted prices. It started dropping this year as a combination I'd say of Tesla's slower ramp, the improved cobalt chemistry (similar to NMC 811 levels), and probably the horribly slow ramp of competition. I mean that's just my interpretation.

But I don't for a second think that the current cobalt spot price represents a valid future prognostication of a world where Tesla is selling kWh's at 250$ a pop. That would chew up multiples of global production very rapidly.

I do hope they have the cobalt-free chemistry. If they do, and if somehow they can control that exclusively, that is a BIG deal. It's probably insanely valuable even if they have to sacrifice some superior properties e.g. energy density or durability.

If FSD is a failure then it's possible for TE to hit 50%. Tesla's automotive business without software margins probably caps out at 200B$ imo. TE maybe can get to that but I doubt it. But if Tesla is going for 1T+ that's all in autopilot and derivatives.

Consider the powerpack is 250$/kWh. The GF1 currently would only be worth 5B$ a year in revenue and not particularly high margin either. Similar math constrains GF2. But I actually voted against SolarCity and I'm still feeling pretty good about that decision.

 

[neroden]

Ummmm looks like Deepak exercised a few options today for a nice chunk of change. His exercise price was covered by todays increase to SP. Saweet. But why wouldn't he wait? Like until tomorrow?

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Deepak spent ~$160K to exercise the options and hold the stock. Maybe he just freed up the cash recently?

I've been looking up the incentive stock option rules -- Deepak gets ISOs rather than NQSOs. If Deepak is subject to the Alternative Minimum Tax -- which he probably is -- then he's immediately taxed on the spread between the option strike price and the market price at time of exercise. So he has an incentive to exercise it at a market price as low as possible, if he has the cash. (If he wasn't subject to AMT, then it would be tax-deferred so not an issue. If they were NQSOs, this would apply regardless of whether he was subject to AMT.)

 

[Right_Said_Fred]

... but the credit might be rationalized before then, because "everyone but Tesla and GM get a credit" looks really bad in Congress.

It might just all fall in place for Tesla. An end of the year order rush because of the halving of the credit and then a change to the credit system by a hopefully more EV-friendly Congress, extending it for several years for all manufacturers, which senator Heller (R, Nevada) has proposed.

 

[neroden]

Musk lives in Bel-Air.

That is a different gang with different colors altogether.

???

 

[neroden]

That's why this seemed odd.......no record of share disposal; only an exercise of the options and acquisition of the related-shares at the strike price.

Deepak isn't stupid -- he's accumulating shares.

 

[neroden]

That episode remains one often referenced among people I know. It's kind of weird too because I can't explain why this episode stands above most of them.

Because it's high concept. Along the same lines, remember "bags of mostly water"? (from "Home Soil", another great episode).

 

[KarenRei]

So, just joining for the day... Merry Christmas, everyone! Are we all excited?

 

[neroden]

So, price changes have been made.

MR went from 45k$ to 46k$
LR went from 54k$ to 53k$

God, it's like buying off Amazon. A different price every five minutes.

 

[ThereAre4Cars]

Because it's high concept. Along the same lines, remember "bags of mostly water"? (from "Home Soil", another great episode).

Yup 'ugly bags of mostly water' to be specific.

It occurred to me earlier and you just gave me the excuse to mention it that I picked my name from the ST:NG episode where Picard gets kidnapped by the Cardassian who is trying to torture him and make him proclaim that 4 lights are 3. Struck me at the moment as relevant to the various mind games.

 

[Sancho]

So, just joining for the day... Merry Christmas, everyone! Are we all excited?

I’m Jewish. If this is how exciting it feels every Christmas morning, I may convert.

 

[KarenRei]

God, it's like buying off Amazon. A different price every five minutes.

Welcome to Tesla. They should issue a realtime stock chart tracking the prices of various options as they change over the course of a day

 

[neroden]

NASDAQ pre-market now up to $299.79 in light volume trading - it appears some traders want to lock in a <$300 price.

Which is impressive, given that futures are still very bipolar and the dollar got stronger as well, which is usually a sign of risk-off (bear market).

A while back, I went and looked at the R^2 for Tesla.

If you look at charts, they will claim that Tesla has a "beta", but they shouldn't. Beta refers to how much the stock moves in response to a "general market" move. The thing is, it only means something if the stock *does* move in response to a general market move. How correlated a stock is with general markets is measured by R^2, and Tesla is *exceptionally uncorrelated*, so beta isn't really meaningful.

I mentioned this a couple of years ago. Yes, Tesla is the "uncorrelated asset" which so many wealth managers have been looking for.

I just recalculated it using an online calculator. TSLA's correlation with SPY -- 0.005. In other words, totally uncorrelated.

This is a rare example of you not already knowing something I know, so hope this helps, Fact Checking.

 

[KarenRei]

I’m Jewish. If this is how exciting it feels every Christmas morning, I may convert.

Yeah, I'm not Christian either... but I figured "Happy Atheist-Kids-Get-Presents-Day" didn't have quite the same ring to it

 

[Xenius]

Yeah, I'm not Christian either... but I figured "Happy Atheist-Kids-Get-Presents-Day" didn't have quite the same ring to it

I love my atheists get presents day! Thank you very much!

 

[mrdoubleb]

Yeah, I'm not Christian either... but I figured "Happy Atheist-Kids-Get-Presents-Day" didn't have quite the same ring to it

Maybe Starbucks can make a cup for it and it will sound better?

 

[Sancho]

This SP run up during a market correction (and hopefully more in the next two days) is probably an ideal scenario. The expected good report is making TSLA pretty immune to macro’s. And when the market recovers SP can ride along.

Also, many potential new TSLA investors are heavily invested in FANG stocks. A TSLA rise during a FANG correction may induce some to move money to TSLA now to catch the next great tech growth stock.

 

[Fact Checking]

TSLA's correlation with SPY -- 0.005. In other words, totally uncorrelated.

Now if you measure against NASDAQ futures and do it intraday then on most days there's significant correlation.

Longer term price correlation is much lower, mostly because during the past 24 months Tesla went through several re-valuation phases and significant corporate events.

But in terms of "unconstrained" correlation NASDAQ intraday volatility maps to TSLA volatility with a 2x-3x multiplier.

 

[neroden]

I do hope they have the cobalt-free chemistry.

I will say again that they don't have to make it entirely cobalt-free to solve the supply/pricing issue.

Cobalt comes out of nickel mines pretty predictably, at a 1 cobalt : 8 nickel ratio or something like that. (It varies by deposit, as low as 1 cobalt: 11 nickel, but I think 1:8 was the average I read.)

If they can get the cobalt:nickel ratio in the batteries down below that (say 1 cobalt: 20 nickel or something like that), it will not exert upwards pressure on cobalt prices.

Older battery designs were something like 1 cobalt : 3 nickel, needing a lot of extra cobalt over the cobalt produced from nickel mines. Tesla's "low cobalt" design is about 1:7.5 judging by their claims of a "60%" reduction.

They need to reduce it more than that, but if they get below 1:8, then they can make do with the side-effect cobalt from nickel mines, so it won't be a big issue any more. Half as much cobalt as they're currently using -- 1:15 ratio -- and it's Definitely Good Enough.