TSLA Market Action: 2018 Investor Roundtable

[neroden]

New tweet: he just offered to give anyone who has bought a dual motor performance (edit: with the performance upgrade package) a $5000 rebate and turn off free supercharging. That could cost a lot.

Elon Musk on Twitter

Not that many people bought the performance upgrade package. Might be a few million dollars.

Including the performance upgrade package in all performance cars (eliminating the "P minus" model) is going to cost them a lot more than the rebates. But I figure it was done to reduce confusion, since the existing situation *was* confusing.

 

[strangecosmos]

Doubled down after passing the reversal candle. IMO 340 is the new 300 very soon

Various online charting, I'm looking for how many times a level has been rejected, married some some volume accumulation level going into the resistance level.

332 and 344 are only 1-1.5 levels of resistance, not failing twice or more. 355 is much more significant. With Calls out in Jan/Feb above 380-400 if one is getting $$ for those in this run up, think about scaling as they bounce higher.

I noticed some people using technical analysis in this thread, so I wanted to re-post something I wrote on that topic in another thread.

Academic research finds that most daily price movements are random.

Here's an academic study that compared five common technical trading strategies to random trading. It concluded:

"Our main result, which is independent of the market considered, is that standard trading strategies and their algorithms, based on the past history of the time series, although have occasionally the chance to be successful inside small temporal windows, on a large temporal scale perform on average not better than the purely random strategy, which, on the other hand, is also much less volatile."

Another study looked at 5,000 technical trading strategies and found none performed better than chance.

This is a great study that simulated a stock market where prices moved 100% randomly. Lo and behold, they found some of technical traders' favourite patterns in the random data:

"To demonstrate why traditional technical analysis falls short, we applied the standard methods to a synthetic market generated by a random walk. Although the market data is engineered to be pure noise, technical analysis "discovers" strong features such as accumulation/distribution patterns, upward and downward trends, support and resistance levels."

So, if you are using the tools of traditional technical analysis, you are probably attributing meaning to noise. These same patterns appear in completely random data.

Just because a technique appears to work once or a few times doesn’t mean it has a success rate better than chance. People could flip coins to decide whether a stock will go up and down, and many of them would have streaks of 7 or more successes in a row. That’s just statistics. Confirmation bias, the gambler's fallacy, and survivorship bias often lead people to feel confident about techniques that perform no better than chance.

Apparently, some prominent proponents of technical analysis are also advocates of astrology, and believe that astrology can be used to predict stock price movements. That's maybe a sign that technical analysis lacks scientific rigour.

You can also ask: 1) if traditional technical analysis worked, why wouldn't high-frequency trading algorithms have arbitraged all the alpha away by now? and 2) if it worked, why doesn't technical trading have a billionaire poster child, like Warren Buffett for value investing?

Also relevant:

The video is about how alpha is elusive because a) the stock market is highly unpredictable and b) even more importantly, anytime anyone finds a way to non-randomly attain alpha, people just copy them and arbitrage all the alpha away. That would of course apply to technical trading methods.

 

[neroden]

He represented himself, he paid for the $5k, you could tell he took it personal with the amount of personal rants he put into the article. This isn't the first time he has done it. And he literally just lead the pitchfork march using his weight as the editor of a popular site, forced Elon into a corner.

While on the other hand, Fred didn't report on the 5000 comments complaining about the loss of camera-on-top functionality in the first versions of v9. Um.... you have an actual disgruntled-customer news story breaking on your own site, and you sit on it because you weren't bothered... but then when YOU are bothered personally, THEN you make a fuss? Come on, you don't have to be much of a journalist to do better than that. Just need to be able to mentally put yourself in someone else's shoes for a minute.

 

[Fact Checking]

Ugh the mythical short squeeze talk again! I remember what happened the last time.

JFYI you are commenting in an investor forum of a company whose stock already went through a sustained short squeeze just five years ago, when the price went from $20-ish levels to just shy of $200. (After a surprise earnings report.)

With 27% of the float still shorted a short squeeze over the next couple of months is a very real possibility, as more and more tiers of investor demand gets unlocked in the near future, as the following financial events trigger:

• Q4 profits,
• paying back bonds/notes,
• Moody's upgrade,
• Addition of Tesla to the S&P 500

I'd not be surprised if short interest drops below 10% in the next couple of months, giving the share price a significant boost up.

While $3,000 is very unlikely to happen in the near future, price levels above $500 are a real possibility, because some models are suggesting $100b+ fair corporate value right now, plus the inevitable price transients.

If the idea of a short squeeze hits too close to home for you then you should complain about it elsewhere.

 

[neroden]

I'd rather they had just re-bundled the options and increase the price 5k. Then those who bought without the Performance package could feel they got a reasonable deal, and nobody else would care. Then if they want to walk back the pricing do it 1-2k at a time no more than once every 3-4 weeks. Throw in some language about how costs have gone down on the upgrades because of volume, etc etc, everyone can feel good.

Yes. This is how they should have done it. I've tried to explain pricing stuff like this to them before (as far back as 2014) and I thought they'd got the message....

 

[MXWing]

In Elon's defense:

• Elon's motivation was to give something to new Performance owners now that Tesla is wildly profitable,
• free unlimited Supercharging was internally expensed at about $3,000, so a it's a pretty high value option, and if you use it frequently it can be worth over $10,000 for the lifetime of the vehicle,
• even if you don't make use of it it increases reuse value if you can transfer it within your family,
• so to Tesla insiders, who are aware of free Supercharging's true value, it was an honest mistake to make.
• Fred Labert is an insecure guy constantly striving for attention, with low journalistic ethics: I personally reported to him a serious math error in one of his Tesla production articles a few months ago, which error materially affected the sensationalist headline and made the headline false. He rephrased the paragraph to make it technically correct but didn't change the headline, didn't reply or acknowledge the feedback and didn't even add an "edited" note to the article. The Q3 delivery report also falsified the headline.
• Elon on the other hand quicly acknowledged the Performance pricing mistake despite Fred's trolling and took corrective action.
• Note how the update to Fred's trolling article is only minimal, you have to read through the same display of outrage to get to the two sentences that outline that Elon accepted responsibility for the mistake and took corrective action. Fred, in his update, also complains about his own readers for disagreeing with him.

I only read Electrek these days as I read Business Insider: with an expectation of low journalistic standards and with an expectation of frequent displays of insecurity and petty grudges by Fred.

Elon is not infallible and he and the Tesla team makes mistakes, but in terms of integrity, listening to readers/customers and empathy Elon is several classes above Fred.

To make an accounting profit of 5000, I would need like 64,000 supercharged miles at 300 watt miles at cost of 0.26c per kw.

To make an economic profit I would need to subtract the opportunity costs of where 5000 could go. The most sure way is reduction of interest in debt. This would push the break even mileage past the life of the car in all likelihood.

Elon means well but you cannot fail to account for human emotion. No one feels good about

1.) Buying something and have it be 5000 cheaper, 5 minutes later.
2.) A former spouse or SO upgrading by finding someone better than you.

This is just nature, right wrong or indifferent.

I agree with you regarding Fred and being primarily self serving.

Edit: Free supercharging or $5000 is a bad bad deal due to the economic principle of adverse selection. Most will take $5000 which takes capital away from Tesla which is bad.

Those who keep the supercharging know they will spend more than $5000 on supercharging. This is even worse for Tesla than just giving THOSE people $5000 back.

With Elon also suggesting using more supercharging to make the $5000 back as well as 6 month supercharging handed to all Model 3s it further makes it less and less likely to achieve even accounting profit on FUSC.

Terrible mess all around.

 

[strangecosmos]

JFYI you are commenting in the investor section of a company whose stock already went through a sustained short squeeze just five years ago, when the price went from $20-ish levels to just shy of $200.

With 27% of the float still shorted a short squeeze over the next couple of months is a very real possibility

While it’s a nice thought, Gali dissuaded me that a short squeeze is likely. There are two major differences between 2013 and 2018:

• 16 days to cover in 2013 vs. 6.5 days to cover in 2018
• ~45-85% cost to borrow in 2013 vs. ~5% cost to borrow in 2018

 

[neroden]

So, what I wrote back in 2014 was this.

* Any time Tesla adds significant new features, they need to raise the price of the car with the new features.
* Ideally, the new features will be added as options. If they have to physically include them on all cars, they can software-lock cars which are going to people who don't buy the option.
* After a month or two, they can discontinue the model without the new features, making it standard, but at the higher price.
* A month after, they can reduce the price of the car with the new feature somewhat, honoring the price reduction for anyone who hasn't received their car yet.
* They can walk the price down a step at a time until it reaches the original price (or not, depending on pricing policy).
* They can also offer software unlocks for the same price as the option, and also walk that price down.
* About a year later, they can software-unlock the software-locked models at no charge without people being particularly upset.

Final result is that you have the new feature on all cars at the original price, but nobody is annoyed.

Rinse and repeat with every significant hardware feature. Nobody will complain.

 

[EVNow]

I noticed some people using technical analysis in this thread, so I wanted to re-post something I wrote on that topic in another thread.

Academic research finds that most daily price movements are random.

Here's an academic study that compared five common technical trading strategies to random trading. It concluded:

"Our main result, which is independent of the market considered, is that standard trading strategies and their algorithms, based on the past history of the time series, although have occasionally the chance to be successful inside small temporal windows, on a large temporal scale perform on average not better than the purely random strategy, which, on the other hand, is also much less volatile."

Another study looked at 5,000 technical trading strategies and found none performed better than chance.

This is a great study that simulated a stock market where prices moved 100% randomly. Lo and behold, they found some of technical traders' favourite patterns in the random data:

"To demonstrate why traditional technical analysis falls short, we applied the standard methods to a synthetic market generated by a random walk. Although the market data is engineered to be pure noise, technical analysis "discovers" strong features such as accumulation/distribution patterns, upward and downward trends, support and resistance levels."

So, if you are using the tools of traditional technical analysis, you are probably attributing meaning to noise. These same patterns appear in completely random data.

Just because a technique appears to work once or a few times doesn’t mean it has a success rate better than chance. People could flip coins to decide whether a stock will go up and down, and many of them would have streaks of 7 or more successes in a row. That’s just statistics. Confirmation bias, the gambler's fallacy, and survivorship bias often lead people to feel confident about techniques that perform no better than chance.

Apparently, some prominent proponents of technical analysis are also advocates of astrology, and believe that astrology can be used to predict stock price movements. That's maybe a sign that technical analysis lacks scientific rigour.

You can also ask: 1) if traditional technical analysis worked, why wouldn't high-frequency trading algorithms have arbitraged all the alpha away by now? and 2) if it worked, why doesn't technical trading have a billionaire poster child, like Warren Buffett for value investing?

Also relevant:

The video is about how alpha is elusive because a) the stock market is highly unpredictable and b) even more importantly, anytime anyone finds a way to non-randomly attain alpha, people just copy them and arbitrage all the alpha away. That would of course apply to technical trading methods.

Technical trading works only if everyone else believes in that too. It then becomes a self fulfilling prophecy.

 

[WarpedOne]

All due respect to Gali but he does not know what he is talking about there.
He is reasoning by analogies and not by principles.

Short squeeze does not happen because days to cover crossed some magic high number.
High number is a consequence or hallmark of a squeeze that is already happening.
Same with cost to borrow.
Trading volume does not say anything until there are fresh shorters opening their positions.

Short squeeze happens when the rate of forced closing (margin calls) rises above short openings.
Longs play little role as long they are staying long.

We are not saying the squeeze is already happening.
We just do not see how the short masses will be able to cover/exit without the squeeze.

 

[strangecosmos]

Technical trading works only if everyone else believes in that too. It then becomes a self fulfilling prophecy.

You might be onto something there. I remember reading something about how momentum investing (buying stocks that are going up, selling/shorting stocks that are going down) has snowballed into a real effect.

 

[MXWing]

So, what I wrote back in 2014 was this.

* Any time Tesla adds significant new features, they need to raise the price of the car with the new features.
* Ideally, the new features will be added as options. If they have to physically include them on all cars, they can software-lock cars which are going to people who don't buy the option.
* After a month or two, they can discontinue the model without the new features, making it standard, but at the higher price.
* A month after, they can reduce the price of the car with the new feature somewhat, honoring the price reduction for anyone who hasn't received their car yet.
* They can walk the price down a step at a time until it reaches the original price (or not, depending on pricing policy).
* They can also offer software unlocks for the same price as the option, and also walk that price down.
* About a year later, they can software-unlock the software-locked models at no charge without people being particularly upset.

Final result is that you have the new feature on all cars at the original price, but nobody is annoyed.

Rinse and repeat with every significant hardware feature. Nobody will complain.

Why Tesla doesn’t have an owner advisory panel with you on it that they can poll is beyond me.

Elon can keep my 5000 if I can sit in on some meetings to see how they go about rationalizing and predicting owner response like this free PUP fiasco.

 

[Fact Checking]

To make an accounting profit of 5000, I would need like 64,000 supercharged miles at 300 watt miles at cost of 0.26c per kw.

To make an economic profit I would need to subtract the opportunity costs of where 5000 could go.

Note that I agree that the fashion this pricing change was executed was a mistake: I even commented on it recently (in the context of an expected FSD price increase) that high pricing gradients need a smoothing phase or recent customers will feel bad about the timing of their purchase.

But free Supercharging has genuine value above what you listed:

• It's a life time option, it doesn't stop at 64,000 or 640,000 miles. The drive train is designed for 1,000,000 miles, the battery pack is easy to swap, the chassis has good corrosion protection.
• The "zero fuel costs for the entire road trip" is very valuable in the sense a Day Pass at Disneyland is valuable: if you ever tried a pay per attraction amusement park (try the Prater in Vienna) it is a day and night difference, the immersion and fun in all-inclusive amusement parks is so much higher, even if you technically don't care about the money at all. We are weirdly wired when it comes to paying money. Free Supercharging is a Lifetime Pass to every road-trip you will ever take, in terms of fuel costs.
• Any family member who gets your car will have free Supercharging, regardless of mileage. The wife getting your cool Model 3 in two years, while you compromise with her with a heavy heart and order a Roadster 2 as a replacement (no SpaceX option, because Safety First)? Check. Kids going to college who need a car? Check. Kids having kids who go to college and need a car and don't mind the car still being linked to Grandpa's Tesla account? Check.

Free Supercharging is easily worth the $5,000 IMO, for a broad range of customers. Not to everyone - but I can understand Elon & team thinking that it has great value - because it's true.

The mistake they made is that they didn't know that many owners don't know the value, and free Supercharging is also frequently trolled. The "but you sold it for $2,000 in the past" comment from Fred was disgraceful dishonesty.

I agree with you regarding Fred and being primarily self serving.

Almost everyone is self serving, few people are altruistic and feel bad about it, but based on his online behavior Fred is also egocentric, petty, impulsive, ethically challenged and routinely tries to address his insecurities at the expense on others. While I don't know him in person, he is probably not a good guy to be around.

Why Tesla doesn’t have an owner advisory panel with @neroden on it that they can poll is beyond me.

If the panel has any statistically significant size it would probably leak like a sieve and affect demand and create rumors and fear.

A smaller panel would work, but the risk of mistakes would still be there and it adds delay. Most corporations are not democracies, they are centrally planned economies with a military style chain of command. The flat hierarchy of SpaceX and now Tesla is pretty exceptional already. Flat hierarchies make for more agile execution - but the risk of mistakes increases.

IMO it's better to be agile, make the occasional mistake and then quickly fix it. That builds trust too.

 

[Artful Dodger]

Or we should go to sec, fbi, doj, state Dept and cry foul for trying to sell more cars and optimize production runs.

Too right. And send the Army to the border with Mexico, just in case you know, SQUIRREL
/S

 

[avoigt]

Analyzing an ER should not only include what has been said but also what has not been said. I believe the latter has not really been discussed here and I wanted to share my thoughts.

In the past we have seen that Elon overpromised and although delivered, it was often not in clock time and has therefore reported as underdelivered. I would call it delivered within Elon time which means he delivered but it was much later than originally thought. Elon Musk's 2015 Tesla Forecasts Compared To Today — The Future Looks Bright | CleanTechnica

We all have likely many examples ourselves where we thought we will achieve something in our lives earlier than what finally happened and still claim rightly that we managed. Well, Elon is measured with different standards in an environment where the many moving parts he is juggling with to achieve a goal is not even understood nor appreciated from most. Its like he is getting a field metal award for solving a complex mathematical problem only 4 people in the world really understand the complexity of the problem and 2 how he solved it. This is what Larry Elission talked about when he said: "who are you?" Larry Ellison reportedly slams media's coverage of Elon Musk and says Tesla is his 2nd-largest investment

Its a fair statement that most of the world was surprised by the strong results that has been reported in Q3. +99% of all people would have called this nonsense and not possible before. Elon hinted to strong results a few times but it was the first time Tesla overdelivered on expectations on that scale. I predicted a while ago that Tesla's results will surprise in Q3 and I predict today that Tesla will surprise in Q4 again.

Elon needs to get the SP up in order to achieve his long term goals. He also feels committed to investors as well as customers beside his justified negative emotion for destructive shorts and bears. Beside showing strong results with Tesla you also have to manage a under expectation and over deliver sentiment. Thats not easy.

If we look what Tesla gave us for Q4 as an outlook and if we compare this to the growth rate as well as fundamentals be it production related or financially than I expect the Q4 ER to surprise again.

My speculation is based on the moderate outlook for Q4 as well as current actions around price and model changes beside many others. If the MR Battery cost reduction is higher than the price reduction than we could see a higher margin with the MR and a higher demand as well as a lower price for a liked product always grows demand. Right now the market is still claiming that the MR will reduce revenue and margin and I expect the opposite to happen. The current price reduction of the P do fit into my thoughts. Elon plays with price elasticity to maximize results.

Production for the MR is the same so no additional complexity or risks. If battery production has been supply constrained than this may lead now to more vehicles produced with equal or better margin hence better results. A couple of other factors I sensed in the last weeks fit to that picture.

To be clear this is pure forward looking speculation on my side and I may be wrong.

 

[Fact Checking]

He's very insecure. I don't know why he's so insecure -- he doesn't need to be.

Insecurity is inherent most of the time, not the "fault" of people affected by it. It's not a problem in itself: Elon is obviously insecure as well, while in terms of accomplishments he would be justified to have the ego of Larry Ellison and the swagger of Arnold Schwarzenegger!

The problem with Fred is how he copes: that he often tries to boost his ego at the expense of others, rather dishonestly in many cases. We've listed three first hand experiences with Fred just here in this short discussion - which is statistically probably just the tip of the iceberg.

 

[Fact Checking]

Sadly true. I hope he gets more secure and starts showing some more integrity. I just find his behavior... sad. Self-sabotaging, really.

Also note that 90% of his articles are good, and I value his clear attempt at isolating fact, news and and opinion with the "Electrek's take" disclosure.

If it wasn't for those 5% "barbs" he tries to stick into others (often the target is Tesla), and the dishonesty in handling the comments section, I'd find his site great.

Also, I've seen shorts trying to create division among Tesla supporters by trolling Fred, and for all the hard time I'm giving Fred he is no Dana Hull and no Linette Lopez.

(Note: I never commented on Electrek's comment system so I don't have a personal "grudge" myself.)

 

[Artful Dodger]

Immediately regret clicking that link... (Fred's spin is always terrible).

Fred censors any criticism of himself. You can't even use his name right now in a comment, or the comment is instantly blocked.

I had to replace the word "Fred" with personal pronouns to get my comment posted:

"Will he now refuse the gift of a free Tesla Roadster that he won from the Tesla referral program? His conflict of interest here is obvious since the people who used his referral code only know of it from this "news" site.

"Clearly, he must either refuse this $200,000 gift or cease his coverage of Tesla. It's the ethical thing to do for a Journalist with such a obvious conflict of interest as this."​

I don't expect to be allowed back to his blog / pretend EV journalist site. Fast freddy has blocked my comments before, when I directed Robert Bollinger to ask Elon to allow Supercharger access to the upcoming Bollinger E-SUV.

Fast Freddy also manually blocked my comment when the NY Times hitpiece was published, and I criticized him for blindly promoting a contrived article, and provided evidence that some of the "quotes" the NY Times attributed to there interview with Elon had appeared weeks previously in one other news sites, proving the whole article was obviously a targeted hit piece against Elon, and solely intended to damage TSLA share price, which did did the following day.

Yes, I have screen shots of both events Fred, and yes, I will post them if it becomes necessary.

Fred has drunk the denier kool-aid from a short glass, and now he's choking in it. It colors ever headline he writes with false "balance" and self-serving click-bait greed.

IMHO Fred is a small, selfish little man, and he has my pity.

 

[22522]

So, what I wrote back in 2014 was this.

* Any time Tesla adds significant new features, they need to raise the price of the car with the new features.
* Ideally, the new features will be added as options. If they have to physically include them on all cars, they can software-lock cars which are going to people who don't buy the option.
* After a month or two, they can discontinue the model without the new features, making it standard, but at the higher price.
* A month after, they can reduce the price of the car with the new feature somewhat, honoring the price reduction for anyone who hasn't received their car yet.
* They can walk the price down a step at a time until it reaches the original price (or not, depending on pricing policy).
* They can also offer software unlocks for the same price as the option, and also walk that price down.
* About a year later, they can software-unlock the software-locked models at no charge without people being particularly upset.

Final result is that you have the new feature on all cars at the original price, but nobody is annoyed.

Rinse and repeat with every significant hardware feature. Nobody will complain.

It was a demographic availability move to make the car popular with tha track crowd. Had to be done fast to avoid blue hair positioning of the product. At least that is my take.

 

[Words of HABIT]

I will survive just fine, but will fight for the car owners who don’t own TSLA. Tesla could have handled the massive drop better.

Hashtag #punishmentsecured if you feel like helping.

View attachment 347372

This is basic supply and demand. Tesla is fine tuning their pricing structure. Apple does it. Every company does it. It also works both ways as we just saw a lemur price increase price after 24 hours. Are you suggesting that Tesla go back to those who secured their order for a lemur early as first movers and now ask them to pay more? If I can answer my own question, of course not.