TSLA Market Action: 2018 Investor Roundtable

[brian45011]

btw I think it is safe to say Elon has poor judgement when it comes to predicting when they will hit their goals and I would bet money he will be late on reaching goals in the future but that's nothing new.

He will lose credibility with institutional holders if he is late on GAAP profits and cash from operations for Q3 and Q4.

 

[YasB]

Idk, why did Elon thought it would provoke a " short burn of the century " then?

Elon is talking to analysts, big stock holders or regulators more or less permanently. So he should have a good understanding of the things these people are concerned about, what they may be watching or what expectations they have. I somehow doubt, he has the same level of insight, when it comes to 'the shorts'. We know he's an hyperactive Twitter user and is reading and re-tweeting a lot of stuff there. I think there is a chance, that he has taken the bearish stuff on Twitter more serious than he should and it's just that simple.

If you follow guys like Spiegel or the TSLAQ hashtag, you may get a good impression about the things, the more extreme and vocal bears think. It looks like some of them have basically made it a hobby to bitch about Tesla. You'll read a lot about bankwupty any day now, SEC investigations or Tesla won't ever be able to build X amount of Y, with X and Y changing over time.

But i somehow doubt, such things are the bear case for the majority of shares short. A big guy like e.g. Einhorn, won't short a stock like Tesla based on the chance they hit or miss a random 5k number by a few month or so. I'd assume they look for more stable trends and more fundamental stuff and compare it to the industry in great detail. Like maybe how often plans have come true over the years, how many times Tesla reached it's stated goals only by 80% instead of 100%, what the average miss was or how much growth is affordable within todays market constraints. In the end such things are way more important over the long run. And usually they are to complicated, to wrap them up in a Tweet and make any sense. Of course, this is only how i imagine things to be. Since i've never experienced such an institution from the inside, i may be totally wrong and they are simply rolling a dice or so.

Back to Twitter: I'm sure in the time it took me to write the last paragraph, several hundred posts about Tesla have been written. Half of them probably discuss, how Tesla was not able to really produce 5k cars a week in June and how they won't be able to produce them in August or September, since they'll be bankrupt because of whatever ... and Elon may be reading too much into that.

 

[scaesare]

Several media outlets mention how these tariffs will hurt automakers like Tesla - but the thing is that due to timing of the US tax credit expiration, Tesla already has good reason to minimize their exports for the remainder of the year. So in six months when Tesla has reason to step up their exports, sensible people may already have fixed these nonsensical tariffs, without any real loss to Tesla.

Given that there is a stepped reduction in tax credit (half, then half again...) in subsequent quarters upon which the clock continues to tick, and there's every likelihood that Tesla will continue to have an order backlog during that time, is there going to be a tax-related reason for Tesla to step up their exports in 6 months?

 

[bpsmits]

Interesting, I'd never heard of that one. Here's a link: The First Harlem Corner (1863)

I live in a city called "the Bilt" in The Netherlands.
Cornelius Vanderbilt's great-great-grandfather, Jan Aertson or Aertszoon ("Aert's son"), was a Dutch farmer from the village of De Bilt in Utrecht, Netherlands, who emigrated to New Amsterdam (later New York) as an indentured servant in 1650. The Dutch van der ("of the") was eventually added to Aertson's village name to create "van der Bilt" ("of the Bilt"). This was eventually condensed to Vanderbilt.[5]

source: Wikipedia

 

[bdy0627]

The "**** up" theory is certainly a valid alternative but he gave the "tsunami of hurt" comment ~8 months before anything was observed on the metaphorical beach. For comparison, the "short burn of the century" comment was made 2 months ago.

The "short position explodes" comment was made ~2.5 weeks ago and predicted to take place in ~3 weeks. Don't know if the "burn" and "explosion" are part of the same event. We should know in 1 week maybe, 6-8 months definitely

I think this whole short burn idea is wayyyyy simpler than it's being made out to be. What blows up the shorts' position is Tesla becoming profitable. That's the fundamental short thesis against Tesla. There are lots of angles they use to get there, but that is their fundamental argument. Tesla becomes profitable at a production level of 5,000 model 3 per week, along with continuing to produce 2,000 model S and X per week. They just became able to do that for the first time last week. Right now, there is disbelief. The shorts were able to drop TSLA hard this week by feeding and amplifying that disbelief into something absurd.

Make no mistake that the short burn has begun with Tesla achieving the ability to mass produce their cars at a level that allows for profitability. Once Tesla demonstrates that they can sustain this level of production, the short position is totally exposed. Of course, shorts will argue various things about demand, competition, quality, Elon sucks, whatever, even after Tesla achieves profitability. In the end, once Tesla can sustain this level of production, the short burn commences. The fuse was certainly lit last week. How long is the fuse? That's the question we can't answer yet. It could be pretty short if Tesla demonstrates a production level anywhere near 5,000 model 3 per week. Elon has been very confident about Tesla's production lately - clearly different from how he appeared in previous quarters. All wheel drive and performance model production is rolling with deliveries starting by the end of this month. He indicated they wouldn't start production of these versions until the production level was at 5,000 per week. My feeling at this point is that Tesla is much closer to sustaining 5,000 per week than most people think it is. Many shorts and analysts suggest they think Tesla's sustained production level is somewhere around 2,000.

If this was a 1 week trick pulled off by Elon, with Tesla dropping back down to around 2,500ish per week, I do not think Elon would be as confident as he has been. Do I think there is still some Elon optimism going on? Sure, that's his M.O. I don't think they will sustain 5,000 per week starting now. However, I do believe Tesla will almost certainly sustain 5,000 per week within 6-8 weeks, if not sooner. If this is true, then this is a superb dip to buy on. We will climb from this dip sooner than later, as TSLA always does. Don't be surprised though if the actual short burn takes much longer.

 

[elasalle]

Some good news that is overlooked is that this means that the (automated!) non GA4 Model 3 lines were responsible for 80% of the output, and increasing. Meaning that Tesla still sees lots of speedup opportunities in those lines. GA4 seems more and more of a quick and dirty temporary way to increase production (and thus margin) without dropping output when improvements to the non GA4 lines are made.
All the fuss about GA4 will be irrelevant, what we should really look at is the progress on the automated GA lines.

Edit: with Elon ‘alien dreadnought’ statements, does anybody really think that a manual GA line is a permanent thing?

while the outside tent makes it seem whimsical and attracted a circus show - people I think forget that the actual assembly line is hard core German Grohmann engineering that was shipped via air to help increase throughput.

Hats Off on the tent - it was an outside the box solution.

I think Grohmann must be busy building the next assembly lines for the next China GF. (If tariffs kick in and China GF is stalled, then everything could go into the Europe GF of MY assembly lines as well) ...

 

[neroden]

Fine. Write naked puts and you will be wealthy.

You have to have a valuation model for the stock in the first place (or it'll be equivalent to buying the stock at too high a price).
And you have to be able to buy the stock if the put executes ("cash-secured" puts secured by purchasing power to buy the stock, *not* actually naked). Otherwise it's like issuing a limit order without having the cash or margin capacity to buy the stock -- big uh-oh.
I'm also making sure that any margin capacity I'm using to secure the puts is from stocks which *aren't Tesla*, for what should be obvious reasons.

Essentially I'm using a strategy which is more conservative than "sell all my other stocks to buy more TSLA". If TSLA goes down during the right time frame, it turns into "sell all my other stocks to buy TSLA". If TSLA doesn't, it doesn't and I just collect premium.

So less upside than straight stock purchases. But also harvests that sweet, sweet volatility premium. Thanks to Jonathan Hewitt for pointing me in the right direction to understand the importance of implied volatility in options trading; selling puts at super-high IV has been really reliable, since they usually come out ahead even if the stock drops. (At low IV, not such a good deal.)

 

[Zhelko Dimic]

So you're saying that these model 3 to S/X switchers prevented a disastrous collapse in S/X demand? Without the switchers S/X deliveries would have fallen by about 13k (c. 30%) from H1 '17 instead of 3k (c.7%)?

Yes, or they'd had to pull some other levers: redesign, discounts, getting cars into press fleet etc...

 

[Unpilot]

I think this whole short burn idea is wayyyyy simpler than it's being made out to be. What blows up the shorts' position is Tesla becoming profitable. That's the fundamental short thesis against Tesla. There are lots of angles they use to get there, but that is their fundamental argument. Tesla becomes profitable at a production level of 5,000 model 3 per week, along with continuing to produce 2,000 model S and X per week. They just became able to do that for the first time last week. Right now, there is disbelief. The shorts were able to drop TSLA hard this week by feeding and amplifying that disbelief into something absurd.

Make no mistake that the short burn has begun with Tesla achieving the ability to mass produce their cars at a level that allows for profitability. Once Tesla demonstrates that they can sustain this level of production, the short position is totally exposed. Of course, shorts will argue various things about demand, competition, quality, Elon sucks, whatever, even after Tesla achieves profitability. In the end, once Tesla can sustain this level of production, the short burn commences. The fuse was certainly lit last week. How long is the fuse? That's the question we can't answer yet. It could be pretty short if Tesla demonstrates a production level anywhere near 5,000 model 3 per week. Elon has been very confident about Tesla's production lately - clearly different from how he appeared in previous quarters. All wheel drive and performance model production is rolling with deliveries starting by the end of this month. He indicated they wouldn't start production of these versions until the production level was at 5,000 per week. My feeling at this point is that Tesla is much closer to sustaining 5,000 per week than most people think it is. Many shorts and analysts suggest they think Tesla's sustained production level is somewhere around 2,000.

If this was a 1 week trick pulled off by Elon, with Tesla dropping back down to around 2,500ish per week, I do not think Elon would be as confident as he has been. Do I think there is still some Elon optimism going on? Sure, that's his M.O. I don't think they will sustain 5,000 per week starting now. However, I do believe Tesla will almost certainly sustain 5,000 per week within 6-8 weeks, if not sooner. If this is true, then this is a superb dip to buy on. We will climb from this dip sooner than later, as TSLA always does. Don't be surprised though if the actual short burn takes much longer.

Well stated I agree. The thing that most short's/analysts don't seem too factor in is the constant growth and line improvement.
To them whatever Tesla is now is what it will be. Look at any graph of the speed and growth of production it really is amazing.

 

[neroden]

The EV Credit cut off is based on vehicles sold for use in the US: not produced, reserved, nor ordered.

Specifically explained in IRS regulations as the date title transfers under state law.

 

[neroden]

But it does matter that the vehicle was not acquired for use in Q2 (drivable and title transferred as the state).

Internal Revenue Bulletin: 2009-48 | Internal Revenue Service

Further, the OEMs self report their numbers...

Huh, are most dealerships 'retail dealers'? If so, GM may need to count dealer inventory...

Good catch. You're right, GM has to count cars against the limit when they hit dealerships.

 

[Boomer19]

• Elon bought more TSLA at $300 (and 340?)
  
• SP is still above the low end
• The good news report came out early (faster than usual and before the trading holiday)
  
• SP did exactly the same thing as the last fourth of July
  
• Shorts just sold a lot of shares to achieve that movement (increasing the % short)
  
• Elon is predicting a short burn of large proportion in a time frame that has not expired

And you think he doesn't know what he is doing??

P.S.
We are paying nothing (unless we sell). I didn't have to spend long days at the plant, those that did are the ones sacrificing for Tesla's success.

i understand all this, just venting at the abuse the price took when it’s more important to do what they do best, innovate, invent, and produce..
not gloat. now the short idiots are gloating. i hate that.
on a good note..my father called me last night. he doesn’t follow all things musk that much, although he knows my friends and i do, and are pretty well invested in tesla. he even noticed the treatment that tesla has received recently. he mentioned cnbc and some other talking heads about nitpicking the news and intentionally misconstruing the data..and he knows basically 0 about tesla and the recent ongoings. even he can see it. that’s actually good news, because their game is transparent to those not even in the know. they keep it up, we win eventually.

 

[mongo]

while the outside tent makes it seem whimsical and attracted a circus show - people I think forget that the actual assembly line is hard core German Grohmann engineering that was shipped via air to help increase throughput.

The airflight equipment (along with other German line) was for GF1, not Fremont.

Specifically explained in IRS regulations as the date title transfers under state law.

Yeah, but they use 'acquire' when speaking of the purchaser, but 'sold' when speaking of the manufacturer.
For instance, the manufacturer sells the car to a dealer whom the purchaser later acquires it from. So there may be two criteria that apply more to traditional OEMs....

 

[neroden]

Interesting, I'd never heard of that one. Here's a link: The First Harlem Corner (1863)

Here's an older citation. Apparently it was actually the *second* Harlem Corner where Vanderbilt and his associates purchased *more* than the total outstanding shares of the company.

The Road of the Century • Chapter 8

'"The Vanderbilt group had bought the equivalent of the entire capital stock and 27,000 shares more, which the wretched shorts had no chance whatsoever of delivering."'

After cornering and squeezing the short-sellers, many of whom were in the states legislature, Vanderbilt is said to have said:

'"We busted the whole Legislature," he exulted, "and some of the honorable members had to go home without paying their board bills."'

 

[mongo]

i understand all this, just venting at the abuse the price took when it’s more important to do what they do best, innovate, invent, and produce..
not gloat. now the short idiots are gloating. i hate that.
on a good note..my father called me last night. he doesn’t follow all things musk that much, although he knows my friends and i do, and are pretty well invested in tesla. he even noticed the treatment that tesla has received recently. he mentioned cnbc and some other talking heads about nitpicking the news and intentionally misconstruing the data..and he knows basically 0 about tesla and the recent ongoings. even he can see it. that’s actually good news, because their game is transparent to those not even in the know. they keep it up, we win eventually.

I agree, it is frustrating and hurts right now (not as bad as 2017... scar tissue maybe), but I am optimistic that in the next 4 days maybe 4 months definitely, things will look better.

 

[neroden]

@neroden already answered most of your questions, but on this one his answer was a bit too terse. Yes, E gets the actual dividend from the company. However part of the arrangement for the shorts to borrow the shares is that they are on the hook for paying any missing dividends, too... So B has to pay the dividend to A, and D has to pay it to C.

Yes. Thanks for that further answer.

I will point out that there is one catch: the tax treatment of the *actual* dividend is frequently different from the tax treatment of the "payment in lieu of dividend" made by the short sellers.

This is why US long-term individual investors, who often pay 0% rates on actual dividends, try not to lend out dividend stock to short-sellers; the payment-in-lieu is taxed at full tax rates. Short-term traders and financial firms have a different tax regime so they may pay the same tax rate either way.

 

[neroden]

Let me just say this. Tesla will get there, that’s obvious for anyone outside of the shorts bubble. But Tesla will also not get there in the time frame you guys all are hoping for. And that’s just as obvious for anyone outside the bubble that is this investor section.

What time frame do you think we *are* hoping for? I'm currently expecting Model 3 at 8K/week by end of year.

Musk said 10K, so I apply the usual 20% Musk Optimism Discount Factor(TM). Normally I would also apply a time discount, but duplicating all the lines which need to be duplicated in 6 months just doesn't seem like a stretch.

 

[neroden]

Why are only Ford's, BMW's, and Daimler's quarterly reports of credit-eligible vehicles available to the public?

Nobody else chose to make them public. Apparently it's totally optional whether they publish these numbers. GM chooses not to. Tesla chooses not to. Nissan chooses not to. (And those are the three who are close to the limit.)

 

[neroden]

Not correct. In the past quarters, Tesla was scaling towards much larger production rate, so volume at the end of quarter was making it look good. But we're not scaling towards 10-15K a week this quarter, so calculation wouldn't hold...

We're not? I think we are. Remember, the next target is 10K/week at the end of the year. Tesla will probably try to do this in a somewhat more relaxed manner than the push to 5K, but they are definitely still targeting 10K. Need to get that reservation backlog down, and every car produced is money in the bank.

 

[scaesare]

. I don't think they will sustain 5,000 per week starting now. However, I do believe Tesla will almost certainly sustain 5,000 per week within 6-8 weeks, if not sooner.

Great post...

I quoted the above, because with Elon having stated that 6K/wk is the goal for the next month, I'd bet 5K/wk sustained is about there or pretty close.

I suspect much of the "all hands on deck" effort that led to the 5K goal was building/tuning the assembly line and associated logistics, in addition to whatever hands-on work on the cars was being done. That should lead to continued higher throughput. The press seems to focus only on the car-assembly labor aspect of the effort...