Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[ZachF]

Global demand for crude oil peaked in 2019.
Demand within the #1 market for crude oil (U!.....S!......A!) peaked in 2018.

On a global scale, crude has been dramatically and permanently oversupplied since 2015. US fracking had increased supply 30+% and showed clear ability to keep building supplies all the way through a peak demand that back then was assumed to come around 2027. In this environment, the Saudis realized they'd lost their role as "swing producer" and would need more players to keep prices high from here on out. They hunkered down with some hedge fund managers and now the only price rises prior to the pandemic were manufactured by a combination of OPEC+Russia+Wall Street.

Now we have a "reopening trade" from Wall Street that's driven WTI to $92 at the same time global logistics are a mess. Once those logistics are sorted out and market players start delivering more crude in a rush to take advantage of these prices, the bottom falls out.

US frackers are selling every oil futures contract they possibly can at profitable levels of $70+ and will be flooding the market with these deliveries from here til god knows when. As of now they're producing at about 11.5Mb/d, down from 13.5Mb/d pre-pandemic. What do we think happens when this logistics logjam eases in 3-5 weeks? US production goes back to 13+Mb/d and our imports go negative.

AND the Saudis are boosting OPEC production in February
AND the Russians will likely pump every barrel they can, even beyond their OPEC agreements
AND Iran will make headway on a renewed nuclear deal

Meanwhile.....demand hasn't even recovered to pre-pandemic levels and is unlikely to ever do so.


See all the notes above. TSLA investors need to be mindful that just before (or perhaps during or a bit after) this pandemic we will have crossed the tipping point on peak global oil demand. That's why oil traders, who very well know this, won't be buying 1yr or 2yr out oil contracts at $90 this June. Or perhaps ever again.

We're shifting from fossil-based scarcity to renewables(and storage)-based abundance. That's why we won't see a recession. Energy prices should absolutely collapse a couple months after the pandemic eases in March/April. Commodity prices will come down with it.

We have TONS of job openings with an unwilling workforce. All during a period of free money, record corporate cash, AND easily deployed renewable energy that's far cheaper than what's in place. That's all absurdly stimulative. Our concern should be inflation due to massive excess money supply, but fortunately there will be no scarcity to go with it so it should moderate itself. As we're already seeing.

You need scarcity for inflation and scarcity is literally over.

I agree with most here, but the timeline (March) and $20 price is too aggressive.

Oil will bounce between $40 and $100 as it decays into lesser relevance and probably settles at $40. The pops in price will come from supply shocks from collapsing petroleum states.

 

[StarFoxisDown!]

You're right.......the usual rules don't apply and do need to be thrown out....and that's why everyone needs to stop listing out their personal anecdotal evidence as evidence of how the broad economy is doing because the fact is, it's just anecdotal.

Just the dynamic of remote work in the tech field/workforce....ya know the workforce that has highest impact per capita on GDP because of how much discretionary spending they contribute to the economy, is having massive deflationary forces. Deflation that is NOT going to show up in the traditional metrics of the economy. Just some of the many deflationary forces of remote work for tech workers:

- No longer commuting. Not spending money on gas, monthly parking spaces in the city, not eating out for breakfast/lunch/dinner
- In some cases, couples are ditching the 2nd car because it's no longer needed
- Not having to pay for child care/day care
- Ability to move to much cheaper cost of living locations while maintaining high salaries and RSU stock compensation
- Migration out of tech has meant city living has become cheaper. Rents in Seattle, San Fracisco, and other big tech cities are still lower than 2019. Apartments are still offering concessions just to get people to rent, even today.
- Meanwhile, salaries and bonuses in the tech field right now are very high because of the high competition amongst employers.

Coupled together, the average tech worker is spending way less on their monthly total costs than they did 2 years ago while at the same time, they're getting all time high salaries and bonuses. Inflation could rise 15% and it still wouldn't mean that much to this group of America because of those other deflationary forces.

Now I'm not saying everything is rosy for the average American. It's not. There's going to be pain for some, while others flourish. But the group that is going to flourish, especially the tech workforce, are the one's that have the most impact on the actual economy when it comes to contribution to GDP and the economy and it's not even close. The upper middle class of America has a very disproportional impact on the economy. Really there's nothing left to do but sit back and watch the next 3-6 months and we'll see who's right

I forgot to mention the deflationary forces on actual tech businesses which are not going to show up until right around now. Which are that most tech companies lease their office space. Most of those leases are 1-2 years leases. Some of them are 3-4 years leases. When the tech field moved to remote work, tech companies couldn’t just cancel those leases. They’ve been on the hook for those costs for the past 2 years including costs like utilities.

Now that most of the tech companies have accepted that remote work is permanent, expect to see them not renew their leases of those office buildings this year. Their operational costs are going to see a noticeable decline starting this year

 

[Ipcress]

There’s definitely some technique to it. In low speed driving I tend to let the wheel slide through my hand to avoid accidental disengagements. Then all I have to do is tighten my grip if it starts swerving toward an obstacle. This wouldn’t work for a yoke though. At higher speeds, the steering wheel turns less abruptly so it’s not an issue.

I wonder how many FSD-beta testers in the new X and S with yokes are having an issue with that? Looks like a problem to me--no ability to let "wheel" slide, and having to try to catch the yoke on a sudden maneuver.

 

[Ipcress]

It's not too late!

Saturn V Skylab Rocket - Estes Rockets

Get your hands on an accurate 1:100 scale reproduction of the Estes Saturn V Skylab rocket! Launch the Estes Saturn V Skylab to heights of up to 400 feet.

estesrockets.com

*Edit: You may not know, but model rocketry has grown up : High Power Model Rocketry Supplies | Advance Model Rockets Kits
I've been to a few launch events out in the Mojave, these things are really something - seems to me you might be living in a place with enough space to support a new hobby

Also check out Rocket Ship Galileo--Robert Heinlein, an old favorite.

 

[TheTalkingMule]

I agree with most here, but the timeline (March) and $20 price is too aggressive.

To be clear, my timeline is supply issues begin to ease Mar/Apr and $20 WTI by the 4th of July.

 

[JustMe]

…..But I think it will take more time for oil prices to collapse. Probably in the 4th quarter of this year.

Which I actually don't mind. Artificially high oil prices drive more and more demand to EV's

Yes, more specifically gas prices in the US are at an 8 yeah high, almost $3/gallon.

I think this will significantly depress ICE auto sales as more people start to see EVs as viable alternatives. Many will wait for less expensive EV models, trucks, or vans to be available. This is will bring real pain to Ford and other OEMs that need ICE sales and plan on that revenue stream to be robust for 5-10 more years during the “gradual” EV transition.

Welp, good luck with that

 

[mrmage]

So you believe production in China and CA will decline by a couple hundred thousand cars if Berlin/Austin build a couple hundred thousand this year?
Because that's the only way your zero sum claim adds up.

If Tesla is chip constrained for 2022 and not production constrained, production in California and China would be reduced by the same amount as what Berlin and Austin produce. If only 1.4M critical components are available for 2022, the production will be 1.4M cars regardless of how many factories are building them.

According to Tesla, their factories have been running below capacity for 2021. That implies Berlin and Austin starting up last year would have had no impact on the number of cars produced. For 2022, my guess is that there will be little impact on production with a few months delay in Austin and Berlin, because they are still constrained by chip supply.

However, Tesla has a lot to gain with extra factories. Profits will be higher with Germany and Texas producing cars.

Edit: I wonder if this is the part of the reason why EM asked everyone to optimize for efficiency. If you can't build any more, it's best to build what you have as profitably as possible.

 

[Matias]

@Chazman92 and unprotected left

 

[wtlloyd]

Yes, more specifically gas prices in the US are at an 8 yeah high, almost $3/gallon.

I think this will significantly depress ICE auto sales as more people start to see EVs as viable alternatives. Many will wait for less expensive EV models, trucks, or vans to be available. This is will bring real pain to Ford and other OEMs that need ICE sales and plan on that revenue stream to be robust for 5-10 more years during the “gradual” EV transition.

Welp, good luck with that

This is a bigger factor than people take into account - well, those people who are thinking about these things, anyway.
You might like to look at a hard number like "BEV sales move up to 3% of total vehicle sales NA last year" and think slow but steady, we can project future years growth. But you won't ever see a figure that accounts for the people who are thinking, "should I really spend 30, 40, 50 thousand on an ICE car that's really just the same 'ole same 'ole, when there is this new technology coming on?"
People use tech now, they've seen it evolve and change in a short time, and radically so. Nobody's thinking "This guy's trying to sell me on the idea that there's a better horse coming if I just wait". They are thinking, "I remember how happy I was when I switched from my flip phone to an iPhone".
They have experienced for themselves how evolving technology improves their lives.
The minute you put a BEV in their hands, they'll want to keep it.

 

[Featsbeyond50]

A minor recession that is fixing inflation while having full employment does not sound like some kind traumatic event to the economy that causes a bear market. In fact this is literally fixing the economy, not causing harm.

My housing, fuel, electricity and most things I buy have remained nearly the same Or 3% higher. Only cars and meat have really gone up For us. We now have less meat and Tesla will benefit when we finally spend on a car. No way 2021 had 20% real world inflation just because you find one category higher. Eggs are still $1, milk still $2.30 a gallon. Anyone who wants a job and capable of actual work can get a job around here for $15 an hour starting. The same place where rent can be as low as $600. we are not in a recession when that is true.

I wouldn't call all our spending "one category".

But, speaking of one category, our biggest spend is food. Eating at home, not eating out. Our second biggest is our mortgages which are fixed. This implies a huge increase in costs that a lot of people can't cut back on so my guess is non-essential spending will get hit the hardest.

Btw, I'm getting a car this year too.

 

[snellenr]

I had the Estes Saturn 1B. Heady stuff!

Same here. I then discovered, to my considerable regret, that Estes' recommendation for firing four C6-5 motors simultaneously (a paperclip "buss bar" for the igniters) was somewhat speculative.

 

[TN Mtn Man]

I forgot to mention the deflationary forces on actual tech businesses which are not going to show up until right around now. Which are that most tech companies lease their office space. Most of those leases are 1-2 years leases. Some of them are 3-4 years leases. When the tech field moved to remote work, tech companies couldn’t just cancel those leases. They’ve been on the hook for those costs for the past 2 years including costs like utilities.

Now that most of the tech companies have accepted that remote work is permanent, expect to see them not renew their leases of those office buildings this year. Their operational costs are going to see a noticeable decline starting this year

It's going to be interesting to see the long-term impact. We have a real combination of enabling, disruptive forces coming together at the same time (technology, transportation, economics) with the pandemic being a trigger that may have much larger long-term changes. Popular, major metro areas have been getting increasingly more crowded and more expensive, with housing prices being out of reach for many. To say nothing of the high costs of doing business in those cities. The availability of broadband internet in more and more smaller cities and rural areas (soon to be near universal with Starlink) has enabled remote work in the tech and financial sectors. In many areas, this capability has only been available very recently. Obviously this has resulted in some shift in population out of major metros during the pandemic. Will it reverse as the pandemic ends? We have proven the viability of not just remote work, but also remote learning. What will be the long-term impact on our educational system? Amazon and other companies have driven rapid growth in the delivery industry, BBTs and FedEx vehicles are everywhere-reducing the need for concentrated transportation hubs, at least for smaller items. The question is to what extent will this be temporary or will this signal the start to a long-term fundamental transformation?

From Tesla's standpoint, should this be permanent, it may be a positive. You are shifting more higher-income earners with more discretionary income, people more likely to own EVs, to smaller towns and rural areas, areas with lower rates of EV ownership. By relocating to typically lower-cost areas, that leaves them more money for discretionary spending (cars). That in turn will expose more people to the benefits of EVs, and hopefully spur the growth of fast-charging infrastructure, which is very limited in rural areas. Also, home ownership rates are likely higher (an assumption, perhaps wrong) in lower cost areas, facilitating home charging vs apartments. Due to the lack of mass transit or even taxi service in these areas, the whole robotaxi business may excel there, as opposed to metro areas where mass transit is common. Pure speculation, hard to say how things will shake out.

 

[-=buzz=-]

Agreed, but maybe a Research FAB would be in order - eventually.

I just looked up how long it takes. TSMC says 2 yrs from a muddy field (assuming the equipment is ready to go in). However, a research FAB might be a good thing to have around. Some of these chips are pretty small (fit 1,000 on a single wafer), so a 1,000 wafer run for 1M chips is in the realm of a smaller FAB with hybrid production/prototyping setups. The Assy/Test could be done as foundry at first (more generic) or build your own with molds, ovens, and testers, lol. (Grohman knows how actually - now Tesla owned, formerly doing R&D for Intel's Assy/Test pathfinding group). For first silicone, this could be useful for security reasons). This is why most FABs at Intel are in the USA and the ones overseas aren't doing the highest tech (except maybe Israel's FAB in a limited way).

FYI, from the SemiWiki...

"Here is how 28nm ramped. In June 2010 fab 15 was a muddy field in Taichung. For 12 months the building and clean rooms were created. In another 10 months equipment move in and qualification took place. 22 months after breaking ground phases 1 and 2 of fab 15 started production output, TSMC’s first 28nm volume fab (of course there is a technology development research fab where the process was developed but that has very limited capacity)."​

No, just no.

A test/research/small Fab still needs the billion dollar investment into the actual process to be used (research or licensed) and without scale you still have hundreds of PhDs on payroll. Additionally your construction costs won't scale with size as you still need at least one of each component (clean room, chemical processing, EUV laser sources, etc).
With modern processes small scale just isn't possible anymore.

The only thing I can see is a self owned board assembly line.
But unless they have problems getting changes into production fast enough there's just no reason to enter this highly specialized market.

 

[Webeevdrivers]

This is a bigger factor than people take into account - well, those people who are thinking about these things, anyway.
You might like to look at a hard number like "BEV sales move up to 3% of total vehicle sales NA last year" and think slow but steady, we can project future years growth. But you won't ever see a figure that accounts for the people who are thinking, "should I really spend 30, 40, 50 thousand on an ICE car that's really just the same 'ole same 'ole, when there is this new technology coming on?"
People use tech now, they've seen it evolve and change in a short time, and radically so. Nobody's thinking "This guy's trying to sell me on the idea that there's a better horse coming if I just wait". They are thinking, "I remember how happy I was when I switched from my flip phone to an iPhone".
They have experienced for themselves how evolving technology improves their lives.
The minute you put a BEV in their hands, they'll want to keep it.

I’ve been saying this for years. Right up until they get in the car it’s pretty much the same old “I can buy a Camry for 20 grand less” spiel. Then they drive our model 3. It’s pretty much over after that. All of a sudden it becomes “worth it”.

One of the things I am doing on test drives now is to show them the ease of using a supercharger. I have them back in and hook up and then we walk over to get a coffee at Tim hortons. We come back, unhook, get in and go. It kind of gives a better context of the convenience of not going to a gas station and having to hold a gas nozzle. I also emphasize that the vast majority of charging they do will be at home in their driveway while they sleep.

Elon should put me on commission. /S.

Cheers. Stay safe all.

 

[TheTalkingMule]

As the chip shortage(and hoarding!) eases and unwinds, don't forget Tesla still gets the benefit of all those audibles they called and software they wrote for simpler stop-gap chips. They can still continue to use these AND the new supply of previously bottlenecked more advanced chips.

Yes Tesla will be broadly "chip constrained" as Elon said, but it's not anything that would limit 50-100% growth in 2022. It'll just be challenging, as it was in 2021.

 

[Zhelko Dimic]

Makes me wonder. To what standard do you need to "stop". 0 mph for 1 ms? 100ms (0.1 second)? 500ms (0.5 second)? 1 second? Is it enough to get the ABS sensor to say the tire stopped moving or are you going to have to hold for some externally observable amount of time?

Can we have a quick/short/low duration stop setting if we can't have a rolling stop setting?

Enough for observing officer to think that you had enough time to roll your head and looked intentionally in every direction. For a person that'd be at least 1.5-2s
For FSD, one can argue that is equal to processing time of the 3D situation, after sensors confirm full stop, but Tesla will likely add couple hundred milliseconds to not look too too aggressive. It may even go as far as time for a person (maybe 1-1.5s), to not involve their beta testers and themselves in a traffic cases, as I imagine creating court precedent isn't on the list of important tasks, yet.

 

[jbcarioca]

Meh, you're barking up the wrong tree. It was Phil LeBeau of CNBC back in 2020 who coined what Telsa was doing with initial production at Shanghai as being a "complete knockdown kit" (I knew the difference when he said it). If you want to argue sematics, he's your man…

Quoting someone you know is wrong then calling a fundamental auto tariff avoidance technique ‘semantics’ is bewildering. If anybody said such a thing they are transparently clueless.

As for the volume question I think that all of us who’ve commented on that are well aware that Tesla is tirelessly working to minimize the lost production due to parts shortages. Logistics issues and shortages obviously will not magically evaporate any time soon. The major questions are about severity. Hence nobody knows where and when each of the thousands of components will force production stoppages or reductions.

We do know that Tesla is now deeply preferred as a customer by the vast majority of suppliers. We also know Tesla is far more adept in part substitution than are other OEM.

Hence we really cannot say there is a ‘zero sum game‘,

 

[SOULPEDL]

No, just no.

A test/research/small Fab still needs the billion dollar investment into the actual process to be used (research or licensed) and without scale you still have hundreds of PhDs on payroll. Additionally your construction costs won't scale with size as you still need at least one of each component (clean room, chemical processing, EUV laser sources, etc).
With modern processes small scale just isn't possible anymore.

The only thing I can see is a self owned board assembly line.
But unless they have problems getting changes into production fast enough there's just no reason to enter this highly specialized market.

Not-No. I get it... but that's what people said about the automotive industry not so long ago. I think my time horizon is longer than yours.
When she scales up, what's a Billion (B for a Lab?) in exchange for more secure, controlled AI silicon jewels for example?
Keeping it 1st Principle, FABs likely cost too much period. Should-cost on everything is in question for me now, even more so in the future. Controlled tech might get important soon as well.

 

[Knightshade]

I have a feeling this argument can run all weekend. Hoping we agree to at least this:

Rank the probable outcomes from last to most likely:

Berlin / Austin takes away production from Fremont/Shanghai so net negative.
Berlin / Austin doesn't increase production without taking the same production from Fremont/Shanghai. Zero sum.
Berlin / Austin makes massive vehicles on their own in 2022. Huge net positive production.
Berlin / Austin produces slightly more cars due to more bases to optimize existing supply chains in 2022. Positive contribution to production and delivery ceteris paribus (all other things being equal)

Quantified contributions? I don't think anyone actually knows.

I expect Tesla to be chip constrained in the sense of being unable to max production at all 4 factories (with "max" for austin and berlin being max during a ramp, not max possible for the building size)

But I expect them to be significantly LESS chip constrained than "We literally have to make 1 less car elsewhere for every 1 we make in new factories" through 2022.

So yes I certainly expect production in total with 4 factories to be higher in 2022 than it would be with only 2, even if total production is chip constrained.


I've not see anybody predicting significant drops in output from Fremont and Shanghai among those who predict such things... but same are predicting something in the 100-200k output from new factories. That'd be impossible if it was 0 sum.

 

[TN Mtn Man]

Yes, more specifically gas prices in the US are at an 8 yeah high, almost $3/gallon.

I think this will significantly depress ICE auto sales as more people start to see EVs as viable alternatives. Many will wait for less expensive EV models, trucks, or vans to be available. This is will bring real pain to Ford and other OEMs that need ICE sales and plan on that revenue stream to be robust for 5-10 more years during the “gradual” EV transition.

Welp, good luck with that

One of the thing I find odd is the number of "financial experts" promoting oil companies as investments at this time. Yes, historically they, and other value stocks, have been solid during times of inflation. Some of the people advising that are the very people recommending TSLA as a buy. IMO, hard to see an oil company as a good long-term investment given the growth in BEV. Granted, that advice might be seen as a short-term hedge against disruption within the next few months, rather than long term.

The other one I find odd are the recommendations for F and GM, as well as the recent SP growth (last week not withstanding). They are touted for their expanding efforts in BEV. Fine-say they actually hit the targets they claim (which I find unlikely due to production constraints), even if they do, their ICE business is likely to crash. Not every one of their lost ICE sales will go to that company's BEV product. Their EPS is down ~30% YoY...while TSLA is up 217%.

I got to check out a Lightning at the auto show yesterday. Not a bad looking truck, and according to the Ford corporate person I spoke with it's built on the same assy line as the F-150 (not sure if that's true). Good and bad if true-it certainly facilitates getting it into production and helps ramp, and due to commonality of parts helps cost. But as a conversion, rather than ground up EV design, I suspect it gives up a lot of efficiency. Same negative as any conventional P/U-with a useful sized bed, it's a LONG vehicle with that long nose. I think the cab-forward, short nose design of CT will result in a shorter and more "parking lot friendly" rig for the same bed length. And the low, sloping hood will be far better for visibility, both to see pedestrians and traffic in congested areas, as well as for off-road applications. Got an overall eye-opener on P/U prices (been years since I had one). Yeah-CT, if the price comes close to the numbers they had published, would be an absolute steal, even compared to ICE. I'm sure we won't see those prices, but still, lots of pricing room.