2017 Investor Roundtable: TSLA Market Action

[dakh]

I think the fear of missing out drove the last uptick before ER. ER didn't have anything big to miss out on thus today's selloff.

 

[TMSE]

Model 3 ramp up plan as outlined in the ER is hugely positive IMO. However, there are two things I am concerned about:

1) CFO Jason leaving, although could be for genuine personal reasons. Return of Mr. Ahuja should mostly mitigate this concern as no sane person would return to a sinking ship. Unfortunately though, this adds uncertainty and risk and hence the extra discount on stock price.

2) Model 3 reveal postponed to July. This leads To concerns that Model 3 interior is not ready yet. What I believe though, Elon would wait until all in-production MS/MX have upgraded interior that is a superset of that of M3.

FastMoney crowd and Jim Cramer on CNBC seem less pessimistic than I am. They aren't even mentioning the CFO leaving or M3 reveal. They are blaming upcoming cap-raise as the reason for price drop today. Infact, they sound bullish for the price to move up once cap raise is done. Cramer's tone on Mad money while talking about Tesla, was much more dovish compared to the ridicule he was heaping on Tesla today morning at market opening.

 

[racer26]

I think the fear of missing out drove the last uptick before ER. ER didn't have anything big to miss out on thus today's selloff.

What uptick before the ER? We lost nearly $4 yesterday before losing 17.50 today.

 

[dakh]

What uptick before the ER? We lost nearly $4 yesterday before losing 17.50 today.

Started about 2 weeks back.

 

[dakh]

So, consider my shares which have a basis of $180 and a long-term holding period. If I sold them at $280 and bought back at $260, I gain $20/share and I pay taxes on $100/share -- taxes at a combined state & federal rate of greater than 20%, so more than $20/share. In short, it's not a profitable thing to do.

That's correct if we ignore that the gain (if it sticks around) has to be paid some day. So to get the actual go/no go decision one would have to model when the position is eventually closed for good, at what price and what the opportunity cost would be for having to effectively pay cap gain upfront for at least part of the gain.

 

[neroden]

The Fed doesn't know how to react to or interpret Trump. How are investors supposed to?

Classic egomaniacal dictator. US stocks will soon have the sort of "political instability discount" which, traditionally, stocks in South American and African countries with dictators had. Really nothing more.

 

[neroden]

That's correct if we ignore that the gain (if it sticks around) has to be paid some day. So to get the actual go/no go decision one would have to model when the position is eventually closed for good, at what price and what the opportunity cost would be for having to effectively pay cap gain upfront for at least part of the gain.

Theoretically true except that I am perfectly likely to hold the stock until I die and have it inherited by charity.

Or Trump may have cut capital gains taxes to zero by the time I sell. Technically you should model future expectations of tax rates! The fact is it's usually better to not pay taxes now. You may, in actuality, be able to defer them forever.

P.S. One way to look at this -- the accrual accounting way -- is that the unpaid taxes on unrealized capital gains are an interest free loan from the government. Foregoing that loan loses you real money. You need to be making a lot more for it to be worth foregoing it.

 

[neroden]

My understanding was that the net effect is no taxes paid on the repurchase but you have more total shares than you started with

You're wrong, you have fewer shares than you started with. Cash got extracted by paying taxes now rather than deferring taxes into the indefinite future.

 

[myusername]

I believe that the dip is temporary. Bought some March 3rd $290's and $300's before the ER that are now down to almost nothing. I just bought twice as many $290's for $0.24 plus about half as many March 24 $280's for $3.00 each.

I agree. Decided not to pay for the additional June time value or April for the numbers (cheap lottery tickets).

Smart decision!

"I believe that the dip is temporary"

and for good reason... because ALL TSLA dips have been temporary... followed by dramatic recoveries... anyone long should always expect an immediate recovery... because that's how it always goes.

one of the CNBC talking heads made a statement of such: "is this a reason to own this stock?... because nobody sells it?"

what if... one day... this changes... that's all it would take... a minor sentiment change where all the sudden TLSA doesn't recover from the drop... and after being conditioned for years now that your money is safe because everyone around you "believes" this too... has worked for a long time.

and that's how bag holders are made... a large drop that doesn't recover... but it will... followed by another large drop... that doesn't recover... but it will... now for sure it will recover because "we've been here before right"... followed by a large drop... that doesn't recover... "well now I'm in the red after buying way up there... so I might as well hold out"... followed by a large drop that doesn't recover.

Tesla is not a $40b company today... they are a $40b company in the future... when is that future?... well Jim Cramer seems to think they'll be producing and selling 500k cars in 2018... he stated that incorrectly today even... when what's really being discussed is "run rates".

there is nothing but mass confusion about Tesla and a bunch of sell side analysts that have pumped the limits of DCFs on an immature high growth stock (which is not what DCFs are designed for)... and now we have a TSLA investment culture...

primed for the taking.

 

[TMSE]

"I believe that the dip is temporary"

and for good reason... because ALL TSLA dips have been temporary... followed by dramatic recoveries... anyone long should always expect an immediate recovery... because that's how it always goes.

one of the CNBC talking heads made a statement of such: "is this a reason to own this stock?... because nobody sells it?"

what if... one day... this changes... that's all it would take... a minor sentiment change where all the sudden TLSA doesn't recover from the drop... and after being conditioned for years now that your money is safe because everyone around you "believes" this too... has worked for a long time.

and that's how bag holders are made... a large drop that doesn't recover... but it will... followed by another large drop... that doesn't recover... but it will... now for sure it will recover because "we've been here before right"... followed by a large drop... that doesn't recover... "well now I'm in the red after buying way up there... so I might as well hold out"... followed by a large drop that doesn't recover.

Tesla is not a $40b company today... they are a $40b company in the future... when is that future?... well Jim Cramer seems to think they'll be producing and selling 500k cars in 2018... he stated that incorrectly today even... when what's really being discussed is "run rates".

there is nothing but mass confusion about Tesla and a bunch of sell side analysts that have pumped the limits of DCFs on an immature high growth stock (which is not what DCFs are designed for)... and now we have a TSLA investment culture...

primed for the taking.

@myusername , you should stick to what you are good at. While you are savvy in TA, I think fundamental analysis and visionary thinking is not your forte. By the way, you made some really good calls on SP moves, solely based on TA. For that reason alone, I look forward to your comments.

 

[Zhelko Dimic]

sorry... you can't "disagree" with the above... it is fact that Elon said they don't need to (when everyone knew they did) but might for "risk reduction"... and then 5 trading days later... they had all the details laid out along with buyers that closed early in the next week. it is very possible that they already have everything lined up for another raise next week.

Sure, how's that a problem? That's exactly what I heard in his statement. Everyone knows it by now.
Or to paraphrase: "We want money so we can sleep well, but we'll survive without it if we have to." (i.e. no cheap shares suckers)

 

[Quesder]

Theoretically true except that I am perfectly likely to hold the stock until I die and have it inherited by charity.

Or Trump may have cut capital gains taxes to zero by the time I sell. Technically you should model future expectations of tax rates! The fact is it's usually better to not pay taxes now. You may, in actuality, be able to defer them forever.

P.S. One way to look at this -- the accrual accounting way -- is that the unpaid taxes on unrealized capital gains are an interest free loan from the government. Foregoing that loan loses you real money. You need to be making a lot more for it to be worth foregoing it.

How could you defer the capital gain tax forever?

 

[neroden]

How could you defer the capital gain tax forever?

I already gave two examples: giving appreciated stock to charity and dying while holding it.

There are others which don't scale up as well, such as realizing the capital gain during a year when you have an otherwise unrealizable loss or during a year when your income is low enough that the capital gain rate is zero.

More common than deferring the gain *forever* is to defer the capital gain indefinitely. I've sold a stock with a holding period of 27 years -- two cases I can find easily. Nice long deferral of income tax there; can you imagine what I would have lost by paying extra taxes back near the beginning? On top of that, capital gains tax rates dropped over those years!

Obviously if you think the stock is going to do badly in the long term you sell it. The situation we're discussing arises when the stock (a) has already done well for you, and (b) you also think the stock is going to do well in the very long term, but (c) you think it is going to go down temporarily. In a taxable account, you can lose a fortune by trying to play the timing, *even if you get it right*, due to throwing away the "free loan" from the government.

 

[Quesder]

I already gave two examples: giving appreciated stock to charity and dying while holding it. There are others.

How does this work?

 

[myusername]

@myusername , you should stick to what you are good at. While you are savvy in TA, I think fundamental analysis and visionary thinking is not your forte. By the way, you made some really good calls on SP moves, solely based on TA. For that reason alone, I look forward to your comments.

then on the TA side... i see the potential for a triple gap down... while tomorrow could recover for options pain back into $260s... a gap down with a lower bb test is in the cards for tomorrow... and I have a sense the general markets are topping... a major market reversal would put tsla back well into the 100s... and that's got to be on the minds of some.

 

[EnzoXYZ]

P.S. One way to look at this -- the accrual accounting way -- is that the unpaid taxes on unrealized capital gains are an interest free loan from the government. Foregoing that loan loses you real money. You need to be making a lot more for it to be worth foregoing it.

Worth another read All

You're wrong, you have fewer shares than you started with. Cash got extracted by paying taxes now rather than deferring taxes into the indefinite future.

Yup and technically we all should be paying estimated tax quarterly on gains.

 

[TMSE]

then on the TA side... i see the potential for a triple gap down... while tomorrow could recover for options pain back into $260s... a gap down with a lower bb test is in the cards for tomorrow... and I have a sense the general markets are topping... a major market reversal would put tsla back well into the 100s... and that's got to be on the minds of some.

@myusername ,
Don't you think TA is meaningless during ER? Your TA prognosis is more valuable during the periods where there is no fundamental catalyst immediately before or after. Right now, you should take a hike or a vacation for a few days and come back here when everything is settled down.

 

[dakh]

Tesla is not a $40b company today... they are a $40b company in the future... when is that future?... well Jim Cramer seems to think they'll be producing and selling 500k cars in 2018... he stated that incorrectly today even... when what's really being discussed is "run rates".

Yes so there's that and then either you think you can play the short to medium term fluctuations successfully or you don't. In the latter case you just buy and hold. In the former case not only one would need to be beating the market on SP moves, but be damn sure to be in if/when a breakout occurs. I think even if you can eek out gains trading in and out, it would only take a few bad predictions to miss a lot of gain due to how TSLA is treated by the market (super high short interest, mass misunderstanding and FUD, etc.).

 

[myusername]

@myusername ,
Don't you think TA is meaningless during ER? Your TA prognosis is more valuable during the periods where there is no fundamental catalyst immediately before or after. Right now, you should take a hike or a vacation for a few days and come back here when everything is settled down.

"Don't you think TA is meaningless during ER?"

yes... but as of the open this morning... we are after the ER... which is the best time to trade options... massive IV drop with lots of activity... my TSLA vacation was the last three weeks.

 

[vgrinshpun]

attention... public announcement here... just got PM from @myusername... he was too embarrassed to acknowledge... made few typos in his post... asked me to help with the corrections... here we go...

"I believe that the pop is temporary"

and for good reason... because ALL TSLA pops have been temporary... followed by dramatic deflation of the bubble... anyone short should always expect an immediate drop back to earth... because that's how it always goes.

what if... one day... this changes... that's all it would take... a minor sentiment change where all the sudden TLSA doesn't go back down after the pop... and after being conditioned for years now that short's money are safe because everyone around them "believes" this too... has worked for a long time.

and that's how bag holders are made... a large pop that doesn't go back down... but it will... followed by another large pop... that doesn't go back down... but it will... now for sure it will go back down because "we've been here before right"... followed by a large pop... that doesn't go back down... "well now I'm in the red after shorting way up there... so I might as well hold out"... followed by a large pop that doesn't go back down.

Tesla is not a $0b company today... they are a $0b company in the future... when is that future?... well Mark Spiegel seems to think it will be here in 12 to 18 month... when massive luxury electrical competition finally arrives... Audi, Jaguar, Mercedes... beautiful SUV crossovers... 20 thousand dollars less expensive that the cheapest model S... when we heard this so many times before... Audi R8 etron anybody?

there is nothing but mass confusion about Tesla and a bunch of shorts that have regurgitated so many times that Tesla produces less cars in a year than GM in a week, when Tesla is not just an automobile company...

... and now we have a TSLA permanent short culture...

primed for the taking.