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

[Gray Man]

The same kind of pattern occurred during the 1970s Oil Crisis. This was in a period in history when:

• A brutal war with Japan that ended with nuclear bombs being dropped on millions of civilians had ended only three decades prior, with many of the buyers at prime car-buying age having fought in that war or had friends and family who did

• Being openly racist towards non-whites and especially Japanese was socially acceptable in most of the US and there had recently been protests and violence simply over ending legally mandated racial segregation

• Japanese cars had a reputation for crappy quality and reliability, which was largely deserved given their historical track record in prior decades

• Americans had predominantly wanted big muscle cars with gas-guzzling V8 engines

As always, thanks for an awesome post, Gigapress. The section quoted above was the most thought provoking for me. The headwinds against Japanese market penetration never really popped up in my mind in thinking of Tesla, even though I'm aware of the 70s and the impact of the Japanese market breakthroughs starting then.

This is really great for helping me to put everything in perspective.

 

[Gigapress]

Impossible. I was assured by many posters that Tesla was NOT battery constrained. Oh wait...maybe all the posters had their head in sand? Anyway I am glad to see energy waking up. They have been losing market share for years. Maybe they can get it back. It would be awesome to see price drops on mega packs.

The quote Dillon Loomis presented is from 2019, when Tesla actually was battery constrained.

Then chips became the limiting factor when the pandemic hit and semiconductors went into a global supply crunch. According to repeated statements directly from Tesla, this has been the primary holdup on stationary storage deployment since then. All along, Tesla has said that in the medium and long term, battery supply will resume being the fundamental limiting factor on growth after semiconductor shortages ease.

For example, on the Q2 '21 earnings call amidst battery discussion:

Elon Musk: We have a massive backlog in Powerwall demand that demand to Powerwall versus production is an insane mismatch. Now part of that problem is also the semiconductor issue. So we used a lot of the same chips in the Powerwall as you do in a car, so it's like, which one do want to make? Cars or Powerwalls? So we need to make cars, so therefore Powerwall production has been reduced. But as the semiconductor shortage is alleviated, then we can massively ramp up Powerwall production.

Then in Q4 '21 Jed Dorscheimer directly asked Tesla leaders what needs to happen for energy storage to grow faster and they clearly explained that until the end of '22 or maybe '23 it will be chip-limited but then will "it will grow like kelp on steroids" after that.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Hi, thanks, and congratulations on a great year. Elon, I guess, my question is around the Megapack or your energy business. And so, as we look at the strategy or the supply chain constraints that you mentioned, you have two different strategies, or it seems like with Megapack and Powerwall, and I think the Powerwall was answered with 4680 and the 2170 opening up. So, I was wondering if you could just talk about the supply chain and LFP for the Megapack and what we should expect for that.

Elon Musk -- Chief Executive Officer and Product Architect

Yeah. To be clear, we do think that old stationary storage, Powerwall and Megapack, will be -- will transition to an iron-based system, basically a non-nickel system. Manganese is also, you know, could be part of the future, but primarily iron. It just comes out iron-nickel.

We need something that is, you know, formed in a star before a supernova, ideally. So, you know, iron is. So that's because there's a ridiculous amount of iron on earth as is a ridiculous amount of lithium. So you can really expect all stationary storage to transition to iron over time.

And like I said, with some -- manganese is like a wild card. There's also not a lot of manganese. And I should say like we did short-change the energy business last year, and that vehicle took priority over the energy side. So --

Drew Baglino -- Senior Vice President, Powertrain and Energy Engineering

Not on cells, but on chip side.

Elon Musk -- Chief Executive Officer and Product Architect

Yeah, on chip side, exactly.

Drew Baglino -- Senior Vice President, Powertrain and Energy Engineering

Yeah.

Elon Musk -- Chief Executive Officer and Product Architect

So, yeah, we -- but -- we do see a very, you know, I mean, long-term probably terawatt-hour per year energy business. So, a lot. It's very vast. Yeah.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

That's helpful. Thank you. So you what -- do you see that '22 is kind of the opening of that -- the energy business reaccelerating?

Elon Musk -- Chief Executive Officer and Product Architect

It's hard to predict 2022 because we still have lingering supply chain -- there are still lingering supply chain issues globally. But I think the chip stuff -- at least the chip side of things appears to -- looks like it will alleviate end of this year or '23. I mean, there are a crazy number of chip fabs being built, which is great. The sheer number of chip fabs being built right now is exciting to see, yeah.

So there could be other issues. We're trying to anticipate those as much as possible but, you know, predicting the future is difficult.

Drew Baglino -- Senior Vice President, Powertrain and Energy Engineering

And the goal is definitely to grow it this year.

Elon Musk -- Chief Executive Officer and Product Architect

Yeah. We'll grow it this year, for sure. It's just, you know, we -- if we're simply -- we're able to respond to demand, it might grow by like 200% or 300% or something, you know, as opposed to sort of 50% or something.

Zach Kirkhorn -- Chief Financial Officer

Yeah. I mean, I think it's exactly that. I mean, it's a question of does it double, triple, quadruple? I mean, either way, I think, you know, our plans are pretty ambitious for Megapack this year and storage in general.

Elon Musk -- Chief Executive Officer and Product Architect

Yeah.

Zach Kirkhorn -- Chief Financial Officer

The exact amount of growth is hard to know. But ultimately -- I mean, to Elon's point about the growth of this business, I mean, we need to be growing it faster than the vehicle business.

Elon Musk -- Chief Executive Officer and Product Architect

And it will naturally grow faster than the vehicle business once we can less shipthe --

Zach Kirkhorn -- Chief Financial Officer

Yeah.

Elon Musk -- Chief Executive Officer and Product Architect

The damn chip constraint, frankly. So it will grow like kelp on steroids, basically, on their own. It needs to. And our primary mission is to accelerate sustainable energy.

That's always been our primary mission, and we're trying to stay true to that.

Do you see this part of the latest quarterly investor update where they once again say that semiconductor challenges continue to be the main problem?

Also, short-term market share is not very important because Tesla has a huge Megapack order backlog to burn down and their 40 GWh plant in Lathrop will vault them straight to first place by a huge margin. I'm seeing differing estimates from various sources but it looks like global battery storage installations by the entire industry were about 25 GWh in 2021, and by 2023 or maybe 2024 Tesla is aiming to make 40 GWh per year by themselves with one factory.

 

[Big Time]

YSP = Model Y Structural Pack?

https://twitter.com/x/status/1605611924946685956

 

[Thekiwi]

I've brought up this point time and time again and this person won't acknowledge it so you're probably wasting your time.

There have been plenty of times where Fed fund rate was 4-5% and the markets and economy did just fine. The Feds are already telling us they're going to tap out around 5%...the idea that this going to lead a massive recession is simply speculation that doesn't have the facts to back it up.

What’s more - market rallies begin BEFORE the fed starts lowering interest rates, as the market see the signals in advance and begin pricing in rate drops before they happen.

 

[UkNorthampton]

Tesla energy scaling up. Useful in so many places, huge demand in all of Europe, some places especially urgent needs (Ukraine). Reports of another 10,000 Starlink going to Ukraine (again, reportedly funded by European countries). Leader visiting USA a day or so after visiting hottest part of the front lines. Could there be a Megapack tsunami heading there?

Edit: I should have said - Tesla demand implications rather than anything else. Ukraine thread elsewhere.

https://twitter.com/x/status/1605574195684855808

 

[sdtslafan]

Can someone point me in the right direction? Will Tesla start benefiting from the IRA beginning 1/01/23? Or has it been delayed?

 

[Big Time]

Can someone point me in the right direction? Will Tesla start benefiting from the IRA beginning 1/01/23? Or has it been delayed?

All fun and games has been delayed until the clogs come out of the crawl space

 

[ZeApelido]

Will Tesla start benefiting from the IRA beginning 1/01/23? Or has it been delayed?

Yes

 

[mongo]

Can someone point me in the right direction? Will Tesla start benefiting from the IRA beginning 1/01/23? Or has it been delayed?

Tesla should benefit starting Jan 1.
Exactly how much remains to be seen due to needing the Secretary of Treasury's guidance.

 

[InDaClub]

https://twitter.com/x/status/1605627214006976530

 

[Big Time]

This account seems to be watching the trucking in and out of lanthrop

https://twitter.com/x/status/1605347896370466818

 

[Ogre]

…Tesla is aiming to make 40 GWh per year by themselves with one factory.

With their first factory. More, likely larger capacity to follow. Start Giga and work their way up to Terra.

 

[Chunky Jr.]

TMCers : Tesla is a great company and so much more than autos
Wall St : Pfft, they are an automaker and should be valued as one
TMCers : Wow, energy is really taking off just like we all knew it would
Wall St (coming soon) : When did Tesla get into energy business? Why didn't anyone tell us?

 

[Ogre]

This account seems to be watching the trucking in and out of lanthrop

https://twitter.com/x/status/1605347896370466818

Those are the numbers we were looking for! Now we’re getting into the Big Time.

PS: It’s Lathrop. It’s easy to remember because it’s just west of Manteca which means butter in Spanish.

 

[Ogre]

TMCers : Tesla is a great company and so much more than autos
Wall St : Pfft, they are an automaker and should be valued as one
TMCers : Wow, energy is really taking off just like we all knew it would
Wall St (coming soon) : When did Tesla get into energy business? Why didn't anyone tell us?

TSLAQ: Those are fake numbers. Tesla isn’t in the energy business, it’s an accounting shell game.

 

[Chunky Jr.]

TSLAQ: Those are fake numbers. Tesla isn’t in the energy business, it’s an accounting shell game.

The megapacks just contain unsold cars that they are dumping in the ocean

 

[SmokyPeat]

Ode to 2022

Two thousand twenty two, a terrible year.
Full of uncertainty, doubt, and fear.
As Tesla plummeted lower each week,
I could not stem my awful losing streak.
While I doubled down with each fall of Tesla's stock,
Elon tripled down on his incessant crazy talk.
Here's to a hopeful '23,
I mean, how much worse could it really be?

Btw, a man from Nantucket informed me that was a limerick and not poetry.

 

[AndrewZ]

Interest rates can stay above five percent and the market can still explode upwards. What is important is that inflation has subsided and the FED has indicated that it is not dispatching search and destroy commando teams for 'overvalued' assets, but will be following inflation trends and reacting accordingly.
View attachment 887614

These five years the fed funds rate averaged well above five percent and hit 7% almost every year.

View attachment 887615

US ten year treasury bonds ran well over six percent at times. The way everyone speaks about interest rates now, you would think these numbers would have translated into a relentless multi year stock market massacre with arterial blood not only in the streets but flooding out and swamping coastal cities into the oceans. That's where all those fancy stock traders live anyway.

Instead we got this:

View attachment 887616

One of the most spectacular runs in the history of the stock market. Inexplicable to this day, but here is the takeaway:

If inflation drops to 3 percent and the recession either happens or goes away as an immediate possibility, there is absolutely no reason interest rates at this level will matter to a fast growing company turning big profits with no debt and huge cash on their balance sheet. The Fed Funds rate can stay at 5 percent forever, but if Tesla executes they WILL be awarded a minimum of a 40 P/E as long as they back it up with earnings growth. This can happen fast. We have seen it happen in both directions.

This is Tesla. There is no slow. When the runway is set look for this stock to explode upward until it once again goes to stratospheric heights .... and probably comes down 30 to 40% in a year at some point because this is the way the market works.

If you don't think TSLA is a good buy here, then you do not believe in growth stocks of any kind. I suggest you stop wasting your time on this board and invest in financial instruments that mirror your risk tolerance. Bonds, index funds and precious metals come to mind.

I haven't really speculated on what the market will do beyond thinking it will grind down to new lows into the middle of next year, and you definitely should not tie my pessimistic perspective to risk tolerance. If it's any indication, my entire portfolio right now is three companies and all stocks that I bought in March-June 2020 when everyone was running for the hills -- I even took out an investment loan at that time, but it was when rates were being cut to 0% and it was basically free money (probably got paid to take the loan if inflation is now considered).

What you're describing is actually exactly what I've been arguing here for a while now: cutting rates will not be a bullish catalyst. IMO people tend to look at this interest rate stuff all backwards despite seeing what's unfolding at this very moment.

Rate hikes are used to modulate the economy down when it's running too hot, and that's what is happening right now.
Rate cuts are used to modulate the economy up when it's running too cold, that's what is yet to happen.

Markets heading upwards in periods of high rates makes total sense, especially if we're talking about the tail end of a rate hike cycle or shortly thereafter, because rates would have been higher to subdue a too-strong economy just like rate hikes now are being used to subdue the too-strong economy and markets should head higher as the economy becomes more and more too-strong. The NASDAQ then crashed down in Q2 2000 through to 2001 and that's when the Fed aggressively cut rates to <2%, and it took 14 years of low rates for the NASDAQ to fully recover to its Q1 2000 highs.

Around that same time, the S&P hit its high middleish of 2000 before beginning a much slower descent to a bottom around the end of 2002 -- the Fed started cutting rates around the end of 2000 and then paused for almost all of 2002 before cutting a bit further in 2003 and then to the middle of 2004.

If you draw parallels with these historical periods of rate action, what we had seen recently would be the highs and we'll grind down to a new bottom as rates are cut to help the economy that is coping with lagged burdens from tighter financial conditions. The Fed hasn't even paused yet, and actual cuts are pretty far out if you listen to them (less far out if you listen to the bond market).

 

[Gray Man]

You just outed yourself as a poser.

A real mountain man makes his moonshine in a bathtub in his basement.

You're confusing your illicit liquors, sounds like you're talking about bathtub gin.

Moonshine is made way out in the woods, far from the tax man's prying eyes.

 

[elasalle]

https://twitter.com/x/status/1605206640562941952