[HN Gopher] Michael Burry of 'The Big Short' reveals a $530M bet...
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Michael Burry of 'The Big Short' reveals a $530M bet against Tesla
Author : kjhughes
Score : 285 points
Date : 2021-05-17 18:28 UTC (4 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| notJim wrote:
| I wonder if due to the increase in retail trading activity,
| stocks are becoming less and less tethered to fundamentals.
| Retail people buy stocks in companies they like, and that they
| see as the future, regardless of whether the pricing "makes
| sense" or not according to traditional metrics.
| TeMPOraL wrote:
| I have a feeling stocks had little to do with fundamentals for
| pretty much as long as you were able to make more money trading
| them than from dividends.
| [deleted]
| PartiallyTyped wrote:
| Also related, since we are talking about Michael Burry (alias
| Cassandra on twitter), besides the subprime mortgage shorting in
| 08, another interesting bet he made was with GME (gamestop)
| against the shortsellers.
|
| To clarify, Burry was long on GME, I think his bet was done in
| January, and ended it late december, so very likely more than 5x
| returns.
| gruez wrote:
| [deleted]
| ericd wrote:
| Not sure how it's ironic, since the GME community hates the
| shorts, and he's betting against the shorts?
| gruez wrote:
| Yeah sorry, I missed the "against" part so I thought he was
| shorting GME.
| jypepin wrote:
| the GME community was long GME, against the shortsellers. So
| if he did bet against the shortsellers, no it's no ironic.
| superduperycomb wrote:
| Isn't that in line with the GME community. They also bet
| against the short sellers
| ska wrote:
| How is that ironic?
| throwaway481048 wrote:
| I am not a fan of public figures (seemingly) using their power to
| attempt to influence price movement in equities.
|
| The market action following someone like Elon Musk's tweets about
| $GME, DOGE, and others, show high correlation with the sentiment
| in those tweets, at least from my armchair. Sure, Burry was
| correct in a similar scenario before. I don't believe that means
| others should immediately believe/trust and follow individuals
| like this to the end of the earth, however.
|
| Shorting a stock is a very different - and far more risky -
| investment "strategy" than the purchasing of a stock. I should
| know, I lost 2 months of gains on a single short over a 3 day
| period, despite all market intelligence, facts, and the logic
| which follows, pointing to the fact which the stock should have
| bottomed, not skyrocketed.
|
| Despite most of its participants being relatively predictable,
| the market never ceases to surprise. Headlines like this should
| at least lead to an article with a highly visible notice or
| disclaimer about the risks of mimicking the mentioned behavior.
|
| Edit: I see I am being downvoted without discussion. I'm open to
| learning what I may have missed.
| mdorazio wrote:
| I'm having a hard time with this one since from the article it
| doesn't seem like Burry is seeing anything that isn't very well
| discussed/analyzed already regarding Tesla. Short sellers have
| gotten very burned in the past in gambles like this, but they've
| also sometimes made money. Given how historically irrational the
| market has been about Tesla, this just seems like a gamble rather
| than the well-reasoned short position based on deep (and
| unpopular) analysis that his subprime mortgage play was.
| radicaldreamer wrote:
| It's likely he's already up massively on his PUTs, which were
| purchased sometime in Q1. We don't really know the strikes or
| expiry dates, so it's hard to say.
| WA wrote:
| He announced it on Twitter when Tesla was around $580. Not
| sure if he averaged down his price, but I'd assume so.
| the_mitsuhiko wrote:
| > this just seems like a gamble rather than the well-reasoned
| short position based on deep (and unpopular) analysis that his
| subprime mortgage play was.
|
| A short is a gamble all the time because you don't know the
| time component. Burry was "lucky" in that it happened fast
| enough. There are lots of people who want to short Tesla but
| don't dare to because of the cost involved in it and
| unpredictability of when their bet would pay off.
| jdmoreira wrote:
| Tesla is a bubble for sure but this is way too risky. Sure, we
| don't know the strikes or expiry dates but there are plenty of
| fan boys to take on the fight against Burry ad infinitum. The
| market can become irrational longer than you can become
| solvent. I'm 100% on Burry camp though.
| thouitsme wrote:
| It's a surprise to see Keynes in here, glad to know.
| 1cvmask wrote:
| Michael Burry shorted the mortgage backed securities market
| before most other short sellers. He even suffered from
| redemptions of his fund and had to disallow them to stop the
| hemorrhage. Let's see if his timing is closer to the downwards
| inflection point now. The market seems super frothy now and I am
| wary of calling the moment of the inevitable downward spiral.
| Seen this movie many times before. Just always called it too
| early (which means you lose). I think being a momentum trader is
| very hard and requires nerves of steel.
|
| https://www.investopedia.com/trading/introduction-to-momentu...
| ehmmmmmmmm wrote:
| Personally I loved every bit of the GME show and I'd love to see
| short sellers get squeezed on TSLA as well.
|
| Shove it to them. We don't need pessimists in this world.
| yumraj wrote:
| > Shove it to them. We don't need pessimists in this world.
|
| Of course not. We only need optimism to keep driving the stock
| market and other valuations only higher so that they are no
| longer rooted in _reality /math/science_ and are driven solely
| by optimism.
|
| And, let's keep burning the fossil fuels since we don't need
| pessimism that the climate change people seem to be spreading.
| Oh, wait, that goes against TSLA, so we need that pessimism.
| rubiquity wrote:
| Short sellers aren't pessimists. They're realists.
| 988747 wrote:
| It's not even about that. It's just about not wasting an
| opportunity to make money. Some stocks go through cycles:
| growth, then correction, then growth again. Shorting stock
| during market corrections helps you maximize your profits.
|
| I mean, I can imagine Michael Burry cashing $200M profits
| when Tesla price goes down, and then switching sides and
| going long. The most important thing in the stock markets is
| to remain rational. Don't let your personal like or dislike
| of Elon Musk stop you from making money.
|
| And btw: since March 31st Tesla stock price fell down about
| $100
| ecpottinger wrote:
| I think you bring up an very valid point. In the Tesla
| forums I see posts from only one person making money over
| shorting Tesla stock. He works on making $10-$50 a share
| whenever the stock falls and then he makes money as a long
| when the stock goes up. Over time he has made a lot of
| money. He is not greedy, he is steady.
|
| On the other-hand, I see tons of people gleefully saying
| how much they hate Elon and because of him Tesla is going
| to collapse and as soon as that happens they will make a
| ton of money. I keep asking them to post when they make
| this windfall, well it has been over five years for me and
| so far not one of them have come back to tell how much
| money they have made. Greed seems to be blinding them to
| how much their approach is failing.
|
| The rational player has been making money for years, the
| ones who seem to be basing their investments on emotion
| have never come back to say they made any money.
|
| PS. I am a long, I bought Tesla stock at $189 pre-split,
| even at today's lower prices each share now represents
| $2825, it has to fall a lot for me to be taking a loss.
| rootusrootus wrote:
| > I can imagine Michael Burry cashing $200M profits when
| Tesla price goes down, and then switching sides and going
| long.
|
| Does he have some supernatural ability to time the market
| when everyone else fails?
| HWR_14 wrote:
| He seems to have an excellent sense of the underlying
| value of assets and enough cash to hold plays for a few
| years until they are where he thinks they should be. On
| timing, he seems to be far too early to maximize profits,
| but I seem to recall him saying something to the effect
| of he'd rather be too early than too late.
|
| However, I could be very wrong. All I know about the man
| is what I've read about him.
| tehsauce wrote:
| we need rational thinkers. over optimism can be just as
| dangerous as pessimism
| ska wrote:
| Those two situations don't seem to have anything in common
| other than the use of shorts.
| thehappypm wrote:
| Good luck.. GME's market cap is a tiny fraction of Tesla's, it
| would take a whole lot of WSB's to move Tesla.
| agloeregrets wrote:
| Which is why TSLA is so overvalued, same game, different
| scale. There are a lot of Elon Worshipers who pump the price
| as well but TSLA has basically no proof that they will
| fulfill any of their advertised goals.
| boringg wrote:
| Actually, this will likely be unpopular here, short sellers do
| have an important role in the economy. In the case of GME and
| more recently short sellers have been making money on crushing
| viable businesses (which they should not be allowed) but
| historically they expose fraudulent companies.
|
| I don't like companies getting pushed out of business by big
| short sellers or making money but just publishing bad research
| under guise of shorting a company. I also detest fraudulent
| C-suite executives.
| totalZero wrote:
| I personally am against selling equity that you don't own. It
| creates so many failure modes for the equity markets (failure
| to deliver chief among them). And I wouldn't be surprised if
| the net impact of short selling were actually positive for
| spot price, because shorts tend to sell into strength but
| they often squeeze into weakness.
|
| We've gotten accustomed to short selling and buybacks, but
| the equity markets would make far more sense if we were to
| outlaw both practices. Borrowing something to sell it is a
| recursive behavior, as is buying shares of yourself. In
| markets as in computer programming, we have to be careful
| about recursive behaviors.
| sigstoat wrote:
| > Borrowing something to sell it is a recursive behavior,
| as is buying shares of yourself.
|
| no, it isn't. this is nonsense, you're just trying to
| equate some reasonable market activities with something
| that sounds a bit scary and weird because you don't
| understand it.
|
| > ... in computer programming, we have to be careful about
| recursive behaviors.
|
| no, we don't. no more than of any other failure to
| terminate a loop.
| totalZero wrote:
| I'll ignore the ad hominem parts of your comment.
|
| If I borrow a share and sell it, I can later borrow it
| again and sell it again.
|
| That is recursion.
|
| When it hits a base case -- eg, I get liquidated -- all
| of those shorts have to be simultaneously covered. Doing
| so can create a stronger bid than the float of the asset.
|
| > no, we don't. no more than of any other failure to
| terminate a loop.
|
| A loop that can be done in-place, or in constant space,
| is less space-complex than a recursive function that
| cannot. Surely you have had situations where writing a
| top-down recursive function requires more memory than
| achieving the same result with a bottom-up recursive
| function, or vice versa. That doesn't happen with an
| iterative loop where I can better characterize the space
| required a priori.
|
| There is no rule in Regulation SHO preventing market-
| makers from selling a greater number of shares than the
| float, and there is no rule preventing any short-seller
| from borrowing and selling the entire float multiple
| times over.
| gruez wrote:
| >It creates so many failure modes for the equity markets
| (failure to deliver chief among them).
|
| Has this actually caused issues? Stock prices usually go up
| when the economy is doing well, so when short sellers
| default the economy/banking system is well prepared to
| absorb the impact. This is as opposed to something like MBS
| which causes a downward spiral of "people losing their jobs
| -> default on mortgage -> banks pull bank loans -> business
| spending drops -> people losing their jobs".
|
| >the equity markets would make far more sense if we were to
| outlaw [buybacks].
|
| Why? Buybacks are equivalent to paying dividends and then
| reinvesting them (which most people do).
| totalZero wrote:
| > Has this actually caused issues?
|
| That was one of the issues for the clearinghouse with
| GME. When a market-maker sells short, they don't have to
| locate inventory prior to selling. Sometimes, they are
| unable to deliver to the clearinghouse, which technically
| forces the clearinghouse to remain short to the buyer. A
| "buy-in" is supposed to take place when a short seller
| cannot deliver, but this doesn't happen with market-
| makers because they get extra time under the rules, and
| also they tend to trade so much that the clock resets on
| their past undelivered shorts every time they buy and
| sell (this is called a "reset transaction" and it is
| illegal for any other market participant to do). If a
| market-maker gets caught wrong-way on a position where
| they sold lots of shares that they neither own nor have
| the solvency to buy at market, they can collapse and that
| puts the clearinghouse itself at risk. This is why a firm
| like Citadel (one of the biggest market-makers) had an
| incentive to capitalize Melvin Capital with $2B to
| attenuate a squeeze. IMO it was self-preservation, not
| charity nor opportunity.
|
| The SEC makes FTD data available twice monthly. You can
| find it here:
| https://www.sec.gov/data/foiadocsfailsdatahtm
|
| MBS wasn't a problem because of the defaults themselves.
| It was a problem because the correlation of defaults was
| underpriced, so banks took heavy losses on positions that
| they thought were pristine.
|
| > Why? Buybacks are equivalent to paying dividends and
| then reinvesting them (which most people do).
|
| This isn't true. Buybacks do two things that make them
| highly attractive to executives. First, buybacks allow
| option holders (including many insiders) to generate
| capital appreciation on those options without exercising
| them. Dividends, on the other hand, distribute only to
| shareholders and actually reduce the price of the stock
| (share price drops by the amount of dividend on ex-date).
| Second, buybacks provide a perpetual bid to the stock
| that mitigates the downward impact of selloffs, which is
| particularly nice for executives that receive performance
| incentive bonuses based on share price. With something
| like an ASR (a more complicated buyback traded against a
| derivatives desk), buying may even get more aggressive
| (in terms of % of total volume) as the stock declines.
| Buybacks are rationalized as capital return but really
| they are a form of inducing asset inflation.
| gruez wrote:
| > In the case of GME and more recently short sellers have
| been making money on crushing viable businesses (which they
| should not be allowed)
|
| How was GME crushed by short sellers? Before the stock got
| pumped it was already looked like it was going down the drain
| due to noncompetitive business practices compared to best buy
| or amazon.
| ralph84 wrote:
| Policing fraud is the role of the government. Restitution for
| fraud should go to the defrauded, not speculators.
| boringg wrote:
| Don't disagree with this - however when the government
| fails its responsibilities someone else will have to step
| in.
| fastball wrote:
| People keep saying this but I'm still not sure I buy it.
| Everyone in the finance industry has some excuse for why
| their particular gig deserves to exist (HFT / hedge funds /
| shorts) but economics are complex and having a plausible-
| sounding reason doesn't mean it actually does help the
| economy / markets function in the long run.
|
| Do you have any examples of shorts actually help uncover
| fraud? Or is it more just when the fraud is uncovered (by
| someone else, say a 3-letter federal agency) the shorts make
| money, but they had no hand in actualizing the outcome.
| gruez wrote:
| >Do you have any examples of shorts actually help uncover
| fraud
|
| just from recent memory:
|
| 1. Muddy Waters Research reporting on Luckin Coffee
|
| 2. Hindenburg Research reporting on Nikola
|
| 3. Citron Research reporting on Valeant Pharmaceuticals
| antattack wrote:
| Tesla is just too many things to reliably short it though. AI
| company, car company, transportation company, energy
| storage/solar company.
|
| For example, even amid ongoing China defamation efforts, 4680
| battery production 'postponed', updated S and X still being
| tweaked, upcoming V9 FSD beta release could make the stock blow
| up again as it did around V8.
| JacKTrocinskI wrote:
| For those interested, you can view other positions Dr. Michael
| Burry has on the official SEC site:
| https://www.sec.gov/Archives/edgar/data/1649339/000156761921...
| mirekrusin wrote:
| He plays classic, shorting overpriced, buying under-priced by raw
| books. You can get surprise on reality benders like Steve Jobs,
| Elon Musk or bitcoin.
|
| Betting against Elom Musk seems like betting from first
| principles against first principles guy. Popcorn and watch.
| Havoc wrote:
| >Michael Burry is long puts
|
| ....so short?
| HWR_14 wrote:
| I mean, you can also say he has Tesla investments. Long puts
| are a type of short position which is a kind of Tesla position.
| However, since it is far more specific it conveys far more
| information.
| rubiquity wrote:
| Puts and shorts aren't the same thing.
| whall6 wrote:
| Yes, but you can also "short" puts by selling them.
| totalZero wrote:
| Short delta, yes.
| swiley wrote:
| short/long derivatives doesn't indicate sentiment. I would say
| "bearish" here.
| MrPowers wrote:
| Tesla can grow and sell tons of cars and the stock price might
| still fall.
|
| Cisco Systems is a great example of a fantastically profitable
| business with a stock price that's still below peak. It's an
| incredibly successful company that makes more than $10 billion in
| profit every year. The stock price is still below the March 2000
| peak.
|
| If Tesla "only" made $20 billion in profit a year, the market
| would probably consider it a failure. Expectations are high.
|
| I can see the bull case for Tesla becoming a multi-trillion
| dollar company or the bear case. Hard to assess Burry's position
| without knowing the expiration date and strike price of his puts.
| roland35 wrote:
| I was curious and looked it up- Cisco is indeed still off of
| its peak stock price $52 vs $77 in 3/2000... But if you
| reinvested their dividends you would be a little closer! Just
| don't adjust for inflation!
|
| $10k invested on 1/2000 would have peaked at $14k in March, and
| now would be worth $9.5k
| bob1029 wrote:
| >Hard to assess Burry's position without knowing the expiration
| date and strike price of his puts.
|
| Even if you knew the exact pieces of paper that he held today,
| that would tell you nothing about his overall plan. Very few
| options strategies involve a one-time purchase of contracts in
| hopes that the dates & prices on those will hold until
| conclusion. For something this big, you would continue to
| acquire (and sell) contracts at a range of strike prices &
| expiration dates until the overall play is concluded.
| felixfurtak wrote:
| Some interesting parallels with automotive industry here. Cisco
| saw huge valuation base on a perceived future. Nortel (who were
| more of an incumbent) also saw massive stock price increases at
| that time. Only one of these two companies survived. Cisco had
| the right tech but Nortel had fundamentally the wrong tech. I
| suspect we'll see something similar in the automotive industry.
| ve55 wrote:
| As options can grant the buyer significant leverage with each
| option representing 100 shares, the sum they came up with for the
| article title is likely a misrepresentation, and if the bet goes
| wrong notably less money will probably be lost. Either way I
| don't think articles of this nature are particularly useful
| however.
| eaenki wrote:
| So how would you go about making an educated reverse
| engineering claim on the stake at risk without knowing his
| other legs nor expiry dates? Is it even possible? How about a
| wide range?
| pvarangot wrote:
| I don't think it's possible. He's also not saying if he's
| actively managing his puts. He may be actively rolling the
| date or the price to cash in on red days and re-buy on green
| days. There's many ways to make a big short bet on a volatile
| stock pay for itself with day trading until it's no longer a
| bet and just a free lottery ticket.
| paxys wrote:
| The only new reveal is the dollar figure. Burry has been very
| openly (and vocally) short on Tesla for a while now. He has been
| Tweeting a bunch about it since September last year. Tesla shares
| are up ~75% since those original Tweets.
|
| "The market can remain irrational longer than you can remain
| solvent" applies to both amateur traders and the most seasoned
| investor/genius alike.
| wwweston wrote:
| Possibly worth noting that Burry is not the only Big Short
| figure to openly opine that Tesla's pricing seems way out of
| whack compared to its fundamentals. Steve Eisman (aka Mark Baum
| in the movie) was publicly short Tesla for a bit. I think he
| ended up closing out and losing money at some point with a
| rueful "It's very hard to short a stock that's a cult."
|
| It's possible both of them are wrong and Tesla has fundamental
| value at a level they were unable to analyze. Or it's possible
| that Tesla's future will be determined by things beyond
| fundamental value. But it's also possible they're right on some
| timeline.
| mixmastamyk wrote:
| Odd that trillions in stimulus has not yet been mentioned in
| the thread. Reality is mostly checked until that dissipates.
| OJFord wrote:
| Infamously Musk himself tweeted 'Tesla stock price too high
| imo' at around (can't get accurate atm) $150; it's currently
| at $573.
|
| (Not that anything Musk tweets should be taken as anything
| other than.. an indication that one or all of TSLA, Bitcoin,
| or Dogecoin is about to move rapidly in one or both
| directions..!)
| eckmLJE wrote:
| And Burry is intimately familiar with this, brushing close to
| that reality as illustrated in The Big Short.
| tenpies wrote:
| Oh you're completely missing the nuisance of what we just
| learned.
|
| Sure, he's been talking short since September, but the size of
| his position has grown considerably since then - almost
| certainly timing the S&P inclusion (sorry index investors, you
| quite literally paid the top price for a stock that has lost
| almost 45% since you bought it).
|
| He's almost certainly made a killing with his position and the
| beauty is we don't even know what it is today. He could have
| realized hundreds of millions in gains, or he could have them
| all still open.
|
| If he has the position from the filings - just today, when
| Tesla is down $22 - he has made over $16 million dollars in
| unrealized gains.
|
| It will be hilarious watching the Musk Zealots crying to have
| Elon tweet something to fraudulently try to pump the stock
| price and try to trigger a squeeze. Meanwhile they don't
| realize he's doing this with options, not shorting directly.
| paxys wrote:
| From the article:
|
| > As of March 31, Burry owned 8,001 put contracts, with
| unknown value, strike price, or expiry, according to the
| filing.
|
| So what are you basing any of this on?
| epistasis wrote:
| > (sorry index investors, you quite literally paid the top
| price for a stock that has lost almost 45% since you bought
| it).
|
| If there's a single index investor that feels saddened by
| this stat, in the slightest way, they should stop index
| investing right now. The great joy of index investing is that
| this single stock is down, while on average everything else
| is way up...
| [deleted]
| awb wrote:
| It sounds like the short thesis is centered around Tesla's
| revenue coming in large part from regulatory credits.
|
| If you take out credits and crypto, they look like most other car
| manufacturers, struggling to make a profit.
|
| > As more automakers produce battery electric vehicles of their
| own, ostensibly fewer will need to purchase environmental
| regulatory credits from Tesla, which they have done in order to
| become compliant with environmental regulations.
|
| > In the fourth quarter of 2020, Tesla's $270 million in net
| income was enabled by its sale of $401 million in regulatory
| credits to other automakers.
| atatatat wrote:
| > It sounds like the short thesis is centered around Tesla's
| revenue coming in large part from regulatory credits.
|
| Hopefully not (for Burry), because where are those going?
| rubiquity wrote:
| Tesla sells its regulatory credits to other auto makers.
| Other auto makers are becoming more environmentally friendly
| and are weening off buying credits from Tesla.
| kikokikokiko wrote:
| Tesla ins't "struggling to make a profit". It never made it.
| Other than artificially imposed government credits, Tesla
| business is not and have never been sustainable. Maybe someday
| people will start to see Musk for the carnival barker that he
| really is.
| [deleted]
| thow-01187 wrote:
| Except...the traditional automakers are not struggling to make
| profit. Not even close. VW Group made $10B last year, during a
| pandemic year. Toyota $19B. FCA, with their public image of
| "also ran", $7B. BMW made $4.5B just last quarter.
|
| Even minor automakers like Suzuki or Kia still make multiples
| of Tesla's profit without breaking a sweat
| Igorvelky wrote:
| one thing i learned, do not short scammers!
| samingrassia wrote:
| All the weak shorts have washed out or got tired of bleeding
| premiums for the past 3-5 years - it will be interesting to see
| if this will reignite that community to put them back on. Long
| Tesla is very much a pro-cyclical business, if you read between
| the lines, Burry is also expressing his $500mm opinion that this
| cycle is coming to an end.
| turbinerneiter wrote:
| Teslas price is just too high. I think they will be very
| successful and become a big, dominant car maker.
|
| But their price only makes sense if they end up being the only
| car maker left.
|
| That's not realistic. Building an electric car is not that hard,
| especially if Tesla already did all the hard lifting for you.
|
| For a while I was thinking that the battery play - becoming the
| number 1 battery supplier - will justify the price, but what I
| see right now looks like there is many players, old and new,
| moving in.
|
| I won't short them tough, in the end I'm just a dog on the
| internet and have no clue how stonks work.
| epistasis wrote:
| There's also solar, in addition to storage.
|
| All three technologies are really key parts of the future, and
| controlling that aspect of the suburban home energy profile
| have absolutely huge synergies.
|
| As we get to higher penetration of renewables, our grid will
| change from the current model of supplying whatever power is
| demanded, to a far more two way mode where excess supply will
| drive time-shifted demand.
|
| Right now the only monetization strategy on the grid for
| solar/storage providers are 1) net-metered solar, and 2) backup
| electricity for outages. This will change.
|
| The most expensive component of an EV is the battery, and it's
| likely we will have as much grid-attached non-EV storage as we
| have EV storage.
|
| IMHO the current price is unhinged from any analysis, and fully
| in the tulip bulb stage of share pricing. But I think that
| Tesla is better positioned to take advantage of three core
| technologies of our energy future, three techs that must be
| tightly coupled, and no other player is even really thinking of
| that.
| [deleted]
| [deleted]
| rubyn00bie wrote:
| I'm not one to typically paraphrase billionaires, or think
| they're too connected to reality... but something I heard Mark
| Cuban say the other day was kind of "oh, shit that's true"
| moment for me. It was something to the affect of (I can't find
| the clip at the moment), "Back in 2010 we never thought we'd
| see a company hit $1 trillion. We never thought Apple or Amazon
| (et. al) would be able to continue their growth year after year
| to even be those $2 trillion dollar companies..." All I could
| think was "oh shit, yeah, I never thought I'd see it either."
|
| Ten years ago, Apple was worth $297 billion dollars, today it's
| worth $2.1 trillion dollars. I think Tesla stands a good a
| chance to be worth these seemingly absurd valuations. The
| market price isn't solely defined by the current value. With
| tech companies especially, it reflects expected value, and
| Tesla still has a lot of room to grow. I'd be more skeptical
| but EVs are eventually going to cost way less to make than
| typical ICE (internal combustion engine) cars, and per unit
| that savings translates into a lot of fucking profit. Not to
| mention the additional profit they're raking in thanks to the
| public's image of Tesla's and the experience generally being
| "magical" (even if gimmicky). Also, a "green crypto" if a Tesla
| branded play (I feel musk is bringing this soon) will cause a
| pretty gigantic boost to the company's bottom line.
|
| For at least the next 2-5 years Tesla is gonna be pretty safe,
| and I'd guess that 2-5 will buy it like 3-5 more years just
| being the incumbent... I don't think Burry is going to be to
| happy on this one. Mark Spiegel has already fallen to the
| beast, and I suspect Burry is likely going to as well.
|
| _shrug_ just my two cents.
| skystarman wrote:
| Amazon and Apple are WAY WAY WAY different companies than
| Tesla.
|
| Apple has dominated high-end smartphones for over a decade.
| Amazon has dominated eCommerce for that time and longer.
|
| Tesla dominates EV, which is a tiny portion of all auto
| sales. There is about to be huge competition in the EV space
| from legacy auto manufacturers and a car is not the same as a
| phone.
|
| There are plenty of cars with a WAY better driving experience
| than a Toyota Camry but it's still the best selling sedan on
| the road. So really hard to believe Tesla can win by offering
| "premium" driving experience.
| antoniuschan99 wrote:
| Sounds like a two pronged question. Will EVs dominate auto
| sales? And will Tesla dominate the EV market.
| bcrosby95 wrote:
| FWIW, the context of that was him defending wallstreetbets
| putting money into gamestop. His argument was that for most
| investors stocks just represent a store of value and little
| else - not some bullshit "owning part of a company" or even
| "fundamentals".
|
| Part of his argument was that even companies like Apple have
| gone way beyond any valuation anyone would have thought
| reasonable as little as 10 years ago.
| fullshark wrote:
| > I'd be more skeptical but EVs are eventually going to cost
| way less to make than typical ICE (internal combustion
| engine) cars, and per unit that savings translates into a lot
| of fucking profit.
|
| What's the basis for this? Battery tech evolution and ICE
| cars have no more (safe) optimizations to make to get costs
| down?
| rictic wrote:
| I won't speak to profit, but battery performance per dollar
| has been improving at a fast exponential clip for the past
| couple decades, which is one of the largest costs of an EV.
|
| An EV drivetrain is also far, far simpler. Fewer parts, and
| less complexity in those parts. No clutch, gearbox,
| carburetor, differential, starter, pumps, exhaust...
|
| A modern ICE car is an absolutely unbelievable engineering
| marvel, but unless battery progress unexpectedly stalls
| there's just no way they can keep up in price or
| reliability with EVs.
| seem_2211 wrote:
| This is also predicated on the idea that every part of
| Tesla's operations are substantially better than existing
| automakers.
|
| Do people really believe that Tesla is literally run 10x
| better than Toyota, Volkswagen, Daimler, BMW or Honda? I
| don't think so.
|
| Then there's the nightmare of trying to appeal to two
| wildly different consumer groups.
|
| At the low end: does Tesla have a meaningful reliability
| advantage versus Honda and Toyota? From what I have seen,
| it appears not. This matters less when you're dealing with
| premium buyers, but will not work with the mass market.
| Fans will put up with hassle (I own an AMG... I'm more than
| aware of the extra expense I am constantly paying for - and
| that's a trade-off I'm happy to make in return for a
| powerful v8).
|
| Secondly from a clout point of view: why would anyone buy a
| Tesla over a comparatively priced Audi, Porsche, Mercedes
| or BMW. The people who talk about their Model 3 with a
| burning passion aren't trading in a 911, or an E Class or a
| Q7. They're excited to upgrade from a 2015 Camry. Massive
| expectation gap.
|
| Plus, all of these companies are valued far more
| realistically. Tesla being worth more than every other
| automaker or whatever gives them very little room to
| breathe. If Tesla is ever valued as the hardware
| manufacturer with relatively low margins (when compared to
| say a tech stock like Facebook or Salesforce).. is the day
| that we will see an enormous valuation haircut.
| fullshark wrote:
| I wonder if it's as simple as the market confusing all
| new technology companies with software companies, which
| have incredible distributional advantages and the ability
| to grow revenues from optimizations.
| tomp wrote:
| > why would anyone buy a Tesla over a comparatively
| priced Audi, Porsche, Mercedes or BMW
|
| Because you want to drive far?
|
| Tesla model 3 range: 354 - 504 km
|
| Porsche Taycan range: 333 - 463 km
|
| (and most certainly _not_ comparatively priced)
| seem_2211 wrote:
| If you are buying a Taycan you would not even consider
| the Model 3 and if you want to drive far you buy an ICE.
| MomoXenosaga wrote:
| Realism is the problem. BMW and Volkswagen are boring.
| Not much to hype. They just sell cars not tech nerd
| dreams.
| seem_2211 wrote:
| The company valuation of BMW and VW isn't the problem-
| it's a problem for Tesla. There aren't enough nerds in
| the world to justify it's insane stock price.
| MarkMc wrote:
| > EVs are eventually going to cost way less to make than
| typical ICE (internal combustion engine) cars, and per unit
| that savings translates into a lot of fucking profit
|
| Not in a competitive market which is where Tesla may be in 10
| or 15 years, especially if everyone commutes by robo-taxi.
|
| When Berkshire Hathaway was still a textile company the
| operating manager excitedly told Warren Buffett about a new
| loom machine being developed which was far more efficient.
| Buffett's responded that therefore he would likely close the
| business, because he cost savings would flow to the customer
| and the long-term return on the new capital investment would
| be low.
|
| Having said that, Elon Musk
| dustingetz wrote:
| The question imo is if time benefits the incumbents (due to
| monopoly / network consolidation) or if time benefits the
| disruptors (due to the commoditization of growth/scale, the
| shrinking of the distance between 0-$1B, and tech monopolies
| being based on 90s web tech which is stretched to breaking
| point). How will climate disruption fit into this, who
| benefits as the world starts to break faster and faster.
| kaesar14 wrote:
| "Tech" companies here encompasses quite a broad list of
| markets. Just because Apple and Amazon managed to upend
| expectations doesn't mean that Tesla will. Most of these
| gigantic technology companies are software companies that
| have incredible profit margins and really hard to disrupt
| market positions. Apple is unique in that it manages to sell
| a premium product with premium pricing without it affecting
| overall demand with the best-in-class product differentiation
| that the Apple brand is known for.
|
| Yes, Tesla's managed to do something somewhat similar, but
| will that continue to hold? Even as automobile competitors
| finally wake up and start competing on electric cars? Will
| they become the largest automaker in the world? Tough
| questions to answer.
| agloeregrets wrote:
| > I think they will be very successful and become a big,
| dominant car maker.
|
| I'm not sure really. They keep throwing the entire company at
| insanely poorly leveraged bets with unfulfilled promises.
| (Cybertruck is on track to be delivered at a longer timeframe
| than any car tesla has ever made, they haven't even built the
| factory or unveiled the final design, same for Semi and
| Roadster, the new Model S was supposed to be shipping in..uh..
| March?) I think they are scaled too big to breathe and survive,
| eventually being bought in a post-Elon world by a Ford, GM, or
| possibly Google or Apple.
| cduzz wrote:
| They bet the company on the OG roadster, S, and 3.
|
| They don't need to now. The 3 and Y are quite successful and
| quite profitable.
|
| The Truck, Semi, Roadster, Leaf Blower, and such are all
| distractions that aren't worth building until they've managed
| to establish much larger battery volumes and aren't selling
| every Y and 3 they make months before they make them.
|
| What's their run rate? They've got a ton of cash and viable
| products (3 and Y) where there are people lined up to buy
| them before they're even made. And they've got the
| supercharger network which is an enormous differentiator
| against any other EV.
|
| Their biggest threat is if there's some enormous unseen flaw
| in their battery design where they get swamped with battery
| warranty claims.
|
| The share price is absurdly high, but it is similarly absurd
| to project the company going out of business.
| Dah00n wrote:
| >The 3 and Y are quite successful and quite profitable.
|
| I'm not sure I would define the sales as successful. Tesla
| would still be in the red if it wasn't for bitcoins and
| emission certificates they sell to other manufacturers (and
| this income will be gone in a few years). VW has barely
| started switching to EVs (ID.3 launched in July 2020) and
| yet they sold half as many EVs in 2020 as Tesla did, so
| maybe in that light it is kinda successful but at the same
| time VW sold almost ten million passenger cars. I predict
| that Tesla will be run over as a car company in a few years
| but will maybe become successful in investments.
| agloeregrets wrote:
| They already are betting the company on a bunch of things.
| Their cash on hand is almost entirely debt.
|
| Additionally, they are merely meeting demand on Model 3
| sales right now, don't forget that they spun down
| production rate on the 3/Y and are slowing China production
| as well. US charging networks are growing at a faster rate
| than Superchargers as well, so in roughly 2 years you are
| looking at a market where Electrify America is as big as
| the Supercharger network, the current NY to LA EV record is
| held by a Taycan on EA's network, not a Tesla.
|
| The Model 3 is not very profitable at all either, sure it
| sells well (as it should, it's a great car being sold at
| almost a loss!) but a M3 without AP is not profitable.
| Still, to this day, they haven't made a penny on their
| business other than with selling credits but they are not
| even investing that heavily back into the business right
| now. Finally, the Cybertruck was told to reservation
| holders to be shipping in 2021... which isn't happening.
|
| What I find kinda funny is this: You call the truck a
| distraction..when it is the #1 best selling category in the
| US AND they have fast encroaching competition that owns the
| market. That's like calling the Rav4 a distraction for
| Toyota. The Ford F150 Lightning will likely outsell the
| cycbertruck in the US as Ford will have two years to scale
| and keep it in that scale by time the Cybertruck does
| actually launch. It has been Ford's #1 R&D goal for the
| last three years as it should be, it's their #1 selling
| vehicle. Ford sells two F150s in the US for every car Tesla
| makes globally and the margin is way more per unit.
|
| I'm not saying they are going to go out of business today
| or this decade. I'm just saying that their differentiation
| will disappear, customer's will to deal with terrible
| timelines will evaporate when they can go the next door
| over and get it today, and once Elon is gone from TSLA
| (which will happen and should terrify shareholders; he
| clearly wants little to do with Tesla), the stock will fall
| like a rock and the debt leverage will fall with it finding
| Tesla way upside down on a LOT of money that they can't
| borrow more to cover and without the market and profit
| explosion the company is betting on.
| riffraff wrote:
| > he clearly wants little to do with Tesla
|
| What makes you think that? I mean he sure has more fun
| with other stuff, and I don't follow him closely, but I
| didn't get the impression he hated the business.
| jrsj wrote:
| F150 Lightning being unveiled in a couple days is a good
| example of this. The F150 is the most popular vehicle in
| America & this has a good chance at being a pretty big success.
| Freestyler_3 wrote:
| What crypto can I use at checkout?
| foodstances wrote:
| The same one you can use at checkout on tesla.com.
| ceejayoz wrote:
| You missed https://www.cnbc.com/2021/05/12/elon-musk-says-
| tesla-will-st... last week, I take it?
| JustSomeNobody wrote:
| How many people planning to buy an F150 (lightning or
| otherwise) have or even have heard of crypto? That's just
| not the market.
| incrudible wrote:
| > I won't short them tough, in the end I'm just a dog on the
| internet and have no clue how stonks work.
|
| To be clear, Michael Burry didn't short Tesla, he bought put
| options, which gives him the right but not the obligation to
| sell Tesla stock for a certain price, on a certain date.
|
| If the bet works against him, his options expire worthless.
| This puts an upper limit on his losses.
|
| If you have an actual short position, your potential losses are
| unlimited.
| Kiro wrote:
| Why can't you have a limit on short positions and just
| withdraw when it reaches it?
| gruez wrote:
| That's basically how a margin call works. If your position
| loses too much money relative to the other components of
| your portfolio, your broker forcibly closes your position
| to prevent further losses.
| aaronblohowiak wrote:
| the limit is a trigger for sale, not a guaranteed price.
| for small volumes (retail) transactions, it usually doesnt
| matter, but if you are talking hundreds of millions of
| dollars worth of shares, your activity aloe will move the
| price.
| mypalmike wrote:
| You can of course. There's a risk the the stock will move
| quickly through your limit and you stop out somewhere
| beyond it. This is unbounded in a sense but not generally
| problematic on a highly traded stock like Tesla.
| mxschumacher wrote:
| There are many ways to short a stock, buying puts is one of
| them
| alex_young wrote:
| > If you have an actual short position, your potential losses
| are unlimited.
|
| Isn't this a bit like saying that the potential upside of
| holding any stock is unlimited?
| ska wrote:
| Sure, they have an inverse relationship, but the
| implications are really different.
| benmller313 wrote:
| Yes. Is that not true?
| enos_feedler wrote:
| Yes. It's just more likely that your shares become valued
| at zero then anyone valuing them at 'infinite'
| ljm wrote:
| It is, that's the wager.
| greycol wrote:
| As a sister to my comment I'll also add you can effectively
| (though not legally) short more stock than you can buy.
| This is because to short you pay for a stock at the current
| market price with the promise to sell it back at the same
| price to the lender at a future date. If you then
| immediately sell the stock you can use that money to
| immediately pay to borrow another stock.
|
| This means with the cash it takes to buy 1 share you can
| short as many shares as someone will lend which can
| multiply your loss to more than you have.
| greycol wrote:
| If you need to cover your short and there are no shares
| being sold you effectively must keep offering higher and
| higher prices until someone will sell you a share as you
| are legally obligated to buy a share[1]. To end the
| unlimited downside (of raising the price you'll pay by more
| and more) you need to have enough sell orders on the books
| to cover your short or have raised the price enough for
| someone to sell. During the time you are trying to buy your
| loss is increasing (as you raise the price to get a seller)
| and is unbounded.
|
| If you have a stock you have to sell and there are no
| offers to buy on the books you can't offer to sell then
| keep raising the price, instead you would need to keep
| lowering the price. The price is either limited by what's
| on the books, or you need to wait an indeterminate amount
| of time for some one to buy at the price you are selling.
| During this time you are trying to sell your profit is
| decreasing (as you lower the price to get a buyer) and
| bounded by $0 (for a limited liability company).
|
| So while it's true that if you hold a stock indefinitely
| the value you could get is unlimited with a short the value
| you could lose could be unlimited over a much shorter time
| frame.
|
| [1] Whether you actually need to cover your shorts may be a
| matter of some debate if you look at the wild rumors around
| GME
| LeifCarrotson wrote:
| No, and this distinction is critical to understanding the
| risk that short sellers take.
|
| To use a slightly anomalous stock which hasn't split as an
| easy example, if you had shorted $BRK in 1980 when the
| price was $300, the potential upside was just 100%: In your
| best outcome, they go bankrupt and the most you earn is
| $300. Unfortunately for you, Berkshire Hathaway shares are
| now worth $430,000, so your $300 or 100% upside turned out
| to be a rounding error against the approximately -150000%
| loss.
|
| Edit: The reverse is technically symmetrical, but the
| consequences make it work out differently for the markets
| and society. Yes, if you'd bought BRK in 1980 you'd have
| had a liability of $300 (your cash input could be worthless
| if they went bankrupt) and a potential upside of hundreds
| of thousands if it went to the moon.
|
| The difference is that if you held the stock and it goes
| bankrupt, you're only liable for the amount that you put
| in. Worst case, you bet the farm and you're going to be
| washing dishes to put food on the table, but it's your loss
| to lose and your gain to win. If instead you bet the farm
| in a short position, you never had and will never have
| thousands of farms to bet in the first place; you're going
| to declare bankruptcy and someone else is going to have to
| pay for the bad bet you made. That effectively pushes the
| losses back on society but privatizes the gains.
| burnished wrote:
| OK, but the person you were responding to was asking if
| this also meant that the upside was unlimited - so in
| your example the answer is 'yes', if you bought in at
| $300 the stock price can just keep going up without
| bound. Can you clarify why these are different?
| LeifCarrotson wrote:
| If you win $300, good for you, if you win $430,000,
| that's even better for you, but the market doesn't really
| care which way that goes.
|
| However, if you lose $300 that you brought to the table,
| that's your problem, too bad for you. If you lose
| $430,000 when you only brought $300 to the table, that's
| beyond being just your problem, that's the system's
| problem.
|
| A system which allows this situation to happen is
| fundamentally flawed, it's vulnerable to exploitation and
| collapse if this kind of behavior allowed to go on
| unchecked.
| dwaltrip wrote:
| Does that ever actually happen? I thought that a margin
| call would come far before it reached that point,
| limiting the damage to any of the involved parties.
| zaat wrote:
| Hence there are checks and defense mechanisms in place,
| and a risky short position (meaning position with loss
| over the credit given to the position holder) will be
| closed by the bank/broker.
|
| Those guys in finance and regulations have been here
| before we were born, they managed to cover most basic
| stuff by now.
| recursive wrote:
| What? Why are you explaining shorts? The potential upside
| of holding a stock is indeed unlimited, and has nothing
| to do with short sales.
| zaat wrote:
| And how is this different from saying that holding the
| stock you bought at $300 giving you +150000%? perhaps you
| missed GP intention?
| ac29 wrote:
| The point is, you can't lose an "unlimited" amount on a
| short, unless the underlying stock goes up by an
| "unlimited" amount.
| damon_c wrote:
| Is there a max limit on how much a stock can go up?
| vasco wrote:
| There technically is now (but should be fixed soon),
| related to the way prices are stored in exchanges, BRK A
| is giving Nasdaq a hard time:
| https://markets.businessinsider.com/news/stocks/warren-
| buffe...
| keltex wrote:
| Actually we have no idea if he is short TSLA. The fact that
| he has purchased TSLA put options is from the SEC Form 13F
| which he's required to file quarterly.
|
| Short positions (for some reason) are not on the 13F.
|
| So he could be long TSLA and have purchased put options as a
| hedge or any number of other strategies.
| m101 wrote:
| Only mentions puts:
|
| https://www.sec.gov/Archives/edgar/data/1649339/00015676192
| 1...
| incrudible wrote:
| You can tell he's short from him talking his book on
| Twitter.
| bko wrote:
| I'm not sure that's necessarily meaningful. Sure, you pay for
| optionality in a put as opposed to a short, but it may be
| easier and cheaper to buy a put than finance a short if you
| believe the stock will go down. The downside isn't unlimited
| if you short, since I don't think you'd be on the hook if you
| hit a margin call, your collateral would simply be seized and
| your position would be exited.
|
| I'm sure there's other intricacies in short vs buy a put, but
| I don't think you can infer too much from the choice without
| knowing a lot more. I think all you could say is that he's
| bearish on the stock in the short term.
|
| I could be wrong though so I would love to hear other
| interpretations or whether there's some liability apart from
| your margin in a naked short.
| [deleted]
| arcticbull wrote:
| With a put option, you pay premium in the form of "theta
| decay" over time. If Tesla stays flat, you lose your entire
| premium, and on a stock like TSLA with high implied
| volatility, that can be a very expensive proposition.
|
| Similarly, with a short position, you'll be paying a borrow
| fee which will vary over time based on short interest.
| AlanSE wrote:
| Fascinating subject. I also just want to mention why it
| makes sense that people SELL put options, in addition to
| buying them.
|
| If you sell a put option, then you have the obligation to
| sell in the future at the fixed price, regardless of the
| market price at the time. However, many of these
| positions are "covered", meaning that someone can sell a
| put option while owning as many stocks as they sell in
| options. So if the stock goes above the strike price,
| they have the option of selling the shares the already
| own. Thus, the seller is not on the hook for infinite
| losses. They merely trade the potential for unlimited
| gains in return for a fee.
|
| I've always thought it would be fun to get into options
| by regular, automated, selling of covered put options.
| You get paid by speculators for underwriting their
| speculating. But... options pricing models are like real
| academic. It's like a real job.
| arcticbull wrote:
| That's when you sell a covered call.
|
| When you sell a put, your obligation is to pay the strike
| to buy someone else's shares.
|
| For instance, AMD is trading at $77. Let's say I'm long-
| term bullish on AMD, but don't want to pay more than $70
| for it. I can sell $70 puts every week, collect the
| premium up front, and then if AMD closes below $70 on the
| expiration date of my short put, I'm obligated to pay $70
| for the shares, even if they're trading much lower. I win
| because I get to collect the premium no matter what, and
| if I get assigned, I bought at a discount to the market
| price when I sold the puts.
|
| A covered call gives you the obligation to sell your
| shares to someone else if the option expires in the
| money. This is a great way to exit a position, for the
| same reason. You can sell calls repeatedly at the lowest
| price you'd accept for your shares, and if it moves down,
| you've hedged. If it moves up, and you get assigned, you
| sold for above market price as compared to when you sold
| the call.
| mypalmike wrote:
| > these positions are "covered", meaning that someone can
| sell a put option while owning as many stocks as they
| sell in options
|
| A covered call is where you sell options backed by long
| shares. A covered put is backed by short shares. A common
| way of selling puts without shorting the underlying stock
| is just having enough cash on hand to buy the underlying
| asset if the option is exercised.
|
| And yeah, some small investors do claim to make decent
| income primarily writing options. The basic idea is that
| if you can eke out like 0.5% a week on average, you can
| get around 25% annual returns. I've been looking into
| trying to automate some basic strategies, but it's rather
| daunting just getting started in automated trading.
| Figuring out how to just get the data you need for
| implementing a strategy is a pretty big hurdle, for
| instance.
| ska wrote:
| re: liability.
|
| Surely your liability is to the shares you borrowed, not
| the fraction your account has to meet margin requirements?
| If not, why would a broker ever let you short on a margin
| account under the same rules as other margin?
| incrudible wrote:
| It's a very meaningful distinction. If you have a put
| option, the stock can go to the moon _and back_ multiple
| times, and you can _still_ end up in the money on the
| strike date. If you have a short position, you 're going to
| get margin called on the way to the moon and it's "game
| over".
| arcticbull wrote:
| True, but if it doesn't go anywhere you lose it all with
| a put, and lose far less with a short (just the borrow
| fee).
| Kranar wrote:
| In other words, a short and a put are not remotely the
| same things and are meaningfully distinct from one
| another.
| arcticbull wrote:
| I certainly agree their risk-reward profiles are
| materially different. They're similar in that they are
| both bearish positions.
| [deleted]
| yumraj wrote:
| And, they have a genius but an _unstable_ genius as a CEO where
| no one knows what he will do next. Not sure how the stock
| market quantifies that.
| fleetingmoments wrote:
| Are you saying they should get a stable genius in?
| chrisco255 wrote:
| Stable geniuses are unfortunately even more rare than
| unstable ones.
| yumraj wrote:
| Stable person yes. _The_ stable genius, hell no.
|
| _Stable genius_ , if they can find one, yes!!
| WJW wrote:
| There is at least one of those available who recently left
| his previous position...
|
| Joking, joking :D
| mdoms wrote:
| Elon Musk isn't a genius. He's a dumb guy who got lucky. Go
| and read literally anything he writes. Obvious dumb guy.
| gonzo41 wrote:
| Telsa's only significant achievement was to create a company
| structure that allowed it to pursue a loss making manufacturing
| startup to begin with. The big auto makers have golden
| handcuffs and can't risk that sort of paradigm shift to a new
| market. Now they know people will buy them they will easily
| retool towards electric. I think Tesla will either be crushed
| or end up a midsized player.
| [deleted]
| clomond wrote:
| While I won't dispute that Tesla's share price is high given
| where the company is at right now when valued as an auto
| business, there are a few things I think are worth mentioning
| and commenting on in your post.
|
| > Building an electric car is not that hard, especially if
| Tesla already did all the hard lifting for you.
|
| This couldn't be further from the truth. While making a
| prototype EV is relatively easy, yes. EV industry followers
| will note that the real challenge is _scaling_ EV production,
| and specifically the batteries ' production. You don't need to
| look further then to answer: 'Why don't all of these automakers
| have tonnes of EVs on their lots available today as we speak?
| Why are they all '2022 release' or even 'dozens of models in
| 2025'. Because all of the tier 1 and tier 2 li-ion battery
| supplies have already been allocated from now to several years
| out, and if you want 'EV model volume' scale batteries, you
| better be ready to fork over the capital or purchase commitment
| for a batttery cell production line that might not have had a
| shovel hitting the ground yet. And waiting a few years for
| assembled product.
|
| > But their price only makes sense if they end up being the
| only car maker left.
|
| Assuming both the gross margin profile and auto ownership model
| stay the same - sure. Tesla has proven to generate more gross
| margin per vehicle than other automakers as is, they have
| 'practically' infinite demand (stimulated by expanding
| geographies and targeted price reductions when demand sags).
| And this isn't accounting for GM expansion for vehicles that
| could be a part of a ride hailing network (autonomous or not).
|
| I do believe, like other 'Tesla fans', that when factoring in
| their lead in scale and tech, unit cost advantage as well as
| how things look on a decade or two time horizon, I think it is
| quite likely that there will not be a better time to become a
| shareholder in the next 1-2 decades.
|
| One way I look at it is by comparing it to Apple, a ~$2T market
| cap company in 2020 dollars. ARPU of an Apple customer compared
| to a Tesla customer is probably between 1/4-1/10 (how much
| iphone/mac/apple services does one buy versus transportation
| spend on an annual basis). If you project Tesla margins to look
| more like Apple's 10 years from now (yes, a big bet), even with
| similar market share breakdowns of iOS/Android today - it isn't
| a huge stretch to imagine with ~50-100M EVs on the roads by
| then - that you could have Tesla with a market cap between 10T
| and 20T in 2020 dollars. Particularly when factoring in their
| business segments beyond personal transport/light vehicles.
|
| They are so far the only company making EVs to have crossed the
| 'valley of death'[See: crossing the chasm]. Startups and
| established automakers will need to spend billions in order to
| get EVs sold at scale that generate FCF per unit. It is a tall
| order.
|
| (Not financial advice do your own research etc etc)
|
| EDIT: Also note that Tesla has stated in an earnings call that
| they are looking at 50% CAGRs moving forward, and I do think
| that they could be undershooting this number a bit.
| nawitus wrote:
| European car brands (combined) sold more EVs in January-March
| than Tesla. Also, Nissan was selling more EVs than Tesla for
| many years. It just doesn't seem that difficult to scale EV
| production.
|
| Source: https://insideevs.com/news/504647/global-plugin-
| sales-march-...
| babesh wrote:
| The EU imposes a 10% tariff on imported cars. That makes EU
| built EVs more competitive within the EU.
|
| Tesla is building that Berlin factory to decrease shipping
| costs and time and also to not have to pay the tariff.
|
| Perhaps more interesting is that the more popular EVs in
| Europe are hatchbacks. Hatchbacks are more popular than
| sedans in many European countries. Tesla is missing a car
| to compete in that segment.
|
| The current normal of competition between countries is to
| allow foreign car companies to build factories in their
| country. I bet that if a country's car industry faces an
| existential threat, the country will tilt the playing field
| further in that country's car companies favor.
|
| I do not expect that Tesla will be allowed to wipe out
| other country's car industries. It may be allowed to become
| the preeminent EV maker (which it already is if you count
| by market cap). I think that Tesla will need to try to win
| in other areas: EVs for countries without strong car
| industries, energy storage, self driving cars, etc...
| notJim wrote:
| I don't follow this very closely, but hasn't Volkswagen
| already shown they're not that far behind, and aren't they
| already outselling Tesla in Europe? I've watched a lot of the
| ID4 reviews (since I'm in the US and we don't get the ID3),
| and the issues with the car seem very minor, and potentially
| fixable with OTA updates. If they end up selling a lot of
| them, that should take a lot of the wind out of Tesla's sails
| IMO.
| clomond wrote:
| I am hoping that VW and others can get to scale quickly. If
| priced correctly (not too high), I don't see why VW won't
| be able to sell every car they are able to make. The key
| thing when looking at these metrics are that it is
| primarily a supply defined market rather than a demand
| defined one. And, it is about offering a low enough price
| such that the market will buy it - while hopefully gaining
| some positive margin on each.
|
| The outselling of Tesla I'm not going to take at face value
| yet until Tesla's Berlin factory comes online. Note that
| Europe sales thus far have been dependent on imports and
| that it's quite likely Tesla has been focused on delivering
| and collecting cash on NA/Asia sales and having the
| European customers wait a few quarters.
| hindsightbias wrote:
| With ICE vehicles being 98% of the market it's not about
| competition for a sliver of the market. It's about who can
| scale. And that is a function of batteries and car bodies.
|
| Tesla probably leads in batteries, whereas VW leads in
| factory capacity.
| jdmoreira wrote:
| On the internet no one knows you are a dog :)
| verelo wrote:
| This comment reminds me of a car auction i went to years ago:
| This 2 yr old car with around 250,000kms on it came up,
| likely used for long distance travel as this was in rural
| Australia. The car looked like a 2 year old car inside and
| out, it was completely normal except for the odometer
| reading. The auctioneer used the line "No one can read the
| odometer when you're driving on by". I wouldn't have bought
| it, but i liked the line.
| toomuchtodo wrote:
| The world needs enormous amounts of stationary storage to
| transition to zero carbon electrical generation, and nuclear
| ain't happening. Tesla sells batteries in lots of products,
| some with better margins than others.
| cryptoz wrote:
| Tesla isn't a car company, though. They even removed "Motors"
| from their name years ago - showing wider interest, and not
| just batteries. Solar roofing as well, and others.
|
| I don't hold TSLA right now, regretfully, I entered pre-split
| at $27 and sold at $200. I _also_ think the current price is
| way too high, for what it 's worth. WAY too high. But it's not
| at all about cars, at least not for me, when trying to justify
| the valuation. It's about energy at large scale, and
| transportation at large scale. Not just car sales. Or battery
| sales.
|
| Edit: Currently P/E is ~570! I remember it being 1,300
| recently. Yikes.
| jeffreyrogers wrote:
| Panasonic makes Tesla's batteries though. I've heard this
| argument since at least 2015. I was told then that Tesla was
| just leveraging Panasonic and would eventually make their own
| batteries. Still hasn't happened.
| kikokikokiko wrote:
| Take a look at the "Common Sense Skeptic" youtube channel.
| Tesla's purchase of Solar City is a scandal on itself, it was
| never a play on entering the solar roof business. It was just
| a bail out using Tesla's shareholders money to save Musks and
| his business partners (which were Musks cousins btw)
| investments. This channel also destroys all the hype
| surrounding Starship, it's a joy to watch.
| karolist wrote:
| Everyone should watch this video, more so people who refer
| to other car companies as "legacy automakers". Another good
| channel to remove the veil is Thunderf00t.
| Robotbeat wrote:
| Thunderf00t's criticisms ring pretty hollow, TBH.
|
| Criticism of Musk is one thing. The whole "remove the
| veil" sorta "red-pill" type language, criticism that Musk
| has never done anything useful or noteworthy other than
| scamming falls apart for anyone who has been paying
| attention for more than a couple years. Electric cars
| pre-Tesla were a joke. Tesla had enormous influence. And
| SpaceX (which was founded by Musk, who runs it as chief
| engineer) launched more mass to orbit last year than the
| rest of the world combined, a remarkable turnaround from
| the failure of US companies to be commercially
| competitive.
|
| There are things worth being skeptical of. "Full self-
| driving," for instance or even, sure, the Solar City deal
| (although arguable). Perma-skeptics like Thunderf00t,
| though, never acknowledge this kind of stuff.
| epistasis wrote:
| It's quite possible for the Solar City purchase to have
| been executed at a terrible price that is basically crony
| capitalism and deserves jail time, while it simultaneously
| being a great value add for Tesla. Controlling solar
| generation, backup batteries, and car charging all at once
| is difficult when cobbling together pieces from vendors
| that don't interoperate, when there's nobody else willing
| to write the middle ware to connect it all.
|
| With Tesla's ridiculous valuation, they can make all sorts
| of terrible purchases like that and still succeed just
| fine.
| iamadog1 wrote:
| The P/E is probably still skewed. They're accounting for the
| robotaxi windfall which is leveraging their buyback program,
| kind of ridiculous considering the constant delays and
| skepticism surrounding their fully autonomous system and then
| you've got to consider the regulatory hurdles that are
| inevitably going to develop after deployment.
| akomtu wrote:
| I'd think of Tesla as of an iPhone for affluent hipsters.
| Teslas remain connected to the manufacturer that collects
| extensive info on drivers (spying, some would say) and can use
| it for marketing or other purposes later. Teslas can be a
| powerful distribution channel if Musk figures a way to
| discreetly advertise to them right in their cars. Teslas are a
| golf club in a sense: a directory of important people, except
| that the club has managed to install mics, gps trackers and a
| internet connected screen right in the members' cars.
| caconym_ wrote:
| Is Tesla the only car company collecting usage data? Off the
| top of my head, I don't think so.
|
| Your comment kind of reminds me of how much shit "Big Tech"
| gets for data collection, just because they're highly
| visible, while the really scary shit (e.g. cell carriers
| offering granular per-user location data APIs to anybody with
| money) flies under the radar because it doesn't have that
| sexy down-with-big-tech angle that (ironically?) seems to
| drive the most clicks.
|
| That's not to say the usual "Big Tech" suspects are
| choirboys, but the public discourse's focus on their data
| collection activities is absurdly myopic.
| Shacklz wrote:
| > I think they will be very successful and become a big,
| dominant car maker.
|
| "Big, dominant" in the same sense as maybe Ferrari: Prestigious
| cars for a niche audience that are willing to pay a premium for
| the brand.
| Hamuko wrote:
| Ferrari is way more exclusive than Tesla. I would rather
| imagine Tesla becoming a Jaguar - kinda exclusive but not
| that rare.
| Xenoamorphous wrote:
| Indeed. Probably Tesla made more cars last year than
| Ferrari in all its history.
|
| Porsche is perhaps a better comparison.
| Dah00n wrote:
| Not really comparable but Porsche sold approximately half
| as many cars last year as Tesla. Shows how small Tesla
| actually is (approx. 500.000 cars). Ferrari sold ~10.000.
| bryanlarsen wrote:
| The statement "Tesla market value is the same as everybody else
| put together" means either Tesla is expensive or everybody else
| is cheap or the statement is inaccurate. It's a little bit of
| all three.
|
| All other car companies are primarily debt financed rather than
| equity financed. Ford's market cap is $45B, but because it has
| $120B in debt which means it is worth $120B to it's bondholders
| and $45B to stockholders for a total enterprise value of $160B.
|
| So Tesla isn't worth as much as all of the companies put
| together, it's worth about as much as 2 or 3 of the big ones.
| Which is still a lot.
|
| But all the other car companies are facing an existential
| threat. Climate change and the EV transition are going to be
| tough. That has to be depressing their valuations some.
|
| Tesla also has a really good profit margin. If they can keep
| that up, it goes a long way to justifying their prices. Pretty
| big if, that one -- the general assumption is that it will go
| down as they go downmarket to chase volume. Vertical
| integration might let them keep it up, though. Think of it like
| Apple -- 20% market share but >80% of the profit.
|
| What I'm saying is that if Toyota or Volkswagen had no debt, a
| Tesla level profit margin and no overhanging challenge like the
| transition to EV, they'd have a market cap similar to Tesla's.
|
| That still doesn't justify Tesla's market cap, but it makes it
| seem less insane.
| treis wrote:
| >Ford's market cap is $45B, but because it has $120B in debt
| which means it is worth $120B to it's bondholders and $45B to
| stockholders for a total enterprise value of $160B.
|
| I believe that's a bit misleading because it includes Ford's
| lending arm. They borrow money and lend it out at higher
| rates. So lots of Ford debt is lent back out to consumers at
| profit.
| cl0ckt0wer wrote:
| I thought money that was owed to you was counted as an
| asset, not a debt?
| thaumasiotes wrote:
| If I borrow $300,000 at 2% interest and lend it to you at
| 5% interest, I have an asset based on my loan to you and
| a liability based on my debt to whoever loaned me the
| same amount.
|
| They don't net out -- if you default, my asset will
| disappear without taking the liability with it. But it
| might be strange to say that I'm worth $300,000 based on
| my debt, when the whole concept of that debt is that it's
| theoretically guaranteed by, and related to, that asset.
| This combined situation does not suggest that I'm
| personally worth $300,000; I'm earning the difference in
| interest, and my debt to my creditor is based mostly off
| of _your_ net worth, not _my_ net worth.
| hahaxdxd123 wrote:
| Debt is a good thing for Ford!
|
| The majority of their debt comes from financing the sales of
| their cars to fleets, dealers, or consumers. This earned them
| 1.7B last year.
|
| Tesla's real advantage imo comes down to not having dealers
| eat into their margins.
|
| [1] https://en.wikipedia.org/wiki/Ford_Motor_Credit_Company
| Kranar wrote:
| Yes, debt is a good thing for Ford which is why its market
| cap alone is not a good indicator of its value in this
| case. OPs entire point is that when you factor in the EV
| instead of the MC, Tesla still comes out looking good but
| within reason.
| ska wrote:
| > out looking good but within reason.
|
| The actual term was "less insane" which isn't really the
| same thing.
| anyfoo wrote:
| > Climate change and the EV transition are going to be tough.
| That has to be depressing their valuations some.
|
| Does it _have_ to be? I can imagine that going from 100
| years[1] of internal combustion engines to an entirely
| different type of drive train is going to be jarring, to say
| the least. But neither are EV completely new at this point,
| nor is a car just its drive train.
|
| Surely other comparable transitions have been successful? Any
| older computer corporation has more or less reinvented itself
| a few times. More topically, airplane manufactures must have
| gone from piston engines to vastly different jet engines at
| some point[2].
|
| [1] BMW for example exists since 1916. [2] Apparently Boeing
| was originally founded in 1916, too.
| kickopotomus wrote:
| > But neither are EV completely new at this point, nor is a
| car just its drive train.
|
| Exactly this. The EV drivetrain is also simpler than an ICE
| because a transmission is not needed[1]. I think the
| hardest part about vehicle manufacturing, which is the
| issue Tesla seems to run into repeatedly, is dependable
| mass production.
|
| The major auto conglomerates have a lot of experience with
| cranking out massive volumes of quality vehicles. I don't
| think that re-tooling their production lines is going to be
| a problem. The primary issue with switching to EVs, which
| Tesla should capitalize on, will continue to be energy
| storage. Sourcing large quantities of batteries is tricky.
| Tesla had the right idea to just vertically integrate cell
| production and likely has a lot to gain by being the
| premier battery producer for the industry.
|
| As an aside, hopefully the switch to EVs will help fund
| research for the next breakthrough in battery tech.
|
| [1]: Application-dependent but most 2-axle consumer
| electric vehicles should not need a transmission
| mxschumacher wrote:
| In light of the Panasonic partnership with its large
| involvement in the gigafactory, I don't understand why
| Tesla is supposed to be considered vertically integrated
| in batteries. Nothing stops Panasonic from collaborating
| with a car maker that churns out 10m+ cars per year
| victor106 wrote:
| > Tesla also has a really good profit margin.
|
| Their net profit margin is barely 2%.[1]
|
| I would not call it good by any stretch.
|
| By contrast Apple has a 25% net margin[2]. That is what I
| call good.
|
| [1] https://www.macrotrends.net/stocks/charts/TSLA/tesla/prof
| it-...
|
| [2] https://www.macrotrends.net/stocks/charts/AAPL/apple/prof
| it-...
| T-A wrote:
| Even worse, those profits would be losses without the
| regulatory credit sales mentioned as a "red flag" in the
| article:
|
| [1]
| https://www.bloomberg.com/news/articles/2021-05-05/tesla-
| wil...
| Seanambers wrote:
| No, that is extraordinary. Are you really comparing a
| software and IT company with a car manufacturer?
| touisteur wrote:
| Apple isn't a hardware company anymore?
| belval wrote:
| If you look at their where their 25% profit margins come
| from then no, they aren't a hardware company. If Apple
| tried to make a car tomorrow they would not have 25%
| margins on it.
|
| From a market valuation standpoint, this is also why
| Apple valuation is 44 times higher than Ford's.
| nunez wrote:
| There are other things to consider too:
|
| - Tesla is achieving vertical integration to a degree no
| other mainstream auto OEM has achieved. The only other
| example of vertical integration to the extreme that I can
| think of is Koeneigsegg, and they are _very_ niche. This only
| helps Tesla make cheaper cars faster while collecting more
| margin per car.
|
| - Tesla's FSD marketing is highly contentious, but they are
| the only auto manufacturer that is building (designing) their
| own SoCs explicitly for this. I wouldn't be surprised if they
| are outspending other auto OEMs on autonomous driving R&D by
| several degrees of magnitude.
|
| - Tesla still has a major, major lead in EV battery tech
| which will only be cemented if they can get 4680 into revenue
| production. They also own the largest and (arguably) most
| reliable charging network in the world, which is growing at a
| faster rate than Electrify America, the second biggest
| competitor.
|
| I think that Tesla is overpriced long term in a world where
| 91% of American cars are EVs and 48% of them are self-
| driving, but I think they are correctly priced for _right
| now_
| TechBro8615 wrote:
| > Tesla is achieving vertical integration to a degree no
| other mainstream auto OEM has achieved
|
| This is crucial. It's also why Tesla vs automakers reminds
| me of Apple iPhone vs existing cell phones. Sure making an
| electric car is "not that hard," but because the carmakers
| didn't take Tesla seriously for 10+ years, they now have a
| lot of catching up to do.
| tasssko wrote:
| No chance with that comparison. Per unit economics are
| different, marginal utility is different. Total cost of
| ownership is different. Pandemic has wreaked havoc for
| automakers and... for WFH Tesla owners made the 1k
| monthly car payment look unnecessary while most iPhone
| users upgraded phones.
| adflux wrote:
| ... isn't iPhone production outsourced? That's the
| opposite of vertical integration
| nunez wrote:
| Outsourced using in-house designs, and, in Tesla's case,
| in-house assembly lines and factories.
|
| Even the SPEAKERS inside of the Model 3 and Y are
| designed by Tesla (and manufactured by a vendor).
|
| That's the big difference. It's also the reason why
| legacy manufacturers will struggle to effectively respond
| to Tesla. It takes a LOT of money and egos to upend
| generations of culture (and accept hundreds of millions
| in losses in the process)
| anyfoo wrote:
| > Even the SPEAKERS inside of the Model 3 and Y are
| designed by Tesla
|
| In this particular case, is this really a good thing?
| Porsche's high end option for example is getting the
| speakers, amplifiers, tuned filters etc. from Burmester.
| Since Burmester specializes on this kind of thing, and
| the sound system (not the head unit and interface) are
| pretty much entirely distinct from the rest of the car,
| except that it has to be tuned to the environment it will
| exist in, that intuitively feels better conducive to
| focus areas and quality all around.
| nunez wrote:
| Naively, I would think that having audio engineers in-
| house from companies like Harmon and Burmester that
| specialize in car audio but specifically to Tesla's
| product line would produce better, cheaper results than
| paying those companies to white-label audio systems.
| mxschumacher wrote:
| If you're looking for a vertically integrated electric car
| maker with an impressive position in batteries and
| semiconductors, I suggest you look into BYD.
| underwater wrote:
| iPhones are not a commodity product. At the moment Teslas
| are. How will Tesla convince consumers that their car, with a
| high profit margin, is worth it over a mature EV vehicle from
| Ford, BMW, etc.
| TeMPOraL wrote:
| As of right now, the most mature EVs _are_ Teslas. They 've
| established themselves as _the_ gold standard of EVs. If
| anything, their main hurdle is still convincing consumers
| to buy EVs instead of ICE cars.
| rsj_hn wrote:
| I would say there are three main hurdles:
|
| * Convincing the public to spend 50-70K on a car
|
| * Convincing the public to buy an EV
|
| * Convincing the public that Tesla can be trusted for
| long term repair costs/reliability
|
| Right now Tesla is squarely in the luxury vehicle market,
| competing against Lexus/BMW/Mercedes, rather than against
| Mazda/Honda/Kia, and it's a new automaker, so we don't
| have good long term reliability or serviceability data,
| nor do we have good info on how long the batteries will
| last, or what costs someone buying a 10 year old model Y
| will face.
|
| These questions will resolve themselves with time, but
| whether they will all resolve in Tesla's favor is another
| matter.
| xedeon wrote:
| >Convincing the public to spend 50-70K on a car
|
| The Model 3 SR+ starts at $39k. For a while, the Model 3
| SR was available by special order for only $35K [1] but
| it did not include autopilot (Autosteer+TACC) and other
| things.
|
| For $39K it's actually a tremendous value. If you plan on
| keeping it for more than 5 years. It will actually beat a
| comparable Accord/Camry Hybrid in terms of TCO.
|
| "Calculating insurance, maintenance, repairs, taxes,
| fees, financing, depreciation and cost of electricity, we
| get the true cost of ownership for the Tesla Model 3
| which is $25,209."
|
| 2020 Tesla Model 3 SR Plus: $25,209
|
| 2020 Toyota Camry Hybrid : $36,571
|
| As for reliability. There are already plenty of really
| high mileage Teslas out in the wild. Like this guy who
| put 800,000+ miles on his 2014 Model S:
| https://twitter.com/gem8mingen
|
| Sources:
|
| [1] https://www.youtube.com/watch?v=w_-_t29bciw
|
| https://www.wheelsjoint.com/toyota-camry-vs-tesla-
| model-3-co...
|
| https://cleantechnica.com/2019/04/25/tesla-model-3-vs-
| honda-...
|
| https://cleantechnica.com/2019/09/27/tesla-model-3-vs-
| toyota...
| TeMPOraL wrote:
| Fair enough. Especially the third one. _Especially_
| outside US.
|
| I've been joking to my wife for years now that we should
| get a Tesla eventually. Over that time, I've seen her
| going from "what's up with these EVs anyway?", through
| "that's a _really_ expensive car ", to "sure, but if
| anything breaks, IIRC the closest shop that can repair it
| is in _Norway_ ".
| rwcarlsen wrote:
| When they provide an interior that isn't inferior to ICE
| cars (e.g. physical buttons and readings/dials in front
| of the driver) - and don't lose half their battery life
| for me in the winter heating the vehicle - then I'll
| probably buy an EV.
| samatman wrote:
| If Tesla carves out an Apple-sized share of a market where
| all new passenger autos are EVs, its valuation is reasonable.
|
| That's not an impossible outcome. I have no bets in this
| market, I'm strictly wait-and-see.
|
| It's worth pointing out that Apple's valuation before it
| carved out that "Apple-sized share" was much, much lower.
| mxschumacher wrote:
| I'm having deep trouble trying to appreciate this argument,
| apple has deep network effects it has build an ecosystem, a
| platform. If I want to use iOS I have to buy Apple
| hardware, if I want to offer a mobile app I have to go
| through the app store. Nowhere does Tesla exhibit similiar
| properties, instead it competes in the hyper-competitive,
| high capex and low margin car business. Trying to beat
| Toyota at scale manufacturing is a very tall order
| MrPowers wrote:
| I agree with the sentiment that comparing Tesla's market cap
| with traditional car companies is inaccurate.
|
| For certain companies, market capitalization is a good proxy
| for enterprise value, but as this poster is mentioning,
| that's not always the case for companies with debt.
|
| enterprise_value = market_cap + debt - cash
|
| Looking at the market caps of long-standing US car
| manufacturers is doubly problematic cause they have
| significant pension obligations. They're producing cars to
| build shareholder value and pay for retirements.
|
| Comparing market capitalizations of companies that have
| completely different debt / pension obligations is
| misleading.
| mxschumacher wrote:
| At the same time we have to consider that debt is both
| exceptionally cheap and advantageous in an inflationary
| environment. Having to serve debt at 2% is much, much
| easier than doing so at 7%+
| rllearneratwork wrote:
| TSLA price may be justified in the future IFF they are not
| "just a car maker". I think with batteries, self-driving,
| something else?, they have a potential to be "more" than a
| "dominant car maker" but they are definitely not there yet.
| Will they ever be in such position? This is a bet some are
| willing to make. Personally, I invested in them near their IPO
| price right when Elon joined betting that they will become "the
| best EV maker". They achieved that. Will they achieve a much
| bigger bet of being "much more than a carmaker"? I am not yet
| comfortable making such bet. At least not at this cost.
| jeremydeanlakey wrote:
| > $530 million bet
|
| > long puts against 800,100 shares
|
| I find the title misleading. Unless I misunderstand, Michael
| Burry has not actually put $530M of his money at risk. He's made
| a much smaller, leveraged bet. $530M is just the notional value.
| 6gvONxR4sf7o wrote:
| Can someone ELI5 how this works to those of us who only buy and
| sell things? I've looked up the definitions, but I'm curious
| about the purposes and practical risk/reward scenarios of this
| particular sort of bet.
| socialist_coder wrote:
| A 5 year cannot understand puts/calls =\
| anyfoo wrote:
| Just like "ask me anything" does not necessarily mean
| _anything_ , it's an expression at this point.
|
| The ELI5 subreddit describes it in its rules as such:
|
| "Rule 4: Explain for Laypeople
|
| As mentioned in the mission statement, ELI5 is not meant
| for literal 5-year-olds. Your explanation should be
| appropriate for laypeople. That is, people who are not
| professionals in that area. For example, a question about
| rocket science should be understandable by people who are
| not rocket scientists."
| curiousgal wrote:
| A put is a option contract that gives its holder the right to
| sell a share at a certain price (strike) within a certain
| time (maturity for American options, European options can
| only be exercised at maturity). If you buy a put of strike
| 100 and a stock is at 90 you can exercise it thus selling the
| stock at 100 which is higher than its actual price.
|
| So when you buy a put you are betting that the stock is going
| to go down. Each put usually gives you right to sell 100
| shares, and since you can buy/sell the contract itself, you
| can easily get leverage when compared to actually trading the
| shares.
|
| Without knowing what the strike prices and how much he paid
| for those contracts you can't really determine how much he is
| going to gain/lose. His gain is capped though as TSLA cannot
| go below 0.
| [deleted]
| feetfailmenot wrote:
| I gives you $1K today. In exchange, we agree now, that in two
| month, I can buy your car for $10K if I want to.
|
| I just bought a 2-month expiry put option at a strike of $10k
| on your car.
|
| Two month later, I check the resell value for your car.
|
| If it's more than $10k, let's say 13, I buy yours at 10 and
| resell it at 13K. I won 3-1=$2k
|
| If it's less that $10k, I just pass, I lost $1k.
| curiousgal wrote:
| You actually described a call option.
| elliekelly wrote:
| When you buy a "put" you are entering into a contract that
| gives you the right, but not the obligation, to sell X number
| of shares of Acme Class A common stock for $Y/share on (or
| sometimes within) a specific date.
|
| So let's say Acme Class A is currently trading at $50/share.
| If you think, for whatever reason, Acme Class A common stock
| will be trading at $1 next week you might want to buy a put
| that lets you sell 100,000 shares for $10/share. If the price
| of Acme Class A stays the same, you would never exercise the
| option to sell because you'd lose money - why would you sell
| Acme Class A for $10/share when you could sell it on the open
| market for $50/share? But if you're right, and Acme Class A
| is trading at $1/share, you would then of course want to sell
| as many shares as possible at the $10/share rate. So you'd go
| on the open market, buy yourself 100,000 shares for $100,000,
| then turn right around and exercise your option to sell those
| shares for $1,000,000.
|
| So the only money at risk is the cost of the contract itself
| because you don't have to actually buy the shares until you
| decide whether you want to exercise the option to sell them.
|
| If you want a put contract that allows you the option to sell
| 100,000 shares of TSLA for $0.01/share tomorrow it wouldn't
| cost much because it's highly unlikely you'd exercise the
| option and so, for the person on the other side of the
| agreement, it would basically be free money. When there's
| more uncertainty then the cost of buying the contract is
| higher because the person on the other side is taking a risk
| that they'll be stuck buying a bunch of securities at a price
| much higher than what they're actually worth.
|
| TLDR: when you buy a put contract you're essentially paying
| money to someone to lock in a price.
| TeMPOraL wrote:
| So, if I understand it correctly, buying "puts" can be a
| cheap way to generate publicity around some stocks? That
| is, I could cheaply buy puts for half a billion dollars'
| worth of TSLA that are so ridiculous it's obvious I won't
| be exercising them, and this would give me a "500M bet
| against Tesla" headline?
| 6gvONxR4sf7o wrote:
| Great explanation, thanks. Do you happen to know far out
| these contract dates tend to be? Is it standardized, or a
| thing you negotiate (at normal levels and at giant $0.5B
| levels like in the article)?
| yepthatsreality wrote:
| You can sign up for a stock trading app. Make 0 trades
| and find out all this information.
| 6gvONxR4sf7o wrote:
| I asked because I figured a trading app would give me a
| could predefined options, but I'm curious about how this
| works for professionals.
| lamontcg wrote:
| Options are time-limited and expire so you're betting that it
| goes up or down BEFORE a certain date.
|
| You can buy very cheap out of the money options at small
| fractions of the cost of the shares by making bets that TSLA
| will drop hard in the next year while the market thinks that
| in that timeframe it will not.
|
| Most of the time you lose money doing this.
|
| Time it right, though and you can make 10x returns, but you
| have to be right and the rest of the market needs to be
| wrong, which is often unlikely.
|
| But even if you're right in the long-term you need to also
| get it right in the short-term.
|
| I don't think I'd be betting against this market right now,
| there's no guessing how irrational we'll wind up getting.
| Post-pandemic I would guess we'll have even more of an
| irrational bubble around back-to-normal, and a rising tide
| lifts all the boats.
| actinium226 wrote:
| Well, they got your attention didn't they? A half a billion
| dollar "bet" is much more eye-catching than "smaller, leveraged
| bet."
| eaenki wrote:
| So how would you go about making an educated reverse
| engineering claim on the stake at risk without knowing his
| other legs nor expiry dates? Is it even possible? How about a
| wide range?
| incrudible wrote:
| He bought 8001 put options on some undisclosed date at an
| undisclosed strike date and price. You can take a look at the
| options chain for TSLA to get an idea.
|
| For example, a $450 put for September 17th 2021 would cost
| about $16.70 per share:
|
| https://finance.yahoo.com/quote/TSLA/options?strike=450&stra.
| ..
|
| One option counts for 100 shares, so that would be a (8001 *
| 16.70 * 100) 13.36 million dollar bet. Suppose that TSLA is
| worth only $400 on that date, with your right to sell at $450
| you'd be in the money for 40 million dollars, or roughly $26
| million in profits. If TSLA is worth $450 or more on that
| date, your options expire worthless.
| nostromo wrote:
| > As of March 31, Burry owned 8,001 put contracts, with
| unknown value, strike price, or expiry, according to the
| filing.
|
| You can't figure out his position with this information.
|
| For example, you could buy very, very out-of-the-money puts
| for a penny. (Your bet would basically be: TSLA loses 95% of
| it's value in the next week.) My total value at risk for this
| bet (of 8,001 put contracts) would be $80.
| medvezhenok wrote:
| *Small correction - the minimum value of 8000 put contracts
| would be $8000, since one put at a price of $.01 actually
| costs $1 and controls 100 shares of stock (the price is
| price per share)
| tengbretson wrote:
| Someone should tell this joker that stocks only go up.
| FinanceAnon wrote:
| "The stock market can remain irrational longer than you can
| remain solvent."
| tim333 wrote:
| I guess that's a reason he's bought puts rather than actually
| shorting the stock.
| freewilly1040 wrote:
| Michael Burry can remain solvent for quite a while
| totalZero wrote:
| nb: According to the article, $530m is the notional value of his
| puts, not the premium he paid. 8k contracts is a fairly
| substantial trade on a $566 stock, but it's not as sensational as
| the headline makes it sound.
| eaenki wrote:
| So how would you go about making an educated reverse
| engineering claim on the stake at risk without knowing his
| other legs nor expiry dates? Is it even possible? How about a
| wide range?
| totalZero wrote:
| Realistically, if he made these trades OTC versus his prime
| broker, only the prime broker (ie, an investment bank) would
| know. That's how many of the biggest trades are done. The
| bank may lay off the short vol slowly, or cover it with
| several strikes and maturities using automated tools. The
| only time a bank would hedge aggressively is when they expect
| the customer to come back and do another piece of the same
| trade. Presumably if they thought the trade were extremely
| toxic, they would have passed on it.
|
| If the contracts were listed, option traders would look at
| big trades that hit the tape without contingent stock
| printing simultaneously, and call the brokers that crossed
| those trades to ask which bank sent the order to the floor.
| Then they'd compare that against banks which are believed to
| trade with Burry, and filter to get a guess at how much he
| traded. This may be tough with TSLA because there is so much
| activity, but in smaller names where only a couple of big
| prints go up daily, it's pretty easy to figure out who trades
| what. The banks that trade options against big players get
| quoted on a lot of stuff that eventually trades at a
| different bank, so they can often infer the identity of the
| client when they see the print hit the tape.
|
| CNBC, on the other hand, know nothing and simply report what
| they are told and what they observe in regulatory filings.
| Their chief function is not to break news, but rather to
| distribute it -- like a buddy who is very up-to-date on
| current events.
|
| TL;DR You can often deduce some of the characteristics of a
| position, but there are ways for a very stealthy market
| participant to hide the characteristics of his stake.
| d--b wrote:
| He his long puts on $500m worth of stock. So the premium he paid
| (what he's betting) is considerably less... stupid headlines.
| jbigelow76 wrote:
| The article starts out with bullet points, the third bullet point
| is this:
|
| "Burry previously mentioned in a tweet, that Tesla's reliance on
| regulatory credits to generate profits is also an impediment to
| the company's long-term prospects"
|
| When the Tesla stock price is tied ostensibly to some ephemeral
| aspect of Elon Musk, who gets his lulz from wreaking havoc on
| cryptocoin markets, does that kind of analysis really matter? I
| guess it doesn't until maybe, possibly, eventually it does?
| dstryr wrote:
| Not mentioned here, and more importantly in my opinion, are
| Burry's bets on US Treasury bonds crashing.
| jollybean wrote:
| Scary.
|
| When the truth about housing was exposed, the financial system
| was forced to reconcile. The system has measures in place that
| must be taken by policy. Ergo, the truth shatters that house of
| cards.
|
| But Tesla? Meet Nikola! The fakest company ever, with no product,
| no development, a proven liar/scammer leadership, with failed
| deals and vapourware. Still. Worth. Billions.
|
| The kids on RobinHood (and many others) are playing a different
| game, so the 'truth' matters less.
|
| This is why I'm wary that market reality may not take hold for
| Tesla - and - that this reality is skewing a lot of other
| securities as well.
|
| I almost wishing the Fed would bump up interest rates just a
| little to bring some reality into the markets.
| patorjk wrote:
| > Besides his "Big Short," Burry made a killing from a long
| GameStop position recently as the Reddit favorite made Wall
| Street history with its massive short squeeze.
|
| Except I remember reading that he sold for before the price
| exploded [1]. So although he made a profit, he missed out on the
| squeeze because he sold too early.
|
| [1] https://markets.businessinsider.com/news/stocks/big-short-
| mi...
| overhero wrote:
| he was not wrong though, just too early
| patorjk wrote:
| I'm not saying he's wrong, but the article is misleading. The
| massive squeeze didn't happen until late January, and Michael
| had sold his position by the end of December. So although he
| was right/made a profit, he didn't make a killing from the
| huge squeeze that made the news.
| briankelly wrote:
| "That's the same thing"
| sigstoat wrote:
| and he was nearly too early in "the big short" as well.
|
| and buying puts integrates the timing directly into whether
| or not you're right. so if he's too early again, he'll be
| wrong.
| motohagiography wrote:
| Not sure Burry priced in TSLA's cryptocurrency play, which (imo)
| was a giant volatility hedge that will help them make their
| numbers, and also, oddly, an inventory liquidity hedge that could
| be used to bludgeon shorts trading on sales data.
|
| Burry is probably right about the market for electric cars and
| TSLA's exposure to raw materials prices and china, but he's wrong
| about the strategic ability of its leadership.
| kstenerud wrote:
| Tesla has already achieved its objective: To bring about the
| electric car revolution. Its secondary objective of pushing the
| self-driving car revolution has done so-so. How Tesla performs
| going forward is more of a nice-to-have, but otherwise irrelevant
| since the ball is now rolling and not in danger of stopping
| anymore.
|
| The remaining pieces now are solar generation on building
| surfaces, battery tech, smart grids to route the energy
| efficiently, cheap space travel, cheap tunneling, and maybe
| hyperloop if no one picks it up.
| nbardy wrote:
| There is so many people claiming a bubble on Tesla comparing it
| to a car company and pointing to fundamentals. Tesla is a high
| growth technology company. Their valuation is all about what they
| could become.
|
| The most talented young people all want to work for Tesla. They
| have made tons of progress and they have the culture and plans to
| continue to innovate. None of the old car companies can attract
| the talent the way Tesla does. They only need to capture the
| market on one of their big bets to be a runaway tech stock like
| FAANG.
|
| They've got electric cars, batteries(Powerwall), Solar roofs,
| cross country supercharger stations, and full self driving. Any
| one of these things could fuel a company by itself.
| cosmojg wrote:
| This guy has been wrong a lot recently. Admittedly, he was right
| once and in a big way. However, remember that success is mostly
| luck, and this is orders of magnitude truer for success in public
| markets.
|
| Outside of entertainment, it isn't worth the time to follow
| celebrity investors.
| selectodude wrote:
| He was long GME and shorted tech in the early 2000s. He's
| gotten more than a few trades correct.
| splithalf wrote:
| Yep. Even Kathy woods understands regression to the mean.
| malshe wrote:
| What major trades he got wrong recently?
| mbgerring wrote:
| Eventually somebody on Wall Street is going to figure out that
| Tesla's business is batteries, that Tesla's batteries are getting
| good enough to compete with natural gas peaker plants, and that
| there is a massive effort underway to convert our electric grid
| away from burning fossil fuels.
| mbgerring wrote:
| I don't understand why more people aren't focused on this
| https://www.theverge.com/2021/3/31/22360839/apple-tesla-mega...
| jsnell wrote:
| How does that theory explain Tesla having 20x the market cap of
| Panasonic?
| mbgerring wrote:
| Is Panasonic building replacements for gas fired power
| plants?
| mbgerring wrote:
| It looks like Panasonic has been planning the deployment of
| a 10MW energy storage system at its own facility in India
| since 2016. Nothing I can find says whether they actually
| built it or not, or what phase the project is in. Tesla is
| capable of mass-producing 10MW battery packs and shipping
| them _today_ , with manufacturing in the US, and is winning
| contracts to deploy them internationally.
| arbuge wrote:
| Few things of note:
|
| 1. This is a Q1 report. Positions might have been closed out by
| now.
|
| 2. He also bought a large number of FB and GOOG calls, indicating
| he's positive about those 2 companies. (Same comment as 1.
| applies though).
|
| 3. Strike prices of all these options positions are unknown.
|
| 4. Premiums paid are unknown.
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(page generated 2021-05-17 23:01 UTC)