We’ve been myopically focused on our own technical navel here recently and I suppose that continues with our most recent video on our new Singineer 12kw off-grid inverter.
But we follow developments at Tesla quite avidly. I become more enamored of my Model 3 every day, and particularly now that Elon repaid me the purchase price, about six times over actually. Like many EVTV viewers, I’m not only driving gasoline free, but my cars are free as well. Free as in beer.
I bought a Model S in early 2013 using the house’s money by some good timing on Tesla stock and call options that in truth could have bought me three Model S’s. Many of our viewers did as well. But I actually left a lot on the table cashing in the options a little early in the runup. I’m hoping not to make that mistake this time.
I am not a stock analyst and indeed don’t even play one on TV. And it absolutely upsets me to think one of our viewers might lose some ducats playing the stock market based on my recommendations.
But I’m detecting kind of a perfect storm. And I don’t want it said that I hogged the information and left anyone out.
In late May Tesla’s stock went deep in the tank on Model 3 production woes and Elon’s brusque handling of the earnings conference call. At $275, I went quite in on 200 contracts for September 21 $400 calls. That basically gives me the right to buy 20,000 shares of Tesla at $400 before September 21. Total cost, $43400 I was already long on Tesla common stock.
This week the stock hit $370 and I confess I did take a LITTLE bit off the table, enough to cover my $2.17 per share cost at the current $24.50 price. Placing my current bet value at $490,000 that day.
But I’ve vowed to ride this one out. I’m not cashing in yet. I smell the perfect storm. And I intend to ride it out.
Elon himself purchased $10 million in Tesla stock earlier in the year and then an additional $25 million in May while blustering and blowing about putting a world of hurt and an epic burn on the Tesla short sellers.
Meanwhile an entire raging and really quite loudly venomous group of Tesla short sellers has emerged and Tesla is the MOST shorted stock on any exchange anywhere with over 30% of their available common stock sold short – a $12 billion dollar bet agains Tesla. These guys lost over $1.5 billion with this dubious strategy last year but Musk vows to create the largest short squeeze in history this year. And the battle has grown heated.
Sunday he issued a memo noting the discovery of sabotage at the Tesla factory. What appears to be known is that a “disgruntled” employee who did not get a desired promotion had purposely broken some automation assembly line OS software and has also apparently disclosed highly proprietary data to third parties outside Tesla. Not connected at this point is a very suspicious fire in a very new paint booth.
I find it hard to believe that an employee would actually do such a thing merely because he failed to get the promotion he deserved, even in alt-left libtard California. There has to be some money in this somewhere, and it really probably has to come from the shorts. We’re talking Federal prison time if that’s the case, unless of course Hillerary is a Tesla short, in which case she walks free of course.
The short squeeze Musk refers to works kind of like this. A short sells stock in Tesla that he never owned in the first place. He does this by “borrowing” shares in the company he doesn’t own from his broker. He actually gets the money into his account from the sale at the time he sells it. So in theory, if I sold a thousand shares of Tesla today at $353, I would receive $353,000. Of course I can’t really spend that on whiskey on women as it is the collateral for the stock I owe. But I also have to pay INTEREST on the money instead of earning interest.
If the stock goes down to $275, I buy 1000 shares to “cover”. Now I don’t owe anything. And I get to keep the $78,000 difference as a lovely parting gift.
Of course, if it goes UP, I have to make up the difference between the $353,000, and the then current price of the stock. And if that difference exceeds my “margin” that I can borrow from the broker, I actually have to pony up the cash. And there is NO LIMIT on the losses. If Tesla goes to $1000, I have to come up with $747,000 cash, plus interest, plus transaction costs.
In practice, I have about 30 seconds to come up with that. Otherwise, and as a practical matter, the brokerage just buys the stock to cover automatically and deducts any losses from my account. It’s a forced sale. And they don’t care at what price. It’s at the NEXT price.
So it’s kind of a neat way to gamble using the house’s money. Until it goes wrong. Real “investors” just don’t short. But Day Traders do.
But I want to focus on timing here. Tesla has this EXTREMELY unusual 30% short overhang here. And if it starts to go bad, the need to cover drives up the price of the stock, which causes more widespread need to cover, which drives the stock up further. And it makes no sense at that point. It’s like a crowd seeking to escape a fire in a nightclub. A rush for the exits. You don’t want to be the last guy buying to cover as that ensures maximum loss. This is called a short “squeeze”. You are forced to cover even if you think the stock is still overvalued simply by the panic of the other shorts. And in this case it is exacerbated by being a kind of automated panic operated by broker computer systems.
So again, I want to focus on timing here. No secret sauce. Musk has been promising a short burn for a year. And everybody has the information that production woes on the Model 3 have been material. And Musk had already set a hard deadline of the end of June to produce 5000 cars per week.
But on MONDAY, he issued a very strange tweet. And the jist of it was that there would be a short “explosion” in “three weeks”. That was on the 18th.
That means about July 8 or 9, right after the fourth of July weekend.
So walk with me talk with me. The story is that Musk is going to announce 5000 cars per week by the end of June. Everybody already knows that. He would likely announce success if it produced 5001 cars on any single week even if it could never do it again. You can almost stage that. So he IS going to announce he won, and everybody already knows that. But he’s now saying it will cause a huge explosion of the short position. I would prefer implosion myself. But semantics.
I just don’t buy it. Nobody of that intelligence exhibits that level of confidence over something everybody already knows is going to happen. UNLESS, they have a little something tucked into the right hip pocket to casually toss on the table to ensure cranial detonations and excrement flying in all directions. Something they know about and nobody else does. And secrets are hard to keep unless you are one of very few who know the secret. And that has to be something you can control And that basically goes to ANNOUNCEMENTS, not production figures.
So it brings up the question of overkill and how you ensure it. Yes, he has to announce success with the 5000 per week. Now what else can he announce that would ENSURE panic in the shorts.
There is little to announce that hasn’t already been announced or at least pre-announced or noted that it would be announced soon – or something like that. So it isn’t a big truck sale. Or a big power storage sale. The Boring company is really a bit boring and already announced but in any event isn’t owned by Tesla shareholders.
My dream candidate would be a Tesla/Apple merger. But impossible. Cooke and Musk just aren’t THAT smart. But picture short smoke as all that would be left at the bottom of the crater. We’re talking signficant impact on American suicide rate statistics. Like guys jumping out of buildings.
But you see my yearning for drama here. That has to be part of it. It can’t be dry numbers.
I confess an allure to a Tesla network like Uber. I think it would be instantly successful. You can get a ride anywhere and ALL the drivers and ALL the cars are guaranteed to be Tesla. EVERYONE would pay a PREMIUM for that ride. But Elon envisions that as part of autonomous driving. And so far autopilot is quickly shaping up as precisely the shitshow for him I predicted it would be several years ago. I just don’t think he’s goine to go to the obvious but not very dramatic manned version of a Tesla “network.” It would burn the shorts but has other issues.
He could of course reverse himself and announce that the flamethrower that is marked as NOT A FLAMETHROWER really IS a flamethrower after all. Nahhhh……I don’t think so.
So a secret that is not a secret, but that not everybody knows, that is really really dramatic.
Well, we all know about the Model Y. But we’ve never actually SEEN one. And it is purported to be a crossover SUV, which in the U.S. outsell sedans by about 40,000 to 1. And I’m kind of picturing a vehicle that is ENTIRELY a Model 3, but a bit higher, has a cargo area/hatchback, and does NOT have falcon doors and hepa filters and all that but could probably be sold for a bit of a premium over the sedan – say base $42,000.
In reality – a minor body change for the Model 3.
I found it really kind of suspicious that in the past month or so he’s talked about a March 2019 announcement of the Model Y. Crimminy, I put a deposit on my Model 3 in March of 2016 and got delivery in February 2018. March 2018 would be more symmetrical for a next model announcement, not March 2019. But he has been a little plagued by production glitches on the Model 3. But why mention it at all?
Of course, he also unveiled this week a Model 3 assembly line in a tent that they put up in three weeks for the superpower Model 3. A Model 3 variant….
So I’m picturing this. Sunday evening, July 8th. Musk holds a special event to announce to the world that he has achieved 5000 units per week. And at the event rolls out the absolutely cool lookng Model Y crossover SUV. And announces they are taking deposits online right now. $2500 per unit. Delivery in late 2019. And on Monday morning about the opening of the market announces they’ve received another 500,000
deposits for Model Y, without the inconvenience of the shitshow they had with people camped out all day at their service centers last time.
And it is a risk free announcement even ff the three on stage are the only three prototypes in existence and none of them even drive. He doesn’t have to deliver anything for a year and a half from assembly lines he already has working. And adding another GENERAL ASSEMBLY line he has just proven takes THREE WEEKS.
That rather sharply puts a point on the fact that he no longer is concerned about Model 3 production – hell he’s announcing a new model already and taking orders for it. And whatever the number is by Monday morning, and I will certainly be down for one, it will cause cranial detonations. Why wouldn’t I order one? The freaking shorts are the ones paying for it!!! For me its a free SUV.
If you cannot achieve a precision fit with a 12 lb sledge hammer DON’T FORCE IT. It would be ENTIRELY unnecessary to show artist conceptions of a Model 3 Pickup Truck. It just really isn’t necessary. Overkill.
But it establishes that a new kind of automobile manufacturing process can churn out variants at will and demand isn’t the problem. And now production isn’t the problem either. We’re talking BODY WORK. Stamping machines. NOT rocket science. And suddenly the demonstrated future of Tesla starts to reveal. And we are reminded that OVERKILL is ALWAYS appropriate.
For those with an ear to hear, FREE TESLAS FOR SALE. Free as in beer.