One could easily write about Tesla all day, every day. A few on Twitter do just that. It’s literally a soap opera every moment.
Here’s the latest Tesla Soap. It’s quite a hoot.
Please consider Tesla exec exits, CEO smokes pot on webcast, shares reel.
Tesla Inc Chief Executive Elon Musk was filmed smoking marijuana, drinking whiskey and wielding a sword just hours before the automaker said its accounting chief would leave after a one-month stint, the latest in a string of unusual behavior and executive departures that have stunned investors.
Shares of the electric carmaker tumbled as much as 10 percent on Friday, with investors on edge after a tumultuous August during which Musk proposed and then abruptly pulled the plug on a go-private deal.
Tesla Rocked by Latest Executive Shakeup, Musk’s Behavior on Webcast
Please consider Tesla Rocked by Latest Executive Shakeup, Musk’s Behavior on Webcast
> Tesla Inc’s shares dropped the most in two years on Friday, rocked by the departure of its accounting chief after just a month and mounting investor concerns about Chief Executive Elon Musk’s behavior after he smoked marijuana on a live webcast. Investors in the electric carmaker are on edge after a tumultuous August, during which Musk proposed and then abruptly pulled the plug on a go-private deal. Tesla said Chief Accounting Officer Dave Morton resigned because of discomfort with the public attention and pace of work. Morton, whose departure comes after the U.S. Securities and Exchange Commission opened an inquiry into Musk’s aborted plan, joins a list of executives who have left Tesla recently.
Bonds Collapse
> Tesla’s $1.8 billion junk bond maturing in August 2025 plunged as much as 4 cents on the dollar to below 82 cents, a record low, in Friday trading, pushing the yield above 8.8 percent.
Potpourri
What follows is a potpourri roundup that I started a couple days ago. The TA charts now look amusing.
Monthly Estimates
Elon Musk brags about August sales despite not being willing to publish official numbers.
Let’s investigate 1st 2nd, 3rd Claim
If the numbers are accurate, it’s first, third, and fourth. OK the Toyota is a hybrid.
That aside, the numbers are estimates. More importantly, they are far below Musk’s stated goals, yet he brags about them.
Musk Calls Cave Rescuer a ‘Child Rapist’
There is going to be on hell of a lawsuit over this.
Recall that on July 18, Musk Apologized for calling the Thailand cave rescuer, Vernon Unsworth, a pedophile.
> Musk this week deleted the offending tweet, which was made after Unsworth questioned the usefulness of a mini-submarine Musk was offering to help the rescue. He also deleted a subsequent comment in which he said: “Bet ya a signed dollar it’s true.”
> On Wednesday, Musk issued an apology to Unsworth in a reply to another Twitter user. He said: “My words were spoken in anger after Mr Unsworth said several untruths & suggested I engage in a sexual act with the mini-sub, which had been built as an act of kindness & according to specifications from the dive team leader.”
Last week, Musk ridiculously made this Tweet.
On August 29, CNN wrote Lawyer: We’re ‘finalizing’ a libel lawsuit against Elon Musk over ‘pedo’ tweet.
Child Rapist Charge
On September 4, after once apologizing to Unsworth, In A New Email, Elon Musk Accused A Cave Rescuer Of Being A “Child Rapist” And Said He “Hopes” There’s A Lawsuit.
Here’s the message Musk sent to BuzzFeed, as claimed by Buzzfeed.
Technically Speaking Weekly Chart
On a weekly chart, Tesla is right on support. But it’s very weak support. It bounced off $280 only once. It bounced off $250 twice. There is a greater chance of a decent bounce off $250.
But if that support breaks, and eventually I believe it will (counting on fundamentals), the next range of support is in the $180 to $200 range.
Technically Speaking Monthly Chart
Bonds
If the technicals and the bonds diverge, believe the bond market.
Tesla 2025 Bonds trade at about 85 cents on the dollar.
Note: Today’s update takes it to 82 cents on the dollar.
Fundamentally Speaking
Some of my readers believe in TA, other don’t.
I do, with caveats.
In a bull market, bounces off support are routine. In a bear market, crashes through support aren’t.
And with all the algo-trading, TA trading patterns are truly suspect.
Speaking My Book
I am speaking my book here, but there is a far better chance of a sustained bounce from the $180-200 range than before.
Even still, I do not know if my September PUTs survive. Right now I am even despite a $60 plunge in Tesla from when I bought PUTs.
That’s what time decay does to you even if you get the direction correct.
That is my message here, no matter which way the trade goes.
In retrospect, I wish I paid more for closer in strikes on the September options (unless of course Tesla crashes in the next few days). I may cover the September’s if there is a quick downward move.
But also recall that I staggered the PUTs in equal dollar proportions. I am well ahead on my October, November, and December PUTs.
Disclosure
Because I was writing about Tesla well before and after my PUT entry, I felt it was necessary to point out my trade. I do not know how the trade will work out.
If I win spectacularly, I am not a genius. Rather, my timing was lucky. If I fail, most option trades do.
I would not have recommended the trade I put on. I took it because it seemed like a reasonable shot. And if I write about something, my readers need to know my bias.
Hopefully, my position on gold is well enough established that I do not need to mention “I have a position in gold” every time I mention the word.
Mike “Mish” Shedlock
Mish, you are ballsy. I think you should have sold your puts Friday on the sensationalism. But what do I know thinking your initial puts were not smart! I guess a true believer shortie might hang in there through the Q3 report.
“Musk was filmed smoking marijuana, drinking whiskey and wielding a sword”.
For a perfect example of reality distorting “journalism” look no further than this distillation of a 150 minute incredibly insightful discussion. Fortunately for shorties spreading FUD beyond any level achieved prior to the new social media paradigm, probably 98%+ of those reading this click bait will never view the interview. If they did they would wonder what shortie was injecting.
I viewed the whole interview and found it very stimulating. I recommend others get the information first hand. Just search Rogan Musk Interview on youtube or click url below. I am interested in your opinion after having watched it yourself. It is a great litmus test for determining if what you read in headlines is how you would view same event first hand.
Am I the only one who thinks what Musk does is good PR for a youth-crazed tech-obsessed generation?
You’re all a bunch of squares, or economics nerds, and you don’t see a flourishing brand when it’s staring you in the face.
Tesla isn’t going away.
How many of that youth-crazed tech-obsessed generation can afford $50-$70k toys? Tesla’s tax breaks are expiring just when established automakers are introducing their EV’s and beginning their tax break cycles.
Tesla can easily go away.
The Model 3 is actually $49K base. On top of that you get:
So, in 5 years the ownership cost becomes 49K-7.5K-2.5K-0.5K-5*(1300)=~$32K for a Tesla Model 3. Of course, these numbers vary by geography, but for me it was a no brainer to buy Model 3 instead of comparable ICE car. There are no other EVs that I even considered, because it is impossible with them to go on longer trips due to smaller battery and lack of Tesla SuperCharger network.
In 5 years my Model 3 ownership cost will be considerably less than BMW 320i ownership costs that has MSRP for lowest trim starting at $45K and has inferior handling, safety and acceleration compared to Model 3.
You also need to factor in deprecation when evaluating ownership costs. Here is how I recommend to guesstimate deprecation:
If you believe that EVs will go mainstream in few years, then all ICE cars will take a big one time deprecation hit because the used ICE car market will be very, very saturated (which equates to another several thousand dollar incentive to buy an EV and not ICE if you have to buy a new car now).
If you don’t believe that EVs (not just Teslas) will go mainstream in few years, then I think it is fair to assume that EVs and ICE will maintain the same historical deprecation rate.
The tax subsidy is going away. Their quality control is awful. There’s a very good chance the Tesla will be worthless in 5 years. Replacing the battery will cost more than the resale value of the vehicle even if they are still in business somehow. At least BMW’s can be repaired just about anywhere.
Do you think Tesla battery pack with active thermal management will have shorter life span than, for example, Nissan Leaf batery pack with passive thermal management? Data shows otherwise…
Also, If your EV would have battery or motor issue then most indy mechanics will still tell you to go to dealer (not just for Teslas, but also for BMW i3, Nissan Leafs or Chevy Bolts).
Now maybe you think that ICE is here to stay and EVs are just a fad. If so, then please be advised that it is hard to find good indy mechanic for delicate german ICE cars. And almost impossible to fix anything outside dealership if you have AirBag issues (even for GM cars). And ICE cars due to heat and so many moving parts are expensive to maintain once they reach 5-10 years (saying from my BMW experience – 2 cooling system leaks, bad transfer gear actuator, 2 gasket replacements).
I think anyone who does not see the rise of Tesla brand should check their inner biases by asking following questions:
If you answered “Yes” to any of those questions, then congratulations, you most likely have negative bias towards Elon Musk and/or Tesla.
This has nothing to do with anti-Musk bias, it has to do with economics. You’re a Musk fan-boy. I get it — and I agree he’s done amazingly well to get the company this far, but Tesla’s financial position is utterly perilous.
Tesla cannot make money at the moment — not even close — and its survival thus far is solely down to a combination of credulous investors and the taxpayer. Once both the aforementioned leave the scene, it’s likely to be game over.
The main threat to Tesla right is huge amount of competition coming down the pike (and soon): there is simply no way that Tesla can compete on price and build quality with the major auto-producers in mass-produced segment which is what the company is hanging its hat on. Additional headwinds include miniscule marketing budgets relative to the majors and broad economies of scale. I reckon Musk knows, in his heart of hearts, that the jig is up — his increasingly unhinged behaviour is perhaps a symptom of that.
IMO it’s impossible to see Tesla surviving in its current form and the only question is whether the brand survives (post-bankruptcy?) or whether Tesla goes the way of DeLorean.
There is Bob Lutz analysis that claims that Tesla is losing money per each car sold. And there is Munro&Associates analysis that claims that Model 3 has thick margins. Which one to believe and why?
The problem with Bob Lutz analysis is that he includes company wide R&D and CapEx expenses to calculate loss per car. This kind of thinking is absurd and most likely explains why GM went bankrupt while he was working there from 2001-2010. He could do this kind of calculation to compare Tesla with other manufacturers if Tesla was only running car assembly plants and service centers to honor warranty claims. But Tesla is different. A lot of Tesla parts are designed in house instead of being outsourced to someone like Bosch. And Tesla is energy and software company that has other products besides cars – they require R&D too. Bob Lutz should have subtracted these expenses before opening his mouth that Tesla is losing money per each car sold.
The problem with Munro&Associates analysis is that they can’t properly estimate future warranty claims on Model 3. Agreeably, this could eat into Tesla profit margins. We will see.
And after the Mercedes EQC fiasco I don’t think there is any competition. Competition has lower efficiency, lower range, no SuperCharger network and you most likely won’t be able to buy those EVs until 2019 or even 2020 (depending whether you live in EU or US).
The debt burden doesn’t matter, if Tesla Model 3 is a profitable hit and we don’t have financial crisis like in 2008.
Musk started selling flame throwers through one of his sites. I wonder if most of them went to Model 3 owners?
What about writing calls? Get the time decay to work in your favor. I recall when I was trading 2 decades ago that something like 80% of option buyers expires out of the money. That still true these days?
Mish, I know you are betting against Tesla. Rather than cheering its demise, seem to be advocating for change of leadership, which seems to run counter to your own self-interest (the implication being you have a lot of integrity). Afterall, it seems as though if the board were to replace Musk it would be a positive development for the company and stock. Of course, in this market who knows what would happen.
So I’m curious how this apparent dichotomy fits into your calculus.
(Doh! I inadvertently posted this in “Stories”.)
I have heard two views on this:
Regardless of which view is correct, Tesla is sitting on a mountain of debt that may very well become unserviceable unless the company quickly makes a profit.
Looks like electric cars will still be under 2% of total US auto sales this year. I also notice the Tesla lounge videos on YouTube about Kettleman City are always completely empty during filming, regardless of who is shooting the piece. I think even EV enthusiasts know mass adoption isn’t happening anytime soon.
TSLA’s “chief people officer” (HR?) has also made a hasty departure. It seems like Musk is going crazy.