General

TSLA. $$$. Past, Present, and Future.

edited December 2020 in General
For us veteran Tesla + TSLA owners, a thread about the stock.

Focus here is specifically on where the price goes, when it does, and why.

A virtual watering hole, where we all can brew and tap our best crowdsourced reasoning.

Please chime in with your predictions and rationale.

A starting point for discussion - see my summary below. History makes a great looking glass.

So here’s a Dickens-inspired retrospective. A synopsis of events to date, to provide context for what is yet to come.


Past
————————

Years of stagnation.

2014 - 2019, Tesla sales grew 10X, but the stock didn’t track this growth.

Why? Aggressive FUD and short sale campaigns.

Oil + Auto interests faced disruption, and actively worked to suppress investor recognition of value.

June 2019 Low - $35

(this date marked peak fud + short power)


Present
———————

Jan 2, 2020 - $86

(Q2+Q3 profits marked a turning point in sentiment)

Dec 14 2020 - $640

(Q4+Q1+Q2+Q3 profit + S&P inclusion)

740% ytd share price growth. All in one year ... after languishing for so many.

Why?

During the pandemic, 50% growth, vs declines for auto peers. Awesome, but still can’t explain 7X.

True catalyst - the dam broke. The suppression campaigns finally yielded to reality.

Many years of hard-won value were finally recognized, accelerated by a fundamental rethink of society in the pandemic.

Tesla isn’t suddenly 7X better in 2020. It was already better beforehand.

That 2019 price was way undervalued, and now it’s getting its correction.

This rethink finally reached the S&P citadel, marking a fundamental maturation and recognition of the enterprise by the biggest bastions of capital.

Result - a huge expansion of the investor audience. Tesla is now a very, very, blue-chip stock.

Overvalued? No. Overdue. Long overdue.



Future
———————

So where is this headed? On Dec 21, and beyond?

Will it rise? Hell yes.

Will it then tank?

There may be an answer in logic. See below for some reasoning.

During this year, a pattern emerged. TSLA rose ahead of good news, and relaxed after.

After TSLA got reliably profitable, surprise expectations were often baked-in ahead of events.

So will S&P inclusion follow this same well-worn pattern? We hear a lot of noise that says it will.

My conjecture - I think not.

Why?

Good business news - quarterly beats, battery day, fsd releases ... these all boost sentiment.

But S&P - this is different. There is no precedent for this scale of step-change event in holdings.

Not in TSLA history. Not even in S&P history.

Not only quantitatively, but qualitatively too.

When speculative short term traders dominated activity, you had a speculative pattern.

But when 270 million shares, 36% of all float, go to index funds, the pattern changes.

Index funds substantially hold the stock between balancings. They don’t high frequency trade.

A bigger pool of capital is about to enter the room, and displace much of the HF influence.

This acts like a giant shock absorber, a dampener of wild speculative swings.

It can’t damp macro forces, but no longer can a small gang of hedge funds push wild moves.

This era is different. TSLA is graduating.

When those shares pass from front-runners to index funds, the behavior changes.

Half of these shares will change hands by the 21st with index funds. And half will change in Jan / Feb with the tracking funds.

So it’s not all over on the 21st. A lot more will move to longer term holders in the 8 weeks following inclusion.

Add this all up, and demand will go up for several weeks. But supply is fixed.

So price should go up somewhat steadily until the new equilibrium is reached.

And the new dominant holders will be longs, who tend to reduce volatility.

No one can predict any of this precisely, but my thesis is this -

————————

Excluding macro events, the pullbacks will be less pronounced in the next several weeks.

The rise will be relatively steady.

So - My price guesses?

700’s within this month, and approaching 800 by end of Jan.

————————

If my inferences turn out to be right (they could be totally wrong), then a wiser strategy would be to not sell early, attempting to guess at profit-taking, but instead follow Samo’s Math Haiku -


Time in market > timing market


Please share your thoughts. Open-sourcing strategies can make a higher overall yield for all of us independent investors, and damp the influence of speculative traders.

Tesla is not just TSLA. It’s not just numbers.

It’s a real company, a real force in the world, that is solving real problems.

That is why we invested in the first place.

It’s still the best reason to own it long. Help them do what must be done.

Which also may just happen to be what creates the greatest wealth for all of us.

Happy Holidays to all!
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Comments

  • With some slight edits, this might one day replace the 12 Days of Christmas🤗

    I know we like to feel that our enthusiasm is instrumental in moving the stock, but most analysis suggests that retail investor activity is more a rounding error. I’m more curious about the impact of institutional investors being forced out of their positions by hitting holding limits as the SP rises. How much of the float rematerializes as funds are forced to liquidate TSLA with rebalancing, as we so commonly see with ARK because they started out near the extreme? Very few major stakeholders are committed to staying all-in outside of Baron or Ellison, perhaps, and will shrink their holdings as SP dictates. Has anyone plotted the impact of the major institutions holdings vs their rules to divest beyond their guidance of a 5 or 10% weighting? And what sort of immediacy is there to rebalance or can they temporarily fall way out of bounds to take advantage of a squeeze?
  • 🌲🌲🌲 @Bighorn

    Retail investors comprise a 20% minority.

    Sell-offs by ARK and Scotland’s Bailee Gifford happen regularly, but now we’re starting to see them bend the 10% rules for a while during run-ups, or even spawn new funds.

    TSLA is by far ARK’s largest holding, and has far outperformed ARK’s composite.

    Maybe some rule tweaking may be ahead.

    The simple reality is that no other entity on earth has the scale and velocity of Tesla. So why wouldn’t the long term winner funds try to find new angles to enhance their positions?

    The ride has worked very well for us and for those funds. If Ron Barron can do it, others can too.

    We’re already here personally practicing it with our own bets - concentration rather diversification, and it has greatly amplified our gains.

    I don’t see Tesla velocity slowing down. If anything, they’re speeding up.

    2021 will definitely be less torrid, and not a 7X year. But I still think Tesla will outpace other large caps, so it still looks more attractive than the alternatives.
  • Btw - S&P weightings adjust with market cap. So as TSLA appreciates, their S&P weight scales up. They don’t dump performers. Look at Apple’s weight in the index. It has kept going up.
  • Good point about S&P weighting being fluid. That would help buffer any mandatory selling with the commensurate rise in share price.
    Is that a quarterly or annual rebalancing that funds would have to make?
  • Quarterly.
  • Observation - look at Monday’s graph. After the initial wiggle, it stayed in a narrow band the whole day - within 5 bucks for hours. With good volume.

    That suggests the index funds are already using their cash buying throttle, run by algorithms, to damp pricing to a narrow band as they meter in their buys.

    They already are throwing their weight to keep the rise pretty orderly, which is healthier than wild overshoot.

    I think they have plenty of contracts to manage what they need, and I don’t expect a huge meltup followed by a crash. Chaos is counterproductive for the market, and they’ll want to use their weight to smooth it out.

    Things work with a fundamentally different dynamic with their participation.

    They can’t overrule underlying supply and demand forces, but they can feather them to improve dollar cost average.
  • Guessing funds will use their weight try to peg range to 640-650 today.

    8 million shares n first 30 min.
  • Notice how narrow the range is around 640.

    Like a thermostat. Consider the odds of that if funds weren’t driving.

    HF traders need volatility make a spread, but there’s nothing for them to gain intraday at this moment.
  • You jinxed it😱
  • There has to be some profit taking after the 21st, perhaps mitigated by a good quarter, and some "Refresh" ing news. ( New MCU2 with 5G)?

    Holding but might decide to buy more in Jan- March

    Expecting that the Covid forecasts for the USA are accurate, and the economy is no where near a recovery.

    However, 100 days in, I expect to see things turn around.
  • @Aerodyne

    The benchmarkers will continue to load up for weeks. Huge positions. 50% bigger than the indexers. A drop is not quickly inevitable. Possible, but not a forgone conclusion.
  • 633 at close. Very orderly buys.

    This just happens to work out to north of $600B market cap.

    That’s a vote of confidence, and will enter them in the top 7.

    In with the big boys now. Feels pretty good.

    More price stability means less chance of a big pullback.

    Liking our $600B upstart-behemoth.
  • A conceptual model for how the fund throttling mechanism works -

    1. During share accumulation, funds may be 30-40% of daily volume.

    2. This makes them the dominant market maker right now.

    3. If the price drops, they vacuum up anything below a floor.

    4. If price rises too fast, past their target, they shut the spigot.

    5. Since they dominate volume, pausing their buys clamps the price.

    6. Speculative funds are too small to backfill all buys on their own.

    7. Trying to fight the dominant buyer is like fighting the Fed.

    8. Expensive and lossy. So right now, they must go with the flow.

    9. Once the positions are all set, then the big funds are less active.

    10. Speculators can then play again, albeit with less influence.

    11. That next phase will start several weeks from now, after tracking funds are fully positioned.

    12. For now, the elephants pace the march.

    Elephants are long beasts, ergo the less volatile dynamic now.
  • Great update tonight on Tesla Daily from Rob Mauer.

    He dropped some useful data on actual current holdings by a few major index funds like spydr, vanguard and ishares.

    It was a small sample, but if representative, it would extrapolate to very low completion of positions through Tuesday.

    What is not mapped is how many contracts these funds may have in place with proxies at pre-agreed prices.

    Many unknowns, but early data would suggest they have quite a lot more buys to consummate this week.

    Activity should pick up quite a bit towards end of week.

    Another detail - consequence for late balancing is fuzzy and may vary by charter for each fund.

    Net net, an extreme squeeze will likely be avoided by the tools funds can use, but upward price pressure should indeed play out through Monday.

    Note that after hours Friday and premarket Monday are fair game to fulfill weight building.

    Tracking funds (vs index funds) can continue building positions for weeks after Monday.

    To give you an idea of one type of tool they can deploy -

    A contract with proxy hedge funds, where the two parties agree to transfer all the shares on the required date, at a pre-agreed split of the spread between the original buy price, and the quote Friday night.

    That can help manage the actual cost to the index funds, and guarantee sufficient supply. The proxy firm would likewise have zero risk, and a guaranteed minimum gain on pre-sold shares. Parties can effectively design it however they want, and they’ve had 35 days to work this out.

    Lots of undocumented ways to play here, to manage order vs. chaos.

    I personally don’t subscribe to the idea that speculators can dictate any price they choose. That’s not how it’s likely to play out.

    Hence a big overshoot spike followed by a big drop seems like it’s possible to engineer out of this process. And there are cost incentives to do this.

    So fluctuations yes, but very tall sharp cliffs - this will probably turn out to have been speculator fud narrative.
  • Indexers aren’t adding shares yet ... what are they doing?

    But I have to say that as a HODLer the entertainment value is amazing.

    Time in the market always beats timing the market.

    Friends and family have bought $200,000 of TSLA shares in the last few weeks. Never too late to learn the cardinal rule of investing for the next 10 years:

    TESLA IS THE NEXT TESLA
  • @SamO

    I thought we were friends😂
  • I didn’t count your added shares since I wasn’t sure how many you actually added.

    A friend from school saw the light a few months ago and is up 60%. He doubled his position last week and is up another 15%.

    A couple of family members had money in cash and they realized they didn’t want to miss the boat. FOMO is a helluva drug.
  • You can double your figure.
  • If the index funds have contracts that shares are deeded over directly on Monday premarket, then those transactions would not immediately move the market since they’re conducted outside the exchange.

    That would give the index funds a lower starting point for the index on inclusion day, so subsequent rises in the quote would book as larger gains for their funds.

    These contractual tricks can manage optics and smooth out pricing, but the effect of a massive new pool of longs holding 36% of the stock would be ultimately felt, and unavoidable.

    You can feather the demand increase, but you can’t make it disappear.

    At some point, its demand effect does raise the price.

    If it happens after their index date starting point, then on paper, more of those gains accrue to the fund’s share of the gains vs. buyers on that last date.

    Btw - such private contracts would not appear at all on the options exchange data, so you can‘t measure what’s coming by trying to track options. Options near inclusion are a treacherous bet here.

    Doing off-radar transactions would be a tool of choice when you’re talking about the biggest funds, and $100B+ movement of capital.

    The big guys are not fools. If they know it’s going up, they can engineer ways to be beneficiaries rather than dupes.

    Once they own their positions though, they flip to the cheerleading squad to promote out how strong the stock is. That will not hurt. The price for all us longs will go up once the funds book them.

    The dust will take a while to settle, but looks like chaos will be avoided, and once the dust settles, the price will inexorably rise.

    Unprecedented change provokes a lot of creativity for novel ways it’s feathered in.

    We expected much misdirection narrative and head fakes, so this is not a surprising tactic.
  • Btw - a secondary benefit to funds of the price being subdued on inclusion day is that last-minute spikes in the share count need for full weight is eased.

    That makes their job easier vs. huge run up on the date of rebalancing.

    Their view would be - move more of the gains to the days after inclusion.
  • Another factor that makes it crazy to predict are the shorters. As the price rises, they have to cover their losses or buy the stock before it goes higher. If there are not many who want to sell, it just keeps climbing. I'm not saying this will happen, and a lot of shorters have taken their deserved losses and bowed out. But remaining shorters can fuel stock increases when it's already going up in value.
  • Short is about 7% of float
  • Which is worth $60B or a larger short than in 2012-2019 ... smaller percentage shorted, even bigger losses.

    https://www.cnn.com/2020/12/04/investing/tesla-short-sellers-elon-musk/index.html
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