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sancho panza

The Big Short Thread

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22 minutes ago, Bear Hug said:

watching it today - too scared to commit.  may be there is some anchoring effect going on around that made up $420 going private value.  

Who knows....it's a share with a lot of volatility and a lot of momo players behind it

Incredible recent run

https://www.investing.com/equities/tesla-motors

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10 minutes ago, Bear Hug said:

It's done!  Shorting 1 share of tesla.  If by some miracle beyond meat, lyft or uber run up a bit, I'll short them too.

Brave. Not because i think Tesla is a good company but because logic left the market years ago

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1 hour ago, Loki said:

Brave. Not because i think Tesla is a good company but because logic left the market years ago

It's only one share, so not that brave. Yet! 

Profits when plotted quarterly look even uglier than annual figures.  And I guess it will be an annual loss in 2019 as well.

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https://www.theverge.com/2019/10/23/20928982/tesla-q4-earnings-profit-model-3-china-gigafactory

Obviously that chart from a month ago means nothing as there was still a spike in price!

 

There is quite interesting article in Seeking Alpha focusing on leasing profits disclosure:

https://seekingalpha.com/article/4312917-dissecting-life-cycle-profitability-of-teslas-leased-cars

Quote
Summary

Tesla's leasing gross margin appears quite strong; it was over 47% in 2019's third quarter. However, there are various direct costs, particularly financing ones, that are not taken into consideration.

It is also possible Tesla is losing money on disposal of cars at lease end. Could this help explain losses in Tesla's "Services and Other" segment?

Could Tesla be entering into potentially uneconomic lease deals simply to keep the "supply constrained story" alive?

Why is used car inventory increasing?

But first, where did all the "$000's" go?

 

Preamble - Three Zero's Are Missing

Suddenly in Q3, and without explanation, Tesla (TSLA) has begun doing its financial reporting to the nearest "million" rather than to the nearest "thousand" for both dollar amounts and share counts. In the "Tesla Second Quarter 2019 Update" letter, the Summary of Key Metrics page stated: "In thousands, except metrics and per share data" while the FINANCIAL SUMMARY page in the letter for the third quarter says: "$ in millions, except percentages and per share data." A similar change was made in the 10-Q. The figures in millions don't even contain amounts to the nearest tenth, such as "$15.6 million," but rather just whole numbers. (i.e. "$15 million")

Making this extreme a change, particularly in mid-year, strikes me as a bit odd. With respect to many figures, it does not make a material difference. However, for some of the smaller ones, such as share count, it is extremely significant. Tesla has recently been issuing roughly 500,000 shares per quarter under various employee stock compensation plans. Now that share count is being reported in millions, we could have multiple quarters in a row where it appears there is no increase in this number even if it increases by as much as 999,999 shares. Even Apple (NASDAQ:AAPL), who many here like to compare to Tesla, still reports share counts in thousands; per its 10-K "millions, except number of shares, which are reflected in thousands." This is despite the fact that Apple has over 4.6 billion shares outstanding, 25 times Tesla's share count.

 

I can understand a growing company wanting to do this at some point, but Tesla's revenue has been flat to down this year, so there does not seem to be any obvious pressing reason to do it now rather than after year-end.

 

 

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14 hours ago, Bear Hug said:

It's done!  Shorting 1 share of tesla.  If by some miracle beyond meat, lyft or uber run up a bit, I'll short them too.

I think BYND is gone.Massive short squeeze at the start then pop.......hissssssss...............

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https://wolfstreet.com/2019/12/30/i-who-vowed-to-never-ever-short-stocks-again-just-shorted-the-entire-market/

Quote

In my decades of looking at the stock market, there has never been a better setup. Exuberance is pandemic and sky-high. And even after today’s dip, the S&P 500 is up nearly 29% for the year, and the Nasdaq 35%, despite lackluster growth in the global economy, where many of the S&P 500 companies are getting the majority of their revenues.

Mega-weight in the indices, Apple, is a good example: shares soared 84% in the year, though its revenues ticked up only 2%. This is not a growth story. This is an exuberance story where nothing that happens in reality – such as lacking revenue growth – matters, as we’re now told by enthusiastic crowds everywhere.

Until just a couple of months ago, the touts were out there touting negative interest rates soon to come to the US and thus making stocks the only place to be. Those touts have now been run over by reality. Now they’re touting QE4 by the Fed, or whatever. And people were looking for any reason to buy.

The unanimity of it all was astounding. I’ve seen this before, but not in this magnitude.

And there is this: As stocks were surging over the past few months, investors with large gains who wanted to sell didn’t sell before year-end in order to defer that income for tax considerations. So there was reduced selling pressure from that group that would have liked to sell, and that will sell after the new year starts.

So I shorted the stock market today, December 30 – me who is on record of saying repeatedly that I would never ever short anything ever again, after the debacle of November 1999 when I shorted the most obviously ridiculous Nasdaq high-fliers a few months too early. They collapsed to near-zero, but not before ripping off my face.

But I changed my mind. The setup is just too perfect. 

 

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Posted (edited)
16 hours ago, Bear Hug said:

.......But I changed my mind. The setup is just too perfect. 

A top post there me son.  Sounds sensible logic.  An Icarus moment?  Might join him! 

Edited by Harley

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Posted (edited)
On 01/01/2020 at 12:07, Harley said:

A top post there me son.  Sounds sensible logic.  An Icarus moment?  Might join him! 

I have joined!  And already lost some money ) Need to decide when to double up.  When S&P is another 5% up? (in GBP terms)

This is a small 0.1 x S&P (~£250) position. 

Edited by Bear Hug

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1 hour ago, Bear Hug said:

I have joined!  And already lost some money ) Need to decide when to double up.  When S&P is another 5% up? (in GBP terms)

This is a small 0.1 x S&P (~£250) position. 

I steer clear of teh S&P 500.Prefer to follow the high beta plays individually or SMH/SOXX which tend to lead the S&P.

from the wolf article

'Mega-weight in the indices, Apple, is a good example: shares soared 84% in the year, though its revenues ticked up only 2%. '

 

I think its' worth reexamining the charts from 2000/1.I took some hits on short term trades last year after a very good year in 2018

 

 

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51 minutes ago, sancho panza said:

I steer clear of teh S&P 500.Prefer to follow the high beta plays individually or SMH/SOXX which tend to lead the S&P.

from the wolf article

'Mega-weight in the indices, Apple, is a good example: shares soared 84% in the year, though its revenues ticked up only 2%. '

 

I think its' worth reexamining the charts from 2000/1.I took some hits on short term trades last year after a very good year in 2018

 

 

Thanks, SP.  Quick plot of SOXX and S&P together on FT site does look very interesting.

Think I need to stop reading contrarian sites/twitter feeds/posts for some balance!

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8 hours ago, Bear Hug said:

Thanks, SP.  Quick plot of SOXX and S&P together on FT site does look very interesting.

Think I need to stop reading contrarian sites/twitter feeds/posts for some balance!

Yeah,I've started running my short term portfolio as a max of 7 stocks with at least two longs,so that you're not constantly searching for bearish bets ,which stop syour focus becoming too narrow.

The FANG stocks have been irrational some time and I'm steering well clear.Having said that, my main US short at the mo is Tesla and even thats small.I'm waiting for some sort of turn before shorting more generally.

Russell 2000 isn't singing from the same hymn sheet

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We've had a couple of face rippers since 2018,S&P looks very over extended.

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8 hours ago, Bear Hug said:

Thanks, SP.  Quick plot of SOXX and S&P together on FT site does look very interesting.

Think I need to stop reading contrarian sites/twitter feeds/posts for some balance!

WIth any index short you're constantly pying out divis.Better to short one of the S&P 500 ETF's and then you can dodge the divis.

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1 hour ago, sancho panza said:

We've had a couple of face rippers since 2018,S&P looks very over extended.

image.png.de28a48d471fa939902a85fa0b526aa0.png

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WIth any index short you're constantly pying out divis.Better to short one of the S&P 500 ETF's and then you can dodge the divis.

Just paid some dividend this morning on the CFD position!  £0.03!   

But is that not cost neutral overall?  If the index is not total return, then the index value is lower than it would be otherwise.  So I may have paid the dividend but the overall position would have not changed because index value has been increased to account for accumulated dividend (if it was TR).

What am I missing? 

 

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6 hours ago, sancho panza said:

Yeah,I've started running my short term portfolio as a max of 7 stocks with at least two longs,so that you're not constantly searching for bearish bets ,which stop syour focus becoming too narrow.

The FANG stocks have been irrational some time and I'm steering well clear.Having said that, my main US short at the mo is Tesla and even thats small.I'm waiting for some sort of turn before shorting more generally.

Russell 2000 isn't singing from the same hymn sheet

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Tesla today.. Wtf? It actually dropped pre-open but up and up now. Was going to add at 450 but maybe that's too early now

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5 minutes ago, Bear Hug said:

Tesla today.. Wtf? It actually dropped pre-open but up and up now. Was going to add at 450 but maybe that's too early now

It's doubled in 5 months

Doesn't sound like sustainable growth to me xD but then I said that at 200...

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11 hours ago, Bear Hug said:

Just paid some dividend this morning on the CFD position!  £0.03!   

But is that not cost neutral overall?  If the index is not total return, then the index value is lower than it would be otherwise.  So I may have paid the dividend but the overall position would have not changed because index value has been increased to account for accumulated dividend (if it was TR).

What am I missing? 

 

Say Cnetrica pays an 8 pence divi and drops from £1.00 to £0.92.Two weeks later Centrica is back at £1.00 and you're still down the £0.08 if you're still short.

7 hours ago, Bear Hug said:

Tesla today.. Wtf? It actually dropped pre-open but up and up now. Was going to add at 450 but maybe that's too early now

Yeah I got  stop tripped at $453.I'm prepared for a long one here.I prefer shorting individual stocks or ETF's.

 

Wolf puts it well.

'But I still won’t short individual stocks because they can get too crazy – especially Tesla, one of the most obvious shorts with an enormous amount of short interest outstanding. This in itself is practically a guarantee the stock cannot crash because short sellers become buyers to take profits when the price drops enough, and they put a floor under the shares. And the massive short interest makes TSLA prone to violent short-covering rallies.

This stock is a prime example of how crazy the market is. In the US, there were fewer new vehicles sold in 2019 than in 2000. Similarly, in Europe and in Japan. Even formerly booming markets, such as China and India, have now hit the skids in auto sales. For growth, every automaker needs to take market share away from other automakers – a tough game in a no-growth environment.

Tesla’s revenues fell 7.3% year-over-year in the third quarter, a steeper decline than the revenue declines at other US automakers.

At $412 a share, Tesla is valued at $75 billion. This is over three times 12-month revenues ($24 billion).

GM is valued at $52 billion. This is just 0.36 times 12-month revenues ($144 billion). By this measure of the price-to-sales ratio, Tesla, if it ever becomes profitable on an annual basis, is overvalued by a factor of 10 compared to GM.

GM at this price is still a sell, in my view. As for Tesla, in the optimistic scenario that it makes an annual profit of $1 billion, it’s shares would have to drop to $41 before they’re on the same level of overvalued as GM, and both would still be a sell at those levels.

So Tesla at the current price is one of the most obvious shorts in history. But I wouldn’t short the shares because they’re just too crazy, and because the short is too obvious.'

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10 hours ago, sancho panza said:

Say Cnetrica pays an 8 pence divi and drops from £1.00 to £0.92.Two weeks later Centrica is back at £1.00 and you're still down the £0.08 if you're still short.

Yeah I got  stop tripped at $453.I'm prepared for a long one here.I prefer shorting individual stocks or ETF's.

 

Wolf puts it well.

'But I still won’t short individual stocks because they can get too crazy – especially Tesla, one of the most obvious shorts with an enormous amount of short interest outstanding. This in itself is practically a guarantee the stock cannot crash because short sellers become buyers to take profits when the price drops enough, and they put a floor under the shares. And the massive short interest makes TSLA prone to violent short-covering rallies.

This stock is a prime example of how crazy the market is. In the US, there were fewer new vehicles sold in 2019 than in 2000. Similarly, in Europe and in Japan. Even formerly booming markets, such as China and India, have now hit the skids in auto sales. For growth, every automaker needs to take market share away from other automakers – a tough game in a no-growth environment.

Tesla’s revenues fell 7.3% year-over-year in the third quarter, a steeper decline than the revenue declines at other US automakers.

At $412 a share, Tesla is valued at $75 billion. This is over three times 12-month revenues ($24 billion).

GM is valued at $52 billion. This is just 0.36 times 12-month revenues ($144 billion). By this measure of the price-to-sales ratio, Tesla, if it ever becomes profitable on an annual basis, is overvalued by a factor of 10 compared to GM.

GM at this price is still a sell, in my view. As for Tesla, in the optimistic scenario that it makes an annual profit of $1 billion, it’s shares would have to drop to $41 before they’re on the same level of overvalued as GM, and both would still be a sell at those levels.

So Tesla at the current price is one of the most obvious shorts in history. But I wouldn’t short the shares because they’re just too crazy, and because the short is too obvious.'

Where Tesla is now at around 450 is absolutely nuts, what is driving these huge moves lord knows, especially with auto markets slowing. Could continue on and get well over $500 but at some point the thing will go down as a recession finally arrives and competition hots up. My understanding is that they have partaken in a lot of accounting shenanigans, which means at some point they will run out of road to window dress the quarterly results and then start posting some epic losses.

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13 hours ago, Talking Monkey said:

Where Tesla is now at around 450 is absolutely nuts, what is driving these huge moves lord knows, especially with auto markets slowing. Could continue on and get well over $500 but at some point the thing will go down as a recession finally arrives and competition hots up. My understanding is that they have partaken in a lot of accounting shenanigans, which means at some point they will run out of road to window dress the quarterly results and then start posting some epic losses.

Key thing is to have some cash left for that drop.

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On 03/01/2020 at 22:52, sancho panza said:

Say Cnetrica pays an 8 pence divi and drops from £1.00 to £0.92.Two weeks later Centrica is back at £1.00 and you're still down the £0.08 if you're still short.

Yeah I got  stop tripped at $453.I'm prepared for a long one here.I prefer shorting individual stocks or ETF's.

...

Wolf puts it well.

In that hypothetical example, if Centrica did not go ex-dividend, it could have been be up to £1.08 or so instead.  Therefore, the short position would have been down by roughly the same amount either way.

Agree on Wolf and Tesla

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On 13/01/2020 at 21:44, Bear Hug said:

I am almost £100 down.  Was going to top up at $500 but it's still flying, so maybe at $600

Lot of great minds like Jom Chanos have got burned on this.Heck of a short covering rally.I've been stopped out a few times since $350.Incredible ride.

2019 was an amzing a year for my short term book.

2020 been an equal disaster but I've learned a lot .

This current run up has the feel of 2000.TSLA appears to be in an exponential phase.AAPL too.

Edited by sancho panza

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59 minutes ago, sancho panza said:

Lot of great minds like Jom Chanos have got burned on this.Heck of a short covering rally.I've been stopped out a few times since $350.Incredible ride.

2019 was an amzing a year for my short term book.

2020 been an equal disaster but I've learned a lot .

This current run up has the feel of 2000.TSLA appears to be in an exponential phase.AAPL too.

Its mad its approaching the market value of volkswagon who sell something like 25 times more cars, utter madness

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1 hour ago, sancho panza said:

Lot of great minds like Jom Chanos have got burned on this.Heck of a short covering rally.I've been stopped out a few times since $350.Incredible ride.

2019 was an amzing a year for my short term book.

2020 been an equal disaster but I've learned a lot .

This current run up has the feel of 2000.TSLA appears to be in an exponential phase.AAPL too.

There is a bit of an uprising of loss-making zombies last few days.  Lyft, Uber, Beyond Meat.  Have they become profitable all of a sudden?  Just joking - of course not.

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