
I'm Betting on Elon - danielodio
http://danielodio.com/im-betting-on-elon?
======
cjbprime
My problem with the "I'm betting on Elon" approach is that the market is
clearly _already_ betting on Elon, to the point of somewhere between 10-40x a
sensible company valuation. If you buy now, you're betting on a clearly
ridiculously-optimistic valuation being not quite ridiculously-optimistic
enough. You're not the first person to have considered that the company might
be successful and grow exponentially in the future -- that's already priced in
to the stock!

Talking about long-term bets, it would be interesting to read about how the
electric car future might tie into the driverless car future. My understanding
is that we'll have many fewer cars around in the driverless future, even if
the cars that we do have are electric.

~~~
millstone
The market is betting more heavily against Elon. TSLA is the ninth most
shorted stock - see [http://online.wsj.com/mdc/public/page/2_3062-nasdaqshort-
hig...](http://online.wsj.com/mdc/public/page/2_3062-nasdaqshort-
highlites.html#shortF) .

It's so heavily shorted that there's a possibility of a short squeeze, which I
would find quite delicious - not because I own TSLA, but because I want to see
people hoping for failure get screwed.

~~~
damoncali
What makes you think that being short on a stock is the same as hoping for
failure? I hope Tesla is fantastically successful, but I would consider
shorting it if I were doing such things these days. They're two totally
separate things.

~~~
millstone
I don't think they're separate. Shorting a stock means you make money from the
stock's decline, and therefore from the company's failure. You hope to make
money from your investment, so you hope for the company to fail, at least
indirectly.

Furthermore, shorting a stock can harm the firm. Big short positions drive
down the stock price, which affects public sentiment (their stock is down,
they must be failing, I won't buy their car because they may not be here next
year), makes it harder for them to retain employees, makes it harder to raise
money by issuing more stock or bonds, etc. By shorting a stock, you are
contributing to that company's failure (though of course the effect is
miniscule for retail investors like me).

I would not buy even a undervalued stock for a tobacco company, because I
don't want to support producers of tobacco products. And I don't want to
impede progress in electric cars by shorting their producers, even if I think
their stocks are overvalued. There's plenty of other investments available
that align my finances with my hopes.

~~~
damoncali
Short selling is nothing more than selling before you buy. If you believe that
short selling drives prices down, then you believe that taking long positions
drives it up. Neither is true.

Short selling provides more information and better liquidity to the market.
It's a good thing.

~~~
millstone
Of course short selling drives prices down, while long positions drive prices
up. That's basic supply and demand. What else could determine prices?

I agree that short selling is overall a good thing, though it can also be
abused (e.g. naked shorts). I am not claiming any market abuse in the case of
Tesla.

Most people do not buy individual stocks based purely on a risk calculation.
They also want to believe that the firms are working for good, not evil,
because buying a stock means you own part of that company, and therefore are
in some small way responsible for its actions.

Short selling is the same, but in the opposite direction. You own a negative
fraction of that company, and so your moral relationship to it has a minus
sign. I think that Tesla is a good company. But some people think that owning
no TSLA is still too much, and I hope they get burned (financially).

~~~
damoncali
Do you think it is ok to sell a stock you think is overvalued and then buy
back in at a lower price? Isn't that what shorting is?

As an aside you may enjoy this article written by an old professor of mine
that goes into some of this tangentially. Ignore the snark - it's just his
personality/sense of humor [http://leedsonfinance.com/wp-
content/uploads/2009/06/market-...](http://leedsonfinance.com/wp-
content/uploads/2009/06/market-update-june-13.pdf)

------
codex
The lesson I draw from Tesla is that it's possible (even straightforward) to
produce an amazing car if you're willing to lose a ton of money on each one
and your competitors (mainstream auto makers) aren't. I say this because Tesla
has, to date, been poor at controlling costs, enough so that the feds (Tesla's
creditors) are concerned about their balance sheet, and Wall Street has
hammered the stock.

For example, Tesla used to lose $30M a month. Last quarter it brought in
hundreds of millions more in revenue, but still lost ~$30M a month. At some
point, they hope to stop losing money, but then they're about to create two
new products which will also incur large R&D costs. To date, Tesla has lost
about a billion dollars, or $50K per car sold, assuming they sell 20K cars
next year.

So to a consumer, Tesla's cars look amazing compared to what else is on the
market (after all, they're losing money on each one, which their competitors
are unwilling to do); to an accountant, the company looks worrysome, and to an
investor, the company looks like either a tremendous deal or a fantastic
lemon, depending on the investors views about the size of the market,
competition, and ability to control costs. At current rates, they will have
more liabilities than assets three months.

Once Tesla can reign in their costs they can rewrite this story, and there's a
good chance they can. Whether they can make electric cars more cheaply than
mainstream automakers in the long term is, in my mind, an open question.

~~~
rogerbinns
Note that Toyota also lost money for several years on the Prius as is GM on
the Volt [http://www.reuters.com/article/2012/09/10/us-
generalmotors-a...](http://www.reuters.com/article/2012/09/10/us-
generalmotors-autos-volt-idUSBRE88904J20120910) \- there is a learning curve
to play in this space. Since everyone is keeping their technology private it
won't be cheaper for later entrants.

There will be an experience curve for the manufacturing which will lead to it
becoming increasingly productive and cheaper
[http://en.wikipedia.org/wiki/Experience_curve_effects#The_ex...](http://en.wikipedia.org/wiki/Experience_curve_effects#The_experience_curve)

As a comparison Boeing is reported to have an experienced a curve of 84%
(costs decreasing 16% every time production units doubled) on the 777. Tesla
doesn't have the legacy manufacturing infrastructure and can use far more
automated methods, especially if they manufacture a large amount of the car
themselves instead of outsourcing. It will be interesting to see what Tesla's
numbers turn out to be.

~~~
codex
Tesla's gross margins are currently 8% (whereas BMW is something like 19%) and
they expect it to increase to 25% in one year alone. It's already up
significantly from negative territory (I shudder to think what it was on the
Roadster), but they still have to make the car another 18.5% cheaper. I wonder
if they're aiming to squeeze that from the battery cost, in which case it's up
to Panasonic, I suppose.

~~~
ANH
They're about to hit a volume discount from Panasonic, according to the
earnings call. There are a number of other efficiencies they've identified. On
the call Elon recounts some anecdotes about parts suppliers not being prepared
in 2012 for the volume of orders, inefficient tire shipments, etc.

------
timdorr
From the article he references:

"Are there that many luxury car buyers out there who are willing to live with
the limitations of an electric car? It seems doubtful to me."

Limitations? What limitations? I've been driving mine for 2 months and it's
been a freeing experience. It doesn't go as far? My old ICE didn't go as far
on a tank and required 10x the cost to fill up. I no longer feel guilty about
driving to the grocery store a few miles away because I know I'm running my
car at it's least efficient state. I just took a trip this weekend to some
relatives in another part of my state (GA) with no concerns about range or
having to compromise to extend it. Google Maps in the car has already saved me
many times from heading into bad traffic (I would never remember to check
traffic on my phone beforehand).

Honestly, if I'm being limited in some way, I'm not seeing it.

~~~
untog
_Limitations? What limitations?_

They are overwhelmingly obvious. The simple fact is that 'filling up' is
harder to do- there are far, far fewer stations, and the actual act of
charging takes a not inconsiderable amount of time. The cost argument is
valid, but the point is that luxury car owners are less likely to worry about
the price of gas, given that they are already rich enough to buy a luxury car.

I'm not saying you are wrong in your assertions, clearly the car suits you
well. But to suggest that there are no limitations flies in the face of all
evidence.

~~~
revelation
What evidence? The evidence shows very clearly that the majority oft people
drive less than 80 miles a day. To suggest that ICE cars have no limitations
in these ranges does indeed fly in the face. of all evidence.

~~~
untog
But you've just gone from "no limitations" to "no limitations as long as you
travel within 80 miles".

So 80 miles should be considered a limitation, no?

~~~
alaskamiller
Convincing a believer otherwise of what they believe in is an exercise in
futility.

------
VeejayRampay
Besides the stocket market evaluations and all those considerations, I have to
say that I am amazed how spoiled America is sometimes.

How I wish we had such an entrepreneur in Europe, someone willing to shake the
status quo and speed up the process of making the future happen.

Tesla is a company that is trying to make AMERICAN electric cars, he should
encouraged and cheered. People with some money and liberal views should be
jumping on those cars, it's History in the making, a true revolution. I really
hope he suceeds, that'd be an encouraging sign that science and technology can
actually have a good impact on climate and consumer practices vis à vis
greenhouse gases and the approach to modernity.

~~~
snogglethorpe
> _Tesla is a company that is trying to make AMERICAN electric cars, he should
> encouraged and cheered_ ... _science and technology can actually have a good
> impact on climate and consumer practices vis à vis greenhouse gases and the
> approach to modernity._

A vastly more effective approach would be to encourage and cheer those trying
to wean America from its addiction to automobiles....

Elon does cool things, but it's not clear Tesla really represents a desirable
future.

~~~
VeejayRampay
I agree with you. I am from Europe where mass transit and reliable and
efficient public transportation has been implemented and enjoyed by the
population for a long time, I think this is a way for the future.

Siemens, a German company and Alstom, a French one both have the technology to
make 200+mph on a train happen in the USA.

The West Coast for example could and SHOULD have a HST from Vancouver to San
Diego. By car that's roughly a 1400 miles trip or something like a 15 hours
drive (give or take). With a HST, that suddenly becomes a 8 hour trip with
next to no greenhouse gas emissions per person while everyone just chills out
browsing the interwebs in a comfy seat.

Same for the East Coast, there should be some sort of East Coast HST as well
(something to the tune of Boston -> NYC -> Philly -> DC -> somehow down to
Florida or some other route, I don't live in the States).

If Germany, Spain, France, Japan and China have that, there's no reason why
the USA shouldn't be able to do it as well.

EDIT: By saying that I am not implying that the "middle of America" should not
benefit from HST as well, but its population density and sheer size makes that
less cost-feasable.

~~~
dyno12345
There is already a Boston-DC semi-HST:

<http://en.wikipedia.org/wiki/Acela_Express>

There is a HST system under development in California, with the first segment
planned for completion by 2017, with the rest scheduled in just 25 short
years:

<http://en.wikipedia.org/wiki/California_High-Speed_Rail>

~~~
VeejayRampay
Indeed, it uses TGV (the French HST) technology, mixed with some Canadian tech
as well.

If anyone wants to read more about this:

<http://en.wikipedia.org/wiki/Acela_Express>

The "Criticism" section highlights how the current rails infrastructure in the
USA currently places a limitation on the speeds the train can achieve. Still a
reasonable good experiment. With President Obama's mention of the structurally
deficient bridges in the States, maybe it will change for the better. I surely
hope so.

~~~
ericd
Yeah, with those restrictions, Acela is next to useless as an upgrade from
Amtrak, at a much higher ticket cost. I really wish we could just do a proper
job and make a Lyon-Paris TGV-like route between Washington and Boston.

------
quux
Sometimes I feel like Tesla is the NeXT of cars. Technologically impressive,
but ahead of its time.

In 15 years electric cars will have much more market share, question is, will
Tesla still be there leading the pack?

Maybe they can reverse acquire some ailing car company ;)

~~~
dman
In an alternative fictional universe Elon will be hired by Honda to survive a
near death spiral and will then bring in the team from Tesla to create Honda
2.0

------
eCa
That page is in an eternal redirect loop (FF19/Win7). With a redirect to self
every three seconds it is not easy to read.

~~~
tynan
Hey, I'm the creator of the blogging platform he's running on and am trying to
replicate this. Do you have cookies or js off or any other notable change from
stock?

~~~
tynan
Thanks a lot for the info, everyone. I can't replicate this even with all the
same addons installed, but I'm working on it...

~~~
wiredfool
Did it for me with ghostery only, chrome Version 24.0.1312.57 on osx 10.7.
Escape stopped the insanity.

------
rdl
I love Tesla as a company, but TSLA as a stock is broken. There seems to be
serious manipulation going on -- right before long annual options expiry, the
price drops, then pops right after. There was shadiness the previous year
related to a drop, then announcing a departure of some mid-level exec, then a
pop. I generally stick to options for playing things like AAPL, TSLA, etc.
where it will move based on some specific accomplishments, but TSLA is one I
own as stock directly.

------
3am
The idea that TSLA's valuation should be modeled in the same was as Ford, GM,
et al is so preposterous that I have trouble comprehending how someone can
make the point in an honest fashion.

I think TSLA is richly valued and I would not buy it now (nor do I own
shares), but saying it should have a similar P/S or EV/FCF to F is like saying
that VMWare is overvalued by virtue of it having a higher valuation than HP.

------
brown9-2
Of course, every other person who bought stock in a company after bad news
where the company ended up going on to fail had the same reasoning:

\- critics don't understand the master plan

\- I'm betting on CEO X, and the market just doesn't understand him/her

------
lifeisstillgood
There is a lot of Elon love on HN - but the analysis here is fundamentally
correct - bet on winners. And Elon will either win big or blow up big. Its a
pretty good bet IMO.

And I am amazed to see the "relentlessly resourceful" tag be dropped casually
in here - even if the author is part of the SV-mafia its still amazing what
impact one mans' essays are having.

So that makes two people to bet on ...

------
blumentopf
A minor correction to this article, to the best of my knowledge Mercedes-Benz
uses batteries produced by Deutsche Accumotive (a joint-venture of Daimler and
Evonik) both in the smart electric drive and the forthcoming B-Class E-Cell.
The Tesla batteries were only used in pre-production smart electric drives, as
a replacement for the old ZEBRA NaNiCl batteries.

------
moakleaf
Well... If the profit margin guidance for the next quarters is correct, and
they are not hit by anything unexpected, the company should be trading at
around 15 P/E by the end of 2013 at the current share price. Which would be
great... But that means that there isn't likely to be any significant share
price growth until then.

One problem with that analysis is that they have overpromised and
underdelivered a bit in the past.

Another issue is that they only got 6000 new reservations in the last quarter.
For them to have significant growth they need a lot more. And this is in a
quarter where they were awarded car of the year and got fantastic reviews
(except that NYT one).

I bet these reasons, combined with a standard sell-off of a stock that has
increased by a lot the last quarter, and that you now really have to be
patient for another or two quarters before anything significant happens, is
why the stock is down today.

Personally, I am disappointed by the number of new reservations. I think it is
far too low for a car with such stellar reviews.

I had hoped they would have more than 20000 reservations currently. 15-16000
is not even enough to use their full capacity for the year, so they need to
start selling more.

I had also hoped the production rate would have been higher. 400 cars per week
is also not enough in the long run. Elon talked about reaching 500 by the
summer, and that really isn't that great. He also said that theoretically they
didn't need to get more reservations in 2013, as they would have enough to use
up their capacity. That also worried me.

I have seen analyst say they will produce 30000 cars in 2014. If that is the
case, the share price is really not going to move a lot from current levels.
Because the growth is just too small.

So I think a lot of shareholders feel like me, that the growth isn't
significant enough.

I guess we need to wait another couple of quarters before we can say anything.

~~~
Shivetya
It is a hundred thousand dollar, its not like the market is large. Sure there
are many buyers out there with good money to spend but there are far more
exciting cars in that price range. Finally, its electric ONLY. Supercharger
network or not, your tied to cord.

To put their numbers in perspective versus their losses and debts, they want
to sell nearly twenty thousand cards this year. Mercedes sold more than that
in January just in the United States. Toyota sells that many cars in four
days, US alone! There are also stories about supplier problems, something
small volume cars suffer a lot.

Sure the luxury market doesn't put up those numbers but the brands there are
well established and storied. Tesla is neither.

Tesla's fate is probably to be bought by Mercedes or similar. Someone who has
the ability to put a large number of these on the road, with a large support
network, and a trusted name

~~~
SeanLuke
> Sure there are many buyers out there with good money to spend but there are
> far more exciting cars in that price range.

Really? I can't think of one.

------
niggler
Full Disclosure: I shorted a few weeks ago when the NYT article came out and
covered today.

I would not bet on TSLA the stock just yet. They can be successful and
profitable and yet still not come close to the current stock price (P/E
contraction, future equity dilution). Most importantly, the thing which
stemmed the drop today was a short-sale restriction (a circuit breaker after
it falls 10%)

What would be a buy signal for me is when the car cost can be brought down to
the 35-40K range (which, based on reports from mercedes benz and bmw, is the
most profitable segment)

------
colmvp
I think it's weird to bet on the person instead of the company. I'd hate to be
in a company or team where outsiders focused on one person.

~~~
jasonyeh
That has its peeves/perks, people don't want to say they work for apple
anymore just to avoid the attention; a company of one.

------
6ren
Elon isn't competing against Ford. He's competing against Exxon.

 _EDIT_ mkt cap: Ford 47.24B <https://www.google.com/search?q=f> Exxon 398.83B
<https://www.google.com/search?q=xom>

~~~
thematt
Here's a contrarian investment approach: if what you say is true, then buy
Exxon. The only way electric vehicles and the "green" movement maintain
momentum is if oil prices stay high. Consequently, Exxon wins.

------
tomasien
The absolute best way to buy stocks is to wait until something happens in the
market that seems to be based on emotions and then bet the other way. 2 best
examples I can remember where I noticed this was when Citi was at $1 despite
the fact we knew the bailout was coming (I bought, but not enough) and when
Facebook was at $17 because investors kept getting hammered with "Facebook
hasn't figured out mobile" shit over and over. Didn't buy then because I was
super broke ([http://tommy.authpad.com/the-one-year-anniversary-of-
sleepin...](http://tommy.authpad.com/the-one-year-anniversary-of-sleeping-in-
the-freezing-cold-without-power-or-heat-in-the-middle-of-a-crime-scene))

~~~
eCa
Of course, the difficulty is in picking the low point.

~~~
tomasien
Finding the bottom doesn't matter, that's impossible so don't even think about
that. Just say "the market doesn't seem to be operating rationally today, I'll
bet against it"

~~~
djloche
There's always support at 0.

------
droithomme
I'm looking forward to purchasing a Volkswagen XL1.

[http://theage.drive.com.au/motor-reviews/worlds-most-
efficie...](http://theage.drive.com.au/motor-reviews/worlds-most-efficient-
car-20130222-2ev0a.html)

Since it gets 261 MPG, I can drive across the entire United States and only
make one stop for refueling, using around 9 gallons of diesel for the whole
trip. Driving with a friend at 60mph and bringing a sack lunch, we can even
make the trip in only 38 hours since there will be no overnight recharging
stops.

And when the 5.5kWh Lithium Ion battery fails, it will only cost 1/15 the
replacement cost of a 85kWh Lithium Ion battery.

------
tokenadult
From the blog post, "Tesla stock is down almost 10% today, after its 2012
earnings report became public. Tesla missed its projections and investors
hammered the stock in response."

I guess that's what you call contrarian investing. Sometimes that works just
fine. Sometimes that doesn't work so well. People who have extra money to buy
speculative stocks can make their own call on this, I guess.

I found it interesting that there were many news reports about the Tesla
fourth quarter results call yesterday.

"Tesla 4Q net loss widens on costs for new car"

[http://www.businessweek.com/ap/2013-02-20/tesla-4q-net-
loss-...](http://www.businessweek.com/ap/2013-02-20/tesla-4q-net-loss-widens-
on-costs-for-new-car)

"As Tesla Eyes Profit, Elon Musk Wants to Punch Himself in the Face"

[http://www.businessweek.com/articles/2013-02-20/as-tesla-
eye...](http://www.businessweek.com/articles/2013-02-20/as-tesla-eyes-profit-
elon-musk-wants-to-punch-himself-in-the-face)

"Loss Widens at Electric-Car Maker"

[http://online.wsj.com/article/SB1000142412788732354920457831...](http://online.wsj.com/article/SB10001424127887323549204578316082000311770.html)

"Tesla’s Earnings Indicate Some Customer Cancellations"

[http://dealbook.nytimes.com/2013/02/20/teslas-earnings-
indic...](http://dealbook.nytimes.com/2013/02/20/teslas-earnings-indicate-
some-customer-cancellations/)

"Tesla posts revenue of $306 million, larger-than-expected loss"

[http://www.latimes.com/business/autos/la-fi-hy-autos-
tesla-2...](http://www.latimes.com/business/autos/la-fi-hy-autos-
tesla-2012-earnings-announced-20130220,0,7725.story)

So, yeah, some investors will read all that and still bet on Tesla's stock
having a rising value over their investment time frame. But customers who are
thinking about buying the car might wonder if the company has enough financial
strength, while losing money on every car it sells, to provide long-term
customer service and the promised completion of the Supercharger network, etc.
If it's your money, spend it how you like, but be sure to diversify for
maximum safety.

------
chris_mahan
I betted on Elon and bought TSLA at 16, 22, 28, and 33. When I saw the CEO of
Toyota with Elon behind the same podium, I knew he had been vetted by the best
in the business. Ref:
[http://www.zimbio.com/pictures/lh9s3JaOMRr/Gov+Arnold+Schwar...](http://www.zimbio.com/pictures/lh9s3JaOMRr/Gov+Arnold+Schwarzenegger+Tesla+Motors+Make/lVfYHyKChJZ/Elon+Musk)

------
dkroy
My first thought for this was, wow cool looking site. I then played around
with the responsive nature of it.

~~~
danielodio
What did you think? It's a new blogging platform called SETT. I'm sure @tynan
the creator would love to get your thoughts on it. - DROdio

------
BrainScraps
I'm also a Musketeer.

I think the company as a whole executes brilliantly, but I decided to allocate
a good chunk of my (measly) portfolio to TSLA as a result of Elon's track
record and vision.

I wonder if we'll soon see a prospectus for the "Musk Fund" containing only
companies that he's been involved in...

------
kirpekar
At the end of the day, you are only "betting". When you know something for
sure, I'll pay attention.

~~~
danielodio
When we know it for sure, the stock will be in a much different place. -
DROdio

------
Scaevolus
The page refreshes itself continuously. How did you even manage that?

(I block 3rd party cookies)

~~~
tynan
I created the blogging platform he's using... the redirect is supposed to
happen once to set a cookie from the platform, but apparently isn't working.
Would you mind telling me what browser/version/os you use so that I can
replicate and fix this?

~~~
davecardwell
Not the grandparent, but it does it in Google Chrome v26.0.1410.10 dev on Mac
OS X Lion v10.8.2

I have third-party cookies blocked.

~~~
tynan
Thanks for the info and sorry for the bad reading experience... looking into
it now.

------
scottschulthess
"Tesla absolutely will get to Ford's volume production numbers with this
strategy"

really? maybe eventually. we are a ways off from mass market all electric
vehicles.

------
rabbitonrails
Elon is betting on SpaceX.

------
Skoofoo
It's not hard to bet on a massively successful entrepreneur.

