(as i like to notate my thoughts on TSLA week by week, overwhelmingly this weeks notes were the exact same "pump & dump" in call buying this week as brad noted--very obvious musk did it this week given the action T/W AM which of course preceded the nothingburger Th AM and a massive jump in call buying in first 15min after )
• For a gamma squeeze, this wasn’t very effective. Prices up $20, congrats, but this wasn’t early July or 4/24 which saw $50+. Two big diffs as I see it was 1) short interest, running ~ 3.8 % of float in the prior two episodes vs ~ 2.9 now, with S3 squeeze marker at 5 (not very squeezy), and 2) call buying in prior episodes had follow through to 2MM+. clearly not happening fri AM, and if there’s no follow through day to day, you’re giving market slack to reverse. very odd / dumb if you're trying to run it up via gamma squeeze (which makes me think this isn't an ongoing operation).
Why? Why did elon send the FO into a call buying program this week? I have 3 theories (pls add to them) with a deconstruct on the 1 that could lead to higher prices (ugh):
1) Share sales are imminent (high class problem, nothing to worry about if it comes. Twitter interest pmt due)
2) Regulatory / judicial action imminent (same as above; I personally lay odds here given A) full throated embrace of trump starting in July as it pre-positions any reg/jud action as ‘politics” against him, B) the information disparity (only folks would know of it are the grand jury / judge if applicable, couple state prosecutors / regulators, TSLA defense attorneys and the atty's employer, the CEO)---elon went on a meltdown 100 post a day on X this week…reminds me of trump when he’s melting down under legal pressure, and C) regulators cannot be looking kindly at 10/10 as it will only increase the body count on existing FSD users, so acting beforehand is warranted. and elon was told its coming.
3) (worst case scenario) he wants to run up share price in advance of 10/10 robotaxi (or as brad opined, a job in trump’s admin) as higher prices are good marketing. Possible. Prob not the case as A) we’re still 5 weeks out from 10/10 and a gamma squeeze isn’t a month-long strategy, folks would get wise & run him over, B) share price was not dire at > $200 before the start. ---and if brad's right that Elon wants to run it up before forced sales in a trump admin, wouldn't you wait til after the election? maybe see if the market helps before you commit to the call buying?
Looking at next week’s DTEs, Open Int is < 300K, with a big call position at 242.5 (35k) and put position at 200K (30k). nothing to derive thus far. But if any shorts got squeezed this week, makes any future gamma squeezes that much less effective and the longer you keep beating this drum, the more everyone gets a beat on what you’re doing and starts looking to work you over.
Thanks for the great color as usual, Ryan. Regarding the stock being pumped due to imminent regulatory or judicial action, I believe that's unlikely ahead of the elections as it would look extremely political.
I'm sure they have a case ready with which to go after him, but they won't do anything until after the election. With the 10/10 Robotaxi Day and the election being far off, this leaves a potential share sale by Musk next week as the only realistic reason for all the pumping this week. He has till next Friday to sell before quarter end. Let's see what happens.
IMHO, it depends on the election results. I doubt anyone would bother to sue Musk, should Trump win (and really keep Musk as a part of the administration).
However, should Trump loose it, he would have been better of to leave the US.
looking at BM> MOSO this AM, 0dte's for the call buyers who held overnight opened down 90%. at the open. so much for scaling out early this AM.
i'm not gordon gecko (P&L proves it) but i do believe WS gets wise to games and looks to win, and this AM's dump on open sure walks & quacks like a duck. --elon keeps playing the gamma game...its just like in vegas---the longer you play, the more the odds tilt to the house.
Ryan, I am considering not to take chances and sell portion of my short to the close. With that call position, do you think, they going to ride the share price up on Monday?
I am not asking for an advice (you are right, I should have kept the first part out). I am just asking for interpretation of those option positions at the end of your comment. Your comments are great, but it sounds like Chinese to me :-).
Reading it again, it is mentioned there, that "nothing to derive thus far" is probably answer to my question :-).
i have to revise that prior point as it was made while market still open. i think we can deduce a few things
* that 9/13 OI noted above just had its delta sharply adjusted lower.
my guess: we've seen 3 MFO gamma squeezes this year (or ever):
1) right after Q1 earnings straight into the China Xi nothingburger summit
2) early July holiday week
3) this week.
in all 3, musk had a reason. 1st) defend against margin call with shares ~ 140, 2nd) prep market for selloff given robotaxi delay and 3) TBD (guesses articulated in prior message)
why did this one fail? few things come to mind:
* wall st catches on fast. musk hit everyone by surprise post Q1. congrats.
also, with 2nd: if he has an experienced option team working for him, they'd tell him in advance that week 1 in july with a mid-week holiday will have dead liquidity and would be a great odds of success in a gamma squeeze. any market maker i worked w/ would know that. but this week? no advantage per se (and M holiday isn't the same as a Th like 7/4 when trying a gamma squeeze). and they sold him calls and waited until Fri am and just ran him the F over. look at min by min charts of TSLA v SPY. not index selling post jobs. this was directed at TSLA. and traders who saw the same call flow as Q1 earnings coming in this week were prepared. crushed him on open and delta hedged down all day. bet they loaded up on deep OTM puts on thurs too knowing what they'd do fri am.
methinks w/ wall st back in the office, musk gamma squeezes are going to be much less successful than before, as noted before. wall st isnt on anyones side but wall st's.
i laid out 3 reasons why he would be trying to squeeze it higher (share sales, pending regulatory / judicial actions, and pump before robotaxi). ---i'd also add a 4th: maybe robotaxi is due for another delay (like the gamma squeeze early july).
Shorting more looks to have been a good call but thats only one day lol. I saw my face getting ripped off and covered. And then caught the PM reversal yesterday and re-shorted about 80% of my original basis. Took a small loss on what I didnt cover and lost a couple bucks of cost basis on the wash sale. Definitely not for the faint of heart. Dont know why I thought shorting this POS was a good idea lol. Cant wait for this mf'r to go to jail.
Adam Jonas said in a note that the core auto business could be loss making this year. Went extremely under the radar, no articles about it (figure that one lol), just a Sawyer Merritt post about it.
What is the rationale for Musk needing to divest if he joins the Trump administration? I don't think normal governance concepts apply to him, or rather he chooses to ignore them until he has no alternatives.
If he's dealing with all government agencies, this means he's exposed to all of their interest groups (lobbyists) as well. Any Administration official in such a position is compelled to sell all of their stock holdings. There could be a loophole where Musk could put his shares into a blind trust, but my hunch is that he knows Tesla is on its way to its demise so he'll be happy to sell at these levels.
I'm familiar enough with the emolents clause, but my point was Trump ignored it to no material ill effect so Musk will follow that model and Trump certainly won't do anything about it.
Only a third joking when I suggest that Tesla may become the sole supplier of government vehicles under a Trump administration...in the US and China.
I think Musk sees the writing on the wall at Tesla and would gladly part with his shares while working in the Trump Administration. He could blame the coming demise of Tesla on whomever he chose to run it while he's in the Administration.
It's the perfect exit strategy; he could even do a "Steve Jobs Part Deux" by returning to Tesla and reviving it after working in the Administration.
His role, assuming that Trump wins, is going to be shady and unofficial. An advisor of some sort with an undeclared power. That way, he can keep his companies, CEO roles he does not want, and make "efficiency" decisions. Bit of conflict of an interest, but that is nothing people are afraid of in government roles. Just my 2 cents of course.
I think this is describe in teh wrong way. I believe Musk, if at all, will be an advisor and not in an official role so all teh official rules for officials probably will be avoided.
Rules for Administration officials are different from Congressmen. If you're in an agency that deals with various vested interests (lobbyists) as Musk will, you're compelled to sell your stock holdings.
Musk could try to resist, but I think he knows it's the best exit strategy for him to use government service as an excuse to sell his TSLA shares at a good price. He can come back, buy it at pennies at the dollar versus where it's trading now and be seen as a savior by rebuilding it.
I have no bone in that fight but I suspect with all the things you are cited, his role will ultimately be minimal as I can’t see him giving up his role in all the companies he leads, let alone sell stock.
Who knows if Trump even wins and even if, he might not really create that commission he was talking about.
Generally, I am very much in favor to overhaul governments every so often, may be aligned with the census.
I know of several cases where companies report that the rules and laws put in place over the decades have created situation where any selection of options leads to breaking a certain set of rules.
In Germany a very promising new design for energy creation was so deeply inundated be rules, laws, and review requirements that the research team ultimately looked for VC funding and started a company in USA to realize their vision.
Just curious, when do you think that point in time will come when TSLA will be worth pennies - I would probably load up if it happens in the next 5 years.
He can't close any of his gigafactories, they're more important to him than his babies. It would be admitting in a big way that he was wrong about selling tens of millions of cars every year in perpetuity. Those gigafactories were built as part of his grandiosity, his fantasy of every car on Earth being a Tesla. It's in the name. Giga. Super-duper-extra-special, just like Elon. He's spent the last year making it very clear he'd bankrupt Tesla before he lets it be anything but his exclusive toy (for example, firing the charging-stations team -- which I think was to interfere with his having to share with the other automakers).
Being part of the so-called “biggest transformation in the automotive industry” myself, I stumbled across your critical views and comments on Tesla. As an R&D engineer, I have mainly been involved with the technical aspects of Tesla. As I am also an investor, I find it very interesting how critical you are of the business side.
I would like to add to your comments on the German plant in Grünheide and in particular its possible closure. This plant is far from being a vanity project, Elon is not simple-minded. Did you know that we have so-called short-time working in Germany? This means that if demand is too low, you can stop production for a certain period of time. Your employees receive 60 percent of their lost net wages as short-time working allowance. If they have at least one child, they receive 67 percent. All of this is paid for by the state.
Although there are rumors of about 400 layoffs (out of 12,000), they have not yet made use of this powerful tool. But they could do so at any time. It was used by many other OEMs during Covid, and in my opinion this was one of the decisive location factors and the main reason why this plant was built in Germany and not in Eastern Europe. It's the biggest hedge you can get against any uncertainty in the market.
Thanks for your views on Tesla's short-time working program in Germany. I hope it doesn't come off like I'm wishing for Tesla to close Grünheide. I'm simply watching the global demand situation for the Model Y and don't see how Tesla can avoid reducing its production capacity in order to stop further losses. Here are some key concerns:
1) At 1.75 million units of annual capacity, the Model Y makes up 62% of Tesla's global capacity.
2) The Y's old age & intensifying competition led to a 16% YoY decline in 1H global sales and
global capacity utilization of 65% (which is a low level that implies losses).
3) The Y's upcoming refresh likely won't help unless the exterior is re-modeled much more
radically than those for the Models S/X/3, all of which looked so similar to the old versions
that they soon required huge price cuts, yet still saw sales volumes decline.
Maybe the best solution would be to switch Model 3 production to Grünheide (which would require big investments for new equipment) and write down Fremont, which even Musk admits is the least-efficient plant at Tesla. But this would lead to eliminating 100% of Model S/X supply and around 250,000 units of Model 3 local capacity in the US.
It's clear that Musk (a) over-levered capacity on 2 models that make up 95% of Tesla's global sales and (b) didn't think enough about new model launches or full model changes that could offset their decline from old age.
This is what has now put Tesla in a very dangerous situation: if they can't cut capacity in China (Musk is servile to the CCP who bankrolled Giga Shanghai), where do they shutter capacity?
It comes down to either Grünheide or Fremont. In light of Tesla's declining market share in Europe, one could argue that Grünheide should be closed. But in light of the inefficiencies at Fremont, maybe that plant would be better to scrap.
My choice would be to close Fremont, switch Model 3 production to Grünheide, and discontinue the Models S/X. The question is whether Musk has the courage to pull off such a huge tactical move. He's too tied up with politics and AI.
Just curious, how could Musk defend such move (factory closure), while facing "another growth wave" which is supposed to start 1-2 years from now? Reducing capacity also means an end of the 50% growth story. Also, while running side-by-side with Trump, he cannot close an US production site and import all cars from somewhere else. Should he choose one to close, it must be then Grünheide. Just my 2 cents of course.
I love a little self-deprecation too: "Being the degenerate that I am, I shorted more Tesla this week. "
As I have written many times, I am not trading options but I think you want to be very careful shorting. I know you have a lot of experience, but it is still a risky thing to do.
You touched on so many things and at the same time not even mention AI, Cortex, Optimus, Energy, it's always hard to respond.
So I give two things to consider, one for optimism and one for perspective:
1. The YoY comparison for Europe and especially for Germany is a little misleading because for Sept 2023 was the first month without government subsidies, so everybody ordered for delivery in Aug 2023. That makes the comparison a little skewed.
2. You can look at the low capacity utilization in Gruenheide as a cause to shut it down, write it off and send all cars from Shanghai. - Or you could add a M3 production, increase capacity utilization and avoid the EU tariffs. If adding Battery production onsite as well, it could become a profit generator, especially while the competition in Europe is dialing back their own efforts.
Thanks, Axel. I believe German subsidies (unexpectedly?) ran out in December 2023, not September. Given the retooling of the Model 3's line in Shanghai in Q3 2023, it should make for very easy comps in the current Q3 in China and Europe, but it evidently hasn't in Europe.
I don't write much about Tesla's AI because there is nearly zero disclosure about it in their financial statements and I can't model out what doesn't exist (FSD is not AI). And despite its increasing weight within total profits, Tesla gives very little detail on its Energy business, so how does one forecast that business (FYI, they merely assemble battery cells from suppliers into Megapacks. That's not very value-added)?
Optimus sounds like a pipe dream right now and it's hilarious that even ARK Invest says that they see it as having very little profit impact (Tesla couldn't even perform Optimus demos at the World Robot Conference in China last month).
I checked and subsidies in Germany ended suddenly in Dec 2023, but orders were placed anticipating the end .
The other aspect that has a big impact in Germany is the crazy way new cars get into the system these days.
I recall how proud my parents were when they, for the first time could buy a new car rather than a used one.
Over the decades German employees successfully expanded the eligibility of employees for company cars to a silly level. That’s why more than 60% of new cars in Germany are bought as fleet vehicles for companies and their employees.
There are many factors why the German economy specifically is deteriorating quickly but this is one of the aspects that make it almost impossible to compare Germany to any other auto market.
By the way, you might be surprised to know that I said from the day of the announcement that putting a car plant in Germany was a huge mistake.
It should have been in Spain to be in EU and in Turkey for east Europe and Arab countries.
If I could have set it up I would have created MY and superchargers in Spain and M3 and future models and Batteries in Turkey.
I mentioned the other parts of Tesla not to include them into your options trading reflections but as a part of the long list of influencers that impact the company and shifting numbers from Auto into other parts.
Transparency is an issue, agreed but when you use measures like CAPEX and a company is spending a lot outside your focus area, I feel it is relevant.
I know options is short term and I am on the extreme other end, looking towards 2030.
Are you nuts?! Elon is above the law. Elon will not “have to” sell in order to join the Trump administration. Of course he will likely CHOOSE to sell under the guise of “have to” because he will want to get out before his ponzi crumbles. Which leads to similar results as if he actually had to.
Given all the various government agencies he'll be dealing with, I think he'll have no choice but to sell. But you're probably right, he'll be happy to say, "sorry, it's the law" and get out before it goes to $0.
US would definitely need the republican administration for few seasons. However it seems to me, that even republicans may consider voting for democrats this year, because Trump lead government may be more damaging for them than Kamala.
Would a Harris win (thereby keeping Musk at Tesla) not be received well by the fanbois/shareholders and serve as a tailwind to shares? I share your thoughts that he has some legal issues but those wouldn't come to ahead until after she would be sworn in.
Not sure how it works in other states in EU, but "not paying an attention" while driving is actually an offense. Technically, anyone spotted using FSD could loose the license. While driving, you cannot have a phone in your hands, reading emails is out of question. So in a case of an accident, where FSD is involved, the insurance may even refuse the damage due to the gross negligence of the driver.
I am bit skeptical, that FSD could be allowed in EU, prior solving hurdle with insurance companies, local laws. One cannot throw a HW3 computer to the jail for killing someone on the street. Musk does not have the EU commission on its payroll (I hope), so this idea will not get the preferential treatment it gets in the US.
Just got kicked off Instagram and Threads for 180 days. No reason given. I started an appeal. They asked me for my gmail account, then my phone number, and then when they asked for a photo of my face, I thought, "I've been hacked." I suspect Musk or Russian bots in behalf of Donald Trump.
Anyway, be careful over there. I am refusing to send Zuck my photo. He's already got my phone and email. accounts. Something ain't right, although, the prompts all come from the Instagram website. But this seems like over-reach to me when trying to argue against a suspension for 180 days and not knowing why I was suspended.
I post over there as Cat9. I think I'm going to enjoy taking up residence on substack. Better quality discussions, and I prefer the long form posts from sharp minds, such as yours. See you around here. Keep giving them hell on Threads.
Keep these weekly updates coming. Love the charts and graphs.
Ah, interesting that they pull this stuff 2 months before Election Day. Definitely don't give them any biometrics or bank account details. And thanks for following my Substack!
I read the seekingalpha article that you shared about the call option contracts who appears to drive up the stock. Given the price of the contracts (that the article seems to evaluate) and the fact that they are sold before expiration, is there any way to assess (even broadly) if they make any sense financially (i.e. If they are sold at a loss, there is no way that Musk is not behind the scheme) ? And also, if Musk is confirmed being behind the pump, would it be illegal ?
no way to know his P&L on it, but Fri's action (opened 233 and dropped to 227 in ~ 3min, destroying those holding calls overnight), someone got killed. and it wasn't index selling, SPY was flat for 20min, by which point TSLA was 225ish.
god bless those boy scouts over on WS for wrecking the call buyers.
to my knowledge, not illegal. sure as hell should be. otherwise any unscrupulous company with a heavy cash position can gamma squeeze itself into an artificially supported stock price (until the WS boy scouts come to the rescue & collect the premia).
Thanks Ryan for the answer. In the seekingalpha article, it's assessed that "For a premium of about $6 million, the option trades triggered a purchase of about $200 million worth of shares, a 34 to 1 leverage."
My point is (If the article is correct) that it's make sense for a very (very) large shareholder to lose money on the contract calls (I am pretty sure that those contracts are not even sold, and simply not executed), losts that are largely compensated by the increasing of the share price in the perspective to sell the stock or to use it as collateral for borrowing money. My guess is that Musk needs cash for twitter and maybe for spacex (a loosing money huge blackbox in my opinion).
thats the plan. i saw some doc on threads that purported to be the MFO Charter and said they were authorized to trade puts & calls. so long calls to boost share price (win) or long puts to protect FO / Musk on downside (+P on shares yet to vest would be sensible, but NOT +Cs). ---but importantly charter had nothing on delta hedging of long call positions as hippocratic oath (do no harm) comes in (by not shorting tesla stock as a delta hedge vs + C position). ---thats the rub, all others +Cs will delta hedge if mkt reverses (like Fri), except his FO who are not shorting TSLA under any circumstance, and they got wiped for any capital held overnight Th into Fri.
you dont do this shit in your own company stock without a reason.
great stuff brad as always.
random thoughts in case anyone is interested:
(as i like to notate my thoughts on TSLA week by week, overwhelmingly this weeks notes were the exact same "pump & dump" in call buying this week as brad noted--very obvious musk did it this week given the action T/W AM which of course preceded the nothingburger Th AM and a massive jump in call buying in first 15min after )
• For a gamma squeeze, this wasn’t very effective. Prices up $20, congrats, but this wasn’t early July or 4/24 which saw $50+. Two big diffs as I see it was 1) short interest, running ~ 3.8 % of float in the prior two episodes vs ~ 2.9 now, with S3 squeeze marker at 5 (not very squeezy), and 2) call buying in prior episodes had follow through to 2MM+. clearly not happening fri AM, and if there’s no follow through day to day, you’re giving market slack to reverse. very odd / dumb if you're trying to run it up via gamma squeeze (which makes me think this isn't an ongoing operation).
Why? Why did elon send the FO into a call buying program this week? I have 3 theories (pls add to them) with a deconstruct on the 1 that could lead to higher prices (ugh):
1) Share sales are imminent (high class problem, nothing to worry about if it comes. Twitter interest pmt due)
2) Regulatory / judicial action imminent (same as above; I personally lay odds here given A) full throated embrace of trump starting in July as it pre-positions any reg/jud action as ‘politics” against him, B) the information disparity (only folks would know of it are the grand jury / judge if applicable, couple state prosecutors / regulators, TSLA defense attorneys and the atty's employer, the CEO)---elon went on a meltdown 100 post a day on X this week…reminds me of trump when he’s melting down under legal pressure, and C) regulators cannot be looking kindly at 10/10 as it will only increase the body count on existing FSD users, so acting beforehand is warranted. and elon was told its coming.
3) (worst case scenario) he wants to run up share price in advance of 10/10 robotaxi (or as brad opined, a job in trump’s admin) as higher prices are good marketing. Possible. Prob not the case as A) we’re still 5 weeks out from 10/10 and a gamma squeeze isn’t a month-long strategy, folks would get wise & run him over, B) share price was not dire at > $200 before the start. ---and if brad's right that Elon wants to run it up before forced sales in a trump admin, wouldn't you wait til after the election? maybe see if the market helps before you commit to the call buying?
Looking at next week’s DTEs, Open Int is < 300K, with a big call position at 242.5 (35k) and put position at 200K (30k). nothing to derive thus far. But if any shorts got squeezed this week, makes any future gamma squeezes that much less effective and the longer you keep beating this drum, the more everyone gets a beat on what you’re doing and starts looking to work you over.
Thanks for the great color as usual, Ryan. Regarding the stock being pumped due to imminent regulatory or judicial action, I believe that's unlikely ahead of the elections as it would look extremely political.
I'm sure they have a case ready with which to go after him, but they won't do anything until after the election. With the 10/10 Robotaxi Day and the election being far off, this leaves a potential share sale by Musk next week as the only realistic reason for all the pumping this week. He has till next Friday to sell before quarter end. Let's see what happens.
IMHO, it depends on the election results. I doubt anyone would bother to sue Musk, should Trump win (and really keep Musk as a part of the administration).
However, should Trump loose it, he would have been better of to leave the US.
I look forward to brad's posts not just for the commentary on tesla but also for your long comments on options
thx.
looking at BM> MOSO this AM, 0dte's for the call buyers who held overnight opened down 90%. at the open. so much for scaling out early this AM.
i'm not gordon gecko (P&L proves it) but i do believe WS gets wise to games and looks to win, and this AM's dump on open sure walks & quacks like a duck. --elon keeps playing the gamma game...its just like in vegas---the longer you play, the more the odds tilt to the house.
Ryan, I am considering not to take chances and sell portion of my short to the close. With that call position, do you think, they going to ride the share price up on Monday?
You manage your own book. Sorry, I patently refuse to advise people what to do
This board / Brad is very helpful in shoring up confidence in the end game , helps ride out the intranet vol like tu-th this week
Everyone is diff and no advice is universal
I am not asking for an advice (you are right, I should have kept the first part out). I am just asking for interpretation of those option positions at the end of your comment. Your comments are great, but it sounds like Chinese to me :-).
Reading it again, it is mentioned there, that "nothing to derive thus far" is probably answer to my question :-).
i have to revise that prior point as it was made while market still open. i think we can deduce a few things
* that 9/13 OI noted above just had its delta sharply adjusted lower.
my guess: we've seen 3 MFO gamma squeezes this year (or ever):
1) right after Q1 earnings straight into the China Xi nothingburger summit
2) early July holiday week
3) this week.
in all 3, musk had a reason. 1st) defend against margin call with shares ~ 140, 2nd) prep market for selloff given robotaxi delay and 3) TBD (guesses articulated in prior message)
why did this one fail? few things come to mind:
* wall st catches on fast. musk hit everyone by surprise post Q1. congrats.
also, with 2nd: if he has an experienced option team working for him, they'd tell him in advance that week 1 in july with a mid-week holiday will have dead liquidity and would be a great odds of success in a gamma squeeze. any market maker i worked w/ would know that. but this week? no advantage per se (and M holiday isn't the same as a Th like 7/4 when trying a gamma squeeze). and they sold him calls and waited until Fri am and just ran him the F over. look at min by min charts of TSLA v SPY. not index selling post jobs. this was directed at TSLA. and traders who saw the same call flow as Q1 earnings coming in this week were prepared. crushed him on open and delta hedged down all day. bet they loaded up on deep OTM puts on thurs too knowing what they'd do fri am.
methinks w/ wall st back in the office, musk gamma squeezes are going to be much less successful than before, as noted before. wall st isnt on anyones side but wall st's.
Thanks for your reply. Without the doubts, this week is going to be another wild TSLA ride.
Ryan, just curious, do you have any indication of Musk selling shares? It looks like the assumption, that he will need cash were not precise, IMHO.
pure speculation on my part.
but why try gamma squeezing market higher ?
i laid out 3 reasons why he would be trying to squeeze it higher (share sales, pending regulatory / judicial actions, and pump before robotaxi). ---i'd also add a 4th: maybe robotaxi is due for another delay (like the gamma squeeze early july).
again, pure speculation on my part.
Shorting more looks to have been a good call but thats only one day lol. I saw my face getting ripped off and covered. And then caught the PM reversal yesterday and re-shorted about 80% of my original basis. Took a small loss on what I didnt cover and lost a couple bucks of cost basis on the wash sale. Definitely not for the faint of heart. Dont know why I thought shorting this POS was a good idea lol. Cant wait for this mf'r to go to jail.
Adam Jonas said in a note that the core auto business could be loss making this year. Went extremely under the radar, no articles about it (figure that one lol), just a Sawyer Merritt post about it.
Damn, you’re more of a degenerate than me lol.
Yeah, saw that comment from Jonas. He’s being honest but using all of his team to find alternative things to pump $TSLA on. Sad.
What is the rationale for Musk needing to divest if he joins the Trump administration? I don't think normal governance concepts apply to him, or rather he chooses to ignore them until he has no alternatives.
If he's dealing with all government agencies, this means he's exposed to all of their interest groups (lobbyists) as well. Any Administration official in such a position is compelled to sell all of their stock holdings. There could be a loophole where Musk could put his shares into a blind trust, but my hunch is that he knows Tesla is on its way to its demise so he'll be happy to sell at these levels.
I'm familiar enough with the emolents clause, but my point was Trump ignored it to no material ill effect so Musk will follow that model and Trump certainly won't do anything about it.
Only a third joking when I suggest that Tesla may become the sole supplier of government vehicles under a Trump administration...in the US and China.
I think Musk sees the writing on the wall at Tesla and would gladly part with his shares while working in the Trump Administration. He could blame the coming demise of Tesla on whomever he chose to run it while he's in the Administration.
It's the perfect exit strategy; he could even do a "Steve Jobs Part Deux" by returning to Tesla and reviving it after working in the Administration.
I still very much doubt, Musk is going to vacant Tesla for a government job. There are lot of skeletons hidden. Naming new CEO could expose them.
Yeah, this. Trump never actually divested, just sham theatrics. I doubt Musk would divest if it came to that.
His role, assuming that Trump wins, is going to be shady and unofficial. An advisor of some sort with an undeclared power. That way, he can keep his companies, CEO roles he does not want, and make "efficiency" decisions. Bit of conflict of an interest, but that is nothing people are afraid of in government roles. Just my 2 cents of course.
I think this is describe in teh wrong way. I believe Musk, if at all, will be an advisor and not in an official role so all teh official rules for officials probably will be avoided.
Good point, emolents may not legally apply to an advisor role. .
But even if it does, it will almost certainly be ignored.
Yep, agreed. Nancy made a fortune ignoring pretty much everything that could have lessened her profits - talk abut insider trading…
Rules for Administration officials are different from Congressmen. If you're in an agency that deals with various vested interests (lobbyists) as Musk will, you're compelled to sell your stock holdings.
Musk could try to resist, but I think he knows it's the best exit strategy for him to use government service as an excuse to sell his TSLA shares at a good price. He can come back, buy it at pennies at the dollar versus where it's trading now and be seen as a savior by rebuilding it.
He could, you are correct.
I have no bone in that fight but I suspect with all the things you are cited, his role will ultimately be minimal as I can’t see him giving up his role in all the companies he leads, let alone sell stock.
Who knows if Trump even wins and even if, he might not really create that commission he was talking about.
Generally, I am very much in favor to overhaul governments every so often, may be aligned with the census.
I know of several cases where companies report that the rules and laws put in place over the decades have created situation where any selection of options leads to breaking a certain set of rules.
In Germany a very promising new design for energy creation was so deeply inundated be rules, laws, and review requirements that the research team ultimately looked for VC funding and started a company in USA to realize their vision.
Just curious, when do you think that point in time will come when TSLA will be worth pennies - I would probably load up if it happens in the next 5 years.
He can't close any of his gigafactories, they're more important to him than his babies. It would be admitting in a big way that he was wrong about selling tens of millions of cars every year in perpetuity. Those gigafactories were built as part of his grandiosity, his fantasy of every car on Earth being a Tesla. It's in the name. Giga. Super-duper-extra-special, just like Elon. He's spent the last year making it very clear he'd bankrupt Tesla before he lets it be anything but his exclusive toy (for example, firing the charging-stations team -- which I think was to interfere with his having to share with the other automakers).
Being part of the so-called “biggest transformation in the automotive industry” myself, I stumbled across your critical views and comments on Tesla. As an R&D engineer, I have mainly been involved with the technical aspects of Tesla. As I am also an investor, I find it very interesting how critical you are of the business side.
I would like to add to your comments on the German plant in Grünheide and in particular its possible closure. This plant is far from being a vanity project, Elon is not simple-minded. Did you know that we have so-called short-time working in Germany? This means that if demand is too low, you can stop production for a certain period of time. Your employees receive 60 percent of their lost net wages as short-time working allowance. If they have at least one child, they receive 67 percent. All of this is paid for by the state.
Although there are rumors of about 400 layoffs (out of 12,000), they have not yet made use of this powerful tool. But they could do so at any time. It was used by many other OEMs during Covid, and in my opinion this was one of the decisive location factors and the main reason why this plant was built in Germany and not in Eastern Europe. It's the biggest hedge you can get against any uncertainty in the market.
Best regards, Christian
Hi Christian,
Thanks for your views on Tesla's short-time working program in Germany. I hope it doesn't come off like I'm wishing for Tesla to close Grünheide. I'm simply watching the global demand situation for the Model Y and don't see how Tesla can avoid reducing its production capacity in order to stop further losses. Here are some key concerns:
1) At 1.75 million units of annual capacity, the Model Y makes up 62% of Tesla's global capacity.
2) The Y's old age & intensifying competition led to a 16% YoY decline in 1H global sales and
global capacity utilization of 65% (which is a low level that implies losses).
3) The Y's upcoming refresh likely won't help unless the exterior is re-modeled much more
radically than those for the Models S/X/3, all of which looked so similar to the old versions
that they soon required huge price cuts, yet still saw sales volumes decline.
Maybe the best solution would be to switch Model 3 production to Grünheide (which would require big investments for new equipment) and write down Fremont, which even Musk admits is the least-efficient plant at Tesla. But this would lead to eliminating 100% of Model S/X supply and around 250,000 units of Model 3 local capacity in the US.
It's clear that Musk (a) over-levered capacity on 2 models that make up 95% of Tesla's global sales and (b) didn't think enough about new model launches or full model changes that could offset their decline from old age.
This is what has now put Tesla in a very dangerous situation: if they can't cut capacity in China (Musk is servile to the CCP who bankrolled Giga Shanghai), where do they shutter capacity?
It comes down to either Grünheide or Fremont. In light of Tesla's declining market share in Europe, one could argue that Grünheide should be closed. But in light of the inefficiencies at Fremont, maybe that plant would be better to scrap.
My choice would be to close Fremont, switch Model 3 production to Grünheide, and discontinue the Models S/X. The question is whether Musk has the courage to pull off such a huge tactical move. He's too tied up with politics and AI.
Kind regards,
Brad
Just curious, how could Musk defend such move (factory closure), while facing "another growth wave" which is supposed to start 1-2 years from now? Reducing capacity also means an end of the 50% growth story. Also, while running side-by-side with Trump, he cannot close an US production site and import all cars from somewhere else. Should he choose one to close, it must be then Grünheide. Just my 2 cents of course.
Great post again, as always Brad.
I love a little self-deprecation too: "Being the degenerate that I am, I shorted more Tesla this week. "
As I have written many times, I am not trading options but I think you want to be very careful shorting. I know you have a lot of experience, but it is still a risky thing to do.
You touched on so many things and at the same time not even mention AI, Cortex, Optimus, Energy, it's always hard to respond.
So I give two things to consider, one for optimism and one for perspective:
1. The YoY comparison for Europe and especially for Germany is a little misleading because for Sept 2023 was the first month without government subsidies, so everybody ordered for delivery in Aug 2023. That makes the comparison a little skewed.
2. You can look at the low capacity utilization in Gruenheide as a cause to shut it down, write it off and send all cars from Shanghai. - Or you could add a M3 production, increase capacity utilization and avoid the EU tariffs. If adding Battery production onsite as well, it could become a profit generator, especially while the competition in Europe is dialing back their own efforts.
Looking forward to next week
Thanks, Axel. I believe German subsidies (unexpectedly?) ran out in December 2023, not September. Given the retooling of the Model 3's line in Shanghai in Q3 2023, it should make for very easy comps in the current Q3 in China and Europe, but it evidently hasn't in Europe.
I don't write much about Tesla's AI because there is nearly zero disclosure about it in their financial statements and I can't model out what doesn't exist (FSD is not AI). And despite its increasing weight within total profits, Tesla gives very little detail on its Energy business, so how does one forecast that business (FYI, they merely assemble battery cells from suppliers into Megapacks. That's not very value-added)?
Optimus sounds like a pipe dream right now and it's hilarious that even ARK Invest says that they see it as having very little profit impact (Tesla couldn't even perform Optimus demos at the World Robot Conference in China last month).
Hi Brad
I checked and subsidies in Germany ended suddenly in Dec 2023, but orders were placed anticipating the end .
The other aspect that has a big impact in Germany is the crazy way new cars get into the system these days.
I recall how proud my parents were when they, for the first time could buy a new car rather than a used one.
Over the decades German employees successfully expanded the eligibility of employees for company cars to a silly level. That’s why more than 60% of new cars in Germany are bought as fleet vehicles for companies and their employees.
There are many factors why the German economy specifically is deteriorating quickly but this is one of the aspects that make it almost impossible to compare Germany to any other auto market.
By the way, you might be surprised to know that I said from the day of the announcement that putting a car plant in Germany was a huge mistake.
It should have been in Spain to be in EU and in Turkey for east Europe and Arab countries.
If I could have set it up I would have created MY and superchargers in Spain and M3 and future models and Batteries in Turkey.
I mentioned the other parts of Tesla not to include them into your options trading reflections but as a part of the long list of influencers that impact the company and shifting numbers from Auto into other parts.
Transparency is an issue, agreed but when you use measures like CAPEX and a company is spending a lot outside your focus area, I feel it is relevant.
I know options is short term and I am on the extreme other end, looking towards 2030.
Are you nuts?! Elon is above the law. Elon will not “have to” sell in order to join the Trump administration. Of course he will likely CHOOSE to sell under the guise of “have to” because he will want to get out before his ponzi crumbles. Which leads to similar results as if he actually had to.
Given all the various government agencies he'll be dealing with, I think he'll have no choice but to sell. But you're probably right, he'll be happy to say, "sorry, it's the law" and get out before it goes to $0.
US would definitely need the republican administration for few seasons. However it seems to me, that even republicans may consider voting for democrats this year, because Trump lead government may be more damaging for them than Kamala.
Would a Harris win (thereby keeping Musk at Tesla) not be received well by the fanbois/shareholders and serve as a tailwind to shares? I share your thoughts that he has some legal issues but those wouldn't come to ahead until after she would be sworn in.
Not sure how it works in other states in EU, but "not paying an attention" while driving is actually an offense. Technically, anyone spotted using FSD could loose the license. While driving, you cannot have a phone in your hands, reading emails is out of question. So in a case of an accident, where FSD is involved, the insurance may even refuse the damage due to the gross negligence of the driver.
I am bit skeptical, that FSD could be allowed in EU, prior solving hurdle with insurance companies, local laws. One cannot throw a HW3 computer to the jail for killing someone on the street. Musk does not have the EU commission on its payroll (I hope), so this idea will not get the preferential treatment it gets in the US.
Hey man, I love this weekly lookback.
Just got kicked off Instagram and Threads for 180 days. No reason given. I started an appeal. They asked me for my gmail account, then my phone number, and then when they asked for a photo of my face, I thought, "I've been hacked." I suspect Musk or Russian bots in behalf of Donald Trump.
Anyway, be careful over there. I am refusing to send Zuck my photo. He's already got my phone and email. accounts. Something ain't right, although, the prompts all come from the Instagram website. But this seems like over-reach to me when trying to argue against a suspension for 180 days and not knowing why I was suspended.
I post over there as Cat9. I think I'm going to enjoy taking up residence on substack. Better quality discussions, and I prefer the long form posts from sharp minds, such as yours. See you around here. Keep giving them hell on Threads.
Keep these weekly updates coming. Love the charts and graphs.
Ah, interesting that they pull this stuff 2 months before Election Day. Definitely don't give them any biometrics or bank account details. And thanks for following my Substack!
I read the seekingalpha article that you shared about the call option contracts who appears to drive up the stock. Given the price of the contracts (that the article seems to evaluate) and the fact that they are sold before expiration, is there any way to assess (even broadly) if they make any sense financially (i.e. If they are sold at a loss, there is no way that Musk is not behind the scheme) ? And also, if Musk is confirmed being behind the pump, would it be illegal ?
no way to know his P&L on it, but Fri's action (opened 233 and dropped to 227 in ~ 3min, destroying those holding calls overnight), someone got killed. and it wasn't index selling, SPY was flat for 20min, by which point TSLA was 225ish.
god bless those boy scouts over on WS for wrecking the call buyers.
to my knowledge, not illegal. sure as hell should be. otherwise any unscrupulous company with a heavy cash position can gamma squeeze itself into an artificially supported stock price (until the WS boy scouts come to the rescue & collect the premia).
Thanks Ryan for the answer. In the seekingalpha article, it's assessed that "For a premium of about $6 million, the option trades triggered a purchase of about $200 million worth of shares, a 34 to 1 leverage."
My point is (If the article is correct) that it's make sense for a very (very) large shareholder to lose money on the contract calls (I am pretty sure that those contracts are not even sold, and simply not executed), losts that are largely compensated by the increasing of the share price in the perspective to sell the stock or to use it as collateral for borrowing money. My guess is that Musk needs cash for twitter and maybe for spacex (a loosing money huge blackbox in my opinion).
thats the plan. i saw some doc on threads that purported to be the MFO Charter and said they were authorized to trade puts & calls. so long calls to boost share price (win) or long puts to protect FO / Musk on downside (+P on shares yet to vest would be sensible, but NOT +Cs). ---but importantly charter had nothing on delta hedging of long call positions as hippocratic oath (do no harm) comes in (by not shorting tesla stock as a delta hedge vs + C position). ---thats the rub, all others +Cs will delta hedge if mkt reverses (like Fri), except his FO who are not shorting TSLA under any circumstance, and they got wiped for any capital held overnight Th into Fri.
you dont do this shit in your own company stock without a reason.
A hat tip to your cajones on increasing your fade of TSLA.
That's rich about the 'Government Efficiency Commission'.