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An easy way to pay for your new Tesla... buy stock

The stock dropped yesterday for no apparent reason. Now is the time to buy.
There is an inordinate number of people 'shorting' the stock* and when Tesla announces deliveries and production numbers the stock will jump. This will cause what is called a 'short-squeeze' and the stock will rise further. Then we'll get the subliminal celebrity-actual-daily-driver endorsements (like the Prius did).
I think we will easily break $40-42 (up $7) by end of January, $46-50 range by summer and once Model X starts getting reviews the sky's the limit.
I plan to buy enough stock to allow me to pay for the car in full within the first year of owning the vehicle. Now that's what I call car of the year!

* Clearly they haven't actually driven the car...

+1....Vawikus

The market is not a strictly zero-sum game. It may be a negative or positive-sum game over any given stretch. Your gains may be "opportunity losses" rather than cash losses for someone else. Or everybody may be losing in a down market, or gaining in an up market. Some more at the "expense" of others' missed gains. Or, of course, actual gains at the expense of others' actual losses. Almost all combos are possible. The brokers really just care about volume, as they get a little slice on both sides of each trade.

A recent paper and study found that "bubbles" were inevitable; indeed, they are the essence of all market activity. It's just that some are bigger than others!

I think some people are taking me too literally. Stock is always risky for sure, but can be fun.

Have I purchased Tesla, sure thing. I always buy strong brands who create products with pride to a loyal following (Apple, Lululemon, Tesla, etc).

Of course what I'm saying (for those who can't seem to read between the lines) is that I really like what I see.
- innovative product
- positive feedback from people who have the product
- ability to re-engineer quickly
- willingness to go above and beyond the call for service and delivery
- change the business model (unions, dealer network, etc)

These just read as very strong signs to me.

The only negative I've found to date is that when I went by the Toronto service center mid afternoon todayy it was dark and closed. I can only hope they are all out delivering vehicles...

Anyway, follow your own signs, I follow mine and so far.. so good.

Jbunn, every dollar you make comes at the expense of someone that lost one. Wow, I do not think you wanted to say that.... In 1983 the market was at 809. Well you know

I agree with Mel, in order to make money with stocks doesn't automatically translate that somebody else just lost money. It's more a expectation game than actual value game. Anybody seen "Sneakers" (the one with Robert Redford, not the other one)?

Agreed - I bought Apple at $70 just before the iPhone announcement in 2007. Tesla now looks like Apple did back then -- high promise with a great product launch from an existing company and an exciting pipeline into related but new markets (e.g. Model S:Model X or BlueStar::iPhone:iPad).

I think there is good potential in the next year for a shift in perception and upswell of less informed investors than those of us in this forum. Which stock will everyone want 12 months from now? When 20,000 Model Ss are on the road? TLSA.

Operations is the primary risk I see, but the biggest risk in any endeavor is the team. I expect that based on evidence at SpaceX and Tesla to date, over the next 5-10 years Tesla will get strong at operations.

I should be more specific. Im refering to day trading here, or working the short period churn. Thi is different than real value in my mind.

jbunn,

I was writing the below when you replied and clarified your earlier comment, so less relevant now but I will post anyway :)

*******

I agree with all of your other points (other posts included), but have to make an exception for your comment about "zero-sum". I think you're correct in the cases of active trading or trading in derivatives, but I disagree for the case of long-term investing in stocks.

Some companies produce worthwhile products that increase the sum total of wealth in the world => their output is worth more than the sum of inputs. In supporting such companies as investors, we can make a profit without hurting other people (financially or otherwise).

Note that I say "can", as there are plenty of companies and industries that hurt other people in their pursuit of wealth (slave-labor, war industries, corruption support services... etc).

And then there's derivatives trading, which is ALWAYS a zero-sum game (or "negative-sum" if you deduct trading fees). Every time somebody makes a dollar in the derivatives market, somebody else has lost that dollar. Every time a bank needs bailing out, having lost hundreds of billions on a derivatives trade, there's some happy investor(s) and/or bank(s) somewhere with positions equal and opposite.

This is my understanding of the big picture anyway. I've been investing in stocks for about 15 years, but my experience with derivatives has been mostly as an observer.

And yes, I'm long TSLA :)

Plus there are always "wildcards" to consider..

http://www.torquenews.com/1075/daimler-changes-tesla-board-member-shift-...

Carl,

Well said. Obviously, when the Bezerkistan prime minister passes solemn gas through his waffle bottom chair, companies round the world do not lose 5% of their real value. : )

The short squeeze has started!
Those pessimists (who haven't driven an MS) will all bail out or double up soon...

The market is zero sum.
Mel, if you sold me the market in 1983 at 809 and I still own it, I gained, you lost=zero sum.

If someone sells me TSLA at 38 later today and I hold until it reaches 100, I gained, they lose.

I am not buying at 38!

I love the idea of using stock gains to buy an ecar.

@RNB - it isn't entirely zero-sum, because companies go bust and new ones start up, plus additional stock offerings dilute existing stockholders for the benefit of the companies.

Futures contracts are zero sum, because for every long, there must be an offsetting short. Just like betting, for every winner there must be a loser. Not hard to understand why trading commodities is considered gambling!

The stock market is fundamentally different. Companies sell stock to the public, invest the proceeds in a Tesla factory, for example, the factory makes products, sells them at a profit, Now the company is worth more (hopefully) than the initial capital raised. Over the long term as the US and world economy grows, wealth is created and the value of the world stock market reflects that.

It is NOT a zero sum game.

Or the company could have kept the stock in house, not gone public, kept all profits and ownership benefits for themselves. If Tesla goes to 100, they lost on all the profit and stock owners gain.

It is zero sum.

Aren't futures negative sum due to transaction costs and risk premiums?

Free Tesla plan:

buy 50 bullish Call Spreads Jan 2014 30-40
sell 25 puts at 20 to fund half of call spread.

sell short term calls covered by spread to fund other half. by 2014 spread is free and you keep the money from puts sold. profit 60k. almost free tesla!!

Risk reduced by options, worst case you buy shares at below 20!

I hear your arguments but I think most are missing the point... Tesla is a disruptive stock. Period.

Disruptive in the luxury market is where you want to be, especially in a huge market like auto. Think Apple at early iPhone launch, or Lululemon going after yoga target... this is much bigger.

RNB,

Futures are a zero sum game when you consider all the players. For every broker that takes a commission, there is the trader who pays it. The books must be balanced.

Your stock analogy is wrong however.

Take your example with round numbers thrown in for purposes of making the point clear.

Suppose Elon sells all of the company at $10 per share and realizes one billion dollars. A few years later the stock is worth $100 a share, or 10 billion dollars and the buyers have made nine billion dollars. If it was a zero sum game, Elon would be 8 billion in the hole because he would have lost the one billion he initially made plus eight billion more. i.e. buyers make 9 billion, Elon must lose 9 billion.

The company is worth 10 billion dollars, not because someone else lost 10 billion, but because the company created value.

GTC;
correct. Considering an "opportunity loss" as cash loss is false. E.g.; if a stock gains $10 from a start point, but you sold after $5 gain to someone who also gains $5 by selling at the $10 point, you both gained. You just split the proceeds. On the fundamentals, if the P/E of the company remained constant, the gains are a sharing, via shares, of the improved valuation of the firm -- which is an increase in the size of the pie, not a redistribution of fixed size/value/worth.

RNB,

I think you are confusing the act of "not making money", with the quite different act of "losing money". For example, I would much rather have $100k and not make another $100k, than have $100k and lose it (in a hypothetical situation where those are the only two alternatives).

Surely you agree that the two cases are not the same?

Furthermore, in the example you give, had Tesla not gone public then it would have most likely never had a chance of going to 100 and so you can't even say that the owners miss out in such a case on the profit of the share they sold. More likely our beloved company (assuming we're all shareholders here) would have gone bust and the original owners would have lost their starting capital. Compared to that alternative, we are all winners.

You are correct that futures (and other derivatives) are negative sum. The trades themselves are always zero-sum and then you have to subtract trading fees and interest cost (if traded on margin). I don't think the risk premium can be "deducted" though, as this is built into the price the derivative is traded at... if one side charges the premium and the other party pays it, then it's just a part of the zero-sum.

Thanks for challenging my understanding and making me think :)

Carl, that first paragraph sounds like Nassim Taleb. Well done.

In Tesla, is it not true that for every dollar spent buying into the company the same amount is taken out of the company? Zero sum!

You sell to me now for 37? I pay 37, you gain 37. I hold to 100 and sell back to you? I gain 100, you pay out 100. Zero sum.

Myths

There are several false notions about whether the stock market is a zero-sum game or not. I searched for the best arguments against this point, but there really aren't any. Different commentators argue different (sometimes contradictory) versions of these three points. I got these from The Motley Fool (the "fool" part of his name is accurate, judging from his analysis), who presents them with the least fluff.
"Zero-sum requires a fixed sum." This is easily seen to be false in the poker game. The pot that the winner takes can be any size, from slightly more than the players' antes, up to the total wallet of some player plus comparable bets from all the other players still in the game. In a Ponzi scheme the total pot keeps growing until you run out of players.

Some people try to argue that the value of the stocks reflects the net worth of the underlying companies -- which is often correlated -- while ignoring the fact that none of that stock price ever gets back into (nor out of) the company's bottom line. Other commentators agree that there is no connection while still arguing that it is not a zero-sum game. The fact is, the company profitability may go up or down, but the stock is still sold for whatever the next investor is willing to pay for it. The company net worth may figure in the buyer's thinking, but the money comes out of the investor's pocket, not the corporate bank account.

"The stock market creates wealth." This is obviously false. Unlike Social Security, no dollar ever comes out of the market into an investor's pocket that didn't go into the market from another investor's pocket. The underlying companies whose stock is being traded can create wealth, but none of that wealth ever shows up in the stock market -- unless the company buys back its own stock and goes private. As I pointed out above, this is a rare event. All the other transactions just move money from one investor to another. No wealth is created nor destroyed in the process. Except brokerage fees.

"Total market capitalization increases." This may be true, but it has nothing to do with whether it is a zero-sum game or not. That's like saying poker is not a zero-sum game because as the evening wears on there are more tables in the saloon playing poker, and the total of all the pots on all the tables is increasing. True, the slice through one instant of time, across all corporate stocks listed in the market might have a market capitalization greater than the last time you looked, but each company is a zero-sum game, and the sum of many zero-sum games is still a zero-sum game. The size of the pot on the table during one hand is irrelevant to the question of whether the winnings of the winners equals the losses of the losers.

In economic theory (this mainly applies to stocks), a zero-sum game is a mathematical representation of a situation in which a participant’s gain or loss is exactly balanced by the losses or gains of the other participant(s). If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero.

Good luck Carl

RNB,

Such a long post, so little valid info.

OK, the stock market doesn't create wealth, it is a mechanism for valuing the wealth created by companies like Tesla.

Stock market a zero sum game? Then how can Elon sell part of his company to the public which makes money, and he is making money too? If it was a zero sum game he would lose a dollar for every dollar the public makes.

enough said. ( I hope)

GTC, Brian H, Carl, +1

RNB, the key is that the value of Tesla as a whole increases as it becomes a capable entity that can convert aluminum, plastic, stock batteries, and circuit boards into something of greater value. Initially, there is great risk and the true value of the company is correspondingly uncertain. As Tesla reduces risk and succeeds in its goals, the company intrinsically has greater value. Divide by the number of shares and each share has greater value. That's why people are willing to pay a higher price per share -- they are buying a share in a more valuable company.

Recommended Reading: Graham and Dodd, Security Analysis. Warren Buffet has been particularly successful in this style of investing. He would not be the wealthy man he is today if the companies he invested in did not grow in value.

"Recommended Reading: Graham and Dodd, Security Analysis. Warren Buffet has been particularly successful in this style of investing. He would not be the wealthy man he is today if the companies he invested in did not grow in value."

+1 Wayne

Buffet made his money the old fashion way. Buy & Hold good companies. (And buy more when everyone is fearful.)

It is false to equate buying a share with a stake in a poker pot. If the company leverages the funds it got from its IPO to go from $200m to $10bn valuation, with shares rising in lockstep, who got "taken" for the difference? The market didn't create the value, but it reflects it.

Share prices at any moment reflect expectations, but they are based on results and are eventually fulfilled or disappointed. As with any venture carrying risk.

Here's another simple way to invest with limited risk...

Tesla is a stock that is an ideal candidate for a new covered call today. Buying the stock for $36.00 while simultaneously selling the March $36.00 call will result in a new position with a target return of 5.4 %. Based on recent prices, this position will cost about $34.15, which is also the trade’s breakeven point. At that level, this covered call has 5.1 % downside protection, while still providing a 5.4 % return in 51 days as long as TSLA is above $36.00 on 3/16/2013. For comparison purposes only, this Tesla covered call aims for an annualized return rate of 38.7 %

OMG, mods please kill this thread...

The shorts are getting squeezed hard now.

Ya gotta ask... why would anyone bet against a high-profile company with disruptive technology who's break-even is 8,000 units, back orders of 20,000 in a factory that has produced 6,000 cars a week average in an industry where the competition sell approximately 10,000,000 units annually...

Of course this is a big winner. We are close to my $40 stock prediction already!

Ok, I was a little early. But now we'll see the upward movement...


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