Reasonable People Will Disagree -- The Tesla Example

Too often people today in public discourse assume that those who disagree with them are bad people, or have bad motivations.  Or at best, they assume others don't have all the facts and have been influenced by some biased media source.

But perfectly well-motivated people with the exact same data can reach stunningly different conclusions.   A while back I signed up for a (free) investing website called Seeking Alpha.  In doing so, they asked me to list some of the stocks I followed, and they send me email alerts when those stocks have new articles on the site.  One of the securities I put in there was Tesla, so I have been watching the flow of articles on this one company.

It has been an amazing exercise!  Most all the authors are working with the exact same data set, in this case the financial reports and public statements of the company.  And each time new information comes out, there is an absolute flood of articles from different authors.  Many of which have completely opposite reactions to the data -- one says its wildly positive for x and y reasons, another says it is wildly negative for z reasons.  The timeline of articles on Tesla is here.

As a disclosure, I was short Tesla until the other day when I covered at the bottom of their big price drop.  Yay!  I finally made money on a short.  I think Tesla is a mess, and its merger with SolarCity borderline corrupt.  My brother-in-law, a successful entrepreneur in the tech space, thought the merger was brilliant and part of a grand strategy with Musk playing chess when everyone else is playing checkers.

  • Dustin Barnard

    I happen to think Tesla cars are pretty great, but their stock confuses me. They're being priced like a tech stock, meaning the price reflects an understanding that they can grow massively without greatly increasing their expenses. When it was young, it was clear that google could grow it's revenue by 10x or more while it's expenses barely moved. That's not really true for Tesla. To make more money they have to build more cars. They're market cap is over 50 billion now on 7 billion in revenue. Ford's market cap is just under 50 billion on 150 billion in revenue. That puts Tesla's price per earnings at 20 times Fords. Now Elon Musk is smart, so I might give him a bit of an edge on ford, but that seems absolutely absurd. Especially since it's not like other car manufacturers are standing still. Everyone is building electric cars now. The big manufacturers were a tad slow out of the gate, but they're definitely catching up now.

  • ErikTheRed

    Not to mention it ignores the fact that no matter how smart Musk is or isn't (I'll concede he's a brilliant crony capitalist), there will always be a steep learning curve designing and building something as complicated as an automobile - especially in the secrecy-obsessed corridors of Silicon Valley where you can't test your products as thoroughly in an open environment as you really should (traditional automakers are also secretive, but they have decades of experience to rely on).

  • Illini Marine

    Well, Musk is playing chess. Only hid objective is capturing government subsidies.

  • The_Big_W

    I am still gobsmacked by the fact that Tesla, which is good at all its shiny technology and innovation in electronic vehicles, has not yet been sold off to Toyota or GM or even more likely a smaller car company that can take that tach and build LOTS of cars.

    Tesla is a boutique car manufacturer and there is no path that can be seen for them to become a big automobile company. They simply refuse to (or consider themselves too good to) embrace large scale manufacturing practices....

    Totally shocked a big player with big factories hasn't snapped them up.

  • The_Big_W

    The irony of the progressive dream of "all cars are electric" is that that only happens if there are no subsidies and electric cars are just the best cars on the market.

    The government CANNOT drive the acceptance of anything on a national scale with subsidies, even it can't go into THAT much debt.....

  • cc

    I was thinking of shorting Tesla but missed my chance. I think they will implode within 12 months, esp if the electric vehicle subsidies go away (by Congress or because they have sold too many to qualify). I have two friends who can't get enough of Tesla and self-driving cars, and we debate it all the time. Same facts, opposite opinions.

  • Dustin Barnard

    They're way to expensive now. As I mentioned Tesla's market cap is now 50 billion, on par with the big car manufacturers. Maybe if someone had pounced years ago that would have worked, but it's not viable now. And I don't think Musk would have sold back when Tesla's valuation would have allowed it.

  • The_Big_W

    Yeah, the best time for that move was a few years ago.

    The second best time will be after Tesla's stock craters....

  • Peabody

    Often "borderline corrupt" deals make the most money for a small number of beneficiaries. So "borderline corrupt" and "brilliant" are sadly not mutually exclusive.

  • sean2829

    Have you looked at the Medicaid and Medicare lately??

  • The_Big_W

    Heh, yeah, true point. They are trying hard to find maximum debt with those...

  • Dan Wendlick

    Tesla is a battery company trying to make cars. It's not a car company.

  • rst1317

    If Tesla's a battery company than how is their gigafactory, really just a regular factory, owned by Panasonic and manufacturing Panasonic batteries?

  • mlhouse

    This is the tax system that would be the most effective in the United States replacing all current taxes:

    1. Gross Tax A 15.4% tax on all gross income: wages, dividends, interest, capital gains, pass thru income. No deductions, immediate withholding. The normal person sees their tax withholdings decrease.

    2. Net Tax A 10% tax on all income over $250,000 excluding pass through income and investment income. The upper income tax filers pay an effective tax rate of about 26% so the combination of the gross and net tax brings them to this level, while significantly lowering the top marginal rates. There is simplicity with the single $250,000 deduction.

    3. A 3-8% national sales tax on all transactions. No more corporate income taxes and the layers and layers of loopholes designed to avoid them. Efficiencies gained in the POS collection and removal of all tax avoidance schemes means some or all of the increases in cost to the consumer might be recovered.

    Simple and efficient. Because the effective tax rate remains the same, the revenues from this plan almost certainly would be at least neutral, with the sales tax bringing in significantly more than the corporate tax. ALl while getting a huge reduction in the marginal tax rate that would be a huge economic boon.

  • allthekingshorses

    You mean Musk was playing chess with other people's (our) money...

  • marque2

    There is only enough cobalt production for about 500,000 electric cars to be produded per year world wide that is the big problem. By comparison about 17million cars are sold in the US every year. Yeah sure with subsidies and price increases I am sure more.cobalt will be found but it seems dubious we will get enough for full electric.

  • The_Big_W

    Yeah, battery technology is a big barrier.

  • herdgadfly

    Rent-seeking is the only principle that Musk pursues with his badly perceived ventures. When government provides the investments and the ongoing financing, no limitations are imposed on his wild schemes. I think that it is safe to say that he has never run a profitable business. Now he cries in his beer because the new federal budget eliminates electric car promotions at taxpayer expense. Meanwhile, Musk lives high-on-the-hog.

  • TuNeCedeMalisPJS

    Why does government have a claim to that amount.
    3% federal tax on all sales and nothing more, states can tax what the hell they want.
    Pre 1913 the citizen paid no federal tax, it was unconstitutional until all those bad admendments. Let get back to basics. I'll give them 3%.

  • mlhouse

    Well, as much as I would love to agree, you have to live in reality.

  • TuNeCedeMalisPJS

    Most Everyone playing checkers are earning an honest living. Musk who likes you to think he is playing chess is playing a shell game. He is a carpetbagger selling snake oil.

  • TuNeCedeMalisPJS

    If you don't push for it, then it won't happen. Wake up your fellow citizens. Our government is out of control and our money gives them that power.
    Reality will be very different in 5 years. Hard times are coming. What we make of it after will either give us prosperity or hell.
    Massive and widespread sovereign bankruptcy's are eminent.

  • Bistro

    to be honest, I didn't think you were that stupid. It kind of calls into question all your other posts.
    Srlsly, you never noticed the black box in your throw-away brokers office spouting the corporate line?

    Obviously, you started out as a premier broker tool. They don't have the 24/7 broker box in their cube.

  • mlhouse

    Do you see any candidate campaigning on such a platform?

  • marque2

    Telsla is really a dream trying to get money from local, state, federal government, and fellow dreamers, using the dream and visison. Nothing more.

  • ErikTheRed

    Even the lamestream media is figuring this out.

    “Put it this way,” Chanos said. “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.”

    http://www.reuters.com/article/us-investment-summit-chanos-tesla/short-seller-chanos-adds-to-tesla-bet-predicts-ceo-will-leave-idUSKBN1DE2NI