Hey everyone meet kevin here, you're about to see an interview from a few days ago, where i have an interview with gary black about tesla. This was at the end of a live stream. So there's a good chance. Many of you who would want to see this have not seen this and if you have not yet seen it, you got ta watch it.

So here's an amazing, in-depth conversation with gary black hedge fund manager about tesla. Now we're gon na talk about tesla and to help me talk about tesla, i'm gon na bring in a legendary tesla investor. His name is gary black. You should follow him on twitter, he's amazing and incredibly insightful and i'm super excited to bring him on it's.

My first time talking to him on the channel and bringing him to you here and super excited, so gary welcome aboard. Thank you for being here. How are you doing good thanks for inviting me absolutely gary? This is insane 1208. Is this sustainable? When is tesla going to go down, so we can buy more.

I think it's going higher um. You know when you think about. What's driving this move, it's a couple things one! The 22 estimates keep going up right. The analysts are behind they're, pushing estimates up, they're, pushing price targets up two you've got a lot of portfolio managers, who've been underweight tesla all year, uh, which has worked, and now as the stock has taken off it's up.

Uh 70 year-to-date right, uh and then - and you know the nasdaq is up like i don't know - 20 23, or so you got all these portfolio managers scrambling and they don't like amazon anymore. They don't like apple, they don't like facebook. They got to find something to buy and tesla has great fundamentals. Third, you got the ev credit.

That's still out there right. This is part of the infrastructure bill. It's going to be 8 000 uh dollars for tesla just a zero today. Okay, so that's another thing and then, when you think about all the stuff next year you got cyber truck coming.

You got this 25 000 compact car coming. When i look at tesla it's worth about 1400 bucks, i think it's still going higher. Now you run an actively managed etf. Is there a limit to how much tesla you could have in it? You know we have one limit, we're uh, what they call a non-diversified fund, so we can have positions that are more than five percent.

We can't have any more than 25 percent in any one industry. This is the ticker ffnd future fund. Um we've gotten off to a great start. We're up.

I don't know close to eight percent in two months: uh beating our benchmark, speeding or beating most of the folks out there um, but no, we can't own more than 25 in any one industry. That's our only limitation, so we're getting close to about 10, which is kind of limited, a lot of people. Think of but as long as we still see really good upside down side and when we put a stock and it's got to have at least two times upside the downside we'll continue to own it and and and probably be our biggest position too now uh a Lot of folks complain that tesla's p e ratio is too high that it's fundamentally overvalued uh. You know i i make argument videos against these folks regularly and try to show look at all these future revenue potentials that we have the growth rates that we have do do individuals in the market, fundamentally misassociate pe with being over undervalued and then get stuck investing In value traps, and then they wonder why they missed the vote on things like tesla.

I think individuals get it better than the institutional guys, because i hear institutions saying that all the time and look if you go to business school, even if you take a basic finance course, you learn very early on, as you alluded to, you've got to look at Present value of future earnings for future cash flows, which is what we do so we go out to 2025. You go up to 2030, but we can only forecast about five years. You come up with about 40 in earnings for tesla in 2025, and it's driven by eb adoption. Eb adoption is soaring okay, so this year it's about six percent issue is three: next year will be ten, so we go out to 2025 and get forty dollars in earnings.

You got ta figure out what kind of pe you think tests will deserve in 2025. It's gon na slow, it's not going to be. You know the same growth rate you have today. We come up with about 50 times.

It's the appropriate, multiple, looking forward from 2025, and you can calculate it mathematically. You put 1000 bucks a share 50 times. 40 is 2 grand and then you discount it back. You got to come up with a discount rate that reflects tesla's.

Riskiness tesla has about a 1.6 beta, which is a measure of its risk units. So i take the ten year treasury, which is about two percent. We think it'll be about two percent. The average year equities beat bonds by six multiply that times.

One six: you get eleven point: six percent discount very cap m financial theory bs, but it but it works, and so, when you discount two thousand dollars back by 1.16 for about three and a half years, which is where we are in 2025, you get about 1400. So that's the way i think about it. I still see plenty of upside for tesla if and where i'm gon na be wrong is ev. Adoption will probably accelerate even quicker than what i'm thinking is and tesla i'm assuming tesla just holds on to its market share.

It's in in the ev space, so my bet is that we're going to continue to take our estimates up which will push our price target up even higher. But when people talk about pes, i just shake my head and say you don't understand the way to value road stocks. Nobody else growth stocks based on current pe. Why? Because the earnings this year for any growth stock, whether it be chipotle or airbnb or trade desk or even amazon, it's going to be much higher in the future.

You can't evaluate a growth stock based on pe. It just doesn't make any sense. Brilliantly said uh. I don't know by the way, if there's a setting on your mic, but if you could maybe dial your volume down just a little bit, it's peaking a little bit no worries, though, if not uh.

In the meantime, i wan na i just pulled up my sheet on tesla. I have twenty dollars for 2025., what you're you're twice as bullish as i am, and i thought i was a tesla bull uh, wait what's driving your 40 dollars yeah! Well, i assume that ev adoption will be 60 percent by 2030 and then i back up uh at 2025, i'm at about 30 again in this year, it'll be six 2021 next should be 10.. I assume that tesla's gon na just hold on to a tv share. A lot of people argue with me about you, know, focusing on ev share or focus on overall share, so i multiply the adoption of db share and i get units.

I take the units without getting into all the details times the average price and i'm assuming the average price goes down over time. Remember they have cyber truck next year, we'll have tesla compact in 2023, multiply it times the operating margin, and i get earnings now. My 40 number, which is worth two thousand dollars, includes nothing for solar, includes nothing for servicing, includes nothing for robo taxi. It includes nothing for any kind of insurance.

I'm just looking at the ev business and ev business to me is worth 40 bucks to share in earnings now uh right. The latest stat that i have here is that tesla accounted for 79 of new electric vehicles registered in the us in 2020. Is that the the number that you're using no we're using a number that we look at it globally? I think you're looking at just us, so they operate globally. In fact, they make more teslas in china than they do in the u.s today, yeah, that's true yeah! This is u.s on a global basis and there's a lot of data out there that you can track.

We try to do it by region, but globally. What's that globally about what 15 between 15 and 20. it's about 21.22 today? Okay, so when we go again, we can get into as much math as you want. But when we look at it we take the ev adoption times.

The tv show we use 21 by the way any option you can multiply each year. You multiply it times the global sar and you get units units times pricing times. Operating margin gives you uh pre-tax profits, put a tax rate about 15 20 on it and that's how we get our net income again. We don't really add anything for energy, solar, energy.

We don't really anything for the service, they don't make any money today. Hmm, that's interesting, yeah! No, that's that's exactly what i do as well as i literally put zero for energy and it's like a loss leader, uh insurance, semis robo taxi. All that i use 40k. Oh sorry, go ahead! That's conservative, then you're being conservative well yeah.

100. What i um, i also use about 40k a vehicle in 2025.. What did you find that reasonable? Thank you so much, i'm a little higher than that, i'm about 48-ish, 48 wow. Okay, if i change mine to 48., what i do i actually i break it down by model.

So right now model three model y. You know probably 85 90 percent of the business. You got to add model s and x, which have been refreshed. There's a lot of demand right now for those cyber truck i use about the same as model wild, though i know one cyber truck goes out because they have over a million pre-orders cyber trucks.

Price is going to get raised and really the wild card. This is the hardest thing to model it is. It is what is the compact gon na do test the queue some people call it a model 2, it's time to be model 2.. I don't think it's going to be called model q.

I think you're going to call tesla compact and then so you you've got to forecast tesla compact. You need to figure out. How much does it cannibalize model 3, because model 3 is going to be the thing the catalyzer is not going to be model y yeah. So you got a 40 000 model: 3, that's being catalyzed by you know what will probably start as a 25 000 tesla compact and that's the modeling question.

You know it's funny. I just i just realized that when i, when i updated my 40k per vehicle to 48, i realized that, even though my projected eps for 2025 was half of yours uh. If, if i update uh to to about 48k a vehicle and uh and you're about 50 times, earnings, probably i think you're still a little bit more bullish than me, but we're in pretty much the same place. I agree with you how many units do you have in 2025, so in 2025 i have 4.8 you're close.

I have five two. So oh look at that. That's good! No one's so interesting! You know there's so many competitors uh, not competitors, but people on the sell side who do this for a living right and i manage money, you do what you do real living, but the sell side focuses on tesla and they just consistently get it wrong. I'm always amazed at the beginning of every year and we're kind of getting to the beginning of the year.

I start so much higher than analysts on the current year, which is what happened this year and then, by the time we get to the end of the year they catch up. So now i'm in 2022 because nobody's looking at 2021 anymore, i'm using twelve dollars in earnings for next year. Okay, you know what the street is 8.50, oh, and this is about it's a 35 difference. It's about the same difference that i was in 2021 at the beginning of the year and then they catch up, and so now we're kind of at the end of the year, we're looking 22 at 12, a share in earnings, big number wow.

So now i want to ask you uh on margin, we just broke a threshold here we just broke 30 percent on margin uh with uh, with credits. We expect that to be 30 without in the future. You know the the whole credit debate like not even worth having, because i'm tired of seeing the trolls, like, oh only profitable because of credits they're fine right. I know you're on the same page with that.

But what do you think? How high can this actually go? Have we have we peaked on margin or where, where can an auto manufacturer, actually go on gross margin, yeah? So, first of all, you're right back out the zeb credits which, because they're going to go away - and i assume they'll - go away not in 2022, but 2023 is going to go away. So my price target assumes zero is ep credits because, as everybody starts making zevs, you know making eds they're not going to need to buy them anymore, so that that makes perfect sense to me, uh 28 is the number for third quarter, excluding the regulatory credits. So i assume 28 for next year because i'm trying to be conservative and then i gradually move it up to about 30 by 2025. And that's my my assumption.

But again i think i'm being pretty conservative right now, because i'm assuming a lower gross margin for next year than they had in the third quarter, yeah yeah you're right yeah. I think you are being conservative, but that's good, because that gives you that margin of safety, which is perfect for investing and especially if you're, managing someone's money you want to have it i'll, tell you the biggest investment controversy is, as competition takes off the gloves. Okay and they really try to go after tesla and risk cannibalizing their own, what we call ice, franchise, internal combustion engine franchise and they take off the gloves and go at it. You know as heavy as they can and deliberately cannibalize themselves.

Are they going to gain share? That's the key investment controversy and so far it's like where's the competition right. They haven't really shown up and everybody keeps saying well they're coming they're coming and look from an evidence standpoint. They are changing their strategy. You see f-150, which is the best-selling pickup truck in america.

For 40 years now, gon na bring out an f-150 eb. Okay, you see uh porch mccann, i'm a porsche guy. I've driven porsches my whole life. Now i'm a tesla guy.

I don't drive portions anymore teslas, but porsche mccann is the best-selling porsche they're gon na bring out a porsche mccann evie? What are you drinking? Is that a monster yeah yeah, i'm a little tired. Today i didn't sleep enough. You have to drink this. This is like the best thing out there.

What is that celsius? It's like if you get on amazon after monster and red bull, this is the energy drink. People are buying, we own it in our portfolio. That's why i'm showing it to you what what stock is? This cel-8 celsius got a market cap of well, i don't know 7 billion talk to the owners. You can't really talk to amazon people, but this thing is a great part because it tastes good and it has no calories in it.

It tastes like florida. What's that do you live in florida? No, but it's in florida, that's where their headquarters is yeah yeah. Well, that's why i was wondering because sometimes you get the like there could be that local bias right. No, no! I live in chicago and you don't find this out here to be honest with you, you know where you do find it.

You find it in sweden. I think it got started, but but by going back back to tesla the investment contrary is his competitors? Take off the gloves, tesla's going to finally lose share, i'm not buying it! Okay, because there's a brand associated with you, stick a mercedes or a volkswagen, even a porsche name plate on the back of an ev. People are confused because they're used to those brands, meaning gas guzzling and and combustion engine, and i'm going to give an example from the marketing world think about cigarettes. Okay, marlboro camel newport are the top three brands in regular cigarettes.

You know where those brands are in e-cigarettes, which is the newest thing, those things they're nowhere, it's new, it's um focus it's mark 10.. You don't see this on e-series, because it doesn't make sense to a consumer and see this is this is there's a big thing on cnbc today? Why do active managers all underperform? Because they all do okay and i think, a lot of us because they never worked in a real operating job. I have you, probably have they've only been financial analysts. They don't know what the consumers think they don't understand.

Branding they don't understand jam. You can't just swap a volkswagen name plate or a ford nameplate or a chevy main plate on an ev and expected to buy. You know it's just not going to happen that easily. So, even if you look at porsche, which has been the most successful with titan titan, almost all the volume has come internally from panamera.

You could draw a chart. It can go like this and america's going like this, and so that's the problem here that the consumer doesn't let you just slap an ice brand on top of an ev and expect it to sell the consumer, wants a brand. That means clean energy. That's why tesla's doing so? Well, that's why we're going to do well.

That's why lucid will do well. Okay, that's incredible! You know i never thought about that before this uh, but this transition you just mentioned between uh cigarette companies failing to get into e-cigarettes you'd. Think that would be the easiest most logical transition like if i were going to start an e-cigarette brand ten years ago or five years ago. I'd be thinking to myself.

What's to stop marlboro from just rolling me right, marlboro is sick and there's no such thing. You know, what's even more incredible. I used to cover the tobacco before i know, probably more than i should know about it. Philip morris with johns marlborough owns jewel.

They own the rights to joel. They chose not to use marlboro on e-cigarettes yeah, but all the topping cigarette butts they're all owned by the top tobacco companies wow really hard to take a tainted brand and stick it on something. That's supposed to be, like you know, clean tar or whatever it's like a disconnect. It's almost like an active etf.

You know it's very hard to take an etf and have like an existing brand name on it, because details are all about transparency and you know saving on taxes. Things like that. So when you try to take it back to a topic at hand when you try to take, you can tell i've, had one too many of these today right right when you try to take a clean energy brand, you know like tesla, and you put it up Against an ice brand like ford or gm there's no way that they can compete with it. It just doesn't okay.

So then, i have a question for you, because uh one of the things that i've liked about lucid is that it is one of the first uh non-uh tesla pure ev, plays that's public and delivering vehicles now just just delivered vehicles saturday, and i think that's led To a lot of enthusiasm for the stock, i can't um, you know the valuation's a lot more difficult to come around because you can't run numbers on their factory efficiencies yet because you have no quarterly earnings yet showing how efficient they are - and i doubt they're going To be efficient, i mean when neo first produced vehicles, their margin was like two percent, then four percent. You know it took a while for them to even get into the teens. So how do you go about valuing something like lucid or do you even care? Is this just gon na be like a winner takes all yeah? It is really hard. I mean you point out.

I can't come up with a volume number i get that blockchain, but i don't know what the deliveries are going to be, especially since they're, starting with the vehicles, they started, delivering a weekend for 170 000 yeah. How many of the 90 000 or 80 000 they're going to actually sell? I'm not a buyer here of lucid, looks like it's about 37. I just think it's. You know there's finger up in the air forecasting going on with lucid at this point, and so i'm not a buyer of it.

On the other hand, rhythm is going to come public next week. Ribbon they're, going to put a value of about 60 billion dollars on vivian has a much better potential for succeeding because they're competing in the truck business, which is the most popular part of the business. It's about 20 market share, so if you think about tam, they're gon na be playing in twenty percent of the tam total adjustable market and then they're going to take their brand and leverage it another concept. If you've worked in a brand management organization, leverage it into a different category, called suvs and you're going to have a ribbian suv sometime next year, that's about 40 percent of the market, so their tam is.

This is an interesting lesson from tesla. Their tan will go from 20 to 60, whereas lucid once you start with a sedan. What are you going to do you leverage into an suv? It doesn't really make a lot of sense. So the reason why i got excited about tesla.

Originally, i got into the stock not that long ago, 2019, because they decided they were going to double capacity because they opened up shanghai and they were going to leverage their brand uh into model y, which is the baby suv. They had a big suv, which is the model x, but that crossover segment cuv segment, it's 40 percent of the market in the us, it's like 45 of the market in china and in europe. So if you're just doing the math you're, basically going from at the time you're going from about 20 of the market with tesla and the big suv, it was only a little tiny piece, but that cuv segment, the crossover vehicle segment is 40, basically gone from 24. I think it was to 65 percent of the market overnight, and so here's here's what's going on next year, they're going into europe with the cuv right they're, going to make the model y in berlin they're exporting it in from china.

But it's it's overpriced, because you've got to pay a 10 import tax from china to europe. Once you make it in berlin, you can sell that cuv, which is 40 of the market against all the european competitors. That's huge, okay! That caribbean! It's the same thing: you're leveraging your brand you're building your your your tam. So when arivian first comes out, people are just going to put the value of the um of the truck in there, which is the pickup truck right.

But you really got to think about. Is they're going to capture a certain percentage of the suv market as well? Let's see, why do you think lucid can't uh make this transition from sedan to suv? I think that's the one place you lost me good, i mean you know, think about it. Tesla was able to do it right, but they had a model x for a long time. I think it's harder now.

I think you know: when tesla did it, they were the only out there yeah why you got a ton of eevees out there and you you brought the chinese names before neo xpav. They all have um, they all have little sedans and little entities. So i just think it's very hard at this point for lucid to go down the path of oh, let's introduce an suv, tesla, um and ribbian, and, and you know the ice guys have all woken up so they're like you're, going to have a volvo uh xc90 Tv, i guess next year, okay, there's a lot more competition today, yeah, but you've also got. I mean, like volvo they're expected to deliver like uh half a million electric vehicles by 2025, rivian's expected to do like one tenth of that by 2025.

who's. Expecting that's management! That's managing forecast right, uh, oh sorry, uh, so uh. This is uh one. You know that, for the only forecast i have for rivien is an analyst forecast and uh and then uh average analyst forecast for volvo, but um volvo shows dvds for analysts exactly expected to deliver 1 million vehicles by 2025, with half of them being fully electric.

The rest being hybrids was an expectation. Okay, that's possible. I mean look. Volvo's got a great brand for safety.

I always think in terms of what i call brand equities and who owns them. Okay, so performance for our performance, but tesla also owns performance. Battery range is another reason by evs. Tesla clearly owns the brand equity for range, even though uh lucid's got a you know, 520 mile range, um technology, fsd tesla clearly owns that.

So i'm listing off all the characteristics that people use when they choose an suv. If you go out and do focus, groups of people say what's important to you. Okay, those are three things i think, as we get more and more into autonomous driving and you're starting to see it really ramp up. Safety becomes a huge element of the brand equity and who owns safety uh in the brand equity space.

Volvo, if you were to, if you were to go to a bar tonight and ask 10 people what's the safest vehicle out there. I bet you seven out of ten say volvo wow people don't say: tesla tesla needs to own, and i think elon knows that you hear him talking a lot about safety. Now i think you know that's a dimension that they will try to. They have.

If you look at their actual safety records in terms of deaths for um mile driven accident, they have one of the safest cars out there, but people don't know about it and here's the problem tesla doesn't advertise. You use social media, try to get their word out. Elon's, a great marketing genius using social media, but once you've got all the other manufacturers. Advertising they're going to have no no they're going to have to somehow advertise a little bit just to compete with them, but back to mobile volvo owns the safety uh brand equity right now.

So if you take volvo, you add ev to it. You add autonomy to it. Volvo could be a really interesting story here. I haven't said enough to know whether i like stock or not the same public as you know last week now or why diversify it all in in the car sector.

If you've got a sector for cars autos, why even bother with the other ones? Why not? Just all tesla, you know my clients, ask me that all the time you know in the ffnde thing i you know i'll respond to people on pm, especially if they own or are fun. They spend all the time and i've got one person who says why? Don't you just announce that you're going to 30 percent tesla in your portfolio because, right now it's about nine? If you look, i didn't go up that way. I believe in high conviction investing like if you really believe in something you should you know you should own a lot of it. Here's the problem and ron barron brought it up one of the big shareholders.

What if something happens to elon tomorrow yeah i mean he's a he's, a very open guy, i'm sure he doesn't have you know tons of bodyguards. I'm sure his health is probably good, but, like me, he probably works a lot. You know, and so the problem is, if elon, if something ever happened to him, the stock would go down by at least the third. You can't say that about the other mid caps multi-caps mega cap right, you know, maybe you could say with facebook with mark zuckerberg, but i don't know a third yeah, no, not as much as elon people.

Don't like zuck. You can't say that about amazon. You can't say it about google, it can't say it about microsoft. You can't say it about apple.

Something happen tomorrow, stock step back, we already have bazel's, basically out so the tesla, if elon ever something ever happened to him. This would be a great short controversy. If you will um, i would bet the stock would go down by third and that's that's the hard thing. Would you agree or no i i mean maybe maybe like a reactionary right reaction area - um, maybe maybe shaved 10 to 15 off longer term yeah.

I could. I could see that yeah sure, so that's why it's hard to go higher but you're right. Is it a winner? Take all game, no at some point, if you ever go to where you're out in california right kelly, yep. Okay, if you go out in la or san fran, everybody's driving, a tesla, you know it's not like here in chicago, where you don't see that many, but you've got where you are there's so many teslas out there at some point.

It's not that it's not cool anymore. People want to be different, and so it's not a winner, take all business and so you're always going to have a number two number. That's actually the best question. In my mind, who's going to be number two, exactly that's.

Where lucid seemed like they had some promise, but you're actually thinking that rivian has much more promise. I think you know the problem with lucid. Is it's um these luxury sedans? And while you can, you can leverage that into trucks into suvs? It's late because a lot more competition is in trucks and suvs. Now, okay, just think about you're gon na have cyber truck in the truck business.

Everybody's got a ev suv now i just think it's gon na be harder to do that. I think where rivien is standing it'll be interesting where, where market cap actually comes from it's supposed to be higher, okay supposed to be 60 billion and i think it'll stay higher. But if you, if you track these and we'll come back a year from now and see where we are i'll bet, your aurivana will have great selling truck a great selling yesterday they're in the right price segment. You know 60 70 grand it's high-end, it's luxury.

They can always go down, they can always go down and have a basic version of that for 30 or 40 grand it's like tesla did going from model s to model 3., um, lucid started, and once they have the uh lucid, uh air. I guess it is from dream to air. I think yeah going down yeah, i just don't. I don't see that as being a huge market.

If you look at luxury sedans, it's only about five or six percent of the market. It's not a big. It's not a big number interesting yeah, i mean that's, that's a good point uh, maybe maybe they're trying to follow that sort of tesla like start with a luxury model ass. But but, like you say now, you've got that competition tesla didn't have that competition uh.

So that's that's a very good point. Okay, so you should loosen that 60 billion today market cap, so it'll be very interesting. Now who's got a bigger market cap. That's a good point! What about uh? The you even mentioned them uh, neo and xpev uh x-bang motors.

Do you invest in these? No, why there's too much competition? I mean there's so much competition that you know the chinese government is encouraging everybody to go ev. I mean the thing that knocked me. Not my socks off the last couple weeks that i think was a big reason why tesla started running it's been running since the second quarter. Earnings was the september um ev numbers, they saw evie percentage.

Pd adoption in china for september was 17 and a half percent a year ago. It's five! Yes and everybody is playing in the eevee space and they're dedicated players. Right. You got neo, you got expat, you got league, you got byb, you got four big players plus you got all the german company and you got tesla all bringing these up.

It's just very, very competitive, and i worry about it. The melting pot of cars is in china is what you're saying yeah and the competition is intense. When you look at expat they're bringing out 25 000 vehicles already and they have. You know if you look at they're, not making money.

But if you look at like the autonomy that they have, they have level four autonomy already and they're, putting them on 30 000 cars. So it's a very competitive environment. It's hard for me to invest in something that competitive in the us other than tesla. It's kabuki! Theater right they're, all pretending, but it's there's nobody there, that that can that really can compete with tesla yet except maybe lose it except maybe you know i'd say that the one who probably has the best chance of competing with tesla is it's the cell phone business.

When, when apple brought out its smartphone - and he had everybody, including myself, using a blackberry, i had a blackberry, motorola or a nokia. Okay and apple brought out its smartphone. It just put those guys literally out of business right because it was so much a superior product and you just you, don't see any competitor matching tesla in the near term in the u.s you know which is still inside china. Now what about uh? You know tesla's, obviously in in the solar space to some limited degree.

Uh do you invest in any any of the uh like the end phase, the solar edge, the sunrun any of the other uh energy competitors? We have nps, we like encase um. You know, i know a lot of people have gotten tesla solar roofs, they love them. I mean they think they're great. I still think there's some logistical issues.

They don't you know they seem to wait a long time. There seems to be. You know, i don't think installation issues but installation delays and policing issues, so they still don't make money on the business they will. In fact, in my model for 2025, i have been making a little bit of money by 2025., but compared to the ed business.

It's like a nat, it's like a you know: it's a minuscule so yeah we like end phase. We do play solar energy within phase. We think that is the best operator and uh. It's now probably the 15th, maybe 20th largest position, absolutely all right.

A big big bull on end phase as well. So that's that's awesome. I mean there's so many people that are, you know investing in solar roofs, because it's really important out in california, where chicago is not that big, a deal gotcha. What uh? What do you see about uh tesla in the event - and i see this question coming up here - regularly folks wondering about a split, i think, there's a lot of enthusiasm around stock splits and that maybe it'll run again like it did the last time uh, you know Running up to this split and then it kind of sold off uh after the split but uh.

What's your take on that? You know nvidia just recently exploded after their split but but they've also been just killing it. So any thoughts there it'll happen. Um we had a split last august and uh stocks played five for one it was announced on. I just put a piece out of this on twitter.

If you want to look at it a couple days ago, i think over the weekend, uh stock was at 1374 when they announced it on august 11., um and split five for one to do the math that's 275 by august 31st, which is the split effective date. When it went five to one, it was up 80 in those 20 days and there's a reason for this, and everybody says: well, it's like taking a um, a pizza pie and splitting it into eight slices. Is it worth more and the answer is yes in new york, if you've ever lived in new york and you try to sell by the slice, you can get a lot more for your pie, then you can. If you sell pies, that's just the way it works, because there's some people who just want to slice and they don't want to pay.

You know twenty dollars for a pie, they're willing to pay four dollars for a big slice and you get eight of them. So the point is there: there's definitely value added in the sense that there's a there's, a management when they do a stock split and there's empirical studies that show this have more confidence in their business. It's almost like self-selection. Those who do splits will leave so much money, because no ceo wants to split their stock if they feel bad about their business, because then it drops from there right.

Just think about that, and so tesla spoke their stock last year. Five to one - and i had all these arguments with the bears that this is imagine being very confident go forward to this year. And i don't know if it's going to happen because elon's now the richest man in the world and there's a lot of political noise about that. Oh yeah and i don't know if he wants to even call more attention to how much money he has he's.

Still in the stock look he's he's going to call attention to himself, no matter what, because that's going to continue to go up from here, and you know, there's a lot of reasons for that. We can talk more about the gamut squeeze, that's been happening, but i do think they're going to do another split yesterday. Did it 1374. we're at 1200 today and so the board? You know boards meet usually once a month today, either by person.

Usually it's not anymore. It usually by phone or video conference, the next board meeting will probably be in november. Usually it's the second week of the month. How do i know that? Because it's consistent with the earnings for earnings the third week the month, so the board has to review the documents, the materials they get approved.

The audit committee, blessed them zach and elon, have to sign them as part of the thank you process. My guess is: there's a board meeting in november and they'll probably consider it whether or not it happens. I don't know, but if they don't do it november, they probably have to wait until february, but i wouldn't be surprised to see another split four for one or five to one in the next six months, wow and then uh. Do you think that could lead to uh another push like you saw that last time i don't know 80 was too much.

I mean that yeah and i'm look i'm. I still believe the stock is worth at least 1400. So to me, 1200 does not give me. No, that said, the stock is up, you know 40 in a month after lagging all year, and then it suddenly just took off and it took off literally it started with the second quarter print and then the third quarter deliveries came out october.

1St then the china numbers came out october 9th and then the earnings came out whatever october 26th. It's been up every single week and then you got you know retail investors and look i'm not sure, who's who's engineering, this gamma squeeze which we could talk about. It's quite incredible to watch every day, but i think the retail investors are buying it at the same time that you got institutional, pms, falling out of love with amazon and apple and facebook saying i got ta own something right. I guess it looks pretty good and it's moving a lot, so i got ta own it.

You know and i used to be underweighted so now i've got to go to microwave it and then you've got the hedge funds. They're, saying hey, there's money here to own tesla: we can create a gamma squeeze, make the market makers pay up because they've got to be hedged. So you know this is all feeding into itself, which it's almost like a perfect storm for the bulls yeah. So so tell me about that a little bit.

Is it then possible that a lot of people, whether they're institutions or individuals, had these massively out of the money call options? You know it's tesla's at six. Seven hundred and people are buying these twelve hundred fifteen hundred seventeen hundred fifty dollar calls for twenty two twenty three whatever and now all of a sudden they're coming in the money. So uh, you know the folks taking the other side are or having to hedge and and that's what's actually squeezing this price up. Do you how much of an impact do you actually think this this gamma squeeze is having on the price action here? Is this just like you say, institutions catching up uh is it? Is it a little bit of everything you know, retail coming in institutions coming in the gamma squeeze? What percentage would you assign to the gamma squeeze? I don't know, but you know, unlike gamestop, where i can't come up with you know.

Maybe it's worth 40 bucks. I don't know what it's worth, but it's not worth 108.. Okay, tesla has got fundamental underpinning. It's got a value, that's worth using real numbers, real forecasts, real math dollars in my mind and any portfolio manager could do exactly what you and i do.

It would take an hour to say: okay, here's soar, there's eb adoption. Here's evie's share here's asp, here's the margin, put a tax effect on it, come up with an earnings sure it's not that hard, and so you can come up with to your point. You know somewhere between 1200 1400, maybe just looking at the ed business, not putting any value on robo tax, which the whole you know like park has after value is based on robo tax, which i just don't see that. But if i'm coming up with 1400, i got that as an underpinning and an institutional portfolio manager at fidelity or capital, or you know any of these hero price.

They can come up with a number and that's why they'll buy it and say: okay, i'm underweight! It's work, but now it's not worth anymore, so i better go at least a market weight. So that's one factor second factor is i got all these catalysts happening. I got you know the factories, two factories coming online, with basically double capacity. If you try to buy a test, you go online and try to buy it.

You got ta wait six months for the you know the model wire, the monthly literally, so you got that factor. You got the eb credit s, p upgraded their debt to one notch below investment grade last week, it'll go to investment grade after fourth quarter. There's no way it's not going to be investment grade because they're covering their interest, expense 18 to 20 times yeah. What do we get like, bb, plus, or something like that right and we got ta, get to the one grade below and yeah if this was not tesla with the history of tesla, where it almost went bankrupt in you know 2018.

This thing would be investigated. The metrics would be investment grade the bonds trade is investment grade yeah. We got that catalyst, so you got doubling the capacity. You got people deep frogging over each other to raise estimates.

You got the ev credit, which will probably get past december first and then in the 1.75 trillion dollar house bill it's in there for eight thousand. There's all this fight about uh. If you're unionized you get additional unions. Yeah don't worry about that because i don't think.

That's gon na that's gon na survive, although we lost it called by the union today, which was pretty funny, and then i got the cyber truck and the cyber truck isn't even out yet the cyber truck. I don't know how many priorities are some people say it's a million. Some people say it's two million. It can't really make more than about 250 000 a year at austin, and some of these are never going to mature.

But that's a huge number right. You're not really cannibalizing your other part. I've got a cyber truck on order, but i'm not going to get rid of my model y. I use the truck for different purposes and i use my model 1..

Okay, so my punchline is it got this underpinning evaluation worth 1400 and then you throw the retail investor. Who's got newfound power, okay on reddit or wall street bets and they're. All talking about you know what stocks they want to own and they're all betting on tesla, and then i got the whole hedge fund world saying hey. This is interesting.

Let's do some magic buy it retail. I can really make some money here by just buying up lots of options and the poor market managers - let's say poor, but you know they're citadel they're suspended they're golden sachs. They have to be delta neutral, which just means that when you look at the delta okay, so for an option, it's how much for a dollar movement in the stock. How much does the option move by so when they, when a retail investor, a hedge fund, they don't know who it is, they want to buy an option? The market makers are selling the option to them, but they have to be delta neutral.

So they have these options worth something they have to buy an equivalent amount of stock to be delta neutral and then what happens? That's all taken care of, and then the stock starts going up and it'll start going up tomorrow morning. You watch it four o'clock in the morning and the positions they put on yesterday. The delta will be higher. So you got to go back and say: okay, because now the delta's gone from point four to point: six, because the 1300 now is getting close to being struck right.

They got a hedge more than what they did yesterday and that's the gamma squeeze. And so, if you think about gamuts, it's the first derivative of delta, so delta is the amount of change on the stock for a dollar worth of stock. That's how much delta is okay, so 26 would mean stock raised by the dollar. The option goes up: 60 cents.

The gamma is the slope of the delta, the change in the delta right, and you can look it up on td or schwab. You can see what the gamma is, but as the delta continues to go up, gamma starts exploding and anybody who's ever sold calls, and i have a couple clients i sell calls for. We stay out of the market, you know when we think there's a cow. That's coming or earnings are coming or volumes are coming.

We try to like do it when there's nothing happening right, yeah yeah buy one volatility is a little lower, but whenever yourself falls you can watch the delta start creeping up and when they get too close, you know and then and the stock price gets too too Close to where i sold the calls off of you know, i could sell. You know. 13. 50 1400 calls now.

I'm gon na get a good return for one week. Okay, you got ta go in, you have to cover and that's what the market makers are doing. The market makers are covering and they have to go back in time and say: okay, all these positions we put on last week. We have to move them up, we have to.

We have to cover them because the delta has moved up and that's creating this gamma space. How much is it worth? I don't know, but it's a big chunk of it and you know i saw what happened with gamestop. I never tried to short game stop or amc, because that gamma squeeze the fight in the ass if you're trying to slip yeah and what i found as well. What's so interesting about it, just investing in general is look.

Maybe the gamma squeeze is is a third of all the activity right. That would be a very big weight. That'd be a massive weight, but let's just make the example that the gamma squeeze only makes up five percent of the volume. Just the fact that it exists - and people are talking about the gamma squeeze could be enough of that dangling carrot for the institutions and retailers to hold on and keep buying right right, exactly and see.

One of the things you can look at is the volume of tesla. Normally is 20 million shares a day today, it traded 55 million shares yeah. Everybody wants to blame the retail investor for chasing it. This isn't.

This. Has the power, the retail investors? Don't have this much power, hedge funds have three trillion dollars and i'm telling you i saw it with gamestop gamestop you saw the stock would like go up 100 one day and then paul percent the next day. I am certain that a lot of the source of this gamma squeeze is hedge funds to say: hey. We can make some money here.

You know. Oh yes running it up in the morning selling it you watch today the stock ran up so much at the open and then it fell and then it zoomed up at the end. You know it's like every day. It's like a it's like watching a roller coaster.

So yeah, i believe on that note, though, at some point, uh tesla's, uh euphoria will wane. When the euphoria wanes again this this gamma squeeze will wane and then the rationale behind it and the actual act of it will wane uh. Is it not then possible that you're going to get some of these traders rotating out of tesla, and we could see some more affordable prices here for tesla? I guess the big question is: how much will it run before then? It's hard to know like i said, i have a 1400 price target which i just went to last week. I was at 12.

in two years. I've never lowered my price target, okay, um and look. The trick is when you get new information. You raise the price regret.

My new information last week was eb. Adoption globally was way higher for third quarter than i thought it was and that's what caused me and i always try to lay out why i raised my price target. That's what caused me to raise the price, so i think you're right. Every institutional portfolio manager is like me right: they try to get into a stock.

Where there's like two to one upside down side. They call this reward should be clubbing forward to risk, but two two times upside for one downside, that's the usual rule of thumb and then they start peeling. It back trimming it when it gets down about half the time half times upside down side. Okay, so the tesla's at uh 1200.

If you got a hundred of upside, you got 200 a downside. That's one half! Okay! You are going to see people at some point say this is too rich. But having done this now for a couple years, um and having been an investor for 30 years of my life, you know upside down side targets, work. If you're disciplined about them, you can make money mark.

You know everybody kind of kids that they don't have uh at this point sure they do every time jessica gets way above 10. She she cuts it back. That's selling high buying lows selling high, so she's very dis yeah. I i admire it.

I think it's great. I think you get you get some folks who are like. Oh she's, you know selling tesla. She must have lost enthusiasm.

I think these are just people who misunderstand how funds work. It's not even worth really talking about so institutions will which so in 70 percent of tests stop yeah we'll start trimming once it reaches their place or it even gets closer to their price target. Sure and you know, look as a growth investor. You try not to get it early, but you know you have to start being disciplined and peel back and look.

I look at it as once. The analysts have baked in all the catalyst into the stock price, so they've taken the estimates up. If they get close to my estimates in 2022, which again is 12 bucks, then it's time for me to start feeling back yeah example this last year we could talk about what would make tesla go down because that's kind of the root of your question. We got off of tesla in uh late january, early february when it hit 880.

We go up at 870., we actually hit the position and we exited the position because it had gotten close to our price point. I think our price started at the time. Yeah you sold for two months, we did and we got out because one they wouldn't give any guys. This is when they were basically going from they guided every year.

They said we're going to grow at 50 long term, and i thought that was a red flag. Um, the fourth quarter call was not good at all and they bought bitcoin and look one. We could talk about whether that was good or bad. That's not the point, but an institutional portfolio manager looks at it.

Is you know they want you to reinvest the cash in your core business, four businesses building new gigafactories and they have huge rois when you build new, bigger factories. Buying bitcoin is something i could do that myself right. It's like buying art or buying gold. It's like: why do i want you to put your money in bitcoin, yeah yeah? We feel comfortable with it because the stock fell.

We got off at 870 and stock got down to 620. We got back in because then my risk reward was back to like two times, but at 870 it was like a half so anyway long story, short institutional pms, want to make sure that the cash reinvestment as they call the marginal return on an investment. It's going to be positive, it's going to exceed the cost of capital capital if you want to look at equity only it's about 11.6. So that's why people when they heard about that bitcoin investment like what are you doing? We could do that ourselves just give the money back to us.

What what do you want to be like microstrategy or the stock, totally dependent on bitcoin the michael sailor approach? Yeah, i mean it's not what people are putting money into people want to build. You know. 10 giga factories over the next 10 years. You know they don't want to put it in bitcoin.

They can do that themselves. So anyway, that's one of the things that, as long as bitcoin stays small, it's a billion three think of it as a billion three of their trillion dollar evaluation, it's minuscule! But if, if that, if that bitcoin investment went to zero tomorrow, it's a dollar off the stock price right, there's a yeah, that's a good point: it's not a big deal. Yeah microstrategy! I think they hold somewhere around seven and a half billion in bitcoin and um. Their market cap is about seven and a half, so the market has basically said the company is worthless, you're, just investing in the bitcoin, and it's interesting to me since michael sarah.

I listened to him he's on nbc today, yeah anytime, he says institut, you know corporate america and i should be in corporate america. It's going to buy bitcoin. I just shake my head and say: they're never going to go into bitcoin because it's drilled into you as the cfo and the corporate treasurer. You invest in the business and, what's left you give it back to the show if you've got access to all the things you need to grow your business, so all the gigafactories, which is where they should put the money you pay down debt you buy back stock Or you paid out, i don't think tesla should pay out dividends, because that really restricts you it's very rigid, but if they wanted to buy back stock whenever got hit, i think that would be a good use of cash.

I would rather than pay down debt, for now they have about eight billion dollars worth of debt, which is minuscule they can get rid of all their debt, get to the investment grade rating, and i think that's good, because there's a lot of mutual funds that can't.