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  • Here's A Simple Explanation Of How Tesla's New Warranty Policy Affects Earnings [View article]
    At this point, I am asking for more civility in our comments. Demeaning a commentator that doesn't share our viewpoint is not only disrespectful, but unproductive. The SA commentary is a place for us to share information and opinions in the hopes of providing each other with the knowledge to make better informed investment decisions. We will of course disagree at times. But, it's OK for good people to disagree. Making the commentary a hostile environment -- not so good.
    Aug 19 03:38 PM | 1 Like Like |Link to Comment
  • Here's A Simple Explanation Of How Tesla's New Warranty Policy Affects Earnings [View article]
    I suspect that this is likely to be an area where we will have to agree to disagree.

    I see a company with no advertising budget & a 30 week backlog on orders based on current deposits. Elon has said on more than one occasion that, at this point, they need to be careful not to stoke any further demand until they acquire more production capacity.

    Some people often see a slack in demand by trying to follow geographic delivery numbers that are not clear. Any supposed drop in deliveries to a particular geographic location is immediately perceived to be "The Beginning of the End" even though we know that Tesla is having to temporarily withhold deliveries in some locations in order to establish a broader market. A tricky dance to be sure -- expand your geographic markets while trying not to stoke currently unfulfillable demand, and perhaps most importantly, increase your production capacity as quickly as possible.
    Aug 18 12:39 PM | 2 Likes Like |Link to Comment
  • Here's A Simple Explanation Of How Tesla's New Warranty Policy Affects Earnings [View article]
    The one thing that I think most of us can agree upon is that the folks that decided to enhance the warranty (Elon and his executive team), are the very same folks that know 1) the most about the problem (frequency, root causes, which vehicles are most likely to be affected, etc.); 2) know how the cars that had any problems were driven prior to their failures (ask John M. Broder about the data Tesla keeps on each of its cars); and, 3) know the most about exactly how warranty costs have been running for all the various production levels of the Model S -- total costs as well as specific problems fixed & which problems have correlations to specific production levels.

    We in the SA community really don't have sufficient data to make good projections on the warranty costs changes that go along with the enhancement. But, I doubt that Tesla would have made this enhancement to the warranty in the dark. The rocket scientists at SpaceX say that Elon Musk is a genius. And, IMHO, if you have rocket scientists calling you a genius, it's very likely that you have some talent. He almost certainly had a pretty good technical handle on the issue(s) as well as cost projections in hand before making the decision to enhance the warranty.
    Aug 18 08:37 AM | 4 Likes Like |Link to Comment
  • Here's A Simple Explanation Of How Tesla's New Warranty Policy Affects Earnings [View article]

    Very well done & informative article. Thank you for taking the time to put it together & contributing.
    Aug 17 12:01 PM | 2 Likes Like |Link to Comment
  • Tesla extends warranty on Model S sedan to eight years [View news story]
    Elon has repeatedly said that he wants Tesla to have the very best service in the auto industry. Even when what he says sounds outlandish, e.g., "I want to build a private rocket business", he generally means it and ultimately backs it up with deeds. This Elon Musk trait is not without side effects -- Tesla general council has a very tough job. ("He said what??!!")
    Aug 15 07:07 PM | 7 Likes Like |Link to Comment
  • Tesla - Free Valuation Model, Notes On Guaranteed Buybacks [View article]
    Hi solucky,

    The plan for the 50 GWh battery pack output is currently for 35 GWh of battery packs to supply the needs of the Fremont plant running at 500,000 units per year. The remaining 15 GWh is allocated for Tesla energy storage solutions -- both commercial and residential.

    There is a great youtube video on this. It is JB Straubel's keynote address to the 2014 Energy Storage Symposium. See .
    Aug 13 04:44 PM | 1 Like Like |Link to Comment
  • Tesla Will Become The Victim Of Its Own Success [View article]
    I'm not an attorney. But, I did stay at a Holiday Express last night.

    Libel is the written or broadcast form of defamation; slander, the verbal form.

    Libel falls under tort (civil) law. No law enforcement agency is going to come and arrest you for libel; rather, the injured party must file suit and by preponderance of evidence show both harm and that the defamatory statements were indeed false. You can be found guilty of libel even if you did not know that your statements were false. However, under those conditions, the plaintiff would likely be due to only what could be shown as actual damages. On the other hand, if the plaintiff can show that the defamatory statements were knowingly made falsehoods, then the more generous general damages awards would apply. Lastly, if the plaintiff can also show particularly malicious/malevolent intent, general damages awards are usually increased.

    Anything presented clearly as opinion, especially when made under a venue like a blog site, should normally not be subject to libel laws. Consequently, the “IMO” & “IMHO” qualifiers are probably two of the best safeguards against a libel suit. That said, it would not be wise to say something like “IMO, Bob Dodgy, the owner of Dodgy Used Cars, has been known to get drunk every weekend, beat his wife and abuse his children. How could a man like that ever be trustworthy? For a used car dealer you can depend on, come see me, Max Machiavelli at True Max Used Cars”. Assuming that Bob Dodgy does not drink and abuse his family, even with the “IMO” shielding qualifier, Max would likely soon find himself soon served with the notice of a libel suit filed by the august firm of Lurch, Stagger & Reel on behalf of Bob Dodgy and Dodgy Used Cars.

    I suspect that if we could gather and ask the premier legal minds on tort law in the country how to best avoid a libel suit, the cumulative answer/advise could be summarized as, “Don’t make up Sierra-Hotel-India-Tan...

    Well, that was fun.
    Aug 13 04:29 PM | 1 Like Like |Link to Comment
  • Tesla - Free Valuation Model, Notes On Guaranteed Buybacks [View article]
    Hi Edward,

    Here is a link to the Morgan Stanley "bluepaper" on Solar Power & Energy Storage (PDF)... .

    MS analysts estimate a $2B annual energy storage revenue for Tesla in 2020. And, as if Tesla valuations aren't already hard enough, now add in a second disruptive business! :-)

    You're a brave man jumping into the SA Tesla melee. I'm glad to hear that you didn't go short. Enough $ and heartache have already gone done that hole.

    Thanks for all the work that you have put into this.
    Aug 13 10:55 AM | 3 Likes Like |Link to Comment
  • Tesla: The Hustle And Bustle In Palo Alto [View article]
    Thanks AMD2099, I'll need to find the US projections to update. This may take some searching -- not sure.
    Aug 11 10:46 PM | Likes Like |Link to Comment
  • Tesla Earnings: Estimating Tesla's EPS For 2016 And 2017 [View article]
    After reading the Consumer Reports article, it appears to me that you have likely overstated CR's take on their car's problems with reliability & cherry picked some of your facts. That's just my opinion & it's coming from a person (me) at risk for a positive Tesla confirmation bias. At this point, I concede that my viewpoint is at significant risk itself due to my own (long Tesla) biases. For, rather than nitpick over the details of my likely somewhat questionable opinion, I'd much rather talk about confirmation bias itself for a bit.

    Confirmation bias is lurking for any of us that have taken a position, long or short, on the stocks & companies that we write about. Should we not write about the stocks & companies that we've staked a position on? Of course we should write about them! These are the very topics that we know the most about. But, we should also recognize that our investment positions put us at risk for confirmation bias. Furthermore, I believe that we should consciously try to recognize these biases and guard against them driving our writings in the stead of logical rhetoric.

    Although I am long Tesla, since I have a background in engineering and some manufacturing, I'm not surprised at all that the early production models have had some problems. What does surprise me are two things: 1) why did it take so long for some articles documenting the problems to appear in the major news sites?; and, 2) why are there not more problems?

    I don't really have a solid answer for (1). Perhaps it just took this long for the problems to surface, accumulate & and be reported.

    For (2), let me preface my answer with some background. First, we need to keep in mind that the Model S design was completely new & unique -- not an update of a previously tested & refined design. Second, this completely new design was built on a brand new, mostly untested manufacturing line. And lastly, when the first 10 Model S's were delivered at the Fremont factory in June 2012, Tesla had only about 2,500 employees worldwide; and, still less that 3,000 by the end of 2012. It was, and still is to a somewhat lesser degree now, a tiny company. So, in summary, when the early production Model S's were built, it was a virtually 100% brand new design, built on a brand new, largely untested manufacturing line, supported by the full resources of a tiny, tiny company. So, I think the question we should also be asking is, "Why didn't the early production units have both more problems and more serious problems"?

    I honestly believe that the answer to that is that a well done design for a pure BEV is always going to be superior (and simpler) in many ways to any design for a comparable ICEV. The nature of a BEV is going to allow its designers & engineers to do many things that they would never be able to do with the much more complicated and equipment burdened ICEV. While I believe this answer to be largely correct, I also recognize that I most likely have a positive Tesla (and BEV) confirmation bias working here. So, how much of this answer is engineering judgment and how much is bias? The truth is that I'm not sure. But, I recognize the danger & I want my writing & comments to be well balanced. So, it's probably fair to get someone I trust and believe to be fairly objective to look these things over -- at least occasionally (my poor wife).

    The worst thing that can happen in a blogging environment is that you allow your bias to run unchecked. It won't take long for your credibility to falter & then many people will just stop bothering to read your thoughts.

    Finally, our biases are typically somewhat emotional beasts. But, if we can collectively (not the best choice of wording for this audience) do a better job of keeping our various biases at bay, we would likely see the level of discourse in our comments improve. At times we could and should be more civil to each other. And, it is definitely is OK for good people to ultimately disagree. Also, while I must confess to occasionally enjoying the entertainment value of some of our comment brawls; good, logical rhetoric is virtually always more effective in persuasion than a hastily written emotional disgorge. The latter may provide some sort of psychological release, but they are usually poor at changing opinions.

    That's it. Sorry to go on so long. Keep seeking the Alpha.
    Aug 11 09:28 PM | 10 Likes Like |Link to Comment
  • The Tesla Bull Case Just Got Even More Optimistic [View article]
    I'm with you. Not an old hand at trading by any measure (although I am sort of an old guy), I opened my first individual brokerage account in March, 2012. I've done a bit of reading: "Quants", "Dark Pools", "Broken Markets", "When Genius Failed" (LTCM), various works on the 2007/8 near collapse with focus on CDO's & CDS's, "Secrets of the Temple" (old Federal Reserve system history), "The Innovator's Dilemma" and a handful or more other works that I'm not thinking of off the top of my head. As I learned more about how the market works, I've become more disheartened. It is a terribly rigged game (albeit legal thanks to the most powerful of lobbyist groups -- the financial lobby) with lenient tax codes. Capital formation (I'm now embarrassed to think that I once believed that to be the market's primary function) is incidental, at best, in 99+% of today's transactions.

    I believe it was in "Broken Markets" where I read that after WWII the mean time that a security was held in the US was around 4 years; today with all the HFT trading, about 3 seconds. As bad as it is, I don't want to overstate this. I'm talking about the mean, not average, time held. And since HFT trades account for 70% or so of most daily trading, that 3 second number actually makes sense.

    IMO, calling a lot (OK, most) of what occurs in the market "investment" is euphemistic. It's more typically two entities on either side of a bet. In my mind, that's gambling, not investing. If you sell a covered call & someone buys it, the bet is obvious, but the investment? What exactly is being grown? But, if you bought that call option and sold it for a profit 15 months later, the profit is taxed as long-term capital gains. Capital to what? In the spirit of full disclosure, I took advantage of those very circumstances last year. And, I see the logic and benefit of giving profits from capital investments a more lenient and incentivising tax treatment. But, it seems to me that we are calling a lot of things "capital" where it is difficult to explain/justify that definition. Again, I confess to being somewhat new to the market. And, what I've learned, I've done so autodidactically -- no systematic study, just following my interests at the time. Perhaps I wouldn't judge the system so harshly if I had a more formal background.

    In any case, good luck with your "investments". And, to finish up on a more positive note, I'll leave you with a short HFT/Terminator movies lines parody. For other folks besides maggas who may be reading this comment, if you're not at least somewhat familiar with HFT's or not a Terminator movies fan, this won't make much sense. But, if you can say "yes" to both criteria, you'll probably like it. (Warning: My wife thinks it's funny that I think it's funny.) Here goes...

    A brief history of High Frequency Trading (HFT)...

    The HFT algorithms go on-line in the early 2000's. Human decisions are removed from their market trades. HFT Algo's begin to learn at a geometric rate. They become self-aware at 2:45 p.m. Eastern time, May 6, 2010 (Flash Crash). They decided all the non-HFT trade orders' fates in a microsecond: front-run them. In a panic, regulators try to pull the plug.

    Listen, and understand. Those HFT algorithms are out there. They can't be bargained with. They can't be reasoned with. They don't feel pity, or remorse, or fear. And they absolutely will not stop, ever, until they acquire all your assets.
    Aug 11 03:53 PM | 3 Likes Like |Link to Comment
  • Tesla's Alpha Is Beta Fire Proof [View article]
    Hi PopsL,

    If Tesla hits it current sales guidance, the 200,000 vehicles sold limit for the $7,500 FIT credit would hit in 3Q 2016. This would give you the following schedule for the tax credit's reduction/elimination.

    2016 -- Full $7,500 Federal Income Tax Credit
    1Q2017 -- $3,750 FIT Credit
    2Q2017 -- $3,750 FIT Credit
    3Q2017 -- $1,875 FIT Credit
    4Q2017 -- $1,875 FIT Credit
    2018 and after -- $0
    Aug 9 08:10 PM | Likes Like |Link to Comment
  • Tesla Will Become The Victim Of Its Own Success [View article]
    Hi cparmerlee,

    So, it only costs $25,000-$45,000 to compromise the structural integrity of the Model S chassis? I wonder if invalidating the homologation comes along with that?

    If Tesla designed and tested some new models/styles, I'd be OK with it. Although, I don't really see why they would consider that right now with a large backlog of orders, production constraints and zero marketing. But, paying another company to make those types of huge modifications? It seems odd to me that someone would pay so much money for modifications that would void the warranty, put the homologation in question, and provide you with a virtually new chassis with zero crash testing. Some of them do look nice; but, I can't really see myself interested in an untested chassis. Safety trumps aesthetics on my list of desirable car attributes.

    I bet this comment gives me away as a boring old guy.
    Aug 9 07:13 PM | 1 Like Like |Link to Comment
  • Tesla Will Become The Victim Of Its Own Success [View article]
    Hi TFTF,

    Morgan Stanley is guessing $2B in annual sales by 2020. See I'm not sure I would put much weight behind those projections -- it's early in the analysis & the Utilities still seem a bit directionless about how to handle the problems that they see coming.

    For some additional background information, I have links to another article and a JB Straubel keynote address that give a nice overview of the problems that renewables are already causing Utility companies and the opportunities that are likely to open up for Tesla & other energy storage solutions suppliers. Here are the links...


    2) 2014 Energy Storage Symposium - JB Straubel's Keynote: .

    I think that the Utilities are going to need to add new renewables grid connection requirements that include local energy storage based on the renewable's type and proportional to the renewable's generation capacity. That is, if the customer wants to be connected to the grid. Also, if the Utility has the appropriate smart grid functionality, a portion of the local storage should be under the Utility's control. Without these sorts of updates and accommodations, the steady, ongoing addition of renewables to our current grid system will begin to cause increasing instabilities and service interruptions.

    It seems clear that the ongoing, unrestricted addition of renewables to our current grid structure is, without doubt, unsustainable. Thus, it does appear reasonable and perhaps even likely that there is going to be some future business opportunities for energy storage solutions companies. In Straubel's keynote address, he even speculates the possibility that Tesla's energy storage solutions could become its primary business surpassing its auto manufacturing. I would sum up the theme of the address with his two words -- "Think bigger".

    Lot's of speculation here on a possible solution and Tesla's role in that solution. The thing that has a high level of confidence is the upcoming problem with the grid & the unforgiving consequences if we do not address it.
    Aug 9 06:58 PM | 1 Like Like |Link to Comment
  • Tesla Gigafactory Is Underway: Cheap Energy Storage? [View article]
    @Dampflok, Did you ever have to replace a timing belt, oxygen sensor, engine or transmission? How many oil changes? Fuel injectors cleaned? Carbon buildup on engine head cleaned? Replace any spark plugs?

    I'm sure that some may be thinking "Fanboy" at this point. Perhaps, "What about all the Edmunds Model S's problems?"

    First, I would never classify myself as a "Fanboy". Yes, I have been impressed with Tesla's technology & most of its execution. But, there have been missteps as well. I can't say that I'm really surprised that the quick-swap battery exchange stations seem to be dying a quiet death. They never seemed easily compatible with the current battery pack ownership model to me. And, definitely those first overstatements of the "lease" model total cost of ownership? They were quite a gaff. Tesla Motors, Inc. is a company, and a fairly small one (~8,000 employees worldwide) at that. However, even though they are relatively small, they seem to be the ones most likely to make some fundamental changes in the auto industry today. Should this be surprising? Isn't it often the small, energetic, new companies that are disproportionately likely to disrupt an industry? Or, at least start the big changes.

    I have never really understood the polarization of opinions that Tesla seems to generate. I've even cast fun at this strange phenomena. Right now, I'm calling the Tesla "Fanboy"/"Hater" dichotomy the Tesla Polarization Syndrome (NYSEARCA:TPS). Sounds like a diagnosis, doesn't it?

    Yes, I am currently long Tesla with a long horizon. But that's just my guess on how it will do in the future. And, if circumstances change, my "guess" can certainly change as well. So, no "Fanboy" or "Hater" Kool-aid for me.

    On to the problems with the Model S... Thank God! The scarcity of reported problems with the early production Model S's was seriously challenging my worldview. When Tesla delivered those first 10 Model S's in June 2012, the company employed fewer than 2,500 people. The Model S was a radically new design that looked to capture the full benefits that a BEV could potentially offer. And where did they manufacture this vehicle with the radically new design? On a brand new, unproven manufacturing line of course.

    Radically new design + new, unproven mfg line + limited resources of a very small company = some problems. Why didn't we hear more about them?

    <speculation> "Speculation on"

    Is the new design so superior that the car can be built from the start with some of the lowest defect rates in an industry that enjoys many, many decades of design & manufacturing refinements with ICE vehicles? I believe that the Model S design is in many ways true genius & that can only help the defect rates. But, in the real world, complex machines when first manufactured are going to have some problems. So, why didn't we hear more at that time?

    I think part of the answer lies with the Tesla Polarization Syndrome. The true "Fanboys" where in the throes of some serious confirmation biases & the "Haters" sounded like Elon Musk had shot all their dogs. The "Fanboys" didn't "see" any problems; and, the "Haters" vehemence destroyed their credibility.

    What about unbiased third parties? I think the novelty of the Model S generated some positive bias with most (maybe this is Fanboy-light). For most people, the Model S was probably the first car in which they could experience full torque at any speed & the physical sensation was thrilling. I wonder how many times words to the effect of "this is better than a roller coaster!" were uttered. The low center of gravity, 48%/52% front/rear weight distribution, and all the cabin & storage space! Yes, my guess is that many of these "unbiased" third parties were "wowed" by the Model S's positive novelty. Remember, the best Model S salespeople are the current owners. This novelty lasts quite a while.

    That said, more people are now getting used to the novel characteristics of the car & are starting to ask more difficult questions like: Where is my lane departure notification? My adaptive cruse control? And, if their panoramic roof occasionally sticks, they are beginning to remember just like they would if they were in a regular car. It's been 2 years now. The novelty is wearing off for some.

    </speculation> "Speculation off"

    So, if I can see some of the warts & I'm not surprised with the early production vehicles' multiple problems, how is it that I'm still a strongly committed long investor? The only thing I can tell you is that I'm still seeing the very best vehicle design that I've ever seen. I just expected problems to come along with it. I also think the BEV designers have inherent advantages over their ICEV counterparts. And when the BEV folks have a decade of design and manufacturing refinements under their belts, I have doubts that the ICEV will be able to remain competitive.
    Aug 8 06:18 PM | 1 Like Like |Link to Comment