QF Research Profile picture
Dec 1 9 tweets 3 min read
1) Posting often about $TSLA for a reason.

LT growth/share/margin assumptions required by valuation were outrageous.

But a LT expectation reset (i.e. blowup outside of lockdowns) seems likely within few Qs.

Book to bill will be << 1 in Q4 ...

$SPY $QQQ $TLT $GLD #Commodities
2) (also in Q3) at this rate.

Backlog = sales-orders. B:B = orders/sales.

I'd guess many TSLA bulls aren't familiar with cyclical risks as bull case is mostly secular.

Have discussed semis as a leading econ indicator for over 1Y. Requires cyclical ...
3) analysis. Orders, sales, backlog, inventory growth thru supply chain (if sales > end market consumption) etc.

If I saw a semi (or in another cyclical sector) stock with huge LT expectations, rising inventory, B:B << 1, rising competition, reduced ...
4) pricing power, AND a shareholder base that doesn't understand cyclical risks, I'd be very very short.

TSLA meets all criteria plus timing - high risk of that LT expectation reset (i.e. secular) within few Q's.

Yes US orders weak due to tax credit ...
5) next Y.

Even taking that into account, I don't see how TSLA avoids a big unit/margin miss soon with current order rates. And reverse is true in some markets (credits and discounts pulled in orders from '23).

Q4 US discount is another very bad sign.
electrek.co/2022/12/01/tes…
6) Finally there's real risk of neg feedback loop (perhaps < $160 or so?). Check the #'s. They hold up.

Elon has pushed boundaries to limits. Have said I've never heard a CEO lie so easily and regularly in decades of listening to calls and presentations.
7) However he always stopped before unrecoverable damage (if he weren't seen as next Steve Jobs he'd prob be barred or in jail by now).

But his behavior recently is even surprising those who follow him closely. I sometimes wonder if it's because he's knows he's at a precipice.
8) Do the back of envelope math.

Orders would have to roughly double 2H '22 run rates (or more) for TSLA to meet expectations 1H '23.

2023 consensus? 40% revenue growth with rising margins.

Given economic environment, exponentially growing competition, and depleted backlog?
9) Typo in 2).

Change in backlog = orders-sales.

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More from @ResearchQf

Nov 30
1) Much to say but just a summary. Rates will go "somewhat" higher?

Peak Fed funds rate now 4.92% vs 5.15% in early Nov.

Or only ~20% prob of 2 more hikes vs Sep dot plot vs ~100% prob few W ago.

Taking under at 4.87% median still looks ok ...

$SPY $QQQ $TLT $GLD #Commodities
2) (btw ignore 4.331 hikes in table - distorted due to 3.83% effective rate vs 3.87% median).

And at least an IT 2Y yield peak on 11/3/22.

Also 3M/2Y inverted today! Correlates with recent 3M 18M forw - 3M "Powell curve" inversion.

Much better than ...
3) 3M/10Y inversion in timing recessions and Fed pauses/cuts.

Why? Shorter term inversions = ST rates likely to go below yields priced within ~1-2Y rather than many Y's.

E.g. 3M/2Y first inverted Aug '00 vs Apr '00 for 3M/10Y. 3M/2Y inverted Jul '06 ...
Read 4 tweets
Oct 18
1) BofA Oct Global Fund Manager Survey released today.

Most charts are saying similar things and are at/near '08 extremes. But here's a sample.

Net fund managers % saying overweight cash and underweight equities beyond peak '08 levels.

$SPY $NDX $TLT $GLD #Commodities
2) Close to record levels of investors expect a weaker economy next 12M.

#Inflation expectations at Dec '08 level.
3) Lowest % on record saying taking higher than normal risk.

Lowest % saying global profits will improve.
Read 5 tweets
Oct 18
1) SF Fed paper "finds national homeowners’ shelter prices rose 4.3% Y/Y in July 2022, compared with 5.8% in the CPI measure" based on actual payments.

- OER based on the “implied rent” that owners indirectly pay to ...

$SPY $NDX $TLT $GLD #Commodities
frbsf.org/economic-resea…
2) live in their homes. Implied rent cannot be observed, so the CPI uses an estimate (i.e. very imperfect, lagged and difficult to model as I've discussed).

Magnitude of shelter #CPI has surprised most, including Nobel laureates, Harvard professors, GS economists (who today ...
3) adjusted their model and increased '23 shelter inflation estimate).

Here are a few threads/debates:





Then an empirical data set with what's actually being paid for shelter is ...
nytimes.com/2022/10/14/opi…
Read 6 tweets
Oct 17
1) Bberg implies selling bills to buy back bonds, so has elements of Operation Twist.

"allowing Treasury bills to be sold in more consistent quantities, with proceeds used for buybacks of securities less in demand."

This would also help ...

$SPY $NDX $TLT $GLD #Commodities
2) release RRP liquidity.

But haven't seen any evidence that this is their intention (sell bills to buy back off-the-run-Treasuries). If Treasury matches tenor by selling on-the-run-Treasuries instead, liquidity of older bonds will improve but market impact is quite different.
3) If anyone has any insights here, would love to hear from you.
Read 4 tweets
Jul 23
1) Another view of 4M decline in LEI.

Not 4M in a row but % change in 4M. Perhaps -0.6%, -0.8%, +0.1%, -1.2% is worse than -0.2%, -0.3%, -0.1%, -0.4%?

All priors when 4M change was as low led to a #recession within a ...

$SPY $QQQ $TLT $GLD #Commodities
2) few Q's (or already in recession in some cases) since the '60's.

Interestingly, this approach dramatically shortened lead time to '08 recession vs LEI down 4M in a row. Signal kicked in Nov '07 instead Jul '06.

Apply your interpretations.

Jobless claims 4W MA rose 70K ...
3) last week.

Again, this did precede every recession since '68.

OTOH 2 of 10 priors ('84 and '96) didn't result in recessions.

However, if initial jobless claims approach anything near 300K, the patterns will be significantly different from the 2 ...
Read 7 tweets
Jul 10
1) 1Y breakeven (1Y forward) < 2.5%, a 52W low and below when #inflation was transitory in ‘21.

1Y breakeven (current) 3.8% vs 6.3% in Mar. When Jun/Jul 8-9% CPI rolls off and sub 3% #’s roll in, 1Y inflation expectations will be 2’s % by Aug!

$SPY $QQQ $TLT $GLD #Commodities Image
2) Will change with data but consistent with current inflation swaps pricing early ‘23 as discussed.

Also Citi’s Global Supply Chain Pressure Index fell by largest amount in its history in Jun.

Prefer this to NY Fed Supply Chain Pressure Index. Citi includes inventory data … Image
3) in addition to many transport cost and supply components (e.g. delivery times, backlogs, input prices etc). I’ve discussed variety of metrics used in these indices in past posts.

Implied gas still low $4’s. Still unreal how bad Fed’s timing has been.
Read 6 tweets

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