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YOUR BALANCE
I'm obviously not a financial planner
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I'm obviously not a financial planner


Mar 9, 2020, 10:39 AM

But why would tesla stock go down if oil goes down?

https://www.marketwatch.com/story/solar-stocks-tesla-and-nio-slammed-by-sliding-crude-prices-2020-03-09?mod=home-page

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Cheaper ownership of gas cars decreases demand for electric.***


Mar 9, 2020, 10:39 AM



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The value proposition of an electric vehicle plummets when


Mar 9, 2020, 10:40 AM

you can get gas for less than water.

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makes sense I guess


Mar 9, 2020, 10:42 AM

But do people really buy Tesla's because of gas price? I mean gas was around $2/gallon when Tesla stock was killing it.

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People buy it to save the planet, but just as much to look


Mar 9, 2020, 11:17 AM

trendy and whatever. The carbon footprint to make a Tesla is multiple times larger than the footprint to make a standard gas car. That reverses when driving though.

But Tesla has always run on hype, government subsidies, and debt. It's biggest marketing plus is probably performance. But a $40K-100K compact car that can't drive over 300 miles before needing a lengthy recharging.....and even then the price is subsidized by the governemnt.

But the financing is what Tesla runs on. 50 years ago that company would not exist. At all. It has $10 billion in debt, rarely makes a profit, and when it does, that profit is just enough to pay its cheap debt.

Now get this, the company has more losses than profits since inception. It has run on debt, that's ballooned up to $10 billion. It HAS managed to eek out enough profits to service it's debt. Ok, so you have that. Now, it's market cap is $116 BILLION. A company that has a net overall profit history of ZERO. Debt that has climbed to $10 billion. Never made a profit over $200 million.

There's a reason I wouldn't buy used underwear from him. Tesla is a perfect example of our debt bubble in action. Now you have the lenders who are in Tesla for $10 billion. They leverage that debt to keep the company floating. Meanwhile their $10 billion investment in a net profitless company, creates a market cap of $116 billion. And that is how $10 billion in debt becomes $110 billion in stock value. And if their lenders own say 40% of the company stock, they can sell in a fire sale, rake in 400% interest on their investment, and let Musk blow away in Chapter 11.

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By most of those standards though, Amazon is a lousy bet.


Mar 9, 2020, 11:32 AM

There's a lot more than financing that answers IE's initial question.

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Amazon has consistently run a profit.


Mar 9, 2020, 11:52 AM

But the same principle applies to Amazon. Amazon makes profits regularly of $1-$2 billion. It varies. It's "stable" because it's debt is only $11.8 billion. Yes, Amazon and Tesla have basically the same debt load. Amazon can easily service their debt. 5 years of profits pays it off. Tesla, is on paper insolvent.

But Amazon's market cap is $916 BILLION. Same game, bigger numbers, more stable with Amazon though. But Amazon takes $2 billion in profits, and $11 billion in debt, and has a market cap of nearly a trillion dollars. At any given time Jeff Bezos or Elon Musk could sell a small portion of their stock, and pay off the debt. But both companies, like most large ones, drink debt from a fire hose.

And you get taxed on profits. No one wants massive profits. You play the game by leveraging the debt to increase the stock value, while keeping profits low. All but the most essential profit level needed to service the debt is rerouted to increase revenue, and customer base, name recognition, marketing, which helps the stock. The market caps are insane, is the whole point. I mean extrapolate Amazon out 10, 20, 30 years. They're up to a billion or two in profits a year now. In 5, realistically 10-15 years, they can pay off their debt with profits. And they do I'm sure. But the stock value.....Amazon is NEVER going to make a trillion in profits. Never.

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Where did you get 11 billion? I'm seeing estimates from


Mar 9, 2020, 12:03 PM

$65-75B (and the variance is weird given it should be easy to find given they're public).

https://www.macroaxis.com/invest/ratio/AMZN--Total-Debt


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I was looking at old data. Was $11 billion in 2016-7


Mar 9, 2020, 12:10 PM

Now is $74. They've had a huge jump in debt last 2-3 years it seems. Market cap is current.

I'd wager it has something to do with Bezos' EX-wife. She walked out with a pretty penny.

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Right, so that's sort of where I was going.....


Mar 9, 2020, 12:16 PM

A market cap that's roughly 10x debt for both companies.

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Yeah, market caps make no sense.***


Mar 9, 2020, 12:44 PM



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Long-term debt is what most look at and it was $23.4BB....


Mar 9, 2020, 4:22 PM [ in reply to Where did you get 11 billion? I'm seeing estimates from ]

at end of 2019.

What no one has mentioned in this thread is cash on hand...Amazon has about $55BB cash on hand (which is hard to comprehend). They have generated about $24BB in cash over the last 2 years. That's a big reason why their market cap is so high.

They are generating cash, reducing long term debt (slightly yoy) while expanding and making substantial capital investments. It is amazing from a financial perspective.

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I think what you're saying is....


Mar 9, 2020, 5:28 PM

they're the Dave Ramsey of companies?

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Nah...they wouldn't have any debt then....


Mar 9, 2020, 7:29 PM

They would pay off all debt tomorrow with cash :)

I'm saying they're pretty kicking #### on all fronts. As someone trying to dig a company out of a big hole, I'm envious :)

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That only works for a Prius and other electric/Hybrids


Mar 9, 2020, 10:44 AM [ in reply to The value proposition of an electric vehicle plummets when ]

not named Tessler. People drive a Prius cause they want to save the earth. People drive a Tessler so they'll be noticed and can rub it in other peoples faces that they have a Tessler.

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See below---disagree about the Model 3.


Mar 9, 2020, 10:46 AM

S or X? Yeah, generally conspicuous consumption first and foremost.

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Got behind a Model S yesterday turning into the Madren


Mar 9, 2020, 11:25 AM

Center.

/CSB

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Or they have experienced the face melting acceleration and


Mar 9, 2020, 11:39 AM [ in reply to That only works for a Prius and other electric/Hybrids ]

became completely addicted.

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Oil prices go down, disposable income among the wealthy goes


Mar 9, 2020, 10:40 AM

down, less Tesslers on the road?

Butt I'm actually going to go with, it don't make no sense really.

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That was the only reason I could figure as well.


Mar 9, 2020, 10:43 AM

Most folks who have to go to work at say, Lowe's, aren't buying Tesla's.

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Maybe not the S or the X, but I think there are a few who


Mar 9, 2020, 10:45 AM

view their volume seller, the 3 as a practical purchase.

I mean, yeah, a Bolt or Leaf would be even more practical, so brand cachet clearly enters the equation.

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sorry, this was my reply to your reply to me above.***


Mar 9, 2020, 10:45 AM



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But they cain't get the 3's at will


Mar 9, 2020, 10:46 AM [ in reply to Maybe not the S or the X, but I think there are a few who ]

They's a long list of other look-at-mes that are already on the list to recieve a slowly produced vehicle.

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I thought wait times were currently 2 weeks-ish?***


Mar 9, 2020, 10:48 AM



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I have no idea. All I know is there's a wait


Mar 9, 2020, 11:00 AM

I ain't waiting for no car.

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3-4, but a lot of people are getting theirs in less than 1***


Mar 9, 2020, 11:40 AM [ in reply to I thought wait times were currently 2 weeks-ish?*** ]



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They will lose financing, which is what Tesla runs on.


Mar 9, 2020, 10:47 AM

Hype, begets financing, begets Tesla.

It's not like Tesla is turning a profit. A LOT of companies run on debt, and hype.

Forget the revenue amounts. Pay attention to the dark red. The company has never made a significant profit. It literally runs on debt. It has $10 billion in debt, and only lost $800 million last year.

https://www.theverge.com/2020/1/29/21113987/tesla-q4-2019-earnings-results-profit-revenue-model-3


Message was edited by: Tiggity®

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gas is cheaper than the coal that teslas run on.***


Mar 9, 2020, 10:50 AM



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