The Tesla Crisis.

hey so when it comes to tesla i want to

share a story with you about an

institutional portfolio manager and give

you some updates on that whole tesla

firing ten percent of their staff

debacle that led the stock to drop nine

percent yesterday along with a strong

jobs report leading to more fears that

the fed's going to be more aggressive

let's talk about this

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tasty they have my tastyworks hat on so

take a look at this this is from gary

black on twitter he says that my

institutional portfolio manager friend

said that the news about layoffs coming

from tesla came out of a left field

today at 4 am by the way there have been

a lot of people complaining about elon

musk's communication style here's an

example of one of those complaints the

problem is how elon musk communicates

his messages without deliberating

reminds me of his take tesla private

comment he needs to have a proper pr

department to draft those releases and

be clear

what it communicates to workers and

investors he's a one-man show costing us

big all right so so let's break a couple

of these things down and then keep going

with sort of the institutional money

management comment but this right here

is an argument that essentially elon

musk should be a little bit more clear

like hey if you're sending out an email

to executives they're going to freeze

hiring maybe it should contain clarity

about exactly wait a minute who's

getting laid off who needs to be worried

is this a sign that production is

slowing down

what are all of the details and maybe

rather than this going you know coming

out in a leaked email how about it

actually comes out in a formal press

release right this is not a terrible

argument

that they should have a little bit more

uh you know of a corporate structure

tesla's still kind of acting like a

startup here i personally think the

complaint that one man is costing us big

is really in my opinion an opportunity

because if you think about it if tesla's

going to lay off 10 of workers either

through a fancy formal press release

with lots of things thought out or

through an elon tweet and the fancy

formal press release leaves the stock

going down five percent and the elon

tweet leaves the stock going down nine

percent well i have a better buying

opportunity with the same fundamental

information creating more short term

fear uncertainty and doubt and so now

i'm able to get a four percentage point

additional discount i'll take the

erratic communications when fundamentals

haven't actually changed let's see

that's what we need to talk about here

because see here's a hedgie that this

this portfolio manager friend

who says i asked my analyst to get

martin and zach you know these are folks

from investor relations over at tesla on

the phone to explain the context but of

course no one gets back to me and i'm

left scanning twitter to figure out if

orders are falling off a cliff you know

and this is the the in my opinion the

fascinating panic that you see in the

stock market like this even if you don't

like tesla this right here is a lesson

why

why would orders be falling off a cliff

if delivery time frames are stable well

it's potentially the case that supply

chain issues are keeping order time

frames delayed and new pre-orders are

falling off a cliff it's not an

unreasonable assumption but what the

person does with this

unreasonable or sort of this uh well i

would say um

unfully informed assumption is the

following at 3 45 i tell my trader to

sell to put an end to the craziness

knowing full well i sold a stock i love

with great fundamentals

so here before corroborating

their fear before this hedgie actually

figures out the additional details about

what's going on with these layoffs which

we're going to talk about they decide

you know what we can't take it anymore

we're going to sell now hopefully

because i think that was a terrible

decision hopefully they're getting their

free two hundred dollars with tastyworks

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the meantime they sell knowing that they

sold a stock with great fundamentals on

really straight up fear uncertainty

doubt and assumptions remember when the

email first came out we were making a

lot of assumptions we're like okay what

does this mean like are there

differences to orders who's actually

getting laid off we have some of those

answers now and we're going to talk

about those but take a look at this

and

then he after saying he sold a stock

with great fundamentals went on to decry

that elon is a ceo who bought bitcoin

sold shares piecemeal to make a point

that he paid a lot of taxes and then

picks a fight with biden and two crazy

senators this in my opinion is not a

rational

institutional money manager this reads

like an emotional child now i want to

make it very clear this is not gary

black right gary black is talking about

his friend i think gary black is very

reason but it shows you how even

institutional money can get emotional i

mean look about it

it's like you hear a piece of news you

start making these terrible assumptions

you think worst case scenario and then

all of a sudden you start justifying

your actions by going that's it the

company's got great fundamentals but the

ceo is crazy i mean he smokes weed he he

but he bought bitcoin and that went down

in value by you know six thousand

dollars since he bought it and and he

made a point about taxes and fights with

politics and he's going woke and broke

or whatever on twitter and it's like oh

my gosh you're fighting the woke

brokenness on twitter right it's like

all of that

that noise that franticness that i just

exemplified it's just pure

stress and emotion and that emotion

multiplies

their worst case scenario assumption

which ended up being wrong anyway but it

shows you that if you ever feel this way

you're not alone like institutional

money managers do this

anyway then complains about elon buying

twitter enough already it's too much

noise in the end i believe in the

investment thesis that tesla will

benefit most as ev adoption soars but i

get no satisfaction except an occasional

cryptic tweet that no longer gets me

excited it's all too much drama so in

other words

you get no satisfaction in other words

this is an institutional money manager

telling you here's a company with great

fundamentals but i'm not getting you

know my little wee wee pleasure i

enough and there's too much noise so

i'mma sell like a little weenie baby

that's that's kind of what you have here

and it is shocking to me to see this

same kind of like uneducated investor

ridiculousness

in the institutional money space and it

actually makes me lose a lot of respect

for institutional money because quite

frankly i think a lot of institutional

money is managed by people that don't

really know what they're doing that

actually don't do fundamental analysis

and are just emotional investors

throwing darts

i don't actually think they read about

fundamentals or macro all day long i'm

not trying to say like oh i'm better

because i do even though i do do that

i'm just saying it's this is shocking to

me okay

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life okay

so what actually happened well let's

take a look at elon musk's follow-up

email here's his follow-up headcount

reduction tesla will reduce will be

reducing salaried head count by 10

as we have become overstaffed in many

areas ah okay all right

note this does not apply to anyone

actually building cars battery packs or

installing solar hourly headcount will

increase

well okay that now goes to show that

this institutional person was a total

weenie baby and was wrong about their

worst case scenario assumption because

what elon's really telling you is that

hey we're going into a recession we're

going to cut costs where we have too

many people doing too little work and

oftentimes that could be in salaried

positions like management human

resources

bookkeeping if all of a sudden you have

three bookkeepers but the work could be

done efficiently by two what do you need

them for i just lost two salaried

staffers and at first when i lost them

i'm like oh my gosh this is terrible now

i'm like

crap we're doing what four people used

to do i'm sorry what five people used to

do including me with three people and

i'm like

damn that just saved me you know four to

five hundred thousand dollars a year

what does that do well first of all in a

recession it increases your ability to

survive but in addition to that it also

increases

margin it makes companies more efficient

it cuts the fat that's a good thing

we're going to get some more color on

cutting the fat in just a moment too

no this does not apply to anyone

actually building cars okay so this

turns on the head this assumption that

oh no uh

car production at tesla must be

plummeting

hourly headcount will increase which

actually makes sense when you're ramping

factories right

uh okay take a look at this here

this i thought was very interesting oh

yeah and a lot of people have been

asking me for this a lot of people have

been asking hey like is there a list

where you have like your cameras or your

gear or stuff that you like to use stuff

you like to buy or whatever yes i've

been updating it and i'm going to update

it some more as well today so you can

kind of check back to it every so often

if you want but honestly go to

medcavan.com shop and you could just see

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whatever and i just updated it so it's

got some fresh cool things on there that

i think you might like but anyway take a

look at this this is ford's number of

employees over time and and uh rob from

tesla daily posted this because joe

biden obviously slammed uh elon musk for

this this uh you know cut here and this

has been ford's employee trajectory and

this has been tesla's employee

trajectory so it's kind of funny to hear

joe biden slam tesla when when you know

ford is actually the one that has had

the substantially declining head count

and even after this 10 salary reduction

or whatever the workforce reduction of

10 cutting mostly salary positions

tesla's probably going to grow by next

year if we're at 100k

right now but we subtract 10k workers

and that's 10 right but then we hire 20k

hourly you know maybe these are the

salary these are the hourly well then we

actually grew by 10 the total workforce

right so very good clarifying email here

which is very very good but this is

another one that i thought was very

fascinating gary black spoke with some

employees to get a little bit more color

on what's going on

and uh he says here this may be what

happened and this sounds you know i i

don't know like partly this potentially

sounds a little erratic which is not

good but then again i kind of do think

that elon musk has quite a level of

erraticness to what he does but

sometimes that actually is what makes a

great leader you see a problem and you

try to deal with it right away rather

than you know waiting for somebody to do

a study on it and waiting a year to

figure out how to best do something and

just do it right it's kind of an

entrepreneurial mindset but anyway this

may be what happened after elon came

back from his visit to twitter

headquarters he saw that the fremont

facility was well

under capacity which prompted elon's

tweet to those working from home to

return to work

then

and that's probably because you see a

bunch of empty desks or whatever then

several thousand employees turn up at

fremont and it was chaos and all of a

sudden elon musk's probably looking

around going wait a minute we have way

too many people which is actually a very

interesting factor about work from home

is that if everybody's in the office and

you see a bunch of people standing

around because there's not enough work

you're like okay let's fire people if

everybody's working from home you think

you know work's getting done you don't

know how many people are actually just

standing around because they're not in

the office for you to see right now

obviously you can manage in such a way

that you have like performance goals and

and you could try to track all this

stuff at a more mature company that's

what larger companies typically do or

they don't they just let people sit

around you know who knows it depends on

the company but anyway then these people

come gary black says not enough parking

desk office space which convinced elon

that there were too many people at tesla

this is different from 2018 when they

fired ten percent of people that was

pre-planned and human resources was

involved this time it wasn't now

everyone is scrambling trying to figure

out how to proceed i've talked to half a

dozen tesla employees today nobody is

panicked many went through this in 2018

but this is different because back then

a lot was going wrong and today most

things are going right almost all are

supportive of elon's directive that

those work from home should go back to

work

work at the office several worry about

complacency and that the company has

grown too fast no one told me that order

flow was declining there's clearly a

here we go again feeling and a working

in the moment mentality rather than

long-term planning but people said

that's the culture and it works okay all

right interesting so it gives us a

little bit more color that yeah i mean

this is just kind of the way our tesla

culture works but fortunately right now

we're in a place where a lot of things

are going right rather than things going

wrong and so i think this is this is

very very insightful first of all huge

shout out to gary black make sure to

follow him on twitter make sure to

follow me on twitter and get that free

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