Confronting Gary Black - Legendary Tesla Fund Investor.

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 gotta watch it so

here's an amazing in-depth conversation

with gary black hedge fund manager about

tesla now we're gonna talk about tesla

and to help me talk about tesla i'm

gonna 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 gotta figure out what kind

of pe you think tests will deserve in

2025 it's gonna 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 gonna 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 wanna 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 gonna 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 gonna 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 gonna 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 gonna 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 gonna 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

gonna 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 gonna have cyber

truck in the truck business everybody's

got a ev suv now i just think it's gonna

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 gotta own something right i

guess it looks pretty good and it's

moving a lot so i gotta 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 gotta 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 gotta 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 gonna

that's gonna 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 gonna get

a good return for one week okay you

gotta 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 own

stocks with a junk

bond rating so that's what i would do i

would basically pay down debt with their

cash if they don't need for

gigafactories

and then they can buy back stock

opportunistically if it gets hammered

because you know the china first month

of the quarter numbers are always bad

because they ban meaning this is what

the media says they're beheaded because

they export out a lot so the domestic

number which is residual always looks

weak and they get me to say oh china

demand is falling which is what they

said back in july is what they say every

month the first month of every quarter

and i'll probably say in november

because my my bet is you're going to see

a big drop from

uh for october which will be reported

november 9th

that's the first month of the fourth

quarter you'll see a big drop from

september where the number was a record

but hopefully investors have learned the

way this works

that the first month of the quarter they

export out the second month of the

quarter they export out about a half the

third month are all domestic but that

first month you satisfy the exports

first so that's something that could

happen that could make the stock of them

a bad what would be a bad investment of

the cash

building restaurants would be a bad use

of the cash

okay

let starbucks or mcdonald's pay for the

right to sell

food at your charging stations don't go

build your own restaurants you don't

know how to build restaurants

you know i i know that elon's brother

builds restaurants but that's just not

your core composite it's not why

and restaurants are notoriously

dangerous uh business in general

so

you mentioned crypto you brought it up

do you own crypto and uh what do you

think about it

look i don't own it because i can't

value it

i can't using

any kind of

you know

discounted cash flow

discounted earnings

comparable i can't use any of the

traditional evaluation methods

but jerry you don't need any of that

stuff you just know somebody's going to

pay you more tomorrow yeah

greater pool theory when the music

music stops

yeah i have friends of mine i have

people in my family knowing crypto you

know and

you do what you want i'm not going to

own it but i don't need to i can i can

look at the russell 3 000 all day long

come up with great names that i think

can double over the next five years

i don't need it okay give me some of

those

uh i just gave you one celsius is a

great name spotify is a great name uh

airbnb is another great name i think

snap snap's gotten crushed

because people think you know you think

they can't figure out the algorithm you

know for the new iphone uh

yeah yeah

um they'll figure it out um

ttb is another one you know they trade

desks

they can figure out you know ways around

the iphone code where they can like

group things together

people together they don't have to know

that the specific

people

they can just look at it as population

they have algorithms that can get around

it and convince advertisers it's not

it's not about that the advertising

doesn't work on a snap

or you know even twitter's a good

example

um it's just they don't have the tools

to measure it

measure the roi which they need to

develop so that's just thinking about

first party tools versus third parties

yeah but i mean like roi measurement in

ads is the easiest way to sell more ads

if you can it's conventional i mean

that's when i used to work i used to be

a brand manager at jmj you know we would

do it using surveys i mean you can you

can measure

roi but you can't use it you know using

your phone anymore

okay we'll figure out ways to do it so

we like that we like etsy um hey that's

one of mine too nice what about

pinterest

what pinterest i struggle with i i just

don't

know if it's

if it has lasting power

yeah i agree

like a snap or

twitter has lit we don't own twitter

anymore we used to twitter's different

because it's mostly brands okay so like

you will advertise on it united airlines

will advertise on it they don't need to

be able to capture everybody's

individual data which is big branding so

twitter's probably fine snap is the one

we own

we think it'll be fine long term

okay

wow that was interesting um okay so

now i want to ask you macro

elon musk responded to

jack dorsey and kathy wood and all of

them kind of

arguing on their own pedestals about

inflation jack dorsey says

hyperinflation is coming elon musk says

he sees costs

pressures going up kathy woods saying

the velocity of money's down so money

circulating less therefore pulling

inflation down and

we also know that

every manufacturer is double triple

ordering right now as soon as this

double triple ordering stops we clear up

these supply backlogs we could be in a

deflationary environment i want to know

where your head is on this

i view inflation as being transitory you

know you look back at every time we've

had

one of these

epidemics and they don't look just at

the u.s

what you see is the government

really creates a lot more uh money to

the fed you know

the fed will put out lots of very easy

money policy monetary policy you see

there's a lot of physical stimulus

because you're trying to offset the fact

that the economy closed down

while the epidemic was raging and you

can go back 70 years and you can see

this happens every time

usually what happens afterward is you

get a lot of physical stimulus

you get a lot of physical stimulus and

you got easy money for you know a year

or so

and you get this temporary inflation the

temporary inflation is because you get a

lot of shortages you can't today you

can't get enough help you know you talk

to restaurant owners they're trying to

hire people at 20 now and they can't do

it they operate with limited hours

um

and that causes treasure inflation but

like if you were to go talk to an uber

driver today okay

now all of a sudden there's a ton of

uber drivers out there and the uber fees

are coming down okay you're going to see

that with all kinds of commodities as

more and more people go back to work

because

their

safety

has been exhausted their benefits have

been exhausted

to your point as prices go up you always

get more supply because it's more

profitable for folks to make stuff

you're going to see the supply shortages

ease over time i don't know if it's

going to be six months diamonds whatever

but they release they will be transitory

they'll have inflation come down so i'm

not buying the argument that this what

what

um powell didn't call transitory

inflation has now somehow turned into

secular inflation not by him right right

it just

it seems like the

tilting point has just been delayed a

little bit sort of peak inflation and

now you got this risk that you got

governments

particularly in europe because europeans

sometimes do they worry more about

inflation than we do okay because the

hyperinflation had after world war ii

you have the risk that people start

really

being restrictive in their fiscal policy

or their monetary policy

and to your point that pushes us into a

deflationary

cycle because you've got too many goods

and there's no more shortages there's

just too much supply now i believe that

you've got yellen who's a dove you know

when she was running the fed powell's a

dove and you still probably have the

majority of fed members who were dovish

okay

so i don't think powell will make the

same mistake i think powell is going to

remain dovish they will start tapering

which remember tapering is just taking

away the punch bowl okay so the punch

bowl is being replenished

at 120 billion dollars a month

120 billion out this month which means

they're buying bonds okay so they're

pushing long-term interest rates down

we're going to do 105 next month and

then we're going to do 90 the following

month and we're going to 75 the

following and over time

the punch bowl stops being replenished

because everything's fine again okay

that's what i think is going to happen

and look if we start seeing bad data

like let's suppose gdp which you know

right now let's say 4s

to

late 2022.

but i do worry that you get so many

people who are screaming inflation

inflation inflation because they're

looking at where it is today

yes yes there's no perspective of

history here that every time you have

one of these epidemics you have massive

fiscal policy

benefits because they close the economy

for a while and they have massive

monetary policy

and that stops okay and once it stops

you're going to have more deflationary

force by definition so i'm much more in

the camp of deflation is still

as much a risk as inflation i mean look

there's four things this is the secular

stuff that are driving deflation okay

one is you got global outsourcing

one is you got price transparency

one is you got automation and the fourth

is demographics people getting older

they're leaving the workforce

um

global price transparency is the last

two weeks substitution

so it makes everything real competitive

global global sourcing and you can get

the cheapest goods possible whether

you're nike or lulu or anybody

and in demographics people get older

they leave the workforce and they don't

spend as much they don't have as much

income that's deflationary you see

that's that's what really happened in

japan that's why japan's

place went to zero and you're seeing

that all over the world yeah i've got

those forces that are secular and then i

have this temporary inflationary stuff

which is because of covet and now this

massive stimulus

but you know i i look at that as being

temporary and this will all take care of

itself

once people start producing goods again

and once people run out of benefits they

have to go back to work

yeah well i don't want to stay home and

day trade not everybody can stay home

and day trade

i see

yeah so yeah i mean i agree with you as

well when you say uh

inflation might be so evident now

because uh to and such a fear for folks

because it is so evident now we're

seeing it happening right now it's kind

of like pain is always the most painful

while you're in pain but your memory of

it or your expectation of it is is never

as bad uh so uh i agree with you uh and

uh i

don't think you'd probably be the right

person to ask if you think crypto's

gonna crash when we start heading

towards deflation

you know i've been i've been thinking

crypto is going to crash well it almost

crashed back in uh july it went to 29.

but

i can't i can't figure out a way how to

value it and i've done on twitter and

i've got a lot of fires they tell me how

you value it

and people do what you do they say well

it's going up you just sell to somebody

else

let's not tell me how to buy it you know

um

that's all we got man that's all i got

here it's like a network effect you have

to calculate the value of the network

and you can put a value based on how

many people are in the network and that

sounds plausible so i'm not predicting

it's going to crash so i've come to

grips with tesla's going to hold some as

long as it doesn't grow i'm fine with it

again tesla if tesla's bitcoin

investment went to zero you'd have to

knock the dollar off the share price not

over earn it it's worth a buck

out of you know twelve hundred dollars

it's the same thing like you said if you

include energy or insurance it's like a

few dollars of the share price like

nobody cares

or even like robo tax robo taxi is

probably the most divisive topic yes

you know tesla has an advantage

you know they've got two million cars

running around collecting data

you know they can feed into the

you know the dojo the dojo can like look

at all these different scenarios and say

you know in this situation this is what

you should do based on you know what

what cars are coming and where you are

in the world

and you could you could have like uh

you know this this this ai driven

machine driven uh network that basically

can drive all these cars all over the

place

fine i get that the problem is that you

know a lot of the equipment

was designed back you know for 2016 2017

type hardware

and a lot of the especially the chinese

autonomous vehicles you know they're

spending a lot more per vehicle on

hardware than tesla is so they might

have

where tesla might have you know eight

cameras

okay or you know um but no lidar no

radar anymore you know that the chinese

makers might have 12 3 lidars and one

radar

and so they don't have the dojo network

they don't have like the ai that tesla

has but they're doing okay and i use

your state of california as a good

example there are eight players now been

approved

for autonomous vehicle testing tesla i

would think would like to be approved

for testing but they're not and to be

approved for testing if you read the

fine print

it says you've got to be level three to

level four and they're not yet okay

because there's still too many

interventions so i'm not saying that

it's a bad even what i'm predicting is

you'll see

uh just like when you used to buy a car

you could have a base stereo you could

have premium stereo

and i'm not saying intestines base

but you could have two levels of um

autonomy one that's more of a

commercial great autonomy and one's more

consumer great autonomy

so i think for robo taxi which is

commercial

you're going to have cars that might be

you know much more expensive that people

buy they're equipped with all kinds of

stuff in it to make sure that they can

drive autonomously including lidar radar

more cameras whatever

and i think unless tesla wants to do

that it's going to be hard

interesting oh that's very interesting

so so what you're saying is we might see

this

you might for example buy the model x

full self driving but in the future uh

you might have to add on um the

commercial package to make you

legal for california standards to

sign up for uber or whatever right maybe

and look i used to

drive pushes it was a bose stereo which

is pretty good

push charges for everything like two

grand extra you'd have the basically

you pay two for bows you'd get a

burmeister for seven

and the burmeister was like you get in

the car you can sit there all day and

listen to it

i'm just saying autonomy is one of those

things that you could add all kinds of

hardware to make it better

and i'm not an engineer and everybody

knows but you're not an injury you don't

know anything

yeah that's true but i look at what a

lot of the competitors are doing a lot

of competitors are putting a lot more

money into their hardware than tesla is

right now

and so all i'm saying is it's not a fade

to complete the tesla gets to the finish

line first because once they get their

fsd to work perfectly because they're

bringing all this information in all

they do is flip a switch

and voila they have instant distribution

okay

whereas nobody else has that

so

i'm saying tesla will probably get there

by 2025 but i think a lot of people are

going to get there by 2025. yeah i mean

really

i mean personally i think

all tesla really needs to do

is

throw on

forward-facing lidar my opinion because

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you're going to have hate mail when you

say that

okay

trust me

because elon hates lidar he just thinks

i mean that investment

that's what he

it's true i i i guess maybe i i don't

know i mean maybe i will uh i've i've

mentioned that a few times on this

channel so maybe i'm a little bit more

callous to saying that but uh you look

at a company like uh microvision tesla

could buy them uh i mean it's it's a

fraction of uh i mean what what's

microvision now i mean it can't be that

expensive but anyway you buy microvision

you have forward-facing lidar it's just

not that hard throw it into the

rear-view mirror console it's a 1.3

billion dollar company

it's it's nothing

and i wouldn't be surprised because i

think what don't people don't appreciate

especially in china

they're putting a lot of money into

their autonomy

and a lot of them are level four already

even the cheaper ones and i think at the

end of the day

that's going to force tesla to have to

spend more on the autonomy hardware

i see i agree with you on that uh you

see it like even um

nvidia see

nvidia has written on their blogs i have

this written down here

nvidia has long recognized that lidar is

a crucial component to an autonomous

vehicle's perception

it's kind of interesting because i i

really like nvidia and i i believe and

trust them so i do think this is a

little bit of a blind spot by elon but

again i'm also not an engineer well and

when they made the decision not to use

lighter lighter was very expensive at

the time yeah

and a spinning

so look i don't know the answer i just

think to put

you know let's suppose you have a three

thousand dollar price target on tesla

without naming names which 1500 comes

from evs and 1500 comes from robo taxi

where you're saying you know if you take

every one of these supply supply-driven

models every one of these robo taxis

number of hours per day

um number of cents per mile number of

miles per hour number central mile

here's the math that's a supply driven

model as opposed to demand model is

what's going to be demand for

you know autonomy and working into that

and look if i'm uber or um lyft i'm not

just going to give up i'm not just going

to let you know tesla come in and take

my business

it wouldn't surprise me to see more like

subscription models that you have with

cable where you know you pay some

monthly rate and you can use it all the

time because you're not now

talking about giving up why do you think

uh lyft and uber

shut down their self or sold off their

self-driving segment

but they're using they're using other

players they're investing

in um third-party

um autonomy units and that's that's what

i think i don't think they thought they

could do it themselves i think they were

better off pitching their wagon to

other autonomous or do you think um

they're going to go for like the hertz

model where hertz is uh renting these

things uh maybe full self driving

individual customers rent them from

hertz

and then and then tesla has the full

self driving through that so it's kind

of like uber's using tesla

see you can't rent a tesla today through

herds that will drive you by itself you

still it's a level two

autonomous vehicle right and you have to

be

look you you can watch all the youtube

videos there's a lot of interventions

they're nice

have you been in it yet the full self

driving sure

it's hard it's hard for me to imagine

because i'm looking at it today because

every time i've been it i mean i have it

i have an fsd car it's it's like

somebody said what's it like i said well

i like watching i hate to say this but

it felt to me like a drunk driver

you know

he was 17 years old yes the first time i

drove it you know because i talked about

a couple weeks ago when i got it

and it it makes mistakes right

it doesn't do well with what they call

unprotected less when you're approaching

an intersection you know on the light

you have to like go across two and trap

doesn't do that well

it doesn't um

it's not something that you could just

kind of let it drive itself from point a

to point b now i don't know if there's

anything that's like that but all i'm

saying is it's you're a couple years

away

from a level four level five tesla

vehicle being put in a hurts and they

just push a button or they stay into

their you know into the air take me from

here to there i just don't think area

and so therefore and i can't figure out

the pricing if you have a prescription

model it's not going to be a dollar per

mile some people are assuming

it may not even be 25 cents a mile

and you have a lot of players trying to

do this and so on it's going to be

competitive i'm not saying tess is not

going to get there because they have the

best engineers in the world working on

this i'm just saying it's it's not a

beta complete that they're going to get

the first market

okay so two competitors i want to ask

you about uh and then uh then i'm gonna

uh we'll we'll wrap it up so i don't

keep you all day

uh

apple car

and then i'll save the other name

because you'll probably just laugh it

off but we're gonna start with apple car

is this a risk even have a chance why

haven't we seen this thing is this a

joke are they just going to end up

partnering with somebody like

lucid so that way uh you know lucid's

got the car apple's got the software

right like what is this

i don't see apple doing much it's kind

of like i don't see tesla making an

iphone

good point

for competency

i don't i don't think apple will ever

have a car that can rival test they'll

try

right but i think

the short answer is they'll partner up

with somebody they got more capital than

anybody they can use their stock which

is worth you know 2.8 trillion dollars

or something and buy somebody for 50

billion and that's the way they'll get

into autonomy um i don't see them doing

it themselves that's not their core

competency that's not what they do

so i would i don't say it's a joke

but and i'd say they'll try but i think

they'll fall short they'll wind up

buying somebody wow okay

do you invest in apple

i don't own apple um

i wouldn't be honest with you

that's 2.5 trillion um

look apple's expensive the way i look at

valuation

but i look at you relative to growth

if you think about a discounted cash

flow there's only really four variables

there's earnings there's the growth rate

there's the history rate there's the

beta okay that's it and well you use the

beta that's for you to pick your

discount rate other people pick it out

of the air okay but i can look it up and

see this

i'm looking 1.6

bloomberg right now apple's growing

their revenues at eight nine percent

okay

and it's trading right now

at 26 pe so the way i look at the world

it's 26 divided by

eight or nine it's trading about three

times a peg which by the way that's what

the s p trades at two point eight two

point nine russell one thousand growth

which is the universe in which that's

competes

uh 22 peg is about 2.1 2.2

okay you know where tesla's trading at

one eight one nine probably one nine

today i haven't calculated but it's

probably one eight if they got 55

percent growth

and they're trading at 100 times my

estimate for 2022. that off the top of

my head

so tesla still looks cheap to me

apple i can't own it when it's got a 2.9

peg i'd much rather on google which we

own google's got about a one google's

about the same as tesla today you know

it's got nice growth rate you know it's

called 18

16 revenue 18 earnings

and as of today google said

yeah i think apple's just been killing

right now because of uh its growth here

during the pandemic but you're right

it's growth rate i mean they're

expecting 3.7 percent and 22 5.5 23 6.1

24.

26 times it's growing at 16

that's pretty good

the cheaper cheapest stock i look at in

the mega cap space magnet cap defined is

over 200 billion mark cap is facebook

but facebook has hair you know the whole

metaverse changing the brand and i

actually think that's a smart idea you

know yeah with the google approach but i

can't get excited about facebook because

people aren't using facebook like they

usually they use whatsapp they use

instagram but facebook is

the lack of a better word dying facebook

product

yeah well i i kind of agree with you i

don't like facebook either i do however

and this is not the other stock i wanted

to ask you about i do like matterport

now don't let me saying that influence

your thoughts on that do you you into

matterport at all no i haven't no

just 3d scanning real estate like a

physical space is right i see that as a

potential bridge to almost metaverse

mostly because maybe because i'm from

the real estate space i'm um a little

bit biased towards these 3d scans but um

my vision of the metaverse is uh

super brief uh

somebody could scan up there you could

scan up whatever property you live in

and uh invite over 10 different

contractors into your your meta home

get your estimates that way forget

having to invite them over in person you

know

well that's that's the way that's the

future yeah yeah exactly okay so the

last thing uh

and i have a feeling you're probably

just gonna laugh this one off but i'm

gonna give the the best bull case i

could think for him

nicola okay

nichola i know i know i know

i told you but i i gotta say

you gotta give him credit for this idea

that uh putting hydrogen in a battery

life and having a battery electric

vehicle having this together

would

create demand for hydrogen fuel stations

which means maybe we'd actually finally

get a hydrogen transition which i just

don't see happening otherwise you know

you got like plug power has their

hydrogen uh commercial vehicle

partnership with renault out in france

but nobody's got hydrogen stations so it

just seemed like that nickel idea that

initial

badger idea of hydrogen battery the idea

was good they were complete fraud of a

company but but what do you think about

that idea and then maybe separately the

company do they have a chance you have

kids

uh-huh okay would you let your wife

and your kids drive in a nicola badger

that's fueled by hydrogen

i i mean i guess i haven't thought about

that

so you're you're anti the explosive the

hindenburg effect

and elon has said this it's an unstable

gas and it's not it's not the most easy

to use

uh power in the world and

i just think there's a reason why you

don't have hydrogen-fueled vehicles you

know driving around the road think about

if one gets gets hit

you know just think about one gets into

an accident

i just need points it's unsafe but i

don't i don't see it being commercially

viable nickel's going to go away at some

point either

somebody i don't know if you've ever

talked to people there

um

i mean i have and it's

that's really kabuki theater at nicola

i'm sorry

and this is before trevor milton it was

kabuki theater and you know you could

you could talk to other people there i

think they're just making it up they go

on look they'll have prototypes

um

you know right now they have i think one

client they're supposed to be delivering

vehicles by the end of the year

anheuser-busch

and if they don't get their vehicles to

them

you know that's their last client and i

just don't see them ever producing

at scale

vehicles in either arizona or in uh i

guess the plan over in europe

and so i put i put their value evaluate

what they have in cash it's about two to

three dollars

at some point they'll realize that

they'll just sell it because

they're gonna run out of time

so so your discounted cash flow is

where's the balance sheet here it is

this is what it's worth three bucks it's

cash

that's great gary black thank you how do

people follow you

uh at garyblack00 on twitter

uh that's the simplest way or you could

go to ffnd which is the ticker of our

active etf

um we just post 100 million dollars

today actually in assets not ffd but our

firm and our premier product is ffnd you

can find us on twitter just go to go the

website at the future month

future fun awesome awesome thank you so

much for being here this has been

amazing if you don't mind stand by for a

moment for everybody watching thank you

so much for being here we will see you

in the next one appreciate it and until

next time

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you