Hey, I’m Steven and this is Solving The Money Problem.
If you’re new, welcome.
If you’re not, welcome back.
As I record this, the stock market is in freefall.
Why?
Panic, fear and uncertainty.
While I don’t want to downplay the social and economic impact of the recent health thing--which
I can’t refer to by name, lest I be demonitized by YouTube, so I’ll call it a cold--I feel
compelled to make this video because thousands of you are freaking out.
Your reason and logic have gone out the window and your reptile brain is completely in charge.
This is a great way to make bad decisions.
So, in this video I’m going to take a RATIONAL look at what this all means for Tesla in the
coming months and years.
I’m a long term investor.
Keep that in mind as you watch and remember, I don’t have a crystal ball.
The best I can do here is engage my reasoning faculties and walk you through my thinking.
So, let’s do exactly that.
The News Media
“If it bleeds, it leads”.
This is the mantra of the news media.
I stopped watching television more 15 years ago.
Today, I seek out the information I want to know instead of opening my mouth like a baby
and being spoon fed by the media.
This was one of the best decisions I’ve ever made.
If you don’t already know, the goal of the news media is not to inform you of current
events.
Its goal is to attract and retain your attention, which is highly valuable to advertisers who
pay the bills.
If you turned on the Crisis News Network and heard “Today Seven Billion Seven Hundred
and Seventy One Million Seventy Four Thousand and Eighty Two people had an uneventful day.”
you’d tune out pretty quickly.
No eyeballs means no advertising dollars.
The whole business model relies on having your attention.
Our brains are wired to respond disproportionately to danger.
A hundred thousand years ago this made a lot of sense.
It’s better to hear a rustle in the bushes, panic and flee only to find it was just the
wind; than to ignore the rustle only to learn it was a jaguar who is now dining on your
FACE.
Society and culture have evolved a lot in the last hundred thousand years.
But our brains have not.
The news media exploit this vulnerability.
Don’t let them.
This Panic Is Irrational
Listen to the words people are using.
Scared, worried, fearful, concerned, panicking, uncertain, confused.
Australians began panic buying toilet paper recently.
Why?
I have no idea.
But I can describe the behavior.
Group-thinking panic.
People who don’t think for themselves turned into sheep and followed the herd.
This level of irrational behavior isn’t limited to panic buying.
People who are whipped up into enough of a frenzy to physically fight one another over
a roll of toilet paper are prone to all mannner of incredibly stupid behavior.
THIS is what’s driving the panic.
THIS is what’s destroying the stock market.
It is NOT based on reason.
It is based on a FEAR.
People are uncertain about EVERYTHING and they’re acting like fools.
The EV Revolution Is Still Happening
Just because a few people catch a cold doesn’t mean the inevitable technological transition
away from ICE vehicles toward electric vehicles will slow.
Or reverse.
In fact,
it’s completely ****ing irrelevant.
You think a few people catching a cold would have stopped the internet taking hold?
Or reversed the computer revolution?
Or killed the digital camera?
Or stopped the smartphone?
Or music streaming?
Or social media?
We ARE transitioning to EVs.
It’s happening.
This isn’t up for debate.
What’s less obvious to most people is the rate of adoption.
Today EVs make up just a few percent of the new vehicle market.
In the future, they will be approximately 100% of the market.
This adoption will happen deceptively fast.
That’s how s-curves work.
This cold has changed NOTHING.
EVs are still the future.
Tesla Still Has A Huge Lead
I mean, this should be obvious but Tesla’s 5-plus year lead in battery and powertrain
technology hasn’t suddenly vanished because of a cold.
Tesla’s unassailable full self driving data lead hasn’t suddenly vanished because of
a cold.
Nor has it’s impressive software lead.
Nor has Tesla forgotten any of the cumulative lessons learned designing and manufacturing
the world’s best electric vehicles for more than a decade.
Nor has Tesla lost its ability to erect a factory in record time.
Nor has Tesla lost any of its engineering talent.
Nor has Elon Musk’s twitter following suddenly dropped from 32 million to ZERO.
Nor has Tesla’s army of ranting and raving fans suddenly stopped loving the products.
Nothing fundamental has changed.
Tesla Is Flush With Cash
Until recently, Tesla had $6.3 billion in cash.
However.
They recently raised an additional $2 billion dollars.
With a more than $8 billion dollar war chest, Tesla is well equipped to weather this type
of storm and come out the other end much stronger.
Indeed, with so much money on hand, and so much global panic, there’s a chance Tesla
may be able to pick up some serious bargains in the form of new acquisitions, equipment,
facilities or even negotiate discounted contracts with suppliers.
Tesla is in an incredibly strong position to make the most of this opportunity.
I wish I had $8 billion to spare right now.
Disruptive Companies Do Best In Recessions
This is an incredibly important and easily overlooked point.
The companies that fare worst in a market downturn are the old guard.
The companies who’ve been doing the same old crap year in, year out.
They shrink in the face of change.
When times get tough, these companies become even more conservative.
They take less risks.
They just go cry in the corner and hope things get better.
And this is often their downfall.
More on this in a moment.
Meanwhile, innovative companies seize their opportunity.
We need only look back to the 2008 global financial crisis to see this in play.
Netflix?
Huge subscriber growth during the recession.
Why?
Much cheaper, better and more convenient than cable.
Amazon?
While brick-and-mortar stores were closing left, right and center, Amazon gained HUGE
market share.
I could rattle off many more examples.
The point is simple.
Innovative companies THRIVE during economically challenging times.
They’re hyper-optimized, they think differently, they’re in innovation mode 24/7.
The perfect state to navigate uncertain times and come out on top.
EVs Are Cheaper To Own
Many consumers aren’t wise enough to actually look at the true cost of ownership of a vehicle
before making a purchase, but when times are tough, people pinch pennies and are much more
likely to look closely at the total cost of ownership.
Anyone doing so will soon discover that today, a Tesla is already cheaper than many other
internal combustion engine vehicles over a 5 year period when you factor in the much
lower energy costs, the efficient powertrain and the near total-absence of maintenance
on an electric vehicle.
If you plan to keep your vehicle for longer than 5 years the economics become even more
compelling.
I admit, not every consumer is smart enough to do this.
Some will see a higher sticker price on a Tesla and never get beyond that point.
But SOME will actually do the numbers and realise a Tesla is a cheaper option in the
long run.
Not to mention the intrinsic value of a Tesla.
Dollar-for-dollar, you can’t get a better car.
Safety, performance, features, over-the-air-updates, infotainment.
All unmatched.
Businesses on the other hand, are typically MUCH smarter with financial decisions.
Businesses only stay in business for the long term if they’re making money.
During tough times, it’s critically important that they reduce costs.
Those with active fleets of vehicles, which drive many more miles than a consumer car,
will find the cost savings compound, meaning the packback time on a Tesla is much, MUCH
sooner.
I won’t be surprised if we see many large commercial orders for Model 3 and Model Y
in the coming months as accountants realise they can save hundreds of thousands--if not
millions a year--by transitioning their fleets to electric vehicles.
Let me spell it out:
The total cost of ownership (factoring in repairs, maintenance and energy costs) of
a Tesla is far cheaper than an ICE vehicle over the long term.
The more miles this vehicle drives in an average year, the sooner the payback period.
For many consumers and especially businesses, it will be economically crazy NOT to buy or
lease a Tesla.
Legacy Automakers Are Screwed
One look at the debt levels of legacy automakers should send investors running for the hills.
But most haven’t figured this out yet.
Most of Tesla’s future “competition” and I use the word loosely, will come from
legacy automakers.
The likes of GM, Ford, Volkswagen and Toyota.
I’ve been predicting for some time that many of them won’t survive the transition
to EVs.
They’re so far behind, they’re not moving fast enough, they’re not investing enough
and they’re not going to make it.
Turning around a big ship is a slow and brutally painful process.
Surviving the transition to EVs was already going to be a huge challenge, costing tens
of billions and taking many years.
Profits and revenue were inevitably going to suffer for years.
But then a few people started to catch a cold and panic set in.
I’m not claiming that this cold will destroy the big automakers, but there’s no doubt
it makes things much more difficult.
With the stock market bloodbath, it’s unlikely these companies will be able to access the
capital markets.
They already have mountains of debt and their future prospects are grim.
Who’s going to lend them money when bankruptcy is a real possibility?
Just when they needed everything to go right, everything went wrong.
This is going to put them under more financial strain.
My prediction:
as things worsen, investors will flee from legacy automakers, sending their stocks plunging.
Some won’t make it.
Others will be acquired or merge.
In either case, they’ll be locked out of the capital markets and unable to access money
when they need it most.
This cold is going to flush out weak companies and only the strong will remain.
This presents a HUGE opportunity for Tesla to gain market share.
And think of all the consumers who decide to put off buying a new ICE car for a few
years only to discover that a Tesla is EVEN cheaper and better value when they finally
are ready to buy a new vehicle.
Tesla Has Barely Missed A Beat
In the midst of the drama, Tesla has hardly missed a beat.
Save for a small break, Gigafactory Shanghai continues producing Model 3 in China.
Model Y delivereis have commenced in the US, well ahead of schedule.
Construction of Gigafactory Berlin remains on track.
Tesla is scouting for a new factory location in the US.
Gigafactory Shanghai is expanding.
And Tesla continues to move forward like nothing has happened.
So what’s it all mean?
The future is uncertain.
More people will catch this cold before things turn around.
But they will turn around.
And it’s not the end of the world.
Far from it.
Right now, the markets are behaving irrationally.
People are selling out of fear, panic and uncertainty.
As I record this, Tesla stock is down almost 50 percent from its recent peak.
Amazon has shed 20 percent.
Google, almost 30.
Did these companies suddenly lose 20, 30 or 50 percent of their future revenue?
Or their talent?
Or their data and technology lead?
Unlikely.
YES, this period will suck for most businesses.
I get that.
I’m not making light of the situation but I am trying to be a beacon of reason in this
storm of stupidity.
We’re not headed back to the dark ages.
Every other year there’s a global drama that the media latches onto and people who
don’t know how to think for themselves panic irrationally because that’s what the news
is telling them to do.
If you have a short memory, you’ve probably forgotten the last few world-ending dramas.
It’s worth reminding yourself of how often everyone thinks it’s game over.
As Warren Buffet has said: be fearful when others are greedy, and greedy when others
are fearful.
I’m not here to tell you guys what to do, ok.
This is MY investing thinking and MY investment reasoning.
I’m sharing what I THINK, not what I know.
And what I’m seeing now is utterly irrational behaviour.
This cold will pass and the market will recover.
It always does.
Some companies won’t make it.
Others will thrive.
Those who innovate and disrupt relentlessly will come out of this best.
Those who are stale, stagnant and steady may not fare as well.
How long the recovery takes, I do not know.
But while everything’s on sale, I’m stocking up.
I bought Tesla stock last week, and more today.
And if there are further price falls, I plan to buy even more.
It’s too good of an opportunity not to.
I don’t want you to buy or sell anything because of this video.
I just want you to THINK instead of REACT.
If you are considering buying or selling a stock, ask yourself WHY?
Is your amygdala in charge?
Or are you?
Are you basing your decision on reason and evidence or what you saw on TV?
Are you following your plan or have you thrown it out the window?
Truthfully, I don’t expect this will change anyone’s mind.
If you’re in full blown panic, there will be no convincing you.
You’ll tell me the market has much further to fall.
You’ll caution against buying more “until the bottom”.
You’ll tell me I should be taking my profits and sitting on the sidelines.
Thanks for your concern, but I’ll be ok.
I always am.
Remember, I’m a long term investor.
To sum it up, I believe this will be a small blip on the radar and a HUGE opportunity for
Tesla to gain market share in the fallout.
Evolution through natural selection doesn’t just apply to animals.
It applies to companies too.
Those most fit to survive in their environment thrive.
Those less fit, perish.
Of all the companies who produce vehicles, Tesla is the one I am LEAST concerned about
right now.
And this is how you must look at things.
Forget the macro environment.
Look deeper.
This cold isn’t going to impact every company or industry in the same way.
Tesla has so many tailwinds it’s absurd.
We ARE transitioning to EVs.
Tesla’s software, battery and powertrain are years--I mean YEARS--ahead of everyone
else.
Their self driving data lead is unassailable.
Their army of fanboys continue to sing praises about their products.
And then there’s Elon Musk.
Yeah, it’s not like Elon died, guys.
Relax.
With uncertainty, comes opportunity.
I’m Steven Mark Ryan, this is Solving The Money Problem and I love you all.
Thanks so much for watching.
Let me know your thoughts in the comments below.
Are you panicking or keeping your cool?
Have you been buying or selling?
Are you sitting on the sidelines watching and waiting?
And of course, if you have any ideas for future videos, let me know.
I read ALL your comments.
p.s.
If you’re still watching, you’re AWESOME.
This channel has kind of blown up since it launched and I’m working on making the best
possible content for you guys, but it takes time.
Consider supporting the channel at http://patreon.com/solvingthemoneyproblem so I can continue creating content for you
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There’s a link in the description.
Either way, the best form of support is you being here and watching, so thanks again.