If you’ve read this blog for any length of time, you know that I talk about Tesla frequently. I got lucky purchasing the stock on a whim in 2012 for $1.93 (split-adjusted). Tesla had a tremendous run up, but the stock hasn’t been doing so hot lately. The stock hit $407 back in November of 2021 and has since crashed down to $163. Oof:
Tesla is an interesting company to follow. By 2030, I think that each of these scenarios are possible:
- Tesla will be the most valuable company on earth as the world moves to EVs and renewable energy (remember that Tesla makes more than cars).
- Tesla will be gone. Competition from China (or some unexpected circumstance) will destroy it.
The most likely scenario is somewhere in the middle. But this post isn’t about Tesla. If you want to know what I think about the state of the company, scroll to the bottom.
VTSAX Won’t Go To Zero
Here are some interesting facts:
- As of 2020, the average lifespan of a company in the S&P 500 was 21 years and this is decreasing.
- Only 1 out of every 200 companies last 100 years.
- You will probably live much longer than most companies.
So, if you own individual stocks, you must accept the following:
- Most of your holdings will go to $0 in your lifetime.
- Because of the quickening pace of tech, the lifespan of companies is decreasing.
- It’s very difficult to tell when your company has peaked. It cracks me up when I see very smart people with terrible ideas. See Steve Ballmer’s initial take on the iPhone.
- It’s very difficult to predict how your company will die. Most of the time, you’ll only figure it out when it’s too late. One real-time example may be Japanese auto companies who have been to slow to embrace electrification.
- Reinvention is VERY difficult. Microsoft and Apple were able to bounce back. See Satya Nadella and the iPhone respectively. Most companies can’t/ don’t/ won’t do this; they just fade away. For a real-time example of a company trying to reinvent itself, see Mark Zuckerberg.
- While most of your stocks will go to $0, VTSAX won’t.
An index fund isn’t sexy, but it’s passive and effective. You don’t have to worry about when (insert your favorite stock here) has peaked. The index is self-cleansing. The winners grow bigger (Apple is 6% of VTSAX!) and the losers will fall away.
I picked stocks and actively managed funds before I knew what an index fund was. While I still own stocks, a basket of index funds now make up the majority of my portfolio. When my syndication deals close, I’ll reinvest the money into VTSAX. When Mindy quits working and capital gains become less of an issue, I’ll sell the stocks and put the funds into VTSAX.
I hope y’all are holding up well. 2022 was a crazy year. 2023 may be more of the same. But eventually, the tide will revert and Mrs. Market will continue her trajectory; up and to the right.
More 1500 Days!!!
You can also find me (and the dinosaurs) at:
- Facebook: Facebook group and page
- YouTube: My channel is mostly devoted to home improvement, but I have some other material coming up soon too.
- Instagram: Pretty pictures of dinosaurs, sunsets, and nail guns!
- Twitter: Spontaneous, often insane, ramblings
- Coworking space: On the surface, MMM HQ is a coworking space. Look a little deeper and you’ll see that we’re really building community. The members of MMM HQ are some of the finest people I know.
*Random Thoughts On Tesla
Elon Musk: I wish he’d just shut up and focus on engineering problems.
My Tesla order: I talked about ordering a Tesla back in August. I’ve since canceled my order. It just doesn’t feel good to spend that kind of money right now. Also, I wanted to buy a Tesla to track FSD progress, but I don’t see evidence that Tesla will achieve Level 4 autonomy before mid-decade, so I’m not nearly as excited about owning one. Musk is either delusional or lying when he makes FSD promises.
4680 batteries: This is one of the most important initiatives for Tesla and it’s woefully behind. I’m not sure what happened here, but Tesla’s end of 2022 4680 battery production is 4% of where Musk predicted it would be on Battery Day.
FSD: Musk has stated that Tesla will be worthless without autonomy. I believe this. Why own a car when it’s far cheaper to have a robot drive you around at a fraction of the price? GM and Waymo are already operating small scale Level 4 fleets. Meanwhile, Tesla is still at least a couple of years off from achieving the same feat. I hear Tesla fanboys state that GM and Waymos’ strategy is expensive (LIDAR sensors) and fragile (requires detailed maps). Regarding the former, LIDAR will come down in price like all tech does. Regarding the latter, the fleet cars themselves will be able to update maps. Now, Tesla’s approach is much more flexible and scalable, but it’s difficult to predict when the cars will be able to operate independent of a human.
Tesla is also doing a lot of things right: Despite being delayed at least 18 months, the Cybertruck is going to be a huge hit. The gigacasting tech is amazing. Despite having quality issues, the cars are amazing too. Some day, I will have one. Just not today.
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I dont think lifespan on a stock exchange equates to going to $0. Mostwill probably decline some and then get acquired or spin themselves apart.
Ny Money Hawk says
Very interesting post.
I agree with your thoughts on Tesla, and desire for Musk to be focusing on business versus Tweets.
I also own some Tesla, though much less than you and at a higher price (my cost basis is ~$48 so still pretty decent).
I really like what the company is doing now execution wise, and they are bringing forward the sustainable energy timeline. I think both Semi and cybertruck will be big in the future.
Unfortunately Musk now being a culture warrior tweeting constantly and alienating some of his target customers is not helping. The company has had great execution this year and all these tweets and bad press from Twitter seem to be dragging Tesla down.
It’s never good for a CEO to be super opinionated and anger many people on the left or right. You lose or limit half your customer base. That’s why most CEOs stay far away from political type debates.
Mr. 1500 Days says
“It’s never good for a CEO to be super opinionated and anger many people on the left or right.”
Yep. Hopefully someone reigns him in soon. Oof.
But yeah, Elon has probably done more to accelerate sustainable energy than anyone on the planet (Putin may be a close second!). People are quick to forget about the good (Elon, NOT Putin!) he’s done. Even if Tesla goes belly up, he has put the ball in play and the momentum continues to build.
I do think that 2023 and 2024 will be good years for Tesla. 2023 will bring back the tax credit and 2024 will see volume production of Cybertruck. I hope we see a cheap world car on sale in 2025.
In the meantime, stay sane!
Good level headed read. I’m with you on Tesla. I own a few hundred shares that I don’t look at and focus on adding to my VTI. No mention of the Tesla bot and what that could do, or is that in the same bucket as FSD?
Good read, thanks for the insights.
Mr. 1500 Days says
I think that the Tesla bot could be huge, but I also think it’s at least a couple years off. So like FSD, check back in 2025.
Eric Bowlin says
I wonder if a lot of companies get bought up and integrated into bigger conglomerates rather than go to $0. Or perhaps they’re bought and their most valuable parts are absorbed and rest dumped.
Innovation is a continuously destructive phenomena.
Mr. 1500 Days says
I’m not sure how many companies get bought, but I’d guess it’s usually not the winners.
Charles McCash says
Just stop perseverating and buy the dang car! 😉
Mr. 1500 Days says
Haha, do you have one?
I hear HW 4 is near and also that the Model 3 will be updated soon. While I had a Y reservation, I wouldn’t mind an updated 3!
This article expanded my vocabulary. I had to look up FSD and also syndication, since until now I’d only associated the word with either a licensing of creative works or being part of a mafia.
Musk often strikes me as a little off kilter, but I also send him money each month so I can read your posts via Starlink. Since I clearly can’t differentiate between the visionaries and the nuts, I probably better follow your advice and stick to my index funds.
Laura S. says
I hear you on Tesla. We just took delivery on a 2023 Y lease….I know, I know, not the best use of funds….but now we’re thrilled that at least we didn’t buy it. We’ve reached FI two years back, but both still working another five years or so as we need to stay in the area for elderly family anyway. So, the Tesla is an affordable splurge for us. This is the second Y we’ve had and it’s easily the most fun I’ve ever had driving. GREAT vehicle.
But….Musk is acting like such a clown right now that I wish we had canceled the order and leased or purchased another EV. We will next time. We don’t want to reward the kind of behavior he’s exhibiting. I’m honestly shocked that the same Board that chastised him for “lighting up” with Joe Rogan, hasn’t put him in timeout for his very public meltdown. We’re already beginning to research our next EV….and it definitely won’t be a Tesla. Hope the stock recovers Mr. 1500!
Mr. 1500 Days says
It’s good to hear you like your Y. Do you have any complaints?
I hear you on the clown behavior. He should shut up and fix issues at Tesla and SpaceX. I hope he rights his ship soon and gets back to a better place. I heard that there was an emergency board meeting, so maybe they’re trying?
Which EV are you considering? I think the upcoming Ioniq 6 is a pretty great design: https://twitter.com/BLKMDL3/status/1603821666227785728
Laura S says
The Y is a super fun car to drive. The interior could use a bit more attention. I like the overall design, but some of the materials don’t match the now 70K price tag.
I would be shocked if Musk isn’t getting more than an “talking to” behind the scenes. The problem is not only that he’s distracted with Twitter, it’s what he’s saying. He’s turning off 1/2 of his customer base, and that’s a big problem for Tesla. Joe Kernan said it best the other day….”the libs you’re trying to own are the same libs that drive your teslas”. He needs to step down from Twitter and disappear for a year or so. I don’t think that’s going to happen.
I like the look of the Ioniq for sure! I’m not sure what we’ll go for in a couple of years….we’ve got plenty of time to research it. The Y is the only EV we’ve ever driven, so we’ll need to get out and test drive a few of them.
Paul S says
You echo my thoughts as well. As a CFA and a CPA my ego told me time and again that good fundamental analysis and overall market knowledge should get me better returns than those of the market. Well, after 15 years of ‘attempts’ it became clear that at best I matched the market while spending a ton of time reading and following news, stressing about inevitable setbacks and so on. Shifted to SP500 and QQQ and don’t look back. A huge time save, stress relieve and likely a more predictable return. Sadly the dream of making it big in stocks faded away…. but then it does for most hedge and mutual fund managers out there.
Still trading some stocks and crypto, but no longer expect to hold them for life and retire off the big dividends from individual companies while sitting on millions of unrealized gains. Real estate is a go-to for building wealth in my family.
Paul S says
Interesting that my comment submitted just now did not post. Just a quick test to see if this one works.
I’ve always told younger investors, that you’ve never actually tested your investment philosophy until you’ve your NW has decreased by 15-20 years’ worth of living expenses. Having gone through some uncertain times during the ’08 financial crisis with concentrated holdings and I was down “20 years of expenses” and it taught me the value of “enough”. I applaud your intestinal fortitude sir & I hope your family has a healthy and safe holiday!
Interesting read 🙂
The stat that caught my eye was: average span of a company in S&P 500 is 21 years and decreasing. Innovations are hard. iPhone released in 2007 and I have been using a different iPhone models since 2010. After 2014, I find little difference in user experience (unless you are a mobile photographer / social media influencer). Surprisingly Apple Air pods are about 5-10% of their revenue.
I honestly think, people have nor realized the power of Tesla cars yet. Once, Tesla builds a people’s car (announced in 2020 Oct) for $25k, it would be a game changer. The level of safety in a Tesla are top-notch.
Back in July 2019, I went to buy a Tesla Model 3. At the same time, I test drove a BMW 530e. Tesla had clean interior but there were panel gap issues. I also did not like the central screen. I found it ugly. I politely asked the person showing the details of the car. He laughed and said that’s minor and does not affect driving or performance of the car. He also did not guarantee that the car I would order will not have the issue. On the other hand, I had driven a BMW before and I knew how it behaved on the road. If I remember it correctly, Fed cash back for buying a Model 3 was almost gone at that time (May $1800), but for BMW 530e , I was getting both Fed and state cash back worth $3500 (I should not have chosen the car based on this ). I leased BMW (Not my greatest financial decision and I did not foresee Pandemic coming) 🙂 .
Note: Now I sold my BMW back in August of 2022 for a profit of $6k. Total lease payments = $20,520. Credit $3500, plus $6000. It cost me $11k and change for 3 years lease.
I had booked a Tesla Cyber Truck when they released and have been waiting patiently since then. I am very optimistic about next phase of Tesla: Cyber Truck, unnamed $25k (may be now 30k) car, Semis and may be a minivan by end of this decade.
Delivery boy says
Just sell Tesla. Bank your incredible profits. It is down $40 per share since you wrote this post and now trades at $125.00 yet this is still 34 times forward earnings. Competition will only heat up against it. I learned a long time ago not to invest in car companies or airlines.
Mr. 1500 Days says
But I think the business is doing just fine.
In the not-so-good category:
So, I don’t care much for the stock price. I think that the business is doing fine. For now, Tesla’s competition isn’t other EVs, but internal combustion vehicles and autonomous vehicle services (Waymo and Cruise). I’m going to hold the stock for now, but I’m also glad that it doesn’t comprise the majority of my portfolio. I know a couple people who are like this and I don’t know how they sleep at night!
Dave Fromel says
You still have the value of your pre-IPO stock listed as $280,000. Considering the drop in valuations, is it time for an update?
Mr. 1500 Days says
That is a recent update. It was previously $250,000.
This has been the bright spot in my portfolio this year. I’m more excited about this investment than just about anything else in my portfolio. Stay tuned…
I agree 100% with your thoughts on Tesla and Musk. I’ll go further though.
1) I can be dialectical on Tesla and Musk as an investor and a consumer. I don’t have to like Musk personally to use the products. In fact, I have increasingly been realized that while he may be a talented tech developer, he suffers from delusions of grandeur in what his role to society is. And he’s been pretty awful in many respects (his hyperloop technology is a complete joke that is costing municipalities biliions as they stall feasible conventional mass transit in favor of his bluster.
2) I purchased Starlink and pay the subscription for my sister and brother in law to have high speed internet in rural Iowa. It has been revolutionary for them. They have ~200mBs speed down and ~20-40 mBs up, which was never available to them previously. It’s a lifeline.
3) I took delivery of my Model Y performance, in August 2022 after a 5 month wait. All in, it was $70K out the door (I purchase cars). No sales tax on EVs in NJ. I explored every possibility for an EV, and despite my personal feelings for Musk, came to the conclusion that this was the right EV for me.
Range of ~300miles, but given the battery technology, its recommended to not charge vehicle to 100% unless absolutely needed. So I have my charge set to 90%, which comes to ~265 miles. This is absolutely fine for me. I have a 120mile round trip commute that I make 2x a week, and my workplace has free level 2 chargers and level 1 outlets available. I’ve mostly just resorted to using the level 1 chargers as I get a convenient parking spot, but don’t need to go out and move the car when charging complete because level 1 charging is slow. No other EV really had a better range
Purchase Experience- it was my best car buying experience ever. I financed a small part of the purchase through my bank, it went through very easily. I never has to deal with an asshole car salesman, the price is the price, no negotiation, The car develiery date was fluid for a while, but I was not in any hurry, and it got more accurate the closer it got in the ap until I got a call to schedule pickup
Driving Experience- The car is honestly better than expected. Its fast, handles great over smooth and not so smooth roads, it has every option I could want. I like the sound system, it has lots of room…I like to drive, so lack of FSD isn’t an issue, and autopilot is perfectly sufficient when I do use that. In fact, this car is easier to drive in stop and go traffic than an ICE powered car, as using one pedal is quite convenient. I am less tired driving it home where I do encounter traffic
Reliability- I’ve had the car 6 months, and put 6K miles on it. Not a single issue. Quality has been fine right out of the Tesla driveway. No weird rattles etc.
Improvements-Tesla is constantly releasing software updates. These come over the air, and they give you the option of installing or waiting. Ive had 2 or 4 major updates that have improved some of the quirks of the car, including improved navigation, improves location of controls like wipers and climate system
Filling up the tank- nope, don’t gotta do that any more, I save time. I have a level 2 charger at home, and fill up while I sleep…
Supercharger network- Of all the EV charging options (I’ve tried a number), Superchargers are the only ones that are easy to use. OK, beinig honest, I’ve not used a supercharger yet, but I have tried all the other options, and let me tell you, they suck. They take a while to get working, their apps suck, and I’m about 50/50 in successfully getting them to charge. But the superchargers are set up through the tesla ap, which is very good, so I doubt I’ll have an issue.
Quirky- While overall I enjoy the driving experience, it did take a little while to get used to things like regenerative braking (you need to pay attention, or it is easy to make passengers car sick if you are not smooth), and controls like turning on wipers, or adjusting the climate. There are shortcuts (voice command is very accurate), but I’m not used to using them too much, so you do have to go through screens sometimes.
Software updates- Sometimes it feels like you need to relearn how to use the car after a major update, because things are moved around. While on an ipad or iphone having to learn new OS is annoying, it isn’t likely deadly, where in a traditional car, once you know where the wipers are, you know where the wipers are. In the Tesla, those can change in an update, which is frankly weird.
Meta- I feel like if you drive a Tesla, people think you are making a statement, or are a Musk bro. I’m not making a statement other than I hate getting gas in NJ (only state where you can’t pump your own so getting gas takes 10x as long and you have to talk to someone like its the 1950’s “fill’er up…)
Remember to plug in-I needed to get out of bed last night cause I realized I didn’t plug the car in cause the cable wasn’t outside. That was the first time I forgot to do that. not a big deal, but its a con that if you don’t remember to charge, you can’t just fill up at a gas station. There is a supercharger station close to my house, but that is still not as fast as increase an ICE car range at a gas station. Not specific to Tesla of course.
Mr. 1500 Days says
I’m glad you like your Tesla so much! While I canceled my MY LR order (too much net worth loss in 2022 to justify a “nice to have” purchase), I’ll probably pick one up later this year or in early 2024. I like road trips and this seems like a great vehicle to drive 800 miles in a day with. Plus, I have solar panels that produce 2x my needs, so fuel is free.