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Tesla [TSLA]: Things I Think I Think — Overall Market

September 11th, 2020 by  


Note: Nothing below is investment advice.

I appreciate how many comments my articles tend to get, and I try to read them all, even though I rarely reply.

And there’s a reason for that: The comments I find most interesting deserve long replies which aren’t so great for comment sections, and often include me doing more research, which leads to me posting replies after everyone else has moved on. That doesn’t really benefit anyone.

Instead, I’m going to start replying with this article headline from time to time with replies that aren’t long enough — or timely enough — for their own articles. I’ve got a lot of comments to reply to (thanks for that!) so to make it more manageable for readers, I’m going to at least start by breaking it up topically and publishing different articles.

Today, I’m starting with my feelings on the general market. If you are annoyed you’re reading general market news on a cleantech site, and my arguments for why this is important don’t convince you it’s important, here’s a link to our homepage to read something else. I’d suggest Johanna Crider’s excellent article on Exxon potentially running out of money, but there is a lot of other great stuff on here too.

If you’re still here (and, seriously, open that article, read it next, and think of the implications it would have!), perhaps you feel that further understanding my thinking is worthwhile context for my other articles. This one is what I would call “Tesla tangential” rather than a straight-up Tesla article, but I also don’t think it’s possible to understand what’s going on with Tesla without understanding the broader market.

So, without further ado …

Is This Investment Advice?

If you’ve read my articles, you should know that I feel that Tesla’s financial success is critical to the future of cleantech. In fact, I wrote a three part series on just that topic.

Due to my interest in the future, I wanted to learn how Tesla was doing, and interpret that for myself. I started with a very modest investment which I grew as I became more confident in my belief. Since I believe that Tesla’s success is critical to the transition off of fossil fuels to a clean future, I figured my work would be valuable for this site, and I’ve been encouraged that a lot of people agree.

Do I think my articles could be data points in forming an investment strategy? Sure!

But, that doesn’t mean they’re advice.

I won’t even give my family advice on picking stocks, because I’ve been wrong before and I don’t want anyone to be angry with me if their stock goes down. Additionally, your situation is hugely influential on what you do. If you barely have enough money for food and rent, I think taking out a loan to buy Tesla stock would be insane. If you’re buying stock instead of paying off credit card debt, I think you have better stuff you could be doing with that money.

You have to determine that yourself.

If You Want Good Financial Advice, Use Pros, Right?

I indirectly started stock investing when I turned 15. My uncle gave me a share of Disney stock for my birthday. The next year, he gave me a share of Pepsi. This got me started. Back then, companies would physically mail investors a copy of their annual reports, something that I do miss a bit. I couldn’t really trade these stocks, though — I needed to call a broker, and I think it cost $24.95 for a trade. These shares were clearly more for learning purposes than anything else, but they did get me thinking.

They used to send you annual reports. I got all of these thanks to my single share of Disney.

When I turned 18 I was ready to start my own account at Scottrade, simply because they offered the lowest cost for trading at the time, $12.95 if I remember right. Although money was tight, I saved everything I could so I could invest a little here and there in the market. I made a few investments that turned out to be really smart, and a few that turned out to be really terrible — I’ve mentioned my investment in Kiwibox before, a stock I paid about $1.50 apiece for, which today is worth … $0.0004 apiece! (Not a typo!)

I learned, and changed my investment strategy to be less speculative and more long term, since I tend to hold things for long, long times. (Yes, I still have my shares of Kiwibox.) I decided to focus my portfolio mainly around companies which paid solid dividends, using the general method for evaluating companies that I outlaid here on CleanTechnica in March. I have continued to make sporadic investments when I could get money ever since.

On the flip side, my wife has invested through her workplace with a 401K. When she started, we met with professional advisors, took their advice, and used it to invest.

After more than 10 years of investment from every check, my wife’s 401K value was worth less than the amount of money that she put in by 2014. It made sense in 2008, but the advisors kept telling us if you bought low, when the market went up you’d be handsomely rewarded. What was going on?

The advisors told us that we hadn’t balanced our accounts as well, and suggested switching into a series of different accounts that had performed well over the past few years.

I didn’t trust this. We invested in the accounts they told us would be the best for our goals, and when it didn’t work, we were blamed for it. I started researching, and I found that these managed funds rarely beat the market returns, and often made less due to their fee structures.

After looking at the data, we decided to move her accounts into low-cost index funds and stop this actively managed stuff. Our investment advisors told us this was a terrible idea, and we might miss out on some huge gains. We ignored them.

I was pleasantly surprised when “Last Week Tonight” did a report that came to the same conclusion I reached. A warning if you’re offended by rough language, but it’s worth watching this, even if it is over four years old:

So, how valuable is “professional” advice?

If you have the right professionals, and if you want to choose not to research, then using a professional might work out well for you. But I don’t think that individual investors who do research are at much of a disadvantage.

In fact, when I hear “professionals” doing things like parroting how bad Tesla’s warranty accounting methods are, for instance, without researching facts, it makes me think of my own poor experiences with them.

Having said that, let me make this very clear: It’s risky. If you’re risk averse, put your money in the bank.

But, with banks offering nearly no interest, I personally think that’s risky too.

Thus, it’s up to you to decide what your level of risk is, and what strategy makes sense for you. For our family, investing in the stock market made sense.

What’s Up With the Stock Market?

The fact that the stock market has been reaching new highs during a pandemic and recession has been making a lot of people ask why, so here’s my quick take:

During the pandemic, many have been staying at home. For those of us who are lucky enough to not have our jobs directly impacted, this has led to having a significant influx of cash. I calculate that between eating almost exclusively at home, a lack of vacations, and ceasing many paid activities we would have done (gym membership, day trips, etc.) my family “saved” thousands of dollars that we would have otherwise spent.

I could put that money in the bank, where my bank offers an annual interest rate of 0.01% as of today! That means for every $1000 I put into the bank, I’ll have an extra TEN CENTS a year from now on!

Instead, I can take a risk with my money, and put it into a stock. Brookfield Renewable Partners, a company I’ve written about before, is about to pay me a $0.434 dividend for each share I held on August 28th, a dividend slightly more than 3.5%. If I take that same hypothetical $1000 and put it into BEP, the dividend would pay out $35 over the next year — and it could be more, as BEP’s dividend tends to fluctuate a lot, and the $0.434 dividend is the lowest dividend the company has paid since 2015.

Sure, there is a risk that my $1000 investment in BEP becomes worth less than $1000 in the same time, negating the $35 gain, but if I don’t expect to need the money during that time, the investment is worth it to me.

To me, with inflation, sitting on money in the bank feels like I’m losing money every year. I think a lot of the gains in the stock market come from others who share this view. Combine that with the lowest barrier to entry that the stock market has ever had — many stock brokers now allow you to trade for free.

Wrapping Up

That’s it for now! Please keep the comments coming!

Disclaimer

I am a Tesla [NASDAQ:TSLA] shareholder who has purchased shares within the preceding 12 months. Research I do for articles, including this article, may compel me to increase or decrease stock positions. However, I will not do so within 48 hours after any article is published in which I discuss matters that I feel may materially affect stock price. I do not believe that my voice could or should influence stock price by itself, and I strongly caution anyone against using my work as your sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may be incorrect.

 
 


 


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About the Author

A businessman first, the Frugal Moogal looks at EVs from the perspective of a business. Having worked in multiple industries and in roles that managed significant money, he believes that the way to convince people that the EV revolution is here is by looking at the vehicles like a business would.



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