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Tesla Outstanding Performance

Tesla outstanding performance 

Tesla is one of those marmite companies, you know, you either love it or hate it.

As someone who appreciates commitment, engineering excellence and performance I am in the “love it” camp.

Detractors suggest that an all electric car is a flash in the pan, that the hype over the founder is just that: Hype. The upside hype has seen the share price soar to nearly $300. Now it’s back closer to $210.

(It seems that the character for the Iron Man films was influenced and maybe even modelled on Elon Musk)

There are rumours of hidden sales, production inefficiencies, safety issues and cost excesses.

They add that other car companies are introducing similar or better cars, either electric or with other efficient fuel technologies, and these will be either more efficient, cheaper or overall a better choice for both motoring and the environment over the long term. The recent oil price reductions and subsequent fuel price drop adds to their case that drivers will not seek an alternative if petrol is cheap.

But while I can see other technologies being good – better than petrol – the electric case I think has many more benefits.

So here is my case for the upside. This comes from a couple of years of observation, and taking time to visit the showroom, take a test drive and observe the arguments on very forum either positive or negative.

The company sounded out its market with a high-end specialist two-seater. The success of this led to the development of a 3 vehicle line-up, of which so far only one has made it to market. That is the model S, a 5+2 saloon car that stylistically is very similar to the Jaguar XF. That’s a plus for me already.

The Tesla S has the highest ever safety rating from Euro NCAP in Europe and from NHTSA in the US. The ratings weren’t just high, they raised the bar beyond the feasible reach of many manufacturers. The roof crush test machine broke when the equivalent of 4 other Model S cars was loaded on top.

The S is one of only 3 cars to ever have scored maximum in every sub-category of testing for both safety schemes.

The Model S has the highest ever ConsumerReports.org survey, scoring 99 from 100, and was the first car to be Motor Trends car of the year with a unanimous vote.

It’s safe, and those that know about safety say it’s safe.

Much was made of the decision to build their own battery production plant rather than rely on Panasonic. The idea is to ensure supply capacity, and reduce prices, both factors are recognisable constraints to future sales. That factory is being built now, and by 2020 it is expected to eclipse the entire 2013 global output of batteries. From one plant.

One of the other main concerns with all electric cars is range. How far can you go on one charge? And when you get there how long does it take to re-charge?

Tesla has addressed this in two ways. One is to start with a realistic range in the car. That is 260 – 300 depending on how you drive it. And then they have built a network of rapid charging stations across the US and Europe. The UK has 15 already in or being built, allowing fast charging from Kent to Devon, across the midlands and on up to Edinburgh. And into Ireland as well. There are more than 80 more over the channel allowing connection from the top of Scandinavia to Rome in the south, and east though Austria and down to Croatia. It takes 30 minutes charging at a supercharger to add 130 mile of range, or a full charge in less than an hour. A regular home charge replenishes overnight.

The most popular model and battery choice allows 265 – 300 mile range depending on your speed. At legal speeds it should be closer to the 300 miles.

Other models being proposed offer a 4 wheel drive SUV type Model, the X, and a smaller saloon / hatch known as the Model or Gen III. Both of these will benefit from the best battery technology and all of the safety and convenience improvements made since the S was launched. But the launch of both these new models has been pushed back repeatedly. Musk says because when they are launched they will be perfect, suggesting there are teething troubles being addressed that won’t be acceptable to buyers.

And the petrol head gets a say too. Another example of Tesla outstanding performance. The top Model S with dual electric motors (P85D) produces 691 BHP. That allows acceleration similar to that of a McClaren F1, and a Lamborghini Aventador. It does not have the top end speed, but it will certainly get you out of the way fast. And how many cars have a spare motor installed, the ultimate built in redundancy.

As an investment I think Tesla will fly again in 2015. The bear argument is fading fast as Musk addresses the concerns – many of them spurious at best – that are raised. The vehicles are state-of-the-art; the factories are also; the direct sales model is welcomed. And the world knows more than ever that the environment need protecting, and Tesla is addressing that. Perhaps he is the final reason for investing in Tesla. Would anyone bet on him failing?

How stop-loss can lose you money

How stop-loss can lose you money

Start by taking a traditional look at share buying – investing – and the protections employed.

When investing in shares most people will either have been told or know about stop-losses. This is a predetermined trade designed to save some of your money if the share price dives. That could be through factors related to the share itself, or more widespread sector or entire market malaise. Standard investing practise is to protect some of your capital by setting these – now largely automated – protective trades. This also affects the gain-lock, a similar automatic trade designed to keep some of the money made as the share price has increased over time.

It is designed to safeguard your asset, but I will describe here how stop-loss can lose you money.

Let’s consider this closely. You have bought shares, and because of the spread and fees paid more than you can get back; you’re already losing. You may need a gain to 3 or 4 per cent in the share price just to enable you to sell without loss. And now you set a figure that effectively accepts further loss or 10, 15 or 20 per cent “in case the market drops”.

Also bear in mind that the value you set is a trigger, and fast moving markets can push share price over these triggers and beyond in a flash. The price you actually get may be a lot less than the one you’d factored in.

You need at least 20 per cent or more as a buffer for some shares, especially if they are not mainstream and less heavily traded. Volatility in markets due to global geopolitical uncertainty affects domestic markets increasingly, as the oil price fluctuations have shown.

So the share price is likely to bounce around. But it will likely bounce up as well as down. That means you have been dumped out of the share just before it bounces back to a higher level. You won’t be making any profits then.

That is how stop-loss can lose you money.

Recent volatility in markets has left many investors adopting this approach, with share prices plunging through stop-loss and gain-lock values triggering sales, only to rise back and often beyond them the very next day.

What this suggests is that investors accept that to buy shares there is some cost – amounting to several per cent of the share price – and an acceptable risk of up to 20 per cent.

Is there a better way?

There is. Technology now provides ways to tell you about the share price movement almost instantly, so rather than allow the trade to be automatic, you can make a decision to execute or not, depending on your own assessment of the situation. This won’t prevent losses, but may prevent repeated unnecessary losses.

But there are other alternatives. I use longer term put options to protect my investment. If I own a put option, as long as the share price is below the option strike price I can sell my shares at said strike. If I own a put option with a strike of $40, and the share price drops to $1, I can still sell my shares for $40.

I think of this as insurance. Inevitably insurance has a cost. But depending on what you buy and when you buy it, it can be very cheap indeed.

A rising or recovering market – like the bounces that are happening more frequently – provide perfect conditions for protecting your investment. As share prices increase, put option prices decrease. It is therefore feasible to buy shares and protection for less than the value of the protection, creating a gain right at the start rather than the traditional loss.

Put options have an expiry date, just like insurance. The value of your shares is assured until that date. And until that date you have opportunities to make money from your shares by selling call options. These entitle the holder to take your shares from you for an agreed fee – the strike – by a defined date – the expiry. You could sell call options with a strike above your share purchase price for between 1 and 4 per cent monthly income. This amounts to between 15 and 50 per cent gain on your trades annually.

For example.

Shares of SunEdison (SUNE) have been suppressed by the oil price slump.  On January 7th they opened at about $18. You could buy a $30 July put option, that guarantees to you that you can sell your shares for $30, for about $12.50. So your total expense would be $30.50. that $0.50 is your insurance cost, and represents 1.6 per cent. At the same time you could sell February $20 calls for a $1 premium. That represents 3.3 per cent return on your $30 investment. That is if the shares remain below $20. Should they go above $20 then your shares will be sold, and you’d collect a further $2 to add to the earlier $1, a 10 per cent gain for the month.

You could improve your return by staging the purchase of shares and options, but that does add the risk of the share price declining before you have protection.

What you have here is very different to traditional investing. You no longer have a loss. You no longer have to set a level of acceptable risk and loss. And you have made money right from the start.

What’s the catch?

Unfortunately there is a catch. When selling call options you define your gain. In the example above you could make 10 per cent at most in the month. Even if the share price doubled overnight, you’d not make any more.

The trade-off is that you can make regular defined income and guarantee not to lose, rather than speculate that you might make a bit more and have the risk that you might lose a percentage or even all of your money.

Sometimes the particular share you want to buy is priced so that you can’t get insurance through puts for free. But it can most often be secured for less than three per cent. In most cases it can be offset by the income in month one, leaving a situation that means even if the share price collapses and you can no make income from it, at least it will have cost nothing.

I call this strategy Cast Iron trading.

Stop-loss trades still do have a place, for buying or selling options when volatile markets create bargains, but that is the subject of note.

Investing does not require unlimited or unknown risk. There are ways to protect your assets. The fact that you may never have heard of them says more about the investment and IFA industries than anything else. Because protected strategies can be learned and managed without the need for IFAs, they are likely the losers.

The conspiracist in me suggests that it’s no wonder it’s kept quiet.

Pay off in safety first funds

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TMR Are your hatches battened down

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Volatility soars and there is more to come

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