ERICOPOLY

I probably won't sell it for several years. I'll just buy puts which will be paid for by BAC's ongoing earnings. In a portfolio margin account that frees up all of my buying power. Then when the kids are out of school I'll spend a year as a resident of another state (with no capital gains tax). Then I'll sell it as a non-resident of California. Then I'll move back. Same with the taxable MBI gains. I'll bet the tax savings will pay for quite a bit beyond just those year's expenses :)

Regarding the goodwill, I always figured that if they could earn $2 per share after smoke clears then those earnings are worth $20 (at least), once we get to that point. That just happens to coincide with the book value. It doesn't matter if they write off the intangibles, or if they keep them there. Will have no impact on the stock. It's all about the earnings, and nothing else.

It's true that he doubled down implicitly but when he threw out C (which was initially a 5% position just like BAC) he then had a 10% position in BAC. So while BAC had a big rebound since he implicitly doubled own, the loss on C was locked in. Good move for taxes though.

What's Berkowitz' cost basis on BAC? I remember he paid about $14 more than 2 years ago in Q1 2011. Imagine all this time and he is still sitting on a loss. It's bizarre that they restrict his fund from buying more because he surely would have as it dropped and he should otherwise have a big gain here.

Still only at tangible book. The gift that keeps on giving.

Maybe he shouldn't have sold his BAC when everyone panicked.

Only another 1.8% to go now.

Constructive, How did you arrive at 4% IRR? They paid $29,205 for their system in October 2011. They reap $4,900 per year from the system (excluding financing costs). The free cash yield (tax free) is 16.77% for 30 years (assumption is that it lasts 30 years, and assuming no financing expenses). They can use this positive cash flow to pay down their highest interest debts, so that free cash flow is reinvested at a risk-free high rate (paying down debts you've already incurred is risk-free). EDIT: It does seem like the article embellishes their savings by ignoring that the electricity to charge the Volt (were they to purchase the electricity) would be cheaper than the gas to fuel their prior car. So that delta is the embellishment.

I saw the mention of 4% IRR in your post and that's what I was responding to.

$2500 annual savings x 125% oversized x 30 years / $29200 installed cost = 4% IRR Cost of capital is at least 4%, so their solar panels are a bad investment. The 4% is extremely low risk, and it's after-tax. At a 35% tax rate you need something like 6.15% pre-tax yield from a Treasury to get close to the same risk-adjusted return. There might also be a lot of inflation in electricity rates which would boost returns.

They should have listened to Elon Musk who practically handed their current sales numbers on a silver platter to them. He warned them about the cash flow positive tipping point, he warned them about the sales numbers, who were they listening to? "Why is it the people who need the most help... won't take it?" - A River Runs Through It

I'm already doing that now -- I'm leasing/financing/renting the system from Southern California Edison, except that "system" probably consists of a mix of natural gas burn, petroleum burn, coal burn, wind, solar, hydro, other stuff... SolarCity merely has a cheaper system than Southern California Edison. And you are right, if you have liquidity and want to tie it up, then it's cheaper to just buy the system. Their program seems aimed at people who don't have $10,000 in liquid cash, or don't want to tie up their debt/income ratio, or don't have home equity, etc... etc... Yet they want lower payments so that they can improve their liquidity situation. Anyhow, the program is not directed at people who want to buy their own systems.

How do you mean "overpriced" if we're talking about just buying the electricity only? It's cheaper than what you currently pay your electric utility company, so many people will find it underpriced relative to what they pay already. I think it makes sense to buy your own system if you have the cash, but if you are hoarding your cash (or paying down debt) and you merely just want to lower your utility bill so that you can have lower monthly expenses, then there is nothing to lose by having SolarCity provide you with discounted electricity for the next five years.

On a high level it seems hard to lose money at this game with current economics (including incentives). Why do the short sellers believe SolarCity can't buy/install systems that pays themselves off and then generate a profit long term? That's what seems crazy to me. If the typical homeowner can have a system built that pays for itself, SolarCity somehow can't be at least as capable of doing so?

It sounds like SCTY gets repaid over 5 years if they are selling you electricity. Then they get paid a second time if you buy the equipment from them at that point, or else they just continue to milk you for cash flow as you continue to buy only the electricity. This sort of model would create a lot of depreciation expenses in the beginning even though they would be hugely cash flow positive (given enough scale and high installed base of customers). Similarly, if you build a hydro dam I doubt you look like an economic actor until it is built and operating. OK. Throw out depreciation, cut SG&A in half, still negative. Sure, because you are still constructing the dam. There is a point where you have a large enough install base throwing off cash that it overwhelms the expenses associated with having the guys running around town installing new systems. These systems could have a 30 year life. It really isn't interesting to say that after the first year or two the company is not making a profit. The hydro dam is a project that over several years produces only losses. Just because SolarCity can begin grabbing cash flow on each cubic yard of concrete added to the dam, it doesn't mean it's not a dam. In other words, don't hate the playa' hate the game :D

It sounds like SCTY gets repaid over 5 years if they are selling you electricity. Then they get paid a second time if you buy the equipment from them at that point, or else they just continue to milk you for cash flow as you continue to buy only the electricity. This sort of model would create a lot of depreciation expenses in the beginning even though they would be hugely cash flow positive (given enough scale and high installed base of customers). Similarly, if you build a hydro dam I doubt you look like an economic actor until it is built and operating.

Dang it, I really should have followed through.

I don't know where you live Eric, but here in California you can find statistics for all solar installations and Solar City is consistently above $5000/ installed kw. I haven't done this myself but if you split the project up, you can have a solar engineer design the system for less than $300, hire a top rated company to install and help you register all the permits/rebates for the system for about $1.25/watt and then buy the panels/inverters /racking yourself for under $1.25/watt bringing your all in cost easily under $3000/kw before rebates. Depending on the amount of Sunlight, your savings yield on the system before rebates can easily be north 20%. It costs nothing (SolarPPA from SolarCity). The difference is that you are now buying electricity from SolarCity instead of Southern California Edison (I'm in Santa Barbara region). No money down, no installation fee, no obligation to purchase their equipment. But the monthly electricity bill goes down because you are getting charged less by SolarCity compared to your electric utility company. So SolarCity is effectively a distributed electric utility company -- they are using your real estate to hang the equipment, you are their energy customer, and there is no transmission lines loss.

These shares have done even better than TSLA shares since IPO. I spent some time on their website last night -- interesting way to get solar panels on your roof. You only pay for the electricity it produces, and get the option to buy the installation after 5 years. Aside from the actual electricity generated, you have no obligation to pay for anything else. No installation charge, no equipment charge, no maintenance charges. SolarPPA is their product name for that: http://www.solarcity.com/residential/solar-ppa.aspx

But to be specific, they're the steerage passengers and the storm has left them a bit worse for wear. Once they get out of the elements and put some makeup on, other captains might appreciate them a bit more. I want to bring them back into my boat again. Probably soon.

So true, information improves your odds but will never bring them up to 100% chance of winning.

The cool thing is that I can keep on tweaking my order because it doesn't go to manufacturing until the 20th. I decided to lose the spoiler -- looks cleaner without it and I can't imagine it has much useful purpose.

I had a thought today. Given that the market is efficient, you can't underperform the market over the long run (aside from commissions). The reason you can't lose is that you have no disadvantages versus everyone else. Because all information is known to all. Now... it's easy to sell people on the idea that you can't beat the market, but I've yet to hear this one.

Good point. I need to only pick up 25 miles of charge to make that Gilroy stretch with safety margin.

It's a big problem because the one in Gilroy is the first one traveling north on Hwy 101 from Montecito. It's about 253 miles. Cutting it close! They need one in San Luis Obispo, or Paso Robles. You don't really want to drive any other route to get to the San Francisco Bay Area from here. But that's why I'm not planning on driving this car for more than day-to-day local driving. EDIT: And what if there is a line at the Supercharging station? Possibly wait for an hour or two just to get your turn of waiting for another hour? So we have a 2008 Suburban and a 2011 Roadtrek for distance driving.