Tesla v Enron

Tesla v Enron

Tesla v Enron

It’s a beautiful weekend in Helsinki. After missed and delayed flights and a horrendous travel schedule I am finally able to relax and take in the charm and beauty of this often overlooked travel destination where the average femme is a 7 or 8. That’s an incredible distribution scale in my opinion. How did I ever end up living in Asia. Oh that’s right, this city is only habitable for a few months of the year.

Over half the people on my flight over were reading actual hard copy books. Liaising with the locals one can easily understand how Finland is continually ranked as having the best education system in the world. The locals I’ve spoken to are highly engaging, well informed, knowledgeable and like I said earlier, 7s & 8’s. I look forward to spending more time is this part of the world.

The markets were unsurprisingly quiet over the last week. With the bulk of earnings season now in hindsight, save for a few remaining big names, the summer doldrums and holidays led to Monday having the third lowest trading volume of the year at just 2.6 billion shares, compared to the 3.5 billion daily average for all of 2018.

The Nasdaq managed to hold onto its second-highest close in history, less than 1% away from its all-time closing high thanks to a 4.5% jump in Facebook (FB) shares on the news that the company is looking to work with banks to help facilitate transactions on its platform, this meshes nicely with my Digital Lifestyle investment thesis, something I shall discuss in greater detail. The jist of it is having one’s social media linked to one’s financials, something that is not unfamiliar in Asia. Beggars in China will often present you their Alipay bar code on their smartphone for donations.

must, tweet, global macro

Midweek market news was dominated by a tweet from Elon Musk concerning taking Telsa (TSLA) private at $420 a share. That’s correct, the CEO of a publicly traded company announced that he was mulling taking the company private at a specific share price and that funding was already locked up. The ‘funding’ being attributed to a deal with the Saudi sovereign wealth fund. Talk about Faustian bargains.

First, I’m pretty sure that Twitter’s (TWTR) Sales Department regularly sends tithes and offerings to Elon and Trump. Second, Tesla’s Investor Relations department and governing body must have xanax frappacino’s on their desks.

The major news outlets all scrambled to get some clarification from Tesla’s Investor Relations department, who could only confirm that the tweets did in fact originate from Elon Musk himself.

Trading of shares of Tesla was halted until 3:45ET, during which time a Tesla blog post was released containing Elon’s email to employees in which he shared that, “”A final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best.”

In his letter Elon Musk claimed that the wild swings in the share price “can be a major distraction,” the quarterly earnings cycle making the focus on the short-term rather than what is in the company’s long-term best interest and that the company is the target of short sellers. While true, a CEO should not be so focused on the share price and instead focus on the long-term strategy and growth of the business.

It remains to be seen if any of the short-sellers that he mentioned decide to go after Elon for damages or if the SEC will find him guilty of attempting to manipulate the share price. Former SEC Chairman Harvey Pitt told CNBC that, “the use of a specific price for a potential going private transaction is highly unprecedented and therefore raises significant questions about what his intent was. So, that would have to be investigated.”

I wanted to devote an entire research paper to this subject but given all that’s happened this week let me jump the gun and let you know what’s been on my mind. Look at the Porsche Taycan, roughly same price as the model S with similar power output at 600bps and a similar range of 500km per full charge. The equivalent Merc’s, BMW’s and Audi’s aren’t far behind either. They offer what Tesla does and much more, not to mention the Tesla model already looks dated and they don’t have the capacity to refresh their model. With what factory?

Musk’s competitors have the ability to play the long game building trust and relationships. I see most of the Tesla early adopters coming back to staple luxury automakers because Tesla offers limited value proposition beyond the medium term. A good friend loves the novelty of his Model S but complains the build quality isn’t as good as his Maserati and he almost had a heart attack when the car’s operating system crashed and rebooted whilst he was driving on a motor way.

enron, tesla

I’m curious to see how much pre-owned inventory Tesla will have in the next 6-12 months. I’m still not shorting the stock though but shorting the bonds are on my radar. We are now in the second half of 2018 and the leases on the first fleet of cars are coming to an end with wear and tear affecting them as they do all cars. Stories of Tesla not being able to fix their own cars covered by warranty are a common gripe.

The reason for this is fairly simple, Tesla isn’t a real car company with the proper network and infrastructure to handle the selling of a consumer product. It’s simply a point of sales for vehicles that roll off an assembly line. That’s only half the game as service, maintenance, ongoing customer relationships with a human touch is what leads to the conversion of the second sale.

So I’ve ramble on enough without substantive data. My point here is that Tesla is screwed not because of their current production difficulties, cash flow burn rate, Musk’s manic tendencies etc etc etc. The real bear case comes from it’s competitors in the next year or two and I haven’t even touched on the electric car revolution going on in China.

The chart above is not a crypto currency but rather the Turkish Lira feeling the wrath of Trump’s sanction’s.

On the global macro front, the Turkish lira got battered as expected, sinking to a fresh record low as concerns about souring relations with the U.S. and runaway inflation outweighed the nation’s plans to stem a market rout. The lira sank more than 5 percent, while the iShares MSCI Turkey ETF extended a two-day plunge.

The rouble sank as well, as a fresh round of U.S. sanctions against Russia deepened concern about what could be targeted next. Traders who had been building long positions in the currency earlier in the summer rushed for the exit, and analysts at Citibank said it looks like traders were already pricing in a worst-case scenario of sanctions on banks and new sovereign debt.

crude, global macro
The removal of U.S. crude from goods targeted by Chinese tariffs is a sign that America has become too big to ignore in the oil market. Less than two months after threatening to impose levies on imports of U.S. crude, the world’s biggest oil buyer has now spared the commodity.

Only fuels such as diesel, gasoline and propane will be hit with duties on Aug. 23. That’s after the nation’s buyers, including top refiner Sinopec, began shunning American supplies to avoid the risk of tariffs. China’s original plan to target U.S. crude came at an inopportune time for the country’s buyers, with Sinopec’s trading unit embroiled in a dispute with Saudi Arabia and amid supply disruptions from Iran and Venezuela. “The U.S. has been and will remain the main source of incremental crude production globally,” said Den Syahril, an analyst at industry consultant FGE.

Time to sample some of the local poisons and see what the rest of the weekend holds. As always, take care of yourselves and each other.

All Time Highs Data is the new Oil