AuthorTopic: Elon Musk Is The Face Of This Bubbling Stock Market (But Maybe Not For Long)  (Read 481 times)

Offline Palloy

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Elon Musk Is The Face Of This Bubbling Stock Market (But Maybe Not For Long)
Jul 13, 2016

    I can’t think of any governance red flags during the Steve Jobs era at Apple (the one exception being the stock-option backdating issue, which was settled).

    By contrast, there have been many at Tesla.  Perhaps the Tesla bulls would say that the combination of Musk’s brilliance as well as the potential size of the electrical car market more than compensates for a few red flags. My guess is that Steve Jobs would have been envious at the many benefits of the doubt, as well as the acceptance of continual losses, which investors continue to bestow upon Tesla’s management and its stock price.

    –Real Money

It is true, that Elon Musk is considered by many to be a true visionary, but in our view, few visionaries turn their dreams into reality with $4.9 billion in government support.

That’s according to the LA Times last summer.

SolarCity, SpaceX and Tesla all received massive funding injections.

Musk wasn’t appreciative of the estimates, calling the report “incredibly misleading and deceptive to the reader.”

But according to the Times, Tesla alone received $2.3 billion – and that was last year.

Musk’s companies make electric cars, sell solar panels and launch rockets into space. But none of them make any money. And these past weeks, as The Wall Street Journal pointed out, Musk has seen his publicity sour:

    It has been a rough two weeks for auto maker Tesla Motors Inc.’s ambitions in developing and deploying new technology.  First was Tesla’s proposal to buy solar-panel manufacturer SolarCity Corp., largely panned by analysts and investors.

    Then, Thursday it was revealed that a Tesla Model S in self-driving mode was involved in a fatal crash on May 7.  The common thread between the two is Tesla’s chief executive, Elon Musk, who pushes boundaries, sometimes to the breaking point.

    The proposed takeover fueled concern about self-dealing. The crash renews questions about whether Mr. Musk’s reach may exceed his grasp—and that he is pushing beyond reasonable risk.

Of course, none of this will probably put a dent in Musk’s progress so long as Tesla’s stock stays up.

Additionally, Musk claims none of the incentives are necessary and they merely speed up the realization of his business plans.

Of course, one could make the argument that investors have been conditioned by decades of propaganda about “environmentalism” and “global warming.”

So when someone like Musk comes along, people respond.

That’s not to say the cars themselves are bad. Apparently many people like them.

But most industry watchers agree they are overpriced and Musk himself keeps making promises about production increases that never materialize.

Beyond that, the cars that Tesla makes are only as “clean” as the power source. It’s perfectly possible that the electrical charge itself is created from coal-burning power plants.

Like everything else Tesla is involved in, the “green” benefits of his cars are questionable.

What Tesla does best is take advantage of the US fedgov bias toward non-coal and non-oil energy.

Fedgov wants mostly wind and solar power. We’ve already suggested this is because neither kind of power is as easily accessible or consistent as coal and oil.

Most people don’t have the wherewithal, for instance, to make their own solar panels. And both solar and wind power are unpredictable.

Coal is perhaps the easiest power source of all, absent wood. You dig it up and burn it.

This is anathema to those in authority who want absolute control over every part of people’s lives.

Seen from this perspective, Musk is supporting the system’s determination to strip people of various forms of self-reliance.

It’s one thing for government agencies to promote “clean” energy. Many are immediately suspicious.

But Musk’s overriding talent is to make federal authoritarianism seem positively sexy. He is the rock star of alternative energy.

More from the Real Money article:
    There’s perhaps no other stock trading today that seems to get the benefit of the doubt from investors than Tesla. The shares are off a little since Sunday’s announcement but not by much.

    Barclays analyst Brian Johnson said this week that Tesla’s stock price has always been more about “cult psychology” than “run of the mill financial metrics.”  … Elon Musk inspires this belief. If Tesla is a cult, he most certainly is the leader.

    It’s interesting that Musk is compared most often in the press to the late Steve Jobs of Apple (AAPL), yet Jobs didn’t get as much favorable treatment by investors as Musk does when you compare the historical price-to-earnings ratios between the companies, as well as the tolerance of losses.  Jobs always had to make money at Apple.

And then there is this, from alternative media site DSSK:

    Elon Musk is an obvious fraud. Something that all of his companies rely upon is continued gub’mint cheese. Without the largesse of the state, his entire empire would have already collapsed.

    He made his initial success in an unrepeatable environment of the dotcom boom. Making web applications is ridiculously simple compared to any one of Elon’s new ambitions: automobiles, space travel, solar energy, and public transit.

    Any single one of these would be a massive undertaking, requiring the full focus of any CEO. To take them on all at once reeks of foolish pride and mania.

    There’s something innately childish about trying to be the king of cars, space, and trains all at once as well. It’s like he’s picking everything preteen boys might decorate their room with.

The article also makes the point that Tesla’s leverage mandates that he capture huge market shares of the businesses in which he is involved. Anything less will not generate the requisite profit. Not that he has ever made a profit to begin with.

Conclusion: Every bull market has its public face, the man (usually) who captures its effervescence and seems to embody its optimism. Right now that man is Tesla. Tomorrow, it won’t be.
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Offline Palloy

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And then there's this - the article's layout is such a mess that you should read it at the ZH site:
Tesla Quietly Kills Car Buyback Program As Probes Reporter Reveals Undisclosed SEC Investigation
Tyler Durden
Jul 13, 2016

While much of the recent public attention surrounding Tesla has focused on the car's self-driving or "autopilot" feature, which was implicated in the May 7 deadly crash and has resulted in a NHTSA probe as well as a potential SEC inquiry into whether the company misled investors by not reporting the death at the time of Tesla's May equity offering, the real problems facing Tesla is not so much whether its cars are safe but the increasingly evident lack of demand at any price point.

Last month, Tesla cut the base price of its Model S sedan to $66,000; this happens at a time when Tesla has missed its sales targets in the first two quarters this year. Then earlier today, Musk also added a lower-priced version of its Model X crossover. The new Tesla Model X 60D is priced from $74,000, $9,000 less than the Model X 75D. Equipped with a 60kWh battery,

But the real sign that Tesla is concerned about flailing demand for its cars came later in the day, when Tesla said it had discontinued its resale value guarantee program that assured buyers that cars would retain value over time.

As Reuters adds, the discontinuation of the buyback program, as of July 1, shows the company stepping back on a pledge begun in 2013 that Tesla would buy back its cars financed through specified loan partners for a predetermined resale value after three years. The program was intended to help Tesla control its secondary market and assure buyers that cars would retain value.

This means that used Tesla values are dropping faster than the company had expected in its worst case scenario, and as a result it can no longer afford to fill the gap. With this program ending, demand for new vehicles is set to slump even more as concerns about resale prices emerge.

A Tesla spokesperson said the program was discontinued to "keep interest rates as low as possible and offer a compelling lease and loan program to customers."

What he really meant but would never say is that demand for Teslas, both new and used, is cratering, something which will promptly be reflected in prices of used Teslas as they suddenly hit the market now that the company is no longer backstopping all repurchases. And, we expect, once the public realizes what the true clearing price of these vehicles is, demand for new cars will slump even further in a feedback loop that ends with Tesla eventually running out of cash.

But not quite yet.

The most recent publicly disclosed valued of Tesla's liability created by the resale value guarantee was $1.58 billion as of March 31. The resale value liability had increased by more than 20 percent since the end of 2015. Needless to say, the ending of the program simply means that Musk no longer wanted to accumulate a massive liability which would, sooner or later, have to be met with actual cash outflows by a company which already burn $2 billion annually in a good year.

The State is a body of armed men


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