The Weekend Comes To A Close

The Mrs. and I threw a party this weekend, which occupied much of my energy and time. We decided to take it to a hall to give everyone a chance to dress up and leave the kids at home. The food was exquisite, with a European torte cake for dessert.

The Thaler household was on prominent display, and our cousins Reichsthaler, along with friends and family of my wife’s maiden Groschen surname. The Grosze’s, Zloty’s, Kopiyka’s, Groat’s, Bezant’s, and Dinar’s – all old families – were all in attendance.

The night lasted until the dancing could not continue from sore feet and a shortage of champagne and cocktails.

This morning, I find the markets simply too dull to take much store in. Year to date, my gains have given back to the +19% mark, as swift draw downs in BAS, AEC and CCJ create temporary illusions of losses. They will be re-earned quickly enough.

There is a reason why I put (at the time) 2-3% of my account into TSLA puts, when I wanted to bet against the stock, rather than trying to short it. Shorting a cult favorite is absolute madness. TSLA can run as high as you can imagine – give them a $30 billion market cap, with one factory sitting half empty – why the hell not?

Sure it makes no sense, but as a short seller, you will not survive the process.

Now, I am reserving the right to judge Tesla’s earnings for when they actually file. I want to look through the books, read the notes, and compare some things. But, I do have an early concern.

First, Tesla did not have surprise earnings this quarter. They lost money. What they claim is that they made money from operations (unlike the opposite last quarter where they lost money from operations but came ahead selling pollution credits). But it’s funny how sometimes little word games we play can sugar coat what amounts to pure semantics.

Tesla’s “operation profit” is based after factoring out “leasing” and other items; that’s pretty vague and since I was already concerned about Tesla’s leasing practice anyway, it doesn’t reassure me, especially at these prices for the stock.

How is leasing not a part of operations?

The second red flag here is the owners who are allegedly purchasing these vehicles.

Aditya Satghare – Lazard Capital Markets
Got it. Okay. The second question was on the U.S. Market so, could you give us a little bit more color about your buyer base here and you know what kind of potential brands do you think your customers are swapping out and who do you think you are grabbing share from?

Elon Musk – Chairman of the Board, Chief Executive Officer, Product Architect
We hit some pretty good numbers for that. It’s a really broad mix of cars. It’s not and not just a premium sedan. In fact, I think we

Deepak Ahuja – Chief Financial Officer
I believe we used off that in our last earnings call that we shared

Aditya Satghare – Lazard Capital Markets
..it’s a the capital raise

Deepak Ahuja – Chief Financial Officer
Probably that’s right.

Deepak Ahuja – Chief Financial Officer
If you go back and look at our capital raise presentation,

Elon Musk – Chairman of the Board, Chief Executive Officer, Product Architect
And we haven’t go ahead and just talk about some of the cars we are replacing. Yes. It’s a wide range of cars. It’s not like you can say or it’s been probably five or something like that or it’s quite short right now, it’s like. (Inaudible).

Deepak Ahuja – Chief Financial Officer
This is from the ALG overview taking data from that bulk and they are showing sort of its various events and hybrids, so are the big ones. But it’s interesting like we have got the largest one here is sort of in the order of 10% and 11%. A lot of people are buying our car instead of the Prius, but that’s 10%. Obviously things like the E-Class are buying our cars there is a lead which also coming from so, it’s like E-Class, Prius, lead the Highlander, BMW 5 Series, Odyssey Honda Odyssey it’s like it’s 4% in the Honda Odyssey very like Model S (Inaudible) is 4%. Volkswagen Jetta is 4%.

Aditya Satghare – Lazard Capital Markets
Interesting.

Elon Musk – Chairman of the Board, Chief Executive Officer, Product Architect
Mix of Honda Civic is 3%, so it’s really a pretty broad range just from previous segment.

Aditya Satghare – Lazard Capital Markets
Got it. Now that’s helpful and congratulations on the good execution this quarter.

Alright, the BMW-style high performance vehicles excluded, most of the cars being listed here are significantly cheaper than a Model S. The range of these electric/hybrids is $25,000-$40,000. So you have people trading up $30,000-$50,000.

Okay, so how many highly affluent Prius owners do you think are out there? I did a quick push and found some statistics that actually quite a few millionaires do buy cheaper cars – that sort of thrift sort of plays to having millions of dollars in the first place. So I guess if Tesla sales are being driven by millionaire Prius drivers who just desperately wanted a high performance electric vehicle, then that’s great.

But if you question the depth of the pool of Prius-driving-millionaires-wanting-to-spend-$70,000-on-an-electric-car, then you’re left wondering if Tesla doesn’t have a pricing/contract problem that’s letting people climb into one of their vehicles who should never be climbing into one.

Because at $70,000 on the low end, any pricing problem is ultimately going to be a Tesla liability.

I have no evidence of this, but it doesn’t smell right, and I’m betting there’s a problem with the way Tesla’s leases have been set up, from the get go. Those parts of the last earnings release and filing felt wrong before. And since they drove the company into a loss this quarter, they still feel wrong now.

It might not matter at all, but any lurking issues, at – now – $150 a pop could easily derail this company.

Again (I’m sure you little pricks, getting ready to spam my comment section aren’t going to take any stock in this), I don’t have a problem with Musk or the Model S. But paying this much for the shares is madness.

An old play, NRP, is back in my books today for $19.71. I added this at 5% of assets, keeping it small.

The play is on coal prices. Natural gas prices have increased and are no longer rock bottom. And, life in America has not changed that much. Obama and his EPA army of extremists notwithstanding, coal consumption is set to increase in America this year. And attempts to mess with that will cost everyone dearly.

I’m not going with a full position because I understand how much this administration hates coal. But, I don’t really think there’s anything they can do about it.

NRP is an LMLP and pays out a very large dividend while I wait. They’ve had problems, naturally, from competition with natural gas. However, they’ve been moving steadily to diversify their royalty revenues, and I think coal will surprise to the upside, as it becomes clear the industry is still essential to American interests.

I will make this brief. I have now finished both AEC’s and CLP’s earnings transcripts, and have found a causal link between the two REITs and outrageous comments taunting company management, making my blood boil.

Effective immediately, one Michael Bilerman is on the radar as a possible enemy of the state of the 9th floor.

Keep an eye out for this man, as his input into both conference calls was – shall we say – reprehensible.

This morning, Italy announced they are now in the 8th consecutive quarter of economic decline. Do you understand how crazy that is?

In the 9th floor, a cool air drafts around my slippers, sneaking in to touch my feet. The black tea in my mug gives off a warmth to the touch, and the paper between my fingers stains the skin lightly. Dim shadows from the clouds outside the windows provides the need for a lamp on the side table that casts humming of electricity, while I read.

Italy, and all of the EU, are subjecting themselves to needless pain, just so that some dim witted economists and politicians from the 90’s can continue to enjoy the benefits of a legacy!

The thread that holds the eurozone together has slipped and is now strangling the wearer. But these fools won’t cut themselves free from some misplaced fear of tattering the shirt!

Fine; they’ve chosen their coffin. Do you believe, dear man reading over my shoulder, that we are near a bottom, just because numbers came in “better than expected”? Wrong!

These policy wonks have been calling for a bottom, always two quarters out, for two consecutive years now. They fail because they fail to grasp the intricacies of the problem. The debt maturities are breaking against the wall. Each crest that is survived simply marks a trivial point before the next wall of water raises up.

There’s one path for Europa, and that is the destruction of the euro. They may dismantle the debt instruments directing it, or they may dilute it directly. Their cheap side games are distracting from the main choice at hand, which is that the continent cannot survive if it allows itself to be dragged beneath the surface, anchored by the stubborness of those that created this mess in the first place.

As we are now almost three years past the start of the EZ crisis, my fears of Europe derailing US markets is on soft footing. However, even if America should rise above our distant cousins, and leave us sitting, as here in my office, watching curiously as distant spectators, my sympathies for what our brothers are being wrongly subjugated to stand.

There is no reason that a quarter of Spain should be sitting idle. There is no reason that almost a fifth of Portugal should be in despair. There is no reason that over half of Greek youth should be permitted to sink into shambles of anarchy.

There is no reason for any of this, other than the pride of a few.

I purchased Rocky Mountain Chocolate Factory for $13.53.

Warning: This company is tiny, and probably prone to high variance shocks.

This was an old play from a few years ago, around $9. I eventually just moved on. It fluctuatues wildly and presently trades for just under $14. I’ll write up on it a little later.

This used up 5% of my account. Cash position dropped accordingly.