Monday, November 26, 2018

I do love me some crazy.

Elon Musk Admits Everyone Was Right About Tesla.

I spent a good part of the early years of the recession listening to CEO talks and trying to understand how they could be so calm when they have to put so much money into a project and not see any return for years. It takes a level of strength that most people can't comprehend. Most people are geared to avoid pain.

One of those CEO's was Elon way back when he was weeks away from losing Tesla and SpaceX. So seeing his comments last night felt like a bit of old home week.

You see, at the time I was in a bit of a crazy situation myself. I was sitting on two underwater houses. You could have burned one of them down and it would not have made a single different to my situation. At one point Mr S. and I were talking and I laughed and said - I may never be a millionaire, but I've been a DEBT millionaire. And that was before it was fashionable. I didn't have the assets to satisfy that debt.

I think until you've ridden the ZERO to that extent, you think all this Elon stuff is crazy. I don't hate the player or the game. Until you've risked absolutely everything, you just don't understand what this does to your brain. It honestly makes you feel a little invisible if you make it through. And you constantly have to rein in that feeling that you'll make it through again. If you are smart. It's easy to become reckless. And I think that is where we are. It's funny to watch Elon. And even through he is fully in the maelstrom, that guy gave it his all. I don't know when the day will be. I just love watching the near misses. A lot of CEO's spend much less effort vaporizing people's money. Meaning, he could just sit back and not work this hard honestly.

I am not really rooting for a Tesla bankruptcy. I think it would be unknowingly painful for my area. Not just the knock on effect for Tesla suppliers and the trickle down. But for all of the newcomers that are trying to gain a foot hold. If Telsa can't make a go of it, they are going to be in for some serious pain. Tesla is best of breed.

Having said that - it doesn't escape me that GM and FORD are squealing hard about being hit by tariffs. But nothing out of Tesla even though they just lowered their prices by like 25% in China.


  1. Capital of Texas RefugeeMonday, November 26, 2018 8:06:00 PM

    Here's a little backstory then on Tesla's batteries: they rely heavily on Panasonic battery technologies, and right now they're in the middle of a conversion from using 18650 cells to 21700 cells.

    Here's a brief bit about the batteries.

    So you'd expect that Panasonic would be doing well because they're pushing through a mini-revolution in the kinds of batteries that go into the Tesla 3 and other Tesla vehicles, right?

    Actually, no, Panasonic's stock on the US OTC markets has somewhat mediocre performance.

    The MarketWatch link above is more interesting if you go to the advanced charts view -- select "Relative Strength Index" for the lower charts and you'll see immediately what's going on. Panasonic has not been strong for most of 2018 and is currently trading at levels it saw in early 2017 before a long period of gradual growth in the stock price that started to wind down around the time of its earnings statement in February 2018. Even during this growth period, Panasonic's performance wasn't all that encouraging, let alone astounding.

    This means that any news coming out of Tesla probably doesn't help the stock and might hurt it in some way, even if it might actually turn out to be good news eventually.

    31 Oct 2018: "Tesla's Model 3 rush costs battery maker Panasonic"
    16 Aug 2018: "Tesla backs off solar panel deal with Panasonic"

    How quickly things change.

    07 Jan 2016: "Panasonic ups ante in Tesla gigafactory experiment"

    And on Monday one of Panasonic's competitors announced that they'd produce similar batteries in the US ...

    But elsewhere in the markets where you'd expect some sort of windfall for certain companies because of Trump's push for increased tariffs, the stock price increases you'd expect have failed to materialize.

    Alcoa, for instance: a long slide since 20 April has left the stock at nearly half of its valuation back then.

    Century Aluminum shows the same pattern even more severely: it's now trading at a little more than a third of its high back in January 2018, putting it back to late 2016 to mid-2016 levels.

    Glencore had a good run during the middle of 2018, but now the stock is sliding slowly downward in price as well.

    A slight increase or a moderate increase in Alcoa and Century Aluminum stock prices might have been what you'd have expected, with Glencore remaining flat, all other things being equal, but since the market for aluminum isn't so hot, not even the benefits of Trump trade protectionism appear to help either Alcoa or Century Aluminum.

    So what happened?

    Sanctions against Oleg Deripaska, that's what happened.

    Prices for US deposits of refined alumina bauxite have climbed, eating into the profits of companies like Alcoa as well as global producers like Glencore.

    This also makes these products too expensive to export, letting the Chinese slide into even more markets with commodity refined aluminum that can be further machined at factories in importer countries.

    Also, this was what I was actually talking about being behind the scenes months ago, and it affects the computer industry as well. None of this stops bringing in aluminum from bauxite mined in China that's further refined in Malaysia and then imported and further processed as machined billets in Switzerland.

    No, all the customs broker cares about is that the HTS code says CH in the country of origin field, and all of it sails right through customs with minimal duties ...

  2. Capital of Texas RefugeeMonday, November 26, 2018 8:09:00 PM

    So what then?

    If Tesla blows up, so might Panasonic, so might the aluminum industry that's servicing the creation of these batteries, so might the capacitor manufacturing industry that relies on inexpensive aluminum ... and a lot of the industry you once took for granted starts to circle the drain in terms of profitability.

    But the damage is going to start first with industrials.

    Not that I'm a big fan of that Russian guy, and not that I'm a fan of China except perhaps for a certain amazing city near Hong Kong of roughly twelve million, but there are smarter fights to be fighting right now ...

  3. That was actually a pretty interesting comment. But I don't think Panasonic will blow up. It's one of those companies I forget is even still alive, but Japan would never let them fail.

    Also after I went to your first link I remembered that I just saw a talk over the summer about batteries. I think there was a rep from Panasonic because they were talking about Fujisawa.

    I find batteries pretty boring, so I have to tease that information out of my brain and try to remember what they said.

    Still, a pretty interesting take on the whole situation.

  4. When a US $7 billion company sinks roughly US $2 billion over several investments into a factory and then winds up with a customer problem, as in the primary customer going bankrupt, that sort of mis-timed investment can ripple back into the investor ...

    Oh, BTW, let's make the SEC slightly less unhappy while we're at it: I don't hold positions in any of these companies right now, and I'm not planning on that any time soon.

  5. Oh, I agree - I just observe what Japan does. I don't make the rules. Panasonic should have died a long time ago.