I especially like the cash burn calculator at the end. It tells you how much Tesla spent while reading this particular article.
Author Archives: efficientminds
Marketplace Lending’s New Ways Look a Lot Like the Old Ones – Bloomberg
Perhaps another storm is brewing…
The Man Who Could Eat Half the Profit in Fund Management – Bloomberg
This is a very interesting perspective and interview of a former active fund company CEO. Since most managers don’t outperform their benchmarks net of fees, one could describe three fund-client arrangements that benefit both client and manager:
1. Cap the amount of dollars a fund can attract and maintain the same fee. If a fund collects too many assets (client dollars) it can’t keep buying the 10 or 15 high-conviction stocks. Thus, it buys more stocks and starts to look like an index. Cap the asset size and you can maintain the high-conviction strategy.
2. Charge a performance-based fee. If a manager does not beat the benchmark, Yee manager is paid no more than a passive management fee. High performing managers survive, low performing managers go out of business.
3. Just buy index funds in the first place. Regardless of the fee structure, passive outperforms active net of fees the majority of the time anyway.
Food for thought…
Wells Fargo Fined $1 Billion Over Consumer-Business Missteps – Bloomberg
I routinely suggest the use of credit unions over large banks to my students. Stories like these add support to that suggestion. However, I am also a shareholder of these large banks via index. Perhaps in the end, Wells Fargo will clean up their act and grow again. What needs cleaning (or is in process)? Let me quote the article:
“The settlement covers issues in Wells Fargo’s auto-lending and mortgage units. The bank revealed last year that it had forced unwanted insurance on customers who took out car loans, prompting investigations by U.S. and California regulators. It was also accused of imposing inappropriate charges for locking in interest rates on new home loans.”
We shall see what the two separate probes of the wealth management side of the business produce…
Short Selling as a Business Model – Bloomberg
Thanks to MW for this find. Now here is an interesting business model: Use the funds from shorting another company’s stock to finance the sale of your own company’s competing goods and services for free.
The article points out an irony in this approach: capital markets are used to destroy value. However, I would argue this is not necessarily anti-capitalism. If one of the goals or hallmarks of capitalism is to efficiently allocate capital, then taking capital away from one company that gouges customers and sending it to another that does not accomplishes efficient capital reallocation. For example, why hasn’t this been vigorously applied to pharmaceuticals?
Enjoy the read,
-Dr. Moore
https://www.bloomberg.com/view/articles/2018-04-16/short-selling-as-a-business-model
Diamond diversification benefit? I don’t think so.
Shout out to DL for drawing my attention to this post. So Drew Brees got conned into thinking diamonds would diversify his portfolio. Of course he lost roughly half his investment. I would wager everyone that buys a diamond ring immediately loses more than half. I know, I know, you can take your ring to a jeweler and get it appraised for $20,000. However, I bet if you told the jeweler “That’s great, why don’t you take advantage of me, pay me $10,000 for this ring, and then go double your money?” the jeweler would decline.
Back to diversification, again, people often get into trouble looking for the shortcuts to building and preserving wealth. Ask Bernie Madoff’s clients.
Stick to the fundamentals folks. Students out there: Pay attention to your finance professors.
-Dr. Moore
College students are using student loans to invest in bitcoin. Yes, really – The Boston Globe
Shout out to F.W. for drawing my attention to this article. Let me begin with a quote from the article:
“One-fifth of 1,000 students polled by The Student Loan Report, a website that reports on debt issues from the perspective of students, said they had used some of the money set aside for their living expenses to invest in cryptocurrencies.”
Cryptocurrency instead of food and books? Sounds like those students hope to find a shortcut to wealth rather than the “narrow path” to understanding (work, buy books, study) that leads to employment. I could quote scripture here as well but let me move on. Hoping to build wealth with bitcoin reminds me of a tee shirt I saw someone wearing a month or so ago “Stop looking for the shortcut and just do the f*****g work.” The intended context of that quote and shirt was physical training. However, I would argue it applies equally well to mental training.
So students that used student loans to buy crypto over the last 4 or 5 months made a grave mistake. For example, the bitcoin “value” decline continues from its near $20,000 peak in December to just $6,756 right now (that’s a –66.22% return). Now those students have debt that can’t be discharged in bankruptcy and bitcoins worth far less than what they paid.
Cut your losses. Buy books, not bitcoins. Stop looking for the shortcut…
College students are using student loans to invest in bitcoin. Yes, really
Andy Rosen
If you were to pick two things that could define the financial future of today’s college students, you could do worse than “bitcoin” and “crippling student loan debt.”So what happens when you combine the tantalizing prospect of a new global currency with a long future of monthly debt payments? Apparently, some are willing to find out. A new survey found that college kids are using money from their student loans to buy bitcoin and other digital currencies.
One-fifth of 1,000 students polled by The Student Loan Report, a website that reports on debt issues from the perspective of students, said they had used some of the money set aside for their living expenses to invest in cryptocurrencies. The survey was conducted by Pollfish, which specializes in online polling.
“Younger Americans are certainly the most enthusiastic about cryptocurrency; they are the most active investors and want to get involved in the space in any way possible,” Student Loan Report founder Drew Cloud told the Globe. “However, I truly thought the percentage would be lower. As a college student, your budget is thin and that extra money could be used on rent, groceries, or books.”
Putting aside the wisdom of investing in volatile cryptocurrencies, Boston attorney Adam S. Minsky said it was legally questionable to do so with student-loan money. A specialist in student-loan matters, Minsky said the federal government might question whether such investments are related to students’ education.
“I would err to the side of it not being a kosher thing to do legally, but regardless of that I don’t think it’s a wise thing to do financially,” he said.
So-called cryptocurrencies, developed to facilitate secure online transactions, simultaneously became the hottest and most poorly understood financial instruments of 2017. Bitcoin began last year trading at below $1,000 and at one point were worth close to $20,000.
Meanwhile, companies issuing alternative cryptocurrencies and tokens have been able to raise billions of dollars from eager buyers.
It’s apparently enough to draw in young investors who only have borrowed money to offer, according to Student Loan Report.
And if cryptocurrency investments looked like a path to free money at one point, they decidedly are not. Bitcoin has fallen back down to about $8,500 in recent months, making big losers of many who bought in late.
In an article discussing the survey, Cloud noted that if students have extra loan proceeds for now, they should consider “stowing that money away in a high-yield savings account that they could later use to chip away at their student debt.”
But, he added, they might be right to take a flier on bitcoin.
“But there is always the chance that there is another period of explosive growth for virtual currency, and these borrowers will be laughing all the way to the bank.”
The survey did not ask any other questions, so it’s not clear how much students were investing.
Christian Catalini, an MIT professor who studies cryptocurrency, said he hopes it wasn’t much.
“People should not invest a single dollar in this that they can’t afford to lose immediately,” Catalini said. “If some of these students have been successful at shortening their loan or something else, I think it’s important to realize that might have been a random, lucky draw.”
However, he said student interest in digital assets marks a generational divide in thinking about finance.
“There is a new generation of consumers that tend to have no faith in traditional financial institutions, and I think they are approaching this asset with curiosity and excitement,” Catalini said.
Remy Kaldawy, president of the investing club at Worcester Polytechnic Institute, said the student group has seen growing interest in the past year as it made cryptocurrency trading a larger focus of its discussions. But Kaldawy said he doesn’t know anybody who has used student-loan money to trade assets he considers “way too risky to trade with borrowed money.”
“I personally think it is a terrible idea to make any leveraged investments at all in cryptocurrency,” he said.
Declining Student Resilience: A Serious Problem for Colleges | Psychology Today
Allow me to begin with a quote from the article regarding an alarming trend in young adults today:
“an increased tendency to see a poor grade as reason to complain rather than as reason to study more, or more effectively.”
It has been some time since I was young undergrad (24 years ago) or an old Ph.D. student (10 years ago). Yes, I too complained about poor teachers. But, those complaints were to myself and other students, never with the audacity of students today in their disrespectful emails directly to professors. I quickly realized that learning the material was my responsibility regardless of professor quality. That meant staying in the library until it closes. I remember thinking of the old Lexus tagline when walking to the library: “The relentless pursuit of perfection.” It was apparent that I was not super smart and I had to be relentless to learn the material.
So here we are today with students unable to cope with failure and take responsibility. The article aptly points out this is a serious problem for universities and students:
“The lack of resilience is interfering with the academic mission of the University and is thwarting the emotional and personal development of students.”
So what can we do? Well, I as a professor, and with even greater vigor now as a tenured professor (slight grin here), maintain standards and remind students that we are training them for a world that does not devote itself to their comfort.
I think teachers at all levels, as well as students and parents, will find the article below very interesting.
-Dr. Moore
Protecting Yourself In A Down Market
This article is in the same spirit as what I tell students all the time: don’t panic & sell all, diversify, reduce equity exposure when expensive, and include bonds. An alternative to bonds would be to purchase stocks that act like bonds and cash.
Be patient and move slowly to avoid mistakes.
Tesla Push To Prove ‘Haters’ Wrong Just Proves Them Right – Bloomberg
The article’s mention of the word “cultish” reminded me of Law 27 of “The 48 Laws of Power”:
“Play on people’s need to believe to create a cult like following”
Enjoy the read…
Tesla’s Push to Prove the Haters Wrong Only Proves Them Right
Until it can sustainably keep up Model 3 production, investors are right to be anxious.
More stories by Liam DenningMarch 29, 2018, 10:58 AM PDT
Self OwnBy Liam Denning
Photographer: Scott Olson TESLA INC
+8.35
At Closing, March 29th266.13 USD
There’s a touch of déjà vu about my colleague Dana Hull’s scoop Thursday that Tesla’s vice president of production urged a blitz of Model 3 vehicle production to “prove a bunch of haters wrong.”
You, too, may recall CEO Elon Musk’s call in the summer of 2016 for Tesla Inc.’s staff to “throw a pie in the face of all the naysayers on Wall Street.” Back then, it was all about pushing sales and cutting costs to help Tesla report a rare set of positive earnings. It worked, although only by pulling a couple of levers marked “zero-emission vehicle credits” and “working capital overdrive.” Within a year, Tesla capitalized on investors’ confidence with an equity issue and its first-ever bond sale.
Similarly, the latest fightback aims to dispel the growing alarm about Tesla’s inability to hit even greatly reduced production targets for the Model 3, with figures due next week. The company’s stock, which has slumped this week, bounced a little Thursday, no doubt aided by the notion of a concerted effort to hit the target (it’s worth noting the bonds haven’t bounced).
Stirring Stuff
News of Tesla’s push for Model 3 production may have helped the stock stabilize on Thursday
Source: Bloomberg
Note: Intraday times are displayed in ET.
Here’s the thing, though: Tesla’s efforts to prove its “haters” wrong just proves them right.
Start with the nomenclature. Calling those expressing skepticism “haters” serves only to underline the cultish aspect of Tesla’s stock. Yours truly has expressed quite a bit of skepticism about Tesla’s finances and whatnot over the years and been called many variants of “hater” — some quite creative, it has to be said — by more than a few … “lovers” (is that the right term?).
This cultish aspect has, of course, worked in Tesla’s favor for a while, letting it tap the external funding it needs in the absence of generating its own. But when it stops working quite as well — as happened this week — that dependence on the kindness of strangers is thrown into glaring relief. Adopting the language of Tesla as an emotional construct rather than a commercial enterprise just reinforces this.
As does, indeed, the prioritization of ultra short-term targets — like a weekly production figure right at the end of a quarter — just to revitalize animal spirits and squeeze the shorts.
Look, there’s nothing wrong with the boss sending out a missive to get everybody pumped, especially if you’re reaching. Who among us hasn’t felt that motivational rush when those firm-wide emails grace the inbox? In this case, though, it borders on counter-productive.
Going all-out to get Model 3 production up this one week toward 2,500 — a target that’s been changed so much already it barely warrants the term — would prove what exactly? That Tesla is now on a smooth glide-path to the skies?
As my colleague Hull reports, lines making the Model S and X are being paused this weekend, and some employees on them are being offered work on the Model 3 instead (the other option is to take vacation or unpaid leave). However, Tesla says pauses on the S and X aren’t related to the Model 3.
The push doesn’t paint a picture of the methodical, efficient production line that enables the wider auto industry to turn a profit in a cut-throat business. Over the longer term, such short-term shifting to hit one-off goals is a recipe for inefficiency (read this splendid critique of Tesla’s manufacturing approach by Bloomberg View’s Edward Niedermeyer).
Tesla’s current problem is a simple one to define: It has built a footprint, market cap and balance sheet sized for a mass-market producer of cars, but thus far lacks the crucial element — the cars.
Until it fixes that, sustainably, its dependence on external funding will intensify further. Positive cash flow — quarter-in, quarter-out — would render the haters, real or imaginary, largely irrelevant.
Correction: An earlier version of this column said Tesla had reassigned workers from the Model S and Model X to the Model 3.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story:
Liam Denning in New York at ldenning1To contact the editor responsible for this story:
Mark Gongloff at mgongloff1Before it’s here, it’s on the Bloomberg Terminal. LEARN MORE
Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal’s “Heard on the Street” column. Before that, he wrote for the Financial Times’ Lex column. He has also worked as an investment banker and consultant.
Read more opinion Follow @liamdenning on Twitter
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