Julian Cox now on TMC

[kevin99]

What a drama unfolding!

Julian, has your comments the #73 been post to SA?

Julian Cox now on TMC - Page 8

If not, I can post it.

The problem with SA is the comments appears to be fickle. Sometime my comment shows up, sometime it doesn't, what is why I thought it was deleted. There are already 750+ comments to this JP's crap piece! It is a battle out there.

 

[Alpha]

@kevin99 - I think if you did post his entire response, you'd be at risk of being censored and possibly banned yourself - maybe just post a link to it, but even that could get you in trouble.

 

[NigelM]

I've noticed it take up to 24hrs for comments to appear on SA.

 

[kevin99]

@kevin99 - I think if you did post his entire response, you'd be at risk of being censored and possibly banned yourself - maybe just post a link to it, but even that could get you in trouble.

ok thanks for the reminder.

I guess I am not too care what SA does nowadays. I am still pretty upset that they reject my 2nd article. Then I was already writing a 3rd one but get very discouraged and abandon it.

 

[Rodolfo Paiz]

Kevin, think carefully about the things you wish to do in life. Then, when you choose to embark on any given initiative, do not get too easily discouraged. There will be a great deal of failure in your life, because there's a great deal of failure in ALL our lives and more so in the lives of those who are entrepreneurs or take the initiative. Being easily discouraged will amplify the failures while not allowing the potential successes to shine through. Don't do everything that comes into your mind... but when you do attack something, be persistent. Be gritty. Learn from your failures, but do not let them control you.

 

[kevin99]

Good advice. Thank you Rodolfo!

I abandon writing the 3rd piece, with the plan to publish on SA.

Once I find the right venue, I might pick it up again. The reason I am upset and discouraged is investment thesis is very time sensitive. I need to reconstruct my frame of thoughts in a different time/price range.

Now that we are in a more philosophical mood(and off topic), with the investment, I feel the first time in my life that I have the resources to do what I always want to do. It is a very liberating feeling.

 

[Julian Cox]

Kevin, Alpha,

What ever has induced SA to guard the likes of JP and shun the likes of me, nobody including myself has ever had a satisfactory explanation. Clearly editorial integrity is not the motive and neither is click income. There is something unseen going on which probably should not be.

Regardless of which, until they are forced to do something different, it's their playground, and in their playground if someone is banned then someone copying and pasting everything they say is a circumvention that they cannot be expected to welcome.

Regards the JP article - I think Glenn Albrecht (spelling?) did a fantastic job of answering it.

If you want to use any idea that I have put forward it is going to need to be your explanation of the facts and not a copy and paste of my words.

The facts are pretty simple: JP is saying that the company is treating GAAP lending as income. As a matter of record, my SA article of the 29th May, however clumsily, tried to credit Tesla for the genius of doing exactly that. (All Tesla Financed production is is used as distributed external collateral for lending the company vast quantities of working capital without interest). The concept is a mind bender but is sure as heck does not harm the business. The alternative is to either sell equity (dilution) or to secure lending on the company (costly and ultimately limited in terms of growth potential). I also pointed out that the vehicles produced are marketing assets - now more than $1 Billion of demonstration and display assets for which the business did not have to pay - and in fact it got paid with profits for producing them.

In the case of this GAAP / Non GAAP thing.

The facts (and management accounts) say that the income is definite and the liability is speculation and likely meaningless anyway 3 years down the road.

This is entirely true no matter what accounting convention is applied to it. Obviously the business cannot run cash flow forecasts on what customers might choose to do in 3 years time, and it is as equally irrelevant to investors.

Some have put forward the idea that the income from the resale of a vehicle is Hypothetical. Well the answer to that is that of course that IF Tesla buys a 3 year old vehicle then it naturally follows that it will try to sell the vehicle again and try to make at least a break-even on the deal. The hypothetical part is not whether Tesla will resell the car, the hypothetical part is whether Tesla receives any cars to sell or not. Obviously if it gets one it will sell it again.

Basically JP in a petulant rage because the way Tesla is financed is so absolutely brilliantly conceived that it is dashing all of his hopes for Tesla to fail. After misleading investors for years he hoping for a following to boo Tesla's genius. Good luck with that.

 

[Alpha]

Kevin, Alpha,

What ever has induced SA to guard the likes of JP and shun the likes of me, nobody including myself has ever had a satisfactory explanation. Clearly editorial integrity is not the motive and neither is click income. There is something unseen going on which probably should not be....

Follow the money? Maybe some of the shorts are in power at SA (or friends of those in power at SA) and trying to manipulate the market... I did notice a spate of bear articles clustered around the recent drop today...

- - - Updated - - -

Kevin, think carefully about the things you wish to do in life. Then, when you choose to embark on any given initiative, do not get too easily discouraged. There will be a great deal of failure in your life, because there's a great deal of failure in ALL our lives and more so in the lives of those who are entrepreneurs or take the initiative. Being easily discouraged will amplify the failures while not allowing the potential successes to shine through. Don't do everything that comes into your mind... but when you do attack something, be persistent. Be gritty. Learn from your failures, but do not let them control you.

Great advice for all of us!

 

[JRP3]

I've noticed it take up to 24hrs for comments to appear on SA.

It seems to depend on who's posting. Even though I've "been in trouble" on SA my posts are not moderated and show up immediately.

 

[Alpha]

I always try and be cordial in my SA posts, even when responding to others who are not - and I have never been censored (except once when I was crying foul at a very ugly racist comment in an anti Tesla article-- that was my very first post there and I attribute that to being moderated -- I think new members are moderated for a time. Although the act of censoring my post seemed quite confusing and one sided to me- the article was promptly edited to remove the racial slur. Others complained as well, some not being censored)

 

[Julian Cox]

Debunking the GAAP Non-GAAP thing is incomplete, and it really should be completed.



There are two valid ways of looking at this GAAP / Non-GAAP thing:


1. Tesla is the world’s smartest recipient of endless interest free loan-capital that is secured and serviced on a constant supply of vehicles and customers making normal car loan payments. Tesla records a paper liability and stands ready to purchase the collateral in a three month window between 36 and 39 months, after which the collateral is either purchased or the paper torn up with the remainder of the cash it received on day 1 finally recorded as a sale. Naturally if the collateral is purchased, then it will be resold or-part-leased again, possibly at a profit, possibly a combination of profit and lease accounting loss, possibly with an actual loss if the vehicle is worth less in the open market than the residual guarantee. None of that matters until the outcome in 36-39 months is known, the only thing that is recorded is a liability to stand ready to enter the cost side of that residual transaction without accounting for likelihood of it occurring, or the nature of the transaction as a trade for an asset. (This is the GAAP perspective).

NB. If this must be recorded as a lending liability, it must also be remarked upon that this is an interest and dilution-free free source of working capital for Tesla. There is no reason to be bearish about that.


2. Tesla is 100% a cash-up-front seller of vehicles that offers its customers a separate residual guarantee deal in a window of 3 months, 3 years after purchase (half way through their bank loan term arranged with third party lenders). The residual deal has a purely hypothetical rate of uptake and a speculative rate of conversion to new car sales and returns for Tesla in the second user market and so should be viewed as transaction only if it occurs and and recorded when it occurs. This is the Non-GAAP perspective. Naturally as stated on the Q2 earnings call this is also the management accounting perspective because it does not assume something that may never happen and may not have any impact on the bank balance one way or another if it does.

There is a third perspective, the dishonest (or confused) one. In the dishonest (or confused) perspective commenters seek to persuade investors that the factual nature of the original sales transaction and the hypothetical nature of the residual transaction is reversed, and go on further to insinuate that the residual transaction is a net loss instead of what it actually is: a fixed price limited window of opportunity to trade.

The dishonest (or confused) perspective promotes a veiled but serious accusation that in its non-GAAP numbers Tesla is claiming to be doing better than it is. In fact the pure GAAP perspective (unlimited free working capital) is in some ways even more attractive.

Here is the main source of the dishonest (or confused) perspective offered by a loss making investor in a technology that the author had hoped would have been competitive with Tesla’s lithium Ion batteries, I have written to Seeking Alpha insisting that they enforce their rules of disclosure concerning this author's conflict of interest represented by his stake in AXPW:

http://seekingalpha.com/article/1622992-teslas-non-gaap-fair...

 

[Julian Cox]

 

[Julian Cox]

Perhaps someone would like to answer this article properly:
Tesla Motors Inc (TSLA): 5 Reasons Why I'm Short Tesla - Seeking Alpha

By which I mean to say that pointing at the safety report is a great indicator for likely demand but it is not not the answer to this article. This article is logically flawed internally.

1. The Non-GAAP / Petersen thing has been debunked for those with their eyes open. Non-GAAP is definite income that is useful for management and investment data, GAAP Lease Accounting is a speculative liability three years into the future of each leased sale that might result in a net cost but most probably won't. Of the two, Non-GAAP is definitely the least misleading with respect to actuals and cash flows. With respect to shorting the stock, this rationale is pure speculation (most likely a losing bet).

2. To suggest that Tesla cannot track or exceed the sales trajectory of Apple iPhone, iPad or iPod is pure speculation for the purpose of shorting the stock. There is every indication that it can and will. There is nothing to prevent it in Tesla's cash flow positive sales model and plenty of indicators that demand is compounding with each sale. The market is full of companies that have no hope of performing like that, Tesla is not one of them.

3. Speculating that the company cannot hire the most experienced professionals from the auto industry or find elegant solutions to handle supply ramp up is just that, pure speculation. There is a hard logical error in the article suggesting that 1% of the number of suppliers who cannot ramp up sales equates to 1% of the value of the vehicle. It is speculation because this was never stated, in fact the opposite is true. It is clear from interviews with Elon Musk that the production capacity constraint is at Panasonic, and that is where additional supply of cells from Samsung (and others maybe LG Chem) will not doubt unlock a step change in delivered sales capacity.

Check out David Einhorn on Youtube David Einhorn: The Speech Part 1 - YouTube this is how to pick a stock to short. Note that the strength of Einhorn's arguments exactly match the strength of the logical bull case for Tesla, the short case genuinely rests on a "feeling" that has no place in investing.

It is entirely natural for a percentage of people to doubt a long thesis when there are no established analogies, adding FUD is form of rationalizing skepticism. The logical response is to leave it alone, it is an illogical response to short a stock without a strong short thesis i.e. the business with a high valuation is inevitably going down because xyz. There is no visible thesis for the business of Tesla to decline and many very strong reasons for it to make strong and likely industry-disrupting gains. To bet on any stock going down sharply while the business is going up, most likely sharply, is not sensible, as proven repeatedly.


Permission to copy and paste universally granted (except for this line).

 

[Julian Cox]

Something semi sensible from Petersen:

seekingalpha.com/instablog/227454-john-petersen/2165332-the-great-climate-change-fraud


To paraphrase: Climate change is real an inevitable and we are all screwed regardless. (Elsewhere he has commented that he hopes and expects to be long gone before the hammer falls on humanity).


This is known as a pessimistic perspective. I am encouraged by the knowledge that practically no-one under the age of 20 shares this view, and when the likes of Petersen and his generation are eliminated by nature the world will be in much safer hands.

 

[brianstorms]

This is known as a pessimistic perspective. I am encouraged by the knowledge that practically no-one under the age of 20 shares this view, and when the likes of Petersen and his generation are eliminated by nature the world will be in much safer hands.

Far be it for me to defend JP but what is it about the young'uns exactly that gives you confidence? If the CO2 and methane and other greenhouse gas concentrations are on a runaway condition going from bad to worse, how are the kids gonna fix that exactly? And is it blissful ignorance or fresh creative brilliance that they've got in spades?

 

[Julian Cox]

Far be it for me to defend JP but what is it about the young'uns exactly that gives you confidence? If the CO2 and methane and other greenhouse gas concentrations are on a runaway condition going from bad to worse, how are the kids gonna fix that exactly? And is it blissful ignorance or fresh creative brilliance that they've got in spades?

Regards to JP, this ought to be a classic case of asking those who say a thing cannot be done to get out of the way of those who are doing it.


JP asks the wrong question. "Who is to blame". It is irrelevant. The correct question is what can we do or more precisely how can we stabilize the atmosphere to within natural norms without the environment doing that to us in the form of a cull - as JP puts it.

The answers are quite revealing: No matter who is to blame for rising CO2 levels, the rate of increase is much less than the rate of human output.

We do two things that we don't need to do: 1. Burn rainforests 2. Burn fossil fuels. In round figures, Fossil fuel replacement 30%, forest fire reduction 100% would do it (at least to flat line the issue). There is absolutely no reason not to do that. Replacing out-dated power plants with solar etc is an economic opportunity, not a cost. Same goes with drilling new oil wells, stop that and put the same money into solar etc. Oil companies can earn a huge boost in P:E ratio from the stock markets doing that, not doing that is financially stupid.

Regards the young: A near universal consensus not to put up with 1 and 2. will be sufficient. We have better and more profitable alternatives. 1. Excellent use of the military. 2. Nuclear, Solar, Wind, Hydro. 2.1. Actually solve industrial fusion.

It is entirely practical as far as I can tell to scale up initiatives like Tesla and Solar City to deal with the issue. A full stop to burning rainforests would get us nearly half the way to stability in the space of 1 year of action to stop it. Much better idea than messing about in Afghanistan etc.

The issues faced by humanity on this subject are an attitude problem (as exemplified by JP), not a technical or a financial problem. It is not fraud to make money doing the right thing at all. The demand for Tesla is meeting a desire felt by millions to actually get on and solve the damn thing. Again on the subject of the young - the are not dreaming of owning a Lambo, they want a Tesla.

 

[JRP3]

To paraphrase: Climate change is real an inevitable and we are all screwed regardless. (Elsewhere he has commented that he hopes and expects to be long gone before the hammer falls on humanity).

He's also said at times that he doesn't know if climate change is real and he's also said it's not, so I think he'll say whatever he thinks will support his particular point at any given moment.

 

[Blsteen]

Agreed. Julian is one of the best authors on Seeking Apha. The diversity of writers there is frothy....so I look for his posts.

 

[Julian Cox]

Here is something new and interesting from Petersen:

Tesla Motors Inc (TSLA): Putting Tesla Motor's Gargantuan Battery Supply Problem Into Perspective - Seeking Alpha

Obviously the spin and conclusions are wrong as usual, but the thrust of the research may have actually uncovered an important positive for Tesla.

Specifically the sensible-looking claim that electronics industry is migrating from 18650 cells to (flat) prismatic cells, potentially exposing an enormous global production capacity in fully optimized and fully amortized production plant and machinery for 18650 cells whose only main use is Tesla.

This is a predictable trend and something Musk and co would have been able to predict: In other words a glut of cheap battery cells from equipment no longer in favor for the production of batteries for portable electronic devices.

I think with this article JP has scored a full -10/10. For anyone worried about cell supply bottle neck it looks as though JP has actually identified the solution.

Please feel free to copy and paste this response (or to use the sense of it to respond to this article). It is brilliant, and the brilliance rests as usual with Tesla.

 

[kevin99]

Here is something new and interesting from Petersen:

Tesla Motors Inc (TSLA): Putting Tesla Motor's Gargantuan Battery Supply Problem Into Perspective - Seeking Alpha

Obviously the spin and conclusions are wrong as usual, but the thrust of the research may have actually uncovered an important positive for Tesla.

Specifically the sensible-looking claim that electronics industry is migrating from 18650 cells to (flat) prismatic cells, potentially exposing an enormous global production capacity in fully optimized and fully amortized production plant and machinery for 18650 cells whose only main use is Tesla.

This is a predictable trend and something Musk and co would have been able to predict: In other words a glut of cheap battery cells from equipment no longer in favor for the production of batteries for portable electronic devices.

I think with this article JP has scored a full -10/10. For anyone worried about cell supply bottle neck it looks as though JP has actually identified the solution.

Please feel free to copy and paste this response (or to use the sense of it to respond to this article). It is brilliant, and the brilliance rests as usual with Tesla.

Ok post it there : Tesla Motors Inc (TSLA): Putting Tesla Motor's Gargantuan Battery Supply Problem Into Perspective - Seeking Alpha

For once, Mr. Peterson's lifetime nemesis Julian Cox has something nice to say about this piece:

http://bit.ly/1aoyowo

Julian Cox

Member


Here is something new and interesting from Petersen:

Tesla Motors Inc (TSLA): Putting Tesla Motor's Gargantuan Battery Supply Problem Into Perspective - Seeking Alpha

Obviously the spin and conclusions are wrong as usual, but the thrust of the research may have actually uncovered an important positive for Tesla.
...



But Julian, I don't see clearly what the solution is? Will the existing 18650 plant sufficient for Tesla' use? for how long? Will Tesla continue to us 18650 forever, or for what period of time?