Entrepreneur

Cutting back on the Tesla staff cookie tin

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Where have we heard this before? When companies look to tighten the belt, bosses often pat themselves on the back by cutting back on ‘unnecessary expenses’ like staff coffee room biscuits. That somehow over a 12 month period a company hemorrhaging millions has saved $832.67 on cookie cutting. Maybe $1,239.31 on fewer newspaper subscriptions. Well it seems Tesla’s Elon Musk is getting tough on approvals. Well he might especially after claims he doesn’t need a capital raise and made wise cracks about going bankrupt on April fool’s day.

Musk tweeted that his finance team were going to be out to trim back on any expense deemed not vital to the cause. All $1mn approvals must be solely signed off by the CEO himself. Suchnis the extent of ‘production hell’ he has moved to 24-7 shifts to hit his slated targets.

His email also bragged,

It is extremely rare for an automotive company to grow the production rate by over 100% from one year to the next. Moreover, there has simultaneously been a significant improvement in quality and build accuracy…

Indeed it is extremely rare to have auto companies doubling production year over year because most companies never plan to improvise their manufacturing  methods to start with. Toyota doesn’t meet a week before starting a new vehicle build and have a thought bubble. “Tanaka-san, did you get hold of Fanuc to see if they have any spare robots they can install by Friday?” Moreover the quality improvements are also a celebration of dreadful moving to mediocre. These aren’t achievements in any manufacturers book. They’re a candid admission of ‘amateur hour’

Musk continued,

Any Tesla department or supplier that is unable to do this will need to have a very good explanation why not, along with a plan for fixing the problem and present that to me directly. If anyone needs help achieving this, please let me know as soon as possible. We are going to find a way or make a way to get there.”

Seriously? It is a rather frightening prospect now that the CEO, whom took over the production floor several weeks ago, is sending a  crisis stations email to staff and suppliers.

His levels of lashing out of late seem somewhat concerning. Two weeks ago he accused the NTSB of lacking credibility by kicking off Tesla in the investigation panel into the recent death caused of a driver in California who had relied on autopilot Attaking the regulator is never a wise move. Worse, he blamed the driver in response to a lawsuit launched by the deceased’s family claiming he put too much faith in a system he champions as smarter than humans. Which is it?

Musk’s full letter to employees is here but perhaps he should take a lead out of the Riva Aquarama production line book. Carlo Riva built the Ferrari of yachts with excruciating attention to detail. All the different stages of production crew had different coloured jackets on. When looking out his window if he ever saw colours mingling he knew he had a problem.

Musk talks the confidence game but the pressure is bearing down on him. Senior departures, impending court actions and a production system that has been found wanting after such a short period of time that major changes need to be enacted because the original concept was so poorly thought out. So much for sensible factory capex allocation.

Elon Musk also made surprising remarks about the new found existence of sub suppliers. Musk can’t  lick his finger to find the direction of the wind forever. This is rookie level discovery. Frankly shareholders should be very concerned.

Zucker feasted on your consent to be a sucker

Whatever the outcome of this hearing, much of the data collected was willingly offered by Facebook users. It was they who told people where they took vacation, the restaurant they ate or birthday they celebrated. It was they who adorned their avatar with a transparent French or rainbow flag as a back drop after another terrorist attack or to show support for same sex marriage. It was they who clicked the check box to agree to the “terms and conditions” immediately without reading it. Is that Zuckerberg’s fault? Questions however must be asked with respect to the ability to access microphones and cameras unbeknownst to users. How flagrantly was privacy law violated beyond that agreed by users?

For as much as Zuckerberg might look an evil violator of privacy laws (he may yet be proved to be so), if one wants real anonymity, social media is the last place to find it. It is doubtful anyone posts happy snaps on social media as a pure storage back up device. Many people crave attention and more than ever their self-actualisation stage in the ‘hierarchy of needs’ is driven by likes and shares rather than the Abraham Maslow’s original theorem of 75 years ago. The higher the ratio of “selfies” would probably be highly correlated to attention deficit disorder. Protesting the use of the data provided is a grossly naive assumption if not borderline negligent. Tucked away in the fine print of the words and conditions would surely have FB gaining their complete consent.

Ted Cruz took it to Facebook CEO Mark Zuckerberg on whether the social media giant ‘censors conservative’ news. He replied, “Silicon Valley is an extremely left-leaning place.While denying that he knows the political affiliations of the 15~20,000 staff who police content he said the group does its best to remove things that are considered hateful (e.g.hate speech, terrorism), hurtful or distasteful (e.g. nudity). It was brought to Zuckerberg’s attention that black conservatives (and Trump supporters) Diamond & Silk had their page blocked with 1.2 million followers on grounds of  “being unsafe to the community”. In any event, Zuckerberg deflected many of the questions in his testimony on grounds of the size of the organization but admitted not enough was done to police itself. Power corrupts…? Absolutely…?

Which brings the whole argument surrounding ‘free speech’ and social media sites exercising subjective political bias. It was only several years back that openly gay shock-jock Milo Yiannopoulos was banned from Twitter for causing ‘offence’ to a Ghostbusters actress. Yet what is offence? Where is the line drawn? What offends one might not offend another. However the censor would seemingly be able to use his or her subjective opinions, values and biases which makes it pretty clear what the outcome will be. President Trump learned that when a disgruntled Twitter employee temporarily suspended his account. Do not be surprised when we’re simply told to “get with the times” and accept the party line. Resistance is futile. It is the simplest way to shut down sensible debate.

Anyone active on social media is well aware of the risks of being targeted, trolled or attacked for expressing differing views. However do users require, much less want to submit to the machinations of the thought police? Shouldn’t they be free to choose what they view or pages they subscribe to? Indeed hate speech (not to be confused with difference of opinion) has no place but the majority of users are likely to be able to make that assessment without it having been arbitrarily made for them.

Then again, surely as a publicly listed corporation Facebook can decide what it wants to do with its site and let participants in the free market (who use it for no charge) decide for themselves that the obvious bias forces them to seek social media platforms elsewhere. Twitter share price was badly thumped for its blocking of certain groups and its share price is around 1/3rd the peak. It’s overall followers have fluctuated in the 316-330mn range since Q4 2016. The market works. It is taking Facebook’s shareprice to task on the grounds it will suffer for treating its users as mugs. Perhaps a look at activity post the hearings will show just how many mugs are still as active as before despite the threats to abandon the evil Zuck. The share price will respond accordingly.

It begs the question as to why a more conservative outfit hasn’t decided to make a Facebook equivalent which does not censor outside of clear violations of hate speech. Surely offering a replicated platform that didn’t censor free speech would be a massive winner. Users would also sign up to a simple (and SHORT) legal agreement that there is a risk of being offended and to commit to accepting it. Where clear violations of hate speech (e.g. threats of murder, terrorism etc.) are found such things can be reported to the authorities (with terms and conditions EXPLICITLY warning of such repucussions for violating easy to understand rules). Then again maybe Zuckerberg is right. Silicon Valley is indeed an extremely left-leaning [alt-left?] place! So this is why conservatives are behind the 8-ball on a free speech social media platform.

The sad reality is that social media is policed by the left and authorities seem keen to exploit the powers that provides. The examples are too many. Controversial conservatives have been blocked, banned and restricted for the most spurious of reasons. Diamond & Silk are hardly a danger to society. It is almost comical to think that.  Yet aren’t the subscription rates/followers of particular sites indicative of the ‘moods’ of people? Could it be that black, conservative and Trump supporter must be mutually exclusive terms in the eyes of the left’s identikit forcing the Facebook apparatchiks to enforce a subjective shutdown? If a public explanation was provided it would probably just say, “trust our objectivity’. Whaaaat?

At some stage if enough people feel they are being played around with they will choose of their own volition to leave and seek their social media thrills on other platforms. Or will they? It maybe too late. Blatant exploitation of social media by governments looks like an obvious trend. If we are only too willing to give up our data and cede any visibility of the inner circle’s terms of use of it we are on a slippery slope of our own making. Think about how your mobile device allows you to be tracked whenever and however. It can turn your camera or microphone on. It can triangulate your whereabouts anywhere across the world. What you’ve read, listened to and watched. Where are the privacy laws surrounding this? Is your local rep fighting in your corner? Probably not.

Could private conversations with a lawyer (client-attorney privilege) be bugged and used as evidence? Don’t laugh. As an aerospace analyst many moons ago, teams of specialists with anti-bugging devices trawled through the suites of the aircraft manufacturers’ chalets to ensure the opposition didn’t get wind of negotiations with airlines they were both competing to win large orders from. Illegal in the extreme but seemingly exercised by all parties. It was an unwritten rule.

However social media censorship hides deeper problems. It is also increasingly a tool to shut down debate and people like London Mayor Sadiq Khan has met with social media execs to collude on cracking down on ‘hate speech’. Surely policing spurious claims of hate speech is a lesser issue to the immediate threat faced by a capitol which saw its murder rate surpass that of New York. Not so. This is the dangerous turn in social media. Not whether our data is used for targeted advertising for cheap flights but used to pillory, interrogate and shut down innocents. After all social media has a half-life of infinity.

Take the controversial figure Tommy Robinson in England. The UK authorities and media wish us to believe he is an unhinged far right wing bigoted racist thug. Yet despite all of the times he has been jailed (for mostly trumped up charges), silenced and muzzled for publicising what he sees as a major problem in his community (i.e. radical Islam), the growth in followers continues to rise on his Facebook page (706,000). Maybe the authorities should keep tabs on them? Arrest them on suspicion of potentially causing hate crimes. Surely they are cut from the same cloth as Tommy? Afterall it is better to arrest a comedian for teaching a dog to do a Nazi salute to annoy his partner as it is less controversial to the state than tackling real issues. Perhaps authorities should pay attention to why Robinson’s following is so large? It is irrelevant whether one finds his viewpoints offensive or not, a majority of over half a million clearly don’t. He is no saint and would be the first to admit it. Still the authorities are trying everything to shut him down. Social media is being used as a watchdog.

Robinson has two best selling books –  ‘Enemy of the State’ and ‘Mohammad’s Koran: Why Muslims kill for Islam’. Is that not evidence that there are more people than the authorities would care to admit to that actually concur with his assessment? Maybe some want to read it out of curiosity? However when many of those same people see an undercover scoop done by the left leaning publicly funded Channel 4 on the inner workings of one of England’s most conservative mosques, praised by politicians as they true face of a peaceful religion. Even though the mosque had promised to clamp down on radical imams, the documentary revealed that despite assurances to government authorities, teachers still encourage students to believe that the only remedy for gays and apostates is to be killed. So maybe Robinson’s followers aren’t as fringe or minor in number as we would be made to believe? With the widespread outing of child grooming gangs across the UK, maybe Brits have had enough of the political hand wringing over politically correct discourse. The more the movement is pushed underground the harder it will be to stop vigilantism. We’ve already seen signs of it emerging. Think of the Guardian Angels in NY during the crime waves in the 1979.

What the Zuckerberg testimony brings to the surface is yet another example made clear to the public of the two tier dispensing of free speech. What worries the public more is that justice seems to be operating under the exact same framework. What the Channel 4 programme exposed with respect to blatant hate speech is incontrovertible. Yet will authorities arrest, charge and jail them as they would a Tommy Robinson? Not a chance. To encourage the murder of people that aren’t part of an ideology can’t be viewed as anything other than a willful threat.  Will the judiciary demand that scholars have their pages scrubbed from social media?

The shoes are on the wrong foot. Earlier this year, Austrian conservative Martin Sellner and his girlfriend Brittany Pettibone were arrested on arrival in the UK, detained and deported. Sellner for wanting to deliver a speech at Speaker’s Corner in Hyde Park (later delivered by Robinson) and Pettibone for wanting to interview Tommy Robinson (which he later conducted in Vienna). Neither look in the least bit dangerous. In this case, social media backfired on the state. In both cases, the public once again saw the double standards and the pervasive political posturing to beat the ‘controllable’ element into submission. Just as it is easier for the police to fine speeding motorists than actively pursue solid leads on catching grooming gangs the public rightly grows increasingly livid. Social media is being used more widely as a policing tool, with negative connotations. It isn’t just being used to foil terror plots but stomp on the rights of the average citizen.

Still there is some sympathy for Zuckerberg in that many people volunteered their information. If it was used in ways that violated ethical and more importantly legal rights it only goes to prove that power corrupts and absolute power corrupts absolutely. To that end, can we really expect lawmakers to cramp their own style when Zuckerberg has only highlighted how powerful the information he possesses can be used to sucker us more than they already do. That is the real crime we are seemingly becoming powerless to stop. Talk about the real Big Brother!

Tale of the gold coin chocolate & a warning for Tesla Disciples

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It hadn’t really hit until going back to read the conditions of Musk’s new executive compensation package but the first thing that struck me was the risk of the old adage of paying too much attention to the share price. The collection of all 12 tranches for CEO Elon Musk only kicks in when his company hits $650bn in market cap. The first thing to pop in the head was that of Japanese mobile phone retailer Hikari Tsushin back during the tech bubble. The rather eccentric CEO Yasumitsu Shigeta had gold coin chocolates made embossed with “Hikari Tsushin: Target Market Cap Y100 trillion.” One could only conclude he believed in his own BS.

It was at that moment where the only thing that crossed the mind was ‘this spells trouble’. There were magazines like Forbes touting how Shigeta was one of the richest men in the world and analysts fell hook, line and sinker for this unrealistic dream forecasting he’d be #1 before long. The only rational conclusion for the Contrarian Marketplace was to tell them that “bet he won’t be in the top 100 next year.”  Low and behold the tech bubble collapsed and Hikari Tsushin – that believed it was worth 2x the market cap of then highest valued corporation in the world, General Electric – fell over 95%.

While Musk may not yet have printed target market cap $650bn gold coin chocolates, what the incentives are saying to the market is that his company needs to be worth more than Daimler, BMW, VW, GM, Ford, Toyota, Nissan, Honda, Renault, Fiat-Chrysler Ferrari and Porsche combined. Just read that last sentence again. Do investors honestly believe that Tesla which consistently misses and is going up against companies that have been in the game for decades, seen brutal cycles, invest multiples more in technology and forgotten more than they remembered will somehow all become slaves to a company which has no technological advantages whatsoever?

Once again, this compensation package screams of gold coin chocolates in mentality. Instead of running the business and letting the share price do the talking, the mindset is focused on launching convertibles into space and distracting investors from increasingly dreadful financial results which eventually must come full circle if the results continue to miss. Broader Tesla report here.

Tesla is trucking kidding itself

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Tesla has bagged 55 orders for the semi so far. Although it is no surprise that no major truck hauling companies have signed up. Funny that. To expect trucking companies who operate under strict cashflow constraints (afterall they’re businesses not wealthy consumers) to give Musk a $200,000 upfront deposit (aka interest free loan) per ‘founder series’ truck is to put in Tesla lexicon – ludicrous. Truck companies, as CM wrote in its 30 reasons why Tesla is likely to be a bug on a windshield, are conservative. They want to see the technology proven in the field before just forking over $150-200,000 and hoping for the best. Were the technology or charging infrastructure to come up short then the whole economic proposition would come unstuck.

The Tesla trucks are roughly 30% to 70% more expensive than diesel trucks which have up to triple the range on full tanks. Many new 2018 diesel models are available now at $120k vs Tesla’s $150k (300mi range) and $180k (500mi range).

If we used the $60,000 more expensive Tesla Semi can to recoup the difference then it will need to be driven 240,000 miles using the $.25/saving per mile vs diesel Tesla number. Some estimates suggest payback in 3-4 years.

One former trucking company planner wrote,

I was surprised when I saw this “two-year” payback period quoted by Musk last week and repeated on the website. Two years? Really? He had just gotten through showing us an operational cost savings of $.25 per mile over diesel.

Well if I am going to pay back the truck I need those savings to equal the purchase price in two years. Well $180,000 divided by $.25 is 720,000 miles or 360,000 miles per year. That is not even physically possible. A truck would have to drive non-stop for 24 hours a day, 365 days a year at an average speed of 41 mph. Subtract out recharging time of 30 minutes every six hours or two hours per day and four hours per day for loading and unloading and the truck must average 54.7 miles per hour for every mile driven. It is impossible to do.

My big trucks ran long trips moving from coast to coast or north to south. I pulled out my records just for the fun of it and my trucks averaged 13,000 miles per month in summer months and under 10,000 in winter months because of weather and tougher loading and unloading conditions. Most trucks ran about 120,000 miles per year maximum even with driver teams. This was due in many cases to operational time limits of over-sized loads (half hour before sunrise until half hour after sunset is mandatory in many states for safety reasons).“

Whether the new Tesla Roadster or Tesla Semi this new deposit scheme is actually more telling than the vehicles themselves. This can be none other than a cash grab interest free loans to keep the thing alive. I salute Musk for his pioneering spirit but playing with the big boys is never easier done than said. Can’t wait to see the cashflow numbers in Q4 reporting early next year. If we get a worsening of this chart beware.

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Perhaps we can also find some amusement in Tesla’s competitor (Nikola) tweets

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The beauty of honesty

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The above quote is from quirky fund manager Dr Michael Burry MD towards the end of the movie, The Big Short. It says so much of today. One mate who is a very decent asset manager in Australia wrote to his clients, “I realise such may fly in the face of typical adviser recommendations (show me how someone is paid and I’ll show you how they will behave) however, I would rather lose a client than lose a client’s capital.

We share similar views on the state of the global capital markets. We joked about his long message to his investors sounding like Jerry Maguire burning the midnight oil writing the “fewer clients, less money” manifesto which got him sacked.

Now that our world is moving further and further toward automated everything including pre-emptive responses (which I scoffed out the other day about LinkedIn) it is truly refreshing to see this authentic honesty. The irony is that as much as machines are pushing us into ever tighter time windows, humans instinctively carry long term memory whether trauma or positive life events.

May your honesty be paid back in spades when those you saved a bundle recall your genuine gesture.

Tesla – 30 reasons it will likely end up a bug on a windshield

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Contrarian Marketplace ー Tesla – 30 Reasons it will likely be a bug on a windshield

Contrarian Marketplace Research (CMR) provides 30 valid reasons to show Tesla (TSLA) is richly valued. Institutional investors have heard many of the financial arguments of its debt position, subsidies, cash burn and other conventional metrics. What CMR does is give Tesla all the benefits of the doubt. Even when extended every courtesy based on Tesla’s own 2020 production target of 1,000,000 vehicles and ascribing the margins of luxury makers BMW Group (BMW GR) & Daimler (DAI GR) the shares are worth 42% less than they are today. When stacked up against the lower margin volume manufacturers, the shares are worth 83% less. There is no fuzzy math involved. It is merely looking through a different lens. We do not deny Tesla’s projected growth rates are superior to BMW or DAI but the risks appear to be amplifying in a way that exposes the weak flank of the cult that defines the EV maker- ‘production hell’.

Follow social media feeds and Tesla’s fans bathe in the cognitive dissonance of ownership and their charismatic visionary, CEO Elon Musk. No-one can fault Musk’s entrepreneurial sales skills yet his business is at the pointy end of playing in the major leagues of mass production, which he himself admitted 18 months ago was a ‘new’ challenge. Let us not kid ourselves. This is a skill that even Toyota, the undisputed king of manufacturing, a company that has coined pretty much every industrial efficiency jargon (JIT, Kanban, Kaizen) has taken 70 years to hone. It might have escaped most investors’ attention but Lockheed Martin called on Toyota to help refine the manufacturing processes of the over budget F-35 Joint Strike Fighter. If that is not a testament to the Japanese manufacturer’s brilliance Tesla is effectively Conor McGregor taking on Aichi’s version of Floyd Mayweather.

Yet Tesla’s stock has all the hallmarks of the pattern we have seen so many times – the hype and promise of disruptors like Ballard Power, GoPro and Blackberry which sadly ended up in the dustbin of history as reality dawned. Can investors honestly convince themselves that Tesla is worth 25x more than Fiat Chrysler (a company transformed) on a price to sales ratio? 10x Mercedes, which is in the sweet spot of its model cycle?

Conventional wisdom tells us this time is different for Tesla. Investors have been blinded by virtue signalling governments who are making bold claims about hard targets for EVs even though those making the promises are highly unlikely to even be in office by 2040. What has not dawned on many governments is that 4-5% of the tax revenue in most major economies comes from fuel excise. Fiscal budgets around the world make for far from pleasant viewing. Are they about to burn (no pun intended) such a constant tax source? Do investors forget how overly eager governments made such recklessly uncosted subsidies causing the private sector to over invest in renewable energy sending countless companies to the wall?

Let us not forget the subsidies directed at EVs. The irony of Tesla is that it is the EV of the well-heeled. So the taxes of the lawnmower man with a pick-up truck are going to pay for the Tesla owned by the client who pays his wages to cut the lawn. Then we need look no further than the hard evidence of virtue signalling owners who run the other way when the subsidies disappear.

To prove the theory of the recent thought bubbles made by policy makers, they are already getting urgent emails from energy suppliers on how the projections of EV sales will require huge investment in the grid. The UK electricity network is currently connected to systems in France, the Netherlands and Ireland through cables called interconnectors. The UK uses these to import or export electricity when it is most economical. Will this source be curtailed as nations are forced into self-imposed energy security?

So haphazard is the drive for EV legislation there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines? Without consistent regulations, it is hard to build EVs that can accommodate all the variance without boosting production costs. On top of that charging infrastructure is an issue. Japan is a good example. Its EV growth will be limited by elevator parking and in some suburban areas, where car lots are little more than a patch of dirt where owners are unlikely to install charging points. Charging and battery technology will keep improving but infrastructure harmonisation and ultimately who pays for the cost is far from decided. With governments making emotional rather than rational decisions, the only conclusion to be drawn is unchecked virtuous bingo which will end up having to be heavily compromised from the initial promises as always.

Then there are the auto makers. While they are all making politically correct statements about their commitments to go full EV, they do recognise that ultimately customers will decide their fate. A universal truth is that car makers do their best to promote their drivetrains as a performance differentiator to rivals. Moving to full EV removes that unique selling property. Volkswagen went out of its way to cheat the system which not only expressed their true feelings about man-made climate change but hidden within the $80bn investment is the 3 million EVs in 2042 would only be c.30% of VW’s total output today. Even Toyota said it would phase out internal combustion in the 2040s. Dec 31st, 2049 perhaps?

Speaking to the engineers of the auto suppliers at the 2017 Tokyo Motor Show, they do not share the fervour of policy makers either. It is not merely the roll out of infrastructure, sourcing battery materials from countries that have appalling human rights records (blood-cobalt?) but they know they must bet on the future. Signs are that the roll out will be way under baked.

While mean reversion is an obvious trade, the reality is that for all the auto makers kneeling at the altar of the EV gods, they are still atheists at heart. The best plays on the long side are those companies that happily play in either pond – EV or ICE. The best positioned makers are those who focus on cost effective weight reduction – the expansion of plastics replacing metal has already started and as autonomous vehicles take hold, the enhanced safety from that should drive its usage further. Daikyo Nishikawa (4246) and Toyoda Gosei (7282) are two plastics makers that should be best positioned to exploit those forking billions to outdo each other on tech widgets by providing low cost, effective solutions for OEMs. Amazing that for all of the high tech hits investors pray to discover, the dumb, analogue solution ends up being the true diamond in the rough!

Ultra High Net Worth Individuals (by country)

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In an ever growing world of haves vs have nots, Elliman has released an interesting update on the statues of global wealth and where it is likely to head over the next decade. It suggests North America has 73,100 UNHWIs at an average of $100mn each or $7.31 trillion. To put that in perspective 73,100 North Americans have as much wealth as Japan & France’s annual output combined. Over the next decade they expect 22,700 to join the ranks.

Europe has 49,650 UHNWI also at the magical $100mn mark (presumably the cut off for UHNWI or the equivalent of Japan.

Asia is growing like mad with $4.84 trillion split up by 46,000 or $105mn average. In a decade there are forecast to be 88,000 UHNWIs in Asia.

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I am not sure what the World Bank was smoking when coming up with the coming forecasts I’ve rthe next decade but the figures smel fishy.  Then it all comes down to this chart.

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1) Political uncertainty? Everywhere you look – Trump, Brexit, Catalonia, Australia, France, Germany, Austria, Czech Republic, The Netherlands, Hungary, Poland etc etc

2) Potential fall in asset values – looks a very high chance of that. Current asset bubbles are almost everywhere – bonds, equities, real estate etc

3) Rising taxes – maybe not the US or Canada (if you follow the scrutiny over Finance Minister Morneau), but elsewhere taxes and or costs of living for the masses are rising

4) Capital controls – China, India etc

5) Rising interest rates – well the US tax cuts should by rights send interest rates creeping higher. A recent report showed 57% of Aussies couldn’t afford an extra $100/month in mortgage – a given if banks are forced to raise lending rates due to higher funding costs (40% is wholesale finance – the mere fact the US is raising rates will only knock on to Aus and other markets).

Surely asset prices at record levels and all of the other risk factors seemingly bumping into one another…

So while UHNWIs probably weather almost any storm, perhaps it is worth reminding ourselves that the $100mn threshold might get lowered to $50m. It reminds me of a global mega cap PM who just before GFC had resplendent on his header “nothing under $50bn market cap”. Post GFC that became $25bn then eventually $14bn…at which point I suggested he change the header entirely.

I had an amusing discourse on LinkedIn about crypto currencies. The opposing view was that this is a new paradigm (just like before GFC) and it would continue to rise ( I assume he owns bit coins). He suggested it was like a promissory note in an electronic form so has a long history dating back millennia. I suggested that gold needs to be dug out of the ground – there is no other way. Crypto has huge risk factors because it is ultimately mined in cyber space. State actors or hackers can ruin a crypto overnight. There have already been hacking incidents that undermine the safety factor. It does’t take a conspiracy theory to conjure that up. To which he then argued if it all goes pear shaped, bitcoin was a more flexible currency. Even food would be better than gold. To which I suggested that a border guard who is offering passage is probably already being fed and given food is a perishable item that gold would probably buy a ticket to freedom more readily as human nature can adapt hunger far more easily in the fight for survival. I haven’t heard his response yet.

In closing isn’t it ironic that Bitcoin is now split into two. The oxymornically named Bitcoin Gold is set to be mined by more people with less powerful machines, therefore decentralizing the network further and opening it up to a wider user base. Presumably less powerful machines means fewer safeguards too although it will be sold as impervious to outsiders. Of course the idea is to widen the adoption rate to broaden appeal. Everyone I know who owns Bitcoin can never admit to its short comings. Whenever anything feels to be good to be true, it generally is. Crypto has all the hallmarks of a fiat currency if I am not mistaken? While central banks can print furiously, they will never compete with a hacker who can digitally create units out of thin air. Fool’s Gold perhaps? I’ll stick to the real stuff. I’ll take 5,000 years of history over 10 years any day of the week.