Public Service

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!

Sloppy senators who snigger at the seriousness of the situation

Regardless of whether one believes in climate change or not, surely even deniers should get access to transparent data, especially from taxpayer funded bodies. Just being told the science is settled is not acceptable. Indeed if the science is settled, what is there to hide? Allow all the ‘raw’ and ‘homogenised’ data to be independently scrutinized. Surely it will corroborate the facts and convert the heretics.

The argument that I am not a scientist is irrelevant. 99% of the people who are alarmists are not either. Yet, should one be vilified for questioning so many blatant acts of  fraudulent behaviour? As often in the world of ‘settled’ topics, the contrarian opinion is often laughed it. Yet, if 99% of people tell you one thing are you not curious to the counter arguments? So often the conventional wisdom has often turned out to be false.

What Senator Dastyari here has done is take allegations of data manipulation by the Bureau of Meteorology (BoM) as just a joke and an opportunity to cheap shot one of his fellow senators who is absent. It is willful behaviour to undermine a serious hearing. What is the constant faith that we are asked to put in government bodies that somehow they are above the law and beyond the scope of audit because we should trust them? That is like leaving candies on the table in reach of your kids but telling them they mustn’t eat any. The crack and eat some but when questioned swear they didn’t even though the blue M&M stain on the tongue proves they’re lying.

Former US Fed Chairman Alan Greenspan regularly spoke to the US Senate House Banking Committee. With the exception of Ron Paul, pretty much all other members used to hang off every word, not questioning anything that came from his mouth. It was nauseating to watch them heap praise on him. He was not held to account. Ron Paul used to ask questions about rampant monetary supply growth, asset bubbles and extreme borrowing to income ratios but his fellow law makers would gang up on him for having the hide to interrogate the ‘Maestro’. It is this type of unwillingness to question group think that is much more worrying. To all of the questions asked of Greenspan by Paul, we still got GFC – avoidable if the group thinkers in the Senate were prepared to challenge.

As CM has written frequently – so many bodies have been busted for data manipulation – the UNIPCC, NASA, NOAA and the BoM to name a few. Yes, even NASA, the people who have the brainstrust to launch man to the moon. Human greed is the issue. This discussion with President of the Sierra Club Aaron Mair who tells Senator Cruz there should be no debate as the science is settled yet can’t reliably argue his position even with a bench full of his flunkies pushing the same garbage.

In all seriousness, Dastyari wants to copy Aaron Mair. Shut down any plausible debate and avoid scrutiny that might upset his own constituents. People often use the argument that investing in renewables is like insurance. That we take it on the off chance we’re wrong. Well, in a sense what many scientists are doing is insurance fraud. Then again it is also an unanswered question. Why is it bankers get thrown into jail and fined exorbitant sums yet scientists riddled with conflicts of interest and deliberate ‘forgery’ of data to fit narratives escape scot-free even if caught.

Voters put Abe back while putting Koike back in her place

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So LDP party leader and Prime Minister Shinzo Abe won a majority in yesterday’s national election. While much expectation was made of Yuriko Koike’s conservative Party of Hope to take advantage of the scandal ridden LDP, voters looked at the platform which had a reasonably patchy manifesto (non-conservative policies of basic income and retained earnings taxation) and saw the fact she wasn’t running as a sign of a self vote of no confidence. While there was much promise at the start she’d drag the Democrats into her fold, they ended up splitting leaving her with too little time to front a proper challenge.

While Abe was tainted with two sizable scandals his coalition with the Komeito has given him 312 seats, a loss of 12 on the last election, the people were prepared to back a more stable platform in the LDP over Koike who ended up sadly being nothing more than hot air rather than the ‘populist’ which saw her crush the LDP at the local Tokyo level. Perhaps there was a touch of Theresa May who thought she had much more of a backing than ended up happening. The Party of Hope ended up with 49 seats, 8 less than the Dems who backed her had at the last election. The other half that split under Edano’s Constitutional Democrats ended up with 54, 39 better as he ran a more honest campaign.

The LDP will now have until 2021 where it is likely Abe will hand the reins over to Kishida, the current Minister of Foreign Affairs, mid term. Despite the typhoon on election day the turnout was a tad under 54%, up on 2014 and not too different from the 1979 election that fell during a typhoon.

One of Japan’s biggest problems is that opposition parties have never had much time in office and when they have they’ve not been effective. So with so much turmoil on the opposition side via a split Democrat platform, the LDP ended up winning because there was so little on offer on the other side. For Japan, there was no populist revolt like so many countries in the West. Koike thought she would gain a much bigger backing than she ended up with and her platform which promised a change to the chain smoking old guard in reality came up with little more than that smoke being blown back in her face.

How many more EU-skeptics can one squeeze in a selfie?

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Last week a 31yo Austrian Sebastian Kurz swept to power in Austria with a strong anti-EU bias. Following the growing strength in nationalist parties in The Netherlands, France, Germany, Catalonia, Britain, Hungary, Italy, Poland it seems that the Czech Republic may be the next country to say, “who do you think you are kidding Mr Juncker

Tomio Okamura (far left in the picture) of the Czech Freedom and Direct Democracy Party (SPD) has experienced a huge surge in popularity in the polls on the eve of the vote suggesting he could secure 10% and form part of the governing coalition of which the center-right Ano Party is set to win.

He said that “Over the last couple of years, the EU has shown itself to be un-reformable… The elites are incapable of showing the flexibility needed to react to current and crucial problems such as terrorism and the migration of Muslim-African colonisers to Europe.

So where have we heard that before? Once again regardless of whether a growing number of people in Europe are viewed as unsympathetic, racist or bigoted towards refugees they are ‘still’ voting for these nationalist parties which can only be seen as another vote of no confidence in the EU project. How could it be anything else?

As to the anti-EU selfie, they may need a drone camera to squeeze them all in next time.

Let’s hope the Feds don’t take the same biases in investigations

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Here we go again. The slippery slope of ‘diversity’ which does everything else other than promote inclusivity because by its very nature it is all about singling out exclusivity. The Australian Federal Police (AFP) brazenly states in its recruitment campaign that they want to get to 50/50 women. Of course there is no issue with hiring women. No ifs or buts. If you are a male, your chances of joking the AFP will be diminished no matter how qualified you might be. What has gender got to do with work performance, let alone the desire to ‘protect and serve’? In most police forces around the world the split is 70/30 men/women. Maybe it is just reflective of individual choices in careers rather than women being selectively discouraged?

The AFP wrote in response to their post,

There’s been a lot of commentary on the fact that we’re targeting women with this recruitment. We’d like to clarify a few things.

In the AFP, women currently comprise 22% of sworn police and 13.5% of protective security officers. Our goal is to increase this proportion to 35% in both streams by 2021.

Today’s ‘special measure’ recruitment action is designed to supplement our current recruitment process – we already have a pool of suitable male and female candidates who applied recently.

This action we’re taking will provide us with additional female candidates. It’s not going to displace existing recruitment pools and it will require applicants to meet all the existing gateways.

Under Section 7D of the Sex Discrimination Act, the special measures we’re taking to achieve substantive equality between men and women in this organisation are legal.”

This lame excuse is yet another spineless rolling over to pander to political correctness. If. 20 candidates apply for 10 positions and there are 10 men and 10 women, wouldn’t it be best to hire 10 women if they were better qualified for ability than the 10 men? Or vice versa? So hire 5 extremely qualified women and 5 inept males just to keep a balance?

Last month CM spoke of the same garbage ‘diversity’ argument in the army.

Recruiters at the ADF have been told they must hire women or face relocation if they don’t comply. The recruiters say there are no jobs available for men in the in the infantry as a rifleman or artilleryman. But these positions are marked as ‘recruit immediately’ if a female applies. If a 50kg woman is in the artillery a 43.2kg M-107 shell is over 80% of her weight. An 80kg man would be lifting the same shells at around half of his weight. This is basic physics.

The West Australian newspaper reported one recruiter who said, “This is political correctness gone mad. I don’t care if it is a man or a woman – I just want to get the best person for the job.”

Yet the political correctness is promoted from the top. Defence chief, Air Chief Marshal Mark Binskin, stressed the importance of diversity for the ADF. “A diverse workforce is all about capability. The greater our diversity, the greater the range of ideas and insights to challenge the accepted norm, assess the risks, see them from a different perspective, and develop creative solutions.”

So once again we are told to view this nonsense as completely acceptable. That the AFP puts gender above ability. Ability and passion are all that matters. Shame on the AFP for having a blonde white woman instead of one from a coloured background for maximum virtue signaling mileage. For all of the AFP’s expertise in forensic science it is an embarrassment to see them use a most flawed identikit for recruitment.

So what is next after the 50/50 target is hit? After all the AFP seeks to match society. Surely what follows is balance in sexual orientation, faith, race and other irrelevant aspects which should be irrelevant to job performance – all in the name of diversity – what a joke. Let men and women chose the AFP of their own volition and take the best of the crop.

Welcome to the nanny state.

Channeling Chewbacca, the feminist…

Here is a video of Justin Trudeau talking complete drivel about how he’s proud to be a feminist and how we bloody minded males must stop being men. What is the perpetual bleating about identity that seems to fill his days. Then again he feels completely at home muzzling his own citizens (e.g. Bill M-103). What a shame Trudeau wasn’t able to give speaking lessons to POTUS before he gave his UN speech. Trump didn’t have to growl like Chewie. All he needed was Chewbacca socks so he could look gruff while he apologized profusely for every hurt feeling even if he had nothing to do with it.

Trudeau highlights what is wrong with world leaders today. Appearing to do things is enough. Sometimes hard measures are required. Leadership, even if decisions are unpalatable, is about doing. In a crisis could would you want to bet on him? He is a vote for virtue signaling. Ewok socks much more appropriate for the Canadian PM

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Blowing the whistle on NASA over climate data

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Jo Nova has an excellent piece exposing the scams inside NASA with regards to their climate models and allegations of misappropriated taxpayer funds. She notes whistleblower Dr Duane Thresher who worked seven years at NASA GISS “describes a culture of self serving rent-seekers, mismanagement and incompetence. These are the top experts in the climate science field that we are supposed to accept without questioning. Those who say they are working to “save the planet” care more about their junckets than they do about the data or their “best” model…NASA GISS’s most advanced climate model is run from the Goddard Space Flight Center (GSFC). Thresher recounts a story from someone on the inside:“NASA GISS’s climate model — named Model E, an intentional play on the word “muddle” — is called the “jungle” because it is so badly coded.” I know this to be true from my own extensive experience programming it (I tried to fix as much as I could…)…”

Of course I can hear the alarmists cry  that Thresher is a ‘discredited’ scientist as they do for anyone who disagrees,. Much in the spirit of the Harvard piece I put out last week, venerable organizations like NASA (which has put humans into space) carry almost untouchable status. This is the problem. Do we just suck up aything we are told by these organizations or do we need to add an extra layer of skepticism because of the ‘reputation’?

It is truly hard to imagine that the brain’s trust that makes up an organization that can launch rockets and space shuttles can be guilty of such sloppiness. Such whistleblowing will  lead to a congressional testimony which will bring many things to light. It wasn’t long ago that NOAA was subpoenaed after a whistleblower said the group had rushed a report ahead of the Paris climate summit with obviously fiddled data that fit a narrative. NOAA refused to hand over the emails for months on the grounds of privacy  when the head of House Science Committee Chairman Lamar Smith explained the reality that they worked for the government and had no choice.

Smith noted, “According to Dr. John Bates, the recently retired principal scientist at NOAA’s National Climatic Data Center, the Karl study was used “to discredit the notion of a global warming hiatus and rush to time the publication of the paper to influence national and international deliberations on climate policy…I thank Dr. John Bates for courageously stepping forward to tell the truth about NOAA’s senior officials playing fast and loose with the data in order to meet a politically predetermined conclusion. In the summer of 2015, whistleblowers alerted the Committee that the Karl study was rushed to publication before underlying data issues were resolved to help influence public debate about the so-called Clean Power Plan and upcoming Paris climate conference. Since then, the Committee has attempted to obtain information that would shed further light on these allegations, but was obstructed at every turn by the previous administration’s officials. I repeatedly asked, ‘What does NOAA have to hide?’

Once again whenever people try to use the ‘credibility’ argument to sway debate, there is a treasure trove of evidence to show in this case that it is politics not science. With billions if not trillions at stake, such fraud has not resulted in any of these climate scientists being fined, deregistered or jailed for the very things that have happened to people in the financial sector. What is the difference I wonder? Maybe because the government has been in on the act…

Even Australia’s Bureau of Meteorology has been recently exposed for divisive behaviour in temperature measurement. Putting hard floors on cold temperatures with no such restrictions on warm weather. We’re supposed to trust these bodies? More on that tomorrow.

Well as the old adage goes, “there are lies, more lies and then there are statistics”