Tesla asks for sub 1.9 week deposit to full transfer of $250,000

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While the new Tesla Founders Series Roadster will supposedly be the fastest car in the world (at least in 1.9secs 0-100km/h) if it ever gets built it remains to be seen whether those $250,000 deposits will disappear inside Tesla inside that the acceleration figures. While the company will charge $50,000 deposits for the base model roadster it remains to be seen how many people will line up to part with cash for a car to be delivered after 2020. I’m sure some will line up to part with the cash to be one of the first to buy one but with cash burn and dreadful production issues it remains to be seen whether that money is just on auto pilot straight into the nearest sink hole.

$450m for a painting? Maybe but 5 of the top 10 traded artists are now all Chinese!

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While one of Leonardo DaVinci’s pictures might have gone under the hammer for a record $450m (50% more than the previous record) last week,  the TEFAF Art Market Report 2017 shows that Chinese artists occupied 5 of the top 10 traded artists. Zhang Daqian traded almost as much as Pablo Picasso. Admittedly Picasso sales were down 50%YoY but even still the art market has continued to surge in an asset bubble everywhere world.

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So even since the heady days leading into the GFC art related exports are 100% higher than the post Lehman collapse shock and almost 50% higher than the previous peak. Imports showed a similar trend.

Art is usually unique. One offs. Trading of such pieces is also very sporadic. It is rare that a Monet or Chagall gets flipped inside a few weeks.

Perhaps the art world report’s best picture was this one. The political stage and how it will impact the art world?

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Surely art’s crowing glories often come from tortured minds which sees artists lop off their ears, smear themselves in excrement or provide more excuses to take illicit substances to come out with the next masterpieces. Interesting how a US Presidency can impact US based art dealers. Although the data would show otherwise.

Then again as much as the total value is trading higher in the art world, according to Artnet, the average prices have been trending down since 2015. The overall picture is one of general prices having peaked during July 2015 and by the start of 2016, they were back to the level seen at the beginning of 2014. Over 2016 prices have fallen to the level they were at between 2014 and 2015, roughly 15% higher than the market trough in November 2012, and still 6.25% higher than ve-years ago.

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Recall when the Japanese were snapping up Van Gogh & Monet’s during the bubble period. Has the art world sent a subliminal message?

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A long report but one full of surprising trends.

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Sometimes we all need to change the window we look out of to forget politics, work, relationships or finances. Bathe your feet in hot water while you dine. Find your place of peace. This is 東府や(Toofuya) in the Izu Peninsula. 静岡県伊豆市吉奈98 Bakery & Table

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 Semi to haul new scrip or incomplete Model 3s?

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Elon Musk is rallying the call on his new truck which he is presenting this evening, albeit delayed from the initial Oct 26 launch.  He tweeted, “Tesla Semi Truck unveil to be webcast live on Thursday at 8pm! This will blow your mind clear out of your skull and into an alternate dimension. Just need to find my portal gun …”  If Elon Musk said that Tesla was superseding lead balloons with Li-ion his devout followers would fall for it as a logical progression with cumulus and nimbus charging stations providing endless power top ups. He is the ultimate salesman. One can only imagine the Tesla Semi will haul (in reality) incompleted Model 3s to double up on the promo!

It is hard not to see it as a distraction to tee up the next capital raising by revving up the share price to minimise dilution. Of course we must give full credit to Musk for his ability to rev up excitement among his faithful followers. He can do no wrong in their eyes. Spend 5 minutes on a Tesla owners forum and they are all gushing at their purchase and quick to virtue signal even when seeking help for trouble shooting whether it be a wayward navigation system or quality defects. They are followers of the Tesla cult and see their leader cando no wrong.

Still the truck is fraught with risks as we wrote at the end of last month. First, truck regulations are extremely tough. Even in America, crossing state lines has legal ramifications. While there are overall weight restrictions, there are also weight restrictions over each axle (defer to the DoT’s schematic below). So even if Musk talks of driverless vehicles (a USP for sure), a battery laden truck will likely be heavier than its diesel cousin. Higher rig weight means the less that can be hauled. Think of the Tesla 100D which weighs in at 2,250kg some 22% heavier than a fully loaded M550ix BMW.

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Also truck haulage companies are hugely conservative. Risking the switch to EV trucks could put them out of business. If it takes 30 minutes to “fast charge” a Tesla car how long will it take to charge a stack likely to be at least 10 times larger (300 minutes?) in mass if it’s to have any chance of hauling 35 tonnes any sensible distance.

For the 2018 model series of the major Class 8 truck makers, most have achieved an extra 8% fuel economy gains for on highway performance to around 5.5mpg. Tyre pressure monitoring and new slipstreaming bodies also assist in the fuel savings. With a 150 gallon tank option, a driver can in theory do 1,300km. Battery-powered semi-tractors may be useful in low-speed, short-haul duty cycles, but long-haul makes little sense because of the batteries bulk, weight and expense.

The battery pack in a Tesla Model S passenger car weighs in at around 600kg. The diesel engine in a Freightliner Cascade Class-8 truck weighs around 1.2 tonnes. So if we assume that the basic Tesla Semi package (ex powertrain), is more or less the same as the Cascade will two sets of Tesla 85D battery packs suffice to give similar range? As we mentioned earlier, in order to give a similar 400km range in a truck having to haul 30+ tonnes it is easy to imagine battery packs being at least 10x the amount needed for an 85D car. So 6 tonnes of batteries replacing a 1.5 tonne engine transmission combination. That would mean 4.5 tonnes less carrying capacity for a start and even then can it be properly distributed over the axles to meet road regulations? Like the chap above, the average truckie probably cares about the environment as much as his waistline.

Tonight’s truck is only having to move around 10 miles to its event. I’m sure the list of its capabilities will be an envious list “on paper” of its potential. Sadly to CM it looks like a distraction for its struggling Model 3 production woes by selling a future that has many questions about commerciality. Cars are personal modes of transport. Trucks are a business. Trucking companies are hugely conservative and won’t risk replacing an entire fleet until it’s completed rigorous field tests. Yes Class 8 truck sales may have nearly tripled in the last month to over 35,000 units but the series is highly volatile. In the auto world Tesla is playing in a local pond of 17mn vehicles. In trucks that is more a 250-400,000 market. Unless Tesla can promise huge market share gains in a field it has little or no experience  (even though his Tesla Semi Guy was a former Freightliner Cascade head developer) in reaching any economies of scale and reaching out to 1000s of haulage companies will be a stretch.

However spectacular the Tesla Semi lunch will be expect the share price to be pumped on the news don’t be surprised if an equity capital raising is towed behind it. Remember that farside cartoon of Ralph Harrison, king of salespeople, standing on a boat waving to eskimos that he’s just sold refrigerators to? That is Musk. A magician who runs on the smell of an oily rag. Looking forward to seeing if the fanfare proves right.

#MakeShimaneGreatAgain

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In CM’s Make Japan Great Again report we noted that Shimane Prefecture has had the slowest population growth in almost 100 years. Shimane has seen its population fall 3% since that time. The issue is not just that Japan has a declining population rate, the regions are depopulating at too fast a pace. Without wanting to get too technical Shimane Prefecture is hosting a drive to get people to move there as it provides great childcare facilities and jobs! Half the battle of such drives, as well intentioned as they are, is who jumps first. While available daycare slots in the big smoke of Tokyo are hard to find, the population is still growing giving much better optionality for the long term.

I will be attending the seminar as I’m curious what other bait will be offered. Indeed Shimane, as lovely as it is to visit,  one wonders what excitement awaits with a population in decline. I was there in September – as was the last time I visited – there is nothing to speak of worth setting up a new life. At least Shimane is facing up to its reality and for that they deserve the full accolades of trying to resuscitate a region that is the same as it was 100 years ago.

Shift your investment from corporates that stick to IR to those that self promote through PR

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Fund managers will find it tougher in the new post MiFID2 world to discover new companies in Japan. The sell-side research houses are likely to focus less and less on the one part of the market that clients are likely to be interested in – smaller medium sized enterprises which have unique business models exploiting the slow to change direction super tanker large caps. As a result many corporations will stick to traditional investor relations (IR) behaviour. Producing quarterly results and annual reports will not be enough. As stockbrokers become disincentivized to promote the same corporations they used to go out of their way to support by hosting IR roadshows, the companies will have to take it upon themselves to fill the gap. To that end IR will become PR.

Instead of buy-side analysts running complex forecasting tools, perhaps they would be better off covering off which corporations are actively promoting themselves relative to others. Surely those companies proactively contacting investors and providing them with up to date and relative updates will gain much more mind-share than those that don’t. Do not think for one second that time poor investors and fund managers won’t make time for those companies that make time for them. It is tough enough trying to fight off the onslaught of ETFs internally so wherever a corporate makes decision making simpler and time efficient it is not unbelievable to think that those stocks (provided they follow through with the earnings) won’t trade at a relative premium to those that stay behind the comfort of their own desks, despite in their eyes providing the minimum requirement of information.

Meeting one successful internet database company in Japan recently, I questioned why a company that had seen its revenues grow 70% in 3 years had seen a share price drift 40% lower. The IR team were worried why they had seen such a drop off in client contact.  It wasn’t that it had poor results. It was that it was sticking to a stale script and a liquidity drifted below crucial levels, the stock was being dumped on that alone. The irony was that the smallest division that was growing the fastest was on the back page even though it was growing 5x faster than any other division and at twice group margins. For a simple tweak in its PR material, the stock would light up. Still the company intends to stick to convention (for now).