IF YOU WANT TO GET PEOPLE CHARGED UP, WRITE ABOUT TESLA (TSLA)

5/30/13

Writing about and/or commenting on Tesla (TSLA) is a lot like writing or commenting on Apple (AAPL).   Neither of these appears to be a stock; both instead appear to be religions.   People have decided they love one (or maybe both) of the company’s products, and therefore the stock, and no one can talk them out of that position.   Not surprisingly, then, my 5/23/13 post TESLA (TSLA):  THE GREENIES ARE CHARGED UP, BUT… in which I questioned (Some who aren’t used to reading my material said “bashed,” but I thought I was quite balanced in my assessment.) the Tesla Model S and expressed my misgivings about the stock at a much lower price ($92.71) than that at which it closed today taught me that if you want to draw attention to your writing, write about TSLA. 

The big announcement today from Tesla Chairman Elon Musk, the announcement on which people had been anticipating for weeks, was that Tesla will triple the number of supercharging stations by the end of next month.  Within six months, Tesla will have covered most of the country’s major metro areas with superchargers and will enable people to cross the country diagonally from New York to LA without fear of losing power…and all, presumably, on Tesla.  By a year from now, the whole country should be covered…no more range anxiety.   Also, the charging network will have some kind of solar backup so Tesla owners will be able to charge their cars even if the electrical grid goes down.

A supercharger, by the way, enables drivers to, within twenty minutes, charge their cars to the point at which they can be driven three hours.   Twenty minutes is longer than it takes to fill a conventional gasoline tank (about four times longer), and if I fill my tank in five minutes, I can drive five or six hours before having to stop to refill.  But Tesla’s getting close to being practical with their supercharging systems…and that’s impressive.  And, lest I draw even more brickbats than I anticipate, I will also add (again) that most of the buff books, especially Motor Trend and Automobile, and Consumer Reports LOVE the Tesla Model S.  Yours truly has not driven it; despite my love of test driving (See my already seminal 5/20/13 post, I TEST DROVE A KIA TODAY…), I cannot in good conscience go into one of the few showrooms in the area and test drive a car I could not possibly afford.

The first reaction of the suitably skeptical and cynical investor (or car buyer) should be to question whether Tesla can pull off such a feat.  A nationwide system of superchargers that can be conveniently accessed would be a titanic accomplishment.   And even if it can be achieved, 20 minutes for three hours of driving, while impressive, still adds a lot of time to long trips and renders the Model S not the vehicle of choice for anything but driving around town.  At $70,000 (Okay, $62,500 after tax credits.), one would like to not have to buy a second car for long trips. 

A few more questions.

According to reports, the juice that Tesla owners get from the superchargers will be free, provided by Tesla.  That can’t be right, can it?   Why not charge the drivers for the relatively cheap electricity?  It would seem that people who are rich, and/or silly, enough to shell out $70,000 for a car should have no problem paying for the electricity necessary to power their status symbols.   But if Tesla is indeed picking up the charge for the charge, if you will, how much will that cost Tesla?  A wise guy answer would be something like “at the volumes TSLA is looking to sell, not much,” but it is something to think about.

And, on a broader scale, if I am wrong and this electric car fad really catches on with the Tesla, the Nissan Leaf, and various other pure electrics capturing the American imagination, how will our electrical grid handle it?   One could answer that if we reach that point, Tesla will have been a resounding success, but not only do stocks discount the future but also the country will have to do something about increasing electrical supply, in a relative hurry, in a nuclearphobic world.  No mean task.

Even if we assume that TSLA can fulfill its promise of covering the country with superchargers by a year from now, which is quite a brave assumption even for someone as widely and justifiably admired as Elon Musk, questions remain.  And it still looks like TSLA is a company selling cars that use a transitional technology, cars that only a few people want and even fewer can afford.   And, yes, I realize that TSLA is a luxury car maker (Its lower priced models, which still won’t be cheap, aren’t supposed to come out until 2017 (See today’s announcement.) and, right now, at least, TSLA doesn’t have the money to develop and produce them (See my aforementioned 5/23/13 post.)) and not everyone can afford luxury cars.  But TSLA is a luxury car producer, indeed, a boutique luxury car producer, aiming to sell 20,000 cars this year in a 15 million car market, with a market capitalization of $12 BILLION!   By contrast, other car companies’ market caps are as follows:

Ford                             $61 billion

GM                              $48 billion

Daimler                        $67 billion

Toyota                         $191 billion

Honda                          $70 billion

Nissan                          $47 billion

Volkswagen                 $76 billion

The comparisons are not perfect, but they are a lot more apt than the comparison the bulls are throwing around to AAPL’s $426 billion market capitalization.   Does it make sense that a company that might sell 20,000 cars this year is trading at ¼ of the value of GM, which sells ten times as many cars, in the U.S. alone, in a month?   Again, this is not the best metric around, but just think logically here.

Is this the time to sell TSLA?   Though I’ve taken a small put position, just to focus my thinking, I don’t know.   And to prove that I don’t know, I bought my July puts on May 21 when the stock was trading at $88.24; it’s now trading at $104.95 and I am down well over half on my position.  The stock has doubled in the last month and has tripled in the last six months.  Somethin’s gotta give.  But, as I’ve said before, markets, and stocks, can stay rich a long, long time.   See my 5/9/13 post, OF 10 YEAR TREASURIES AND STEAMROLLERS:  RICH MARKETS CAN, AND DO, STAY RICH.  And perhaps stepping in front of this freight train is not advisable; note how TSLA has defied, so far, the old “buy on rumor, sell on fact” adage in the wake of today’s supercharger announcement.

As for yours truly, I’m going to wait around a little while before I dump my puts.   Even trading, like investing, should be done with patience, understanding the relative nature of that term.   And, as a further warning, I am a far better investor than I am a trader; accordingly, I have so little in this trade it won’t make much difference one way or the other.

TSLA:              $104.95

S&P 500:         1,654.41

Dow                 15,324.53

GM:                 $34.64

F:                     $15.90

I TEST DROVE A KIA TODAY…

5/20/13

And why, one might ask, would I test drove a Kia Rio today?  It’s Kia’s smallest and least expensive car, what is called a B-body car, two sized down from my trusty 2007 Accord.  Why would I even consider what some might call such a drastic downsizing?

First, I don’t know if I’m considering buying a new car; in fact, I’m probably not.   But I am never completely out of the car market (back in the old days, when I was making lots of money and had far fewer financial responsibilities, I owned, consecutively, 4 cars in the space of 16 months.  I guess we all do dumb things, and if that were the dumbest thing I’ve ever done (It’s not.), I would be in good shape.   Dumber than owning 4 cars in the space of 16 months was that one of them was a Saab (“Sure ain’t a Buick,” as a guy who sold both Buicks and Saabs once told me), but I digress.

Second, I love to test drive cars.  It’s fun, it keeps me up to date on what’s going on in the car market, and, in the past when I traded car stocks with some frequency, helped me make some considerable money on those positions. 

Third, Kia offered me a small inducement to test drive one of its cars and I had the time on this beautiful afternoon to stop by my local Kia dealer (Gerald in Naperville) and take one for a spin.  Further, I did so during the week during the day, so the salespeople were not busy with customers, as they would be on a Saturday or in the evening; I don’t want someone indulging my habit of test drives for fun when they have actual, want to buy that day, customers, and the potential to make some dough, waiting for them.

Fourth, I am, as regular readers know, frugal beyond the point of fault.  And though the Rio is, by and large, an inexpensive car, the Kia Rio, in its most expensive guise, the SX, has most of the features I look for in a car…a manual transmission and some decent equipment; more on that later.

Fifth, as I wrote in my 4/3/13 post, “R-E-S-P-E-C-T, FIND OUT WHAT IT MEANS TO (KIM JONG EUN)”, I am a great admirer of the South Korean people and might want to indulge that admiration by buying a Korean car, to wit…

The South Koreans and, yes, their formerly authoritarian regimes under Syngman Rhee and, to a greater extent, Park Chung Hee, took the types of risks, and engaged in the type of hard work, that the North Koreans are too timid to undertake.   They are to be congratulated.   The North Koreans, and their pudgy ruler, are to be ridiculed.   Only they don’t appear to know it.

With that having been written, I think I’ll go out and buy a Kia or a Hyundai.

Roughly equivalent sentiments point me in the direction of a Volkswagen (BISMARCK’S DREAM, MERKEL’S VICTORY, 5/1/13), but that is another issue.

So what’s the point of this screed?

I was amazed at the car.  I wasn’t amazed so much at the car itself, but at what is available in new cars, even at lower price points, nowadays.   Yes, I keep up on the industry, and I know intellectually that x, y, or z is available in certain cars, but until you get in the car and drive it and experience all the gizmos (and, more importantly, the ride, handling, and driving experience), you don’t realize how far cars have come.

Here I was, driving a car for stickering for just under $20,000 (Rios can be had for a lot less money; I drove the fully loaded SX, as I said above.) that handles like a sports car of not too many years ago with a six speed manual and plenty of power.  The car has satellite radio, Bluetooth (I have only a vague notion of what “Bluetooth” is, not being a regular celphone user.), all kinds of gizmos for streaming music in the car, backup camera, navigation, power folding mirrors, one of those keys that enables you to not only start the car but also open the doors with the key only being in your pocket, eight air bags, stability control, hatchback utility, a 5 year, 60,000 mile bumper to bumper warranty, 10 year, 100,000 powertrain warranty, 28/36 city/highway fuel economy…again, for under $20 grand.   It is amazing how far cars have come in the six model years since I bought the venerable and trusty Accord.

Since I am sure some of readers will point this out, I, too, can remember when you could buy two fully loaded Cadillacs for less than $20 grand.  But by latter day standards, this Kia Rio is just an amazing achievement, testimony to how great and dynamic the world auto industry, and, more importantly, the competitive, free market system, is.

Not that I would want to trade-in the greatest, and, in at least one sense, most unusual car I have ever owned, my 2007 Accord EX-L manual.   Nor would I necessarily trade it in on the Rio; the Rio lacks a few things I would like in a car and could be quieter and have tighter steering.  But the drive I took today really opened my eyes.

BISMARCK’S DREAM, MERKEL’S VICTORY

5/1/13

Emblazoned across the front page of today’s (i.e., Wednesday, 5/1/13’s) Wall Street Journal is the headline “Latest Leader Pays Court to Mother Europe” over four pictures of European leaders (new Italian Prime Minister Enrico Letta, Greek Prime Minister Antonis Samaris, Spanish Prime Minister Mariano Rajoy, and French President Francois Hollande) exchanging pleasantries with, paying homage to, or being lectured by German Chancellor Angela Merkel.   The article behind the picture, which appears on page A10, explains that, over the last few years, and especially as European financial problems have taken hold, the first stop of any new leader of a Eurozone country is in Berlin to get the seal of approval from, er, sorry, visit Ms. Merkel.

My first thought as I saw the picture and read the nearly extraneous article was the same thought that has occupied at least some of my thinking since the European “crisis” started and spread…the Germans have accomplished what has been their goal since the unification of the German state under Bismarck in 1871:  economic and political domination of what was once called Mitteleuropa, or the heart of Europe, and beyond.

Germany tried twice in the first half of the last century to achieve this goal of European domination and failed both times.   In the latter part of the last century and into the early part of this one, the Germans have finally succeeded.   They have done so not by militarism or by pursuing ghastly political and racial theories to their horrific ends.  Instead, the Germans have come to dominate Europe by being, well, German…working hard, being smart, saving money, and being fiscally responsible.   The tremendous success Germany has achieved by applying what once were simple, common sense principles is nearly enough to make yours truly consider a Volkswagen, but I digress.

There are many lessons of here, including

·        Military conquest, at least in the modern era, ultimately always fails.

·        No one, and no country, ever gets rich or powerful by spending money she doesn’t have.  A person or a country gets rich by making more money, by producing more, than one spends.

·        Blowing money, perhaps especially on the military, is no recipe for achieving domination, power, or even success.

Here is the United States, however, we are heeding none of the above lessons.   This is no surprise; we have long been of the opinion that we have nothing to learn from anybody else, especially when the lesson involves delaying gratification.