"Just one more thing."

- Lt. Columbo

Did any of you see today that insiders at Koss Corp. (KOSS) sold to those who bid the stock up earlier this week? Makes sense, the company and the ... owners hit the lottery with the those, ahem, who were buying it.

I do not know much about the current company, but the same family who has been running for years is still doing so. Smartest thing they have done in decades is to have sold this stock.

"The family and other insiders at the company sold stock Monday and Tuesday, according to documents filed with the SEC. President and CEO Michael J. Koss sold stock for $12.88 million. His total compensation last year was around half a million dollars. Vice President of Sales John C. Koss Jr. sold $16.6 million."

Thanks for reading my Diary today.

I am going to sleep for the evening!

See you bright and early tomorrow.

Be safe.

I am under the weather from yesterday's second vaccine. 

Resting up a bit.

Dragon8888

- FWIW, you can sign up on ARK website and receive an email every night on what they buy/sell during the day for their funds: https://ark-funds.com/inves....
- As I suspected, they bought a lot of SPOT yesterday.



dougie kass Dragon8888

I can confirm as I am on their mailing list for trade updates.
Dougie

* What could muck things up post Covid? 

* How the dumb money won. 

* Musk on quality problems at Tesla. 

The frenetic interchange between the short squeeze candidates and the general market turned a good deal less volatile and frenzied on Wednesday.

The near freefall plunge in the short squeeze spike stocks came to a temporary pause as they circled the wagon and started testing and retesting the levels.

As you will see from the midmorning update yesterday, the reaction was amusing to say the least. Each mild uptick in things like GameStop resulted in some mild softening in the general market as it re-raised anxiety that the squeeze might continue and, people might have to liquidate other stocks in order to raise capital for the squeeze.

It was, as I said, almost borderline amusing as, at least directionally, the opposite reactions were nearly tick for tick. As GameStop started to inch higher, the Dow started to inch lower.

As the day went on however, it was more a general action and reaction. So, GameStop changed very little and, that resulted in a minor change in the averages. There was a little weakness which brought the Nasdaq into small negative territory.

The talk surrounding the short squeeze incidents now generates a lot more talk about possible structural changes in the market. How much capital is required in of a short sale and, when is it required? On settlement day or before? A lot of talk about changing settling on trade day plus 2, perhaps trade day plus 1 or, even trade day itself. That could bring some difficulty in making the structural changes work, particularly, I am told by those more knowledgeable than I, in the area of international trade where foreign exchange is involved in conversion.

But it is interesting that the new Administration appears to be quite animated with the Treasury Secretary calling for a prompt meeting of the major regulators in Washington. It certainly would appear that the game is not over.

The relationship between things like GameStop and the general market will be watched very carefully. Hopefully, however, any reaction if it continues, will be a little less volatile and a lot less frantic.

Overnight, it appears that the Democrats may try to go ahead and jam the Covid rescue package through under a reconciliation procedure. As we noted in the past that allows it to get through the Senate by a simple majority. But again, there being a tie score, Schumer must make sure everybody is present and everybody votes aye. One defection and the game is over for that bill. It does, however, look like he will be able to muster it through.

It shouldn't be too much of a market influence now since it may take several weeks to actually write the bill. So, we are looking at early March to probably get the bill passed and signed. That also fits the deadline with unemployment falling off the table by mid-March, unless it is changed.

Overnight, Asia markets weakened slightly, possibly on some further concerns about China's liquidity. Stocks in Europe are neutral.

At dawn in the U.S., it does look like we may be looking at a repeat of yesterday's interaction between the GameStop short squeeze types and, the general markets. Both are marginally changed and, we are seeing the same reaction in the general market. Although, the Nasdaq, which lost marginally last night, is showing signs of strength. I think on continued earnings benefits from the tech sector.

For now, we will cross our fingers and assume we are looking at a rerun. So far, no geo-political surprises. They can represent something new.

Keep your eye on GameStop and we will watch the relationship.

Stay safe.

Arthur

After hearing comments from Chicago Fed President Charlie Evans last night and with DC debating another spending bill, I want to tie the two together because what is not clear to either side is that they are at odds. We know some economists get lost in their econometric models and swerve from reality. Charlie Evans is one of those. He said yesterday that 2.5% inflation would be welcome and 3% is not a problem. So take a family earning $100,000. An inflation rate of 2.5% would take their after inflation income to $97,500 (using pre tax dollars here so the hit would be more after tax) and a 3% inflation rate would reduce that by $3,000 to $97,000. Thus, the $1,400 per person that Biden and Co want to give these families would only be refilling this hole. Yes we live in a nominal world but you get my point on a real basis. Evans doesn't seem to realize the real world implications of what he desires. Most in Congress have no clue as to what the Fed is trying to achieve.

On the topic many Fed officials have been asked over the past week in light of Reddit, GameStop and others where they see little connection between their easy money policies and the stoking of excessive market speculation, here is a chart of stock market margin debt as a percent of GDP. Fed officials likely are not aware of this stat when they say they see little connection. h/t Jesse Felder. James Bullard, the St. Louis Fed President, for sure is not aware of this stat as with regards to financial stability risks he said yesterday "I'm not really seeing that right now" and that monetary policy was in a "good place."

Investors Intelligence yesterday said Bulls fell to 57.8 from 61.2 and that follows 9 straight weeks above 60. Above 60 I consider extreme. Anything from 55-60 should be considered stretched. Almost all went to the Correction side as Bears were up just .2 to a still very low read of 16.7. Thus, the bull/bear spread is still above 40. AAII today said sentiment was little changed w/o/w. Bulls were 37.4 vs 37.7 and Bears fell to 35.6 from 38.3 with those Neutral gaining 3.1 pts to 27. Consider this an 'I don't know.' The Citi index seen over the weekend is still well in Euphoric land at 1.79.

I usually cite the 10 yr inflation breakeven when discussing inflation expectations in the TIPS market but today I have to mention the 5 yr as over the past two trading days it is up almost 9 bps to 2.30%. That is the highest since April 2013.

5 yr INFLATION BREAKEVEN

The US dollar index is bouncing again to the best level in two months with higher US rates along with the jawboning we've seen from ECB officials over the past week.

DXY

The only data point of note in overseas was the Eurozone retail sales figure for the December holiday month and it was a bit light relative to expectations. Sales grew 2% m/o/m vs the estimate of 2.8% and that is after a 5.7% drop in November (though revised up by 4 tenths). As stated with the dollar strength, the euro is falling to a hair below $1.20. European bond yields are little changed though at multi month highs. The German 10 yr yield is the least negative since mid September.

Fortunately the Bank of England decided against going negative as they kept their benchmark rate at a still microscopic level of .10%. They specifically said that "the existing stance of monetary policy remains appropriate" but of course said they can always do more they said. Right, more of the same but to another extreme. That said, they really don't seem to want to go down the NIRP path but confusingly are still telling banks to prepare. With about 10% of the UK populace now vaccinated there is NO reason for them to do anything as that vaccine is the greatest possible economic stimulus we can possibly have. The pound is bouncing off its morning lows to almost unchanged in response after being lower by a full penny.

I recently moved from small to large in Walmart (WMT) . 

The shares are looking like they are moving out of a deep oversold. 

I suspect a lot of upside lies ahead for the patient investor in this name.

Gold has broken thru its uptrend this morning. 

From the Comments Section: 

dougie kass

Smartest Trader on the World just sold his gold - as it broke an uptrend.
Dougie

No trades yet today.

Here you go. 

Initial jobless claims fell to 779k from 812k (revised from 847k) and that is 50k less than expected. That is the lowest since late November but the four week average was little changed at 848k vs. 850k last week. PUA fell to 349k from 404k. Continuing claims totaled 4.59mm vs. the estimate of 4.7mm, the lowest since the spike in late March. Continuing PUA, delayed by two weeks, fell by 126k after the jump in the week prior. Also delayed by two weeks, those continuing to receive pandemic emergency assistance fell by 290k. 

Notwithstanding the added benefits in the bill signed in late December, claims are still headed in the right direction but still slowly. That though should change this summer, particularly driven by reopenings of leisure, hospitality and travel businesses.  

Here is a one year chart on initial claims: 



Here is a one year chart on continuing claims:

Thanks to Covid and the upside nature of employment staffs in terms of getting people to work, people getting sick, quarantines, shift adjustments, spreading out on assembly line, clogging in the supply chain, etc.... Q4 productivity fell -4.8% quarter over quarter annualized, below the estimate of down -3%. This follows a rebound in the two prior quarters. On a year over year basis, productivity did rise by +2.5% while output fell, and hours worked fell by more. 

Because of the drop in productivity vs. Q3, unit labor costs jumped by +6.8% but after the -7% drop in Q3. Bottom line, I want to wait until Q3 to see how the productivity begin to settle out at as more people get back to work and a lot of the Covid protocols get eased with the mass inoculation in the process of going on. 

Finally, if you haven't noticed, long term interest rates continue higher. (Mentioned in my previous post!) The 30 year bond yield is breaking out to 1.94%, the highest since mid February. The 10 year yield is as well on a closing basis and if the 10 year yield got back to its mid February level we're talking about a yield of around 1.60% vs 1.15% today. Inflation breakevens are moving higher still. I get asked all the time at which level of long rates will matter for stocks and I of course don't know but if this continues we might find out soon. 

Here is a one year chart of the 30 year bond yield: 

Here is a one year chart on the 10 year yield: 

Break in! 

The ten year US note yield just hit 1.16% and (TLT) looks around $149. 

Here is what I wrote on the long yield yesterday:

Feb 03, 2021 ' 01:30 PM EST DOUG KASS

The Long Bond Yield Is Breaking Out

* I remain short bonds in size (and long banks as a beneficiary)!

Elevated valuations will matter at some point as the 30 year bond yield is breaking out and could put pressure on price earnings ratios:

European core CPI was an upside shocker this morning - albeit still with a 1-handle.

GAAP trailing 12 month PEs are nearly 40x on both the S&P and Nasdaq. So, the valuations may not be able to stomach an inflation spike to a number starting with a "3" - where we seem destined to go later in the year.

Meanwhile the euro inflation 5 year 5 year swap jumped six basis points to the highest level since May, 2019:

* My revised levels

I don't want there to be any ambiguity about the size of my positions, or about my buy and short levels, as I strive for as much transparency as possible.

"When the time comes to buy, you won't want to."

- Walter Deemer

"When the time comes to sell, you won't want to."

- Walt Deemer

I promised to update my "levels" at least once a month. My last update was in December.

My "official coverage list" includes more than 50 large cap names - about 2x more long buys than short candidates.

Not included in my list is a homebuilder package - which I am short - but have disclosure issues as discussed - and an ever expanding list of SPAC and speculative shorts that I prefer not to mention by name, also as discussed recently.

Sometimes I am short opportunistically of longs on my Best Ideas List - as a very short term trading rental. Such is the case of Facebook, for example, today.

Here are some of my new individual buy/short levels of stocks that I want to add to or reestablish on weakness, and in the case of shorts, to sell on strength I have raised my financial buy levels, among other moves:

BUYS

-- Facebook (FB) $230

-- Amazon (AMZN) $3,200

-- Alphabet (GOOGL) $1,800

-- Papa John's (PZZA) $90

-- FedEx (FDX) $235

-- Hartford Financial Services (HIG) $42

-- Goldman Sachs (GS) $235

-- Twitter (TWTR) $45

-- Macy's (M) $9

-- Dillard's (DDS) $55

-- Kohl's (KSS) $35

-- Comcast (CMCSA) $50

-- Bank of America (BAC) $30

-- Citigroup (C) $57.50

-- JPMorgan Chase (JPM) $125

-- PNC (PNC) $130

-- Wells Fargo (WFC) $30.50

-- Procter & Gamble (PG) $124.50

-- SPDR Gold Shares (GLD) $174

-- Silver Trust (SLV) - $25

-- Kraft Heinz (KHC) $32

-- ViacomCBS (VIAC) $35

-- Walt Disney (DIS) $148

-- Morgan Stanley (MS) $58

-- Verizon (VZ) $56

-- Micron (MU) $67.50

-- Penn National Gaming (PENN) $75

-- Vornado Realty Trust (VNO) $33

-- TreeHouse Foods (THS) $36

-- J.M. Smucker (SJM) $108

-- General Motors (GM) $45

-- Walmart (WMT) $141

-- VTV (VTV) $112

-- VBR (VBR) $138

-- XLF (XLF) $28


SHORTS

-- Apple (AAPL) $130

-- ARK  (ARKK) $141

-- Carvana (CVNA) $270

-- Zoom (ZM) $405

-- Tesla (TSLA) $700

-- KKR & Co. (KKR) $39

-- Blackstone Group (BX) $68

-- Caterpillar (CAT) $177

-- T Rowe Price TROW (T25ROW) $152

-- Franklin Resources (BEN) $27

-- Peloton (PTON) $140

-- Hilton (HLT) $102

-- Hyatt (H) $71

-- Plug Power (PLUG) $60

-- SPDR S&P 500 ETF (SPY) $370

-- Invesco QQQ (QQQ) $300

-- Bonds (TLT) $155
__________

Long: BAC large, C large, JPM large, WFC large, KHC (large), WMT (large), GLD (large), SLV (large), VZ (large)

Short: TLT (large), SPY (large), QQQ (large), HLT, H, TSLA (large), PTON, AAPL, CVNA, DIS, MU (small), TWTR (small), CAT (small), FB, Homebuilder Package (large), SPAC/Spec. Package, ARKK (large)

* And some other views of Tesla from the "peanut gallery"
* Opinions are like butts, everyone has one!

Unfortunately, at least for me, fundamental analysis is time consumptive. 

Fundamentalists can't just look at a stock chart and say buy it - unfortunately, to me, the investment and the trading process is far more complicated and laborious. 

The former (technical) approach works for many on our site and elsewhere - and I admire those that can trade on that basis. At times, I am even jealous! 

In the ideal world technical and fundamental analysis can be joined at the hip - and many of the best investment managers do such. 

But I won't stray from my investment methodology that has gotten me here. I do look at simple technical conditions often (searching for support/resistance, signs of volume changes, etc.) but it is not my guiding force. As for my Diary, I simply can't just write a few sentences describing what a company does for a living, with little available financial and operational data and stick in a chart at the end that is moving from "the lower left to the upper right" -- and buy it. 

It doesn't mean that it's my way or the highway - rather, that is my time-worn approach which has worked well for me for four or five decades. So I leave that chore the majority of technically oriented professional contributors on this site to deliver that. 

So, when I write a summary of a new investment idea, or update a company's quarterly results, I can't just conclude that I like it because the chart says it's going higher. Rather, it takes quite a while for me to construct and distill even a fundamental - and non consensus - summary of an investment idea in less than a few hundred words. 

Finally, I would note that, on our site and on Twitter and other platforms, those that are technically-inclined often tend to proselytize too much in defense of their approach reminding me of a line from the play Hamlet by William Shakespeare spoken by Queen Gertrude in response to the insincere overacting of a character in the play within a play created by Prince Hamlet to prove his uncle's guild in the murder of this father, the King of Denmark: 

"The lady doth protests too much, me thinks."

To them, it is their way or the highway. When it is accompanied with venom and ad hominem attacks of other methodologies I thankfully use the block button on Twitter and otherwise no longer listen and enjoy the bliss away from those attacks. It no longer bothers me as I recognize that this sort of behavior tells you a lot more about the person that their approach to trading and investing. 

That said, here are some more general views on Tesla (TSLA) delivered by Whiney Tilson and some others: 

* Piper Sandler on Sunday released a 104-page report and upped its price target to a Street-high $1,200. 

A skeptical reader commented: 

Was there something in that report that we hadn't read before?

For example, Elon promised in October 2016 that all Teslas manufactured from that point on had hardware capable of Level 5 autonomy. That's why you should pay thousands extra for that software. When can those Teslas purchased starting October 2016 be operated under Level 5 autonomy? Does the report answer this question?

Because it seems to me that the promise of Level 5 for every Tesla made October 2016 onwards was not true -- and Tesla knew that it wasn't true at the time that it made the promise.

As was the whole "1 million robotaxis by 2020" and "Teslas will appreciate 4x by 2020" and all that other nonsense that no other company could have gotten away with promising, and then not fulfilling.

Can you imagine if Apple had come out with a computer for which it charged $5,000 extra for software that it promised would enable it to drive the computer from Los Angeles to New York in a snowstorm by 2017, and then not delivered on it, while still keeping the $5,000 extra software fee? The government would have come down on the company with a ton of bricks.

Or that Apple would have said "Buy this computer right now, and within 18 months from now it will be worth four times as much."

Those are the kinds of questions to which I want to read answers in a Tesla report. If this were any other company making those kinds of false promises, it would be full-time employment for people at the FTC, SEC and DOJ.

* One reader wrote: 

Re. the convenience of charging vs buying gas. Of the many, many things I love about the electric vehicles I've owned over the past 8 years (Nissan Leaf and BMW i3) right in the top 2 is never having to go to a gas station and fill up the tank ever again. I have always just plugged in the car at home, in my garage, with a normal outlet in the wall, easy peasy.

As to the repairs / maintenance, it is not my experience that the EV's have "less" they have zero. Zero repairs needed on either car in the years that I've driven them. All I do is wash them and rotate or replace the tires as needed.

Also not mentioned in this persons list, who has clearly never so much as temporarily leased an EV, is the FUN. I was never a car person and didn't care what make or model I drove as long as it was comfortable to sit in and I could see out. The i3, with its automatic breaking when the acceleration pedal is released, makes this car so easy and super fun to drive. I also feel much safer in a car with such rapid acceleration.

* Another responded: 

Let's take those things in turn.

Yes, some people can plug in at home -- if you have a house, with private parking and reliable electricity. I think that describes about 18% of the world's population. Most people live in apartment buildings, and/or don't have private parking, or anywhere else to charge reliably.

The world simply does not look like 50% of The United States. The average person in Cambodia, Peru or Zaire laughs at the proposition of an electric car at this point. It may happen some day -- with enough time, almost everything is possible -- but it's not a priority for the next decade.

Speaking of priority, I don't understand this whole "convenience of charging at home" thing. Let me first say that I have owned multiple plug-in cars, including a Tesla, and I have driven almost every other plug-in car that has come to market.

If you plug in at home, it takes time to fill, and almost half the time I forget to plug it in when I come home anyway.

In contrast, how do you beat the convenience of simply not having to think about charging, and just wait until the yellow light comes on -- and then stop at the next street corner or road stop? It takes 3 minutes to fill, and then you have another 500 miles of range, which will last you on average two weeks. This has to be the most convenient way of filling up a car -- nothing to think about, nothing to worry about, ever. No pain, no problem, no up-front investment, and it's dirt cheap.

In regards to maintenance, I have always said that BEVs have an advantage here. There's typically a lot less -- almost zero for the first several years -- for a BEV. But here's the thing: Modern ICEs also have a lot less regularly scheduled maintenance than they used to. Remember 20-30 years ago, when you needed to change oil every 3,000 miles? On newer cars it went to 5,000 miles, then 10,000 and some cars are now at 12,000 or even 15,000. Many people stop by for that 20 minute oil change once a year. Hardly a significant burden. Granted, not zero -- but we are deep into the 99.99% zone here.

In regards to the fun, this is true. The short-range BEV experience is indeed fun. They drive great. For regular around-town driving, they are the best. However, there are three counter-arguments:

1.  Regular cars are also fun. Until last March, I drove almost 100 new cars per year and some 95% of them drove very well, thank you. Go forth and back between BEV and ICE cars and guess what? You'll find that almost all new cars drive very well, fun, whatever the adjective. They're all good. So, any BEV advantage in the "fun to drive" department is... non-zero but modest in the big scheme of things.
2.  What is *not* so much fun is if you leave the house in the morning realizing that you forgot to charge it last night. Whoops.
3. Go on a road trip. The BEV is supposed to have 250 or 300 miles of range or whatever. However, it's Winter and you're criss-crossing The Rocky Mountains or The Swiss Alps. It's 20 below zero and it's uphill. Now your range is down to 175 miles and how close do you really want to cut it? Your knuckles are white and you're in a bad mood because you're watching the meter and hoping that you'll make it to the next station where you have to wait 30-45 minutes. Meanwhile, everyone around you has 500 miles of range even in the cold, and can pull over anywhere to add another 500 miles of range in 3 minutes, with nothing to worry about. They can take a voluntary or involuntary detour at any moment and not have to think "So, how will this go?"

* My analyst Kevin DeCamp, who's made more than 100x on TSLA, wrote: 

The most important chart from Tesla's earnings report is its market share of TOTAL vehicles below. Bloomberg reporter Liam Denning's comment that "even the most bullish" of his colleagues don't see EVs "taking even half of new car sales until 2037" is laughable. I think ICE vehicles will be pieces of scrap metal by 2030 - except the classic/collectibles which will probably be even more valuable than now.

As you can see from the chart, once Tesla establishes local production, market share gains accelerate - see China in 2019. The same will happen in Europe in 2021.

Having autopilot for over a month now reinforces my view that cars that are not electric and don't have a comparable, OTA improving, ADAS system are essentially the "dumb phones" of this decade and this will become more apparent over the next year or two. Where's the competition? GM's Super Cruise which you can only get with the Cadillac and use on certain roads?

Look at how small of a slice Tesla has of the total auto market. I know many think this "is as good at it gets", but it's only the beginning...

The only limiting factor to this growth is battery production which Tesla has finally showed its cards here and demonstrated that they have a solution with the lowest cost per kWh. The FSD software that Tesla bears think is vaporware actually exists, has many happy paid customers (I am one!!), and the take rate will only increase as functionality increases and the subscription option opens up within the next few months. This will allow Tesla to continue cutting prices of their hardware and taking market share.

Also, did you see Tesla's energy storage deployment of over 3 gWh for 2020? This is growing at about 100% CAGR and will continue to grow faster than EVs. Still a small percentage of revenues now, but what will their distributed energy business look like in 5-10 years? Any view on that?

See TSLA's Q4 and FY 2020 update here.

* In response, a bearish reader wrote:

Naturally building a new/additional factory will increase Tesla's sales.  News flash: This goes for any and every automaker in history.  Build a new/additional factory -> sales go up.  If it were otherwise, no automaker would ever build a new factory!

As for ICEs being scrap metal after 2035: That is entirely possible.  We are, after all, talking about a market that is driven by regulatory fiat.  If the government wants to cancel all outstanding dollars and replace them with some new currency, say adding a decimal point or so for good measure, it can.  If the government bans ICEs, then - surprise, surprise - there won't be any ICEs left, other than a theoretical black market.

By the way, ICEs will have a longer life in many parts of the world.  Not sure if you've been traveling in Latin America, Africa or much of Asia (Pakistan, India, etc.) in recent years, but I don't think it's realistic that people will be able to "charge from home" in a majority of the world anytime soon. 

Even in Puerto Rico, there are only a few people who have homes where it's realistic to "charge at home."  Most people park on the street or have very unreliable electricity.  I don't know if the information is reliable, but I first punched up Google Maps for Puerto Rico and then searched for "electric car charging station."  18 of them come up -- 13 in San Juan and 5 for the rest of the island.  That's for 3 million people. 

In contrast, there's a gasoline station on every other street corner, and it's dirt cheap at around 65 cents per liter, or $2.46 per gallon (cheaper than milk or mineral water).  Fill up the car in 3 minutes or less, then drive somewhere between a week and a month until the next time the light is flashing yellow.  Hardly a problem that needs any solving.  The average Puerto Rican is laughing at the proposition of having to pay more for the total hassle of having to deal with an electric car.  Where's the upside?  And if more people in some parts of the world convert to BEVs, then that will just lower the gasoline price for the ones who are still driving ICEs!

That's the situation for most people in the world.  Electric cars will do better in some very wealthy geographies, where they're subsidized or people live in fancy homes with garages, and access to reliable electricity. 

As for "Autopilot" -- here is the reality:

1. Tesla is not approved for eyes-off or hands-off driving.  By law and by Tesla's user agreement, you must have your hands on the wheel at all times and keep your eyes on the road.  So, Tesla is no more autonomous today than a $20,000 Mitsubishi.  None of these cars is allowed to drive itself on any public road.  At least GM has been selling "hands off" cars for several years already.  That would be cars where you are legally allowed to take your hands off the wheel. 

2. In California, automakers are required to apply for a permit to test self-driving cars.  Then, they have to log the miles driven and report any disconnects.  Can you remind me what permits Tesla has in this regard, and how many miles of testing it has reported to the California state authorities -- and how that compares to other companies? 

As for the energy storage business, I looked at the financial report Tesla published a few days ago:

Look at the income statement, on page 29.  I see "Energy generation and storage" under Revenue -- $752 million for the quarter that just ended, December 2020.  Then, under "cost of revenues" -- "Energy generation and storage" at $787 million.  Hmm, that's a *negative* gross margin of 4%.

A business that's running at a 4% negative gross margin does not look good.  What would Ben Graham, Warren Buffett or Charlie Munger say about a business that's running at negative 4% gross margin?  What would it be worth? 

From Mark Spiegel's Stanphyl Capital January Letter:

We remain short the biggest bubble in modern stock market history, Tesla Inc. (TSLA), which currently has a fully diluted market cap of approximately $844 billion, which is roughly $143 billion more than those (non-diluted) of Toyota ($195 billion), VW ($105 billion), GM ($73 billion), Daimler ($73 billion), BMW ($54 billion), Stellantis ($48 billion), Hyundai ($46 billion), Honda ($45 billion), Ford ($42 billion) and Nissan ($20 billion) combined (!) despite run-rate sales of 720,000 cars a year to their approximately 65 million.

The core points of our Tesla short thesis are:

1) Tesla has no "moat" of any kind; i.e., nothing meaningfully proprietary in terms of electric car technology, while existing automakers-unlike Tesla-have a decades-long "experience moat" of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably, as well as the ability to subsidize losses on electric cars with profits from their conventional cars.

2) Excluding sunsetting emission credit sales Tesla still loses money, as it has every year in its 17-year existence.

3) Unit demand for Tesla's cars is only increasing via continual price cutting.

4) Elon Musk is a pathological liar who under the terms of his SEC settlement cannot deny having committed securities fraud.

In January Tesla reported its Q4 2020 financials, and excluding $401 million of pure-profit emission credit sales (an income stream that begins shrinking imminently then likely disappears after 2021 when other automakers have enough EVs of their own) it lost $131 million. And if you think Tesla is really "an energy company," well, that division had a negative gross margin. And for those of you who still think Tesla is a "growth stock," the most competitive EV region in the world (and a bellwether for what will soon happen in Asia and then North America) is Europe, and due purely to new competition Tesla's year-over-year Q4 sales declined by 4% there while its EV market share dropped from over 30% to just an estimated 10% (and in 2021 will likely be much lower). And contrary to what bullish Teslemmings may tell you, Q4 European sales were not "production constrained," as Tesla delivered 181,000 cars in the quarter while its October 8-K reported current quarterly production capacity of 210,000: Nothing is more amusing than seeing this giant stock promotion of a company try to perpetuate the illusion of being "supply constrained" by continuing to add capacity (expanding its Chinese factory while breaking ground on new factories in Texas and Germany) in order to desperately try to maintain an image of "limitless demand" while it continually slashes prices (including again in January 2021) just to utilize far less than its existing capacity. Tesla's "plan" is now obvious: keep slashing prices to move as much volume as possible while using the world's most illicitly creative accounting to maintain razorthin profitability.

But what's the end game? If Tesla stops cutting prices volume will collapse. Tesla is no longer "a growth story"-it's a nearly-profitless stock promotion for idiots!

In China during Q4 (and Europe in Q1 2021) Tesla cut its Model 3 price significantly (enabled by the use of an inferior LFP battery formulation that could soon bring a class action lawsuit), and thereby drove an improved Chinese sales number. Yet it still sold fewer than 60,000 cars there while GM sold over 963,000 and Ford sold 191,000. In December Tesla sold 25,500 cars in a Chinese passenger vehicle market of 2.4 million; i.e., with its 1% share, Tesla is just a flea in an elephant-sized market. And now, exactly as in Europe, China's EV competitive landscape is about to get vicious. As for Tesla's newest "hope," the Model Y, its quality is awful and it faces current (or imminent) competition from the much better built electric Audi Q4 e-tron and Q4 e-tron Sportback, BMW iX3, Mercedes EQA, Volvo XC40 Recharge, Volkswagen ID.4, Ford Mustang Mach E and Nissan Ariya, as well as the less expensive yet excellent all-electric Hyundai Kona and Kia Niro. Meanwhile, Tesla's Model 3 now has terrific direct "sedan competition" from Volvo's beautiful new Polestar 2 and the premium version of Volkswagen's ID.3 (in Europe), and in 2021 from the BMW i4. And oh, the joke of a "pickup truck" Tesla previewed in 2019 won't be much of "growth engine" either, as it will enter a dogfight of a market. And in the high-end electric car segment worldwide, the Audi e-tron now outsells both the Tesla Model S and the Model X, and almost outsells both of them together!

Meanwhile, Tesla ranks second-to-last in the latest Consumer Reports reliability survey: ...and last among 31 brands J.D. Power surveyed... ...while the latest What Car? survey shows similar results with Tesla finishing #29 out of 31.

As for batteries, Tesla has nothing proprietary-it doesn't make them, it buys them from Panasonic, CATL and LG.

Regarding safety, the Chinese government recently forced the recall of tens of thousands of Teslas for a dangerous suspension defect the company spent years trying to cover up, and now Tesla has been hit by a class-action lawsuit in the U.S. for the same defect. Tesla also knowingly sold cars that it knew were a fire hazard and did the same with solar systems, and it's battling an NHTSA demand that it recall a dangerously defective touchscreen. And of course Tesla continues to sell and promote its hugely dangerous so-called "Autopilot" system, which Consumer Reports has completely eviscerated; God only knows how many more people this monstrosity unleashed on public roads will kill, despite the NTSB condemning it as dangerous. In fact, Teslas have far more pro rata (i.e., relative to the number sold) deadly incidents than other comparable new luxury cars. In other words, when it comes to the safety of customers and innocent bystanders, Tesla is truly one of the most vile companies on Earth. Meanwhile the number of lawsuits of all types against the company continues to escalate, including one proving blatant fraud by Musk in the SolarCity buyout. (If you want to be really entertained, read his deposition!)

Finally, Tesla has the most executive departures I've ever seen from any company. Telas seemingly hasn't been able to hire or even retain a high-profile executive from outside in years; clearly no one with any real-world experience wants to work for Elon Musk.

* For now the markets are paying little attention to facts and details

* But, eventually, the data mattas

* Direct payments are popular but not targeted and are only a one-time boost to growth

My friends at Miller Tabak took my book on economic growth.

* The Republican plan is poorly designed as it neglects aid to municipalities while spending one-third of the plan on direct payments.

* The Democratic plan is also poorly designed -- in that spending nearly $2 trillion to boost GDP by only $500 billion is not an effective program. (Remember I have continually written that it takes more and more monetary and fiscal policy to produce a marginal unit of production (GDP)).

"As we feared, the focus on relatively ineffective direct payments to households has distorted the debate over additional stimulus and we now doubt that there will be a good package. Neither President Biden's $1.9 trillion proposal, which may be pushed through the budget reconciliation process that only requires 50 votes in the Senate, nor Republicans' $618 billion proposal would be especially good news for financial markets. Brookings projects that absent any additional stimulus, GDP will remain about 2.5% below potential by the end of 2021. The FOMC's December forecast probably assumed little additional support beyond December's deal and likewise predicted about a 2.2% shortfall. We continue to believe that both forecasts are somewhat too optimistic.

The Republican plan is poorly designed, spending $220 billion on direct payments while neglecting aid to state and local governments. It would provide only a very small boost to growth. Brookings projects that President Biden's proposal would fully close the output gap by the end of 2021. Its sheer size suggests that this is possible. But spending almost $2 trillion to boost GDP by a little over $500 billion is not effective stimulus. The constraints on future budgets and, to a lesser extent, the effect on yields could cause a large stimulus to negatively impact stock fundamentals. On Wednesday, St. Louis Fed President Jim Bullard, in an unusually blunt comment, echoed our concerns by questioning whether Democrats should "save firepower" by waiting to invest in other priorities (e.g. infrastructure). The ideal policy would be much closer to the size of the Republican plan, but much better targeted. This seems highly unlikely, however, and the best realistic outcome for stocks may be no deal.

Longer-term, one of the costs of the covid-19 crisis will be to move the emphasis of fiscal stimulus away from targeted relief and towards direct payments, which are politically popular despite their ineffectiveness. This will significantly reduce the ability of Congress to mitigate economic downturns and will lead to more volatility."

Danielle DiMartino Booth:

The circle is squared when you factor in new small business openings. As per Yelp, while restaurant and food business openings were down 16% for the full year over 2020, openings were off by only 4% in 2020's last three months. Assuming stimulus comes through, expect the "mouse" rally in midcaps and small caps over the large cap "lion" to continue.