• "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"

JayDubya

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Here’s something that makes absolutely no sense

If you feel like you’ve been watching a meteor streaking across the sky over the past several weeks, it turns out it was just Tesla stock soaring to astronomical heights.

As of Tuesday afternoon, Tesla’s stock price was up 4x in the last four months, more than double since the beginning of January, and nearly 50% since February 1st.

(The stock is now down about 20% from that peak.)

It was an absolutely epic surge that nearly outpaced the 2017 Bitcoin bubble.

But even still-- the company is now worth a whopping $136 billion at the time of this writing.

Much of the stock’s rise was related to Tesla’s earnings, which were announced at the end of January; the company reported a net loss for the year, and a total of 367,500 vehicles sold in 2019.

I find this pretty incredible; Tesla told investors at the beginning of 2019 that they would sell between 360,000 and 400,000 vehicles for the year. They achieved the low end of that estimate.

And that’s great. Congratulations. But the stock price is now multiples higher simply because they did what they said they would do. That’s a pretty low bar.

At $136 billion, Tesla is now worth more than Ford, General Motors, and Nissan COMBINED. Those three companies collectively sell more than 14 million vehicles annually.

Now, don’t get me wrong-- I like Tesla just fine. This isn’t a dig against the company. But I find it extraordinary how much investors are willing to overpay for shares.

According to the company’s most recent financial statements, Tesla lost $745 million in 2019.

Well, that’s OK… newer companies often lose money for several years before they reach maturity while they’re still growing.

But Tesla’s balance sheet also shows total ‘equity’ of just $6.6 billion.

This is essentially Tesla’s ‘net worth’, i.e. the value of all of its assets, including factories, cash, inventory, brand value, etc. minus liabilities like loans and other obligations.

Remember, investors are essentially buying shares of Tesla at a value of $136 billion. This means that people are willing to pay more than TWENTY TIMES what Tesla’s assets are worth even though the company is losing money.

Now let’s look at a mature company to see a comparison.

Volkswagen Group is the largest automobile conglomerate in the world; it owns brands like Porsche, Bugatti, Audi, Bentley, Skoda, Lamborghini, Seat, and of course, Volkswagen.

In total, Volkswagen Group sells more than 11 million vehicles per year. This makes it THIRTY TIMES bigger than Tesla in terms of vehicle sales.

Volkswagen Group earned more than $13 billion in 2018, and will likely exceed that figure when it reports its 4th quarter numbers for 2019. This ranks Volkswagen among the 50 most profitable companies in the WORLD.

And Volkswagen’s equity is $131 billion according to its most recent financial statements.

So-- Tesla loses money and has equity valued at $6.6 billion. Volkswagen sells 40x as many cars, is one of the most profitable companies in the world, and has $131 billion in equity. (Volkswagen also pays a small dividend to shareholders.)

Which of these companies is worth more?

You guessed it. Tesla.

Volkwagen’s stock price values the entire company at just $95 billion.

So investors are willing to pay $20 for every $1 in equity for unprofitable Tesla. But they’re only willing to pay 72 cents for every $1 in equity for extremely profitable and much larger Volkswagen.

Why?

This is where people usually talk about Tesla’s ‘technology’, its leadership with electric vehicles, autonomous driving, etc.

That might have been true several years ago. But every automobile manufacturer in the world has had the opportunity to catch up. And Tesla is no longer the clear leader.

Volkswagen’s Audi brand recently launched its A8 with the most advanced autonomous driving technology in existence. The A8, in fact, is the only production vehicle in the world with ‘level 3’ autonomous driving technology. ‘Level 3’ is so bleeding edge it isn’t even legal yet in many countries.

And just yesterday, one of Nissan’s autonomous vehicles broke a record in the UK for driving 230 miles (on an extremely complicated route) without any driver involvement.

Plus there are plenty of other companies developing driverless technology, including some giants like Google. So, again, Tesla is no longer the clear leader in this field.

Moreover, pretty much every auto manufacturer now offers electric vehicles, from luxury brands like Porsche’s Taycan and Jaguar’s I-PACE, to affordable, mass market vehicles like the Volkswagen e-Golf.

Many of these models are very highly rated and extremely competitive with Tesla’s products.

In addition to not having any clear technological advantage, Tesla also has no special financial or manufacturing advantage.

Automobile manufacturing is a fairly low margin business, and Tesla is no exception. The company’s gross profit margin (according to its own financial statements) is 20.1%.

This means that it costs Tesla about 80% of the sales price to manufacture the vehicle. So 80 cents out of every dollar in vehicle sales goes to manufacturing expenses. The other 20 cents has to pay for all the other expenses of the business-- legal, accounting, rent, etc.

20.1% is pretty much in line with the rest of the industry; Volkswagen Group posted a gross profit margin of 19.65%, and Daimler (Mercedes) was 19.8%.

So from this perspective, Tesla is just like every other automobile manufacturer. It just happens to be unprofitable and a lot smaller… yet it’s somehow worth more than most of its competitors combined.

That makes total sense.

To your freedom,



Simon Black,
 

Uglytruth

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Short a few shares......... if you dare!
 

Scorpio

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looks like they are going to be giving away natty sometime soon,

the 'ole bernie free heat for your homes.........

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solarion

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JayDubya

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Do you dare roll the dice and take a chance?
(Following the "buy it when nobody wants it" theory.)
 

BarnacleBob

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solarion

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It's almost...like there are two economies. Who'dathunkit.
 

madhu

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So in 3 years the dow goes from 18k to 29k and by Nov may even break 30k..Were lucky to grow gap by about 3% a year but the dow is going to average 15-20% over the same period. Something doesn't add up.
it doesn’t because fiat printer are running as fast as they can to keep the interest rates artificially low and after sep 19,2019 repo market fiasco where the overnight rate jumped from 2% to 10%, the feds were forced to bail out wall street again with billions every day till that crisis was papered over. But for every treatment that the fed does, there is a sideeffect.

There is obvious distress in the whole system and it may be deflation that is not responding to any of the fed measures. In order to save Too big to fail (only 4 mega banks) the feds are printing without any congressional or American oversight approval. There is hyperinflation for main street but wall street is sitting pretty with printed paper that is appreciating in their stock performance.
At some point everyone will come to know that the only appreciating asset is Wall Street stocks and then the Uber driver , neighbourhood barber is going to tell you stock tips. Till then there is only one way and the stocks are going higher. Why stop at dow40,000. We might as well hit Dow 100,000. Mark to fantasy value.
 

BarnacleBob

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Tax his land, Tax his bed, Tax the table,
At which he's fed.

Tax his tractor, Tax his mule, Teach him taxes
Are the rule.

Tax his work, Tax his pay, He works for peanuts anyway!

Tax his cow, Tax his goat, Tax his pants,
Tax his coat.

Tax his ties, Tax his shirt, Tax his work,
Tax his dirt.

Tax his tobacco, Tax his drink, Tax him if he
Tries to think.

Tax his cigars, Tax his beers, If he cries Tax his tears.

Tax his car, Tax his gas, Find other ways
To tax his ass.

Tax all he has Then let him know
That you won't be done Till he has no dough.

When he screams and hollers; Then tax him some more, Tax him till He's good and sore.

Then tax his coffin, Tax his grave, Tax the sod in Which he's laid...

Put these words Upon his tomb, Taxes drove me to my doom...'

When he's gone, Do not relax, Its time to apply The inheritance tax.


Accounts Receivable Tax

Building Permit Tax

CDL license Tax

Cigarette Tax

Corporate Income Tax

Dog License Tax

Excise Taxes

Federal Income Tax

Federal Unemployment Tax (FUTA)

Fishing License Tax

Food License Tax

Fuel Permit Tax

Gasoline Tax (currently 44.75 cents per gallon)

Gross Receipts Tax

Hunting License Tax

Inheritance Tax

Inventory Tax

IRS Interest Charges IRS Penalties (tax on top of tax)

Liquor Tax

Luxury Taxes

Marriage License Tax

Medicare Tax

Personal Property Tax

Property Tax

Real Estate Tax

Service Charge Tax

Social Security Tax

Road Usage Tax

Recreational Vehicle Tax

Sales Tax

School Tax

State Income Tax

State Unemployment Tax (SUTA)

Telephone Federal Excise Tax

Telephone Federal Universal Service Fee Tax

Telephone Federal, State and Local Surcharge Taxes

Telephone Minimum Usage Surcharge Tax

Telephone Recurring and Nonrecurring Charges Tax

Telephone State and Local Tax

Telephone Usage Charge Tax

Utility Taxes

Vehicle License Registration Tax

Vehicle Sales Tax

Watercraft Registration Tax

Well Permit Tax

Workers Compensation Tax

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago, & our nation was the most prosperous in the world.

We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.



What in the heck happened? Can you spell 'politicians?'
 

Scorpio

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with the weakness in stocks supposedly due to more beer virus propaganda,

metals are making attempts at resistance,
gold getting up near 1600 while silver tries once again to get to 18

gold chart looks more convincing, while if silver ever breaks and runs, it should run for awhile

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arminius

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^^^

That is an excellent encapulization of what has happened to our culture...
 

JayDubya

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Surprise! Massive Consumer Debt Fueling 'Record' Economy

http://www.silverbearcafe.com/private/02.20/record.html

In May 2018, we reported a 47% increase in total consumer debt. Today, that debt is still on the rise, now at a staggering 61% increase since 2008.

You can see how total outstanding consumer debt, currently at $4.2 trillion, has skyrocketed since 2008 in this graph.

But the total amount of outstanding debt isn't the only problem, because as reported by Newsmax Finance, consumer borrowing in December also shot up the most in five months:

Total credit climbed by $22.1 billion from the prior month, exceeding all economist estimates in Bloomberg's survey, after a downwardly revised $11.8 billion gain in the prior month.

This graph shows the change in consumer credit for the past 25 years. What's particularly interesting to note is that monthly increases in consumer borrowing have pretty much stayed above the $10 billion mark (and mostly above $20 billion) since 2013.

That high rate of increased consumer borrowing came at a time when the Dow doubled from 14,000 to over 29,000 today.

The eerie problem with economic growth fueled by consumer debt

Consumer spending represents about 70% of all economic growth, so if most of that spending is fueled by debt, then there could be a bursting debt bubble on the horizon when the bill comes due. Especially if consumers can't afford to pay their bills.

"The rebound in credit suggests consumers needed more than just wage gains and cheaper fuel to drive fourth-quarter growth," according to Newsmax. If that's true, it seems like consumers already are having trouble paying the bill with earned wages.

The proof is in the pudding, with official inflation at 2.5% (including food and energy) and still rising, and personal income stagnating since 2013. If rising inflation and stagnating wages continue, consumers will have difficulty repaying their debts.

And keep in mind, the Federal Reserve report on consumer borrowing doesn't factor in mortgage debt or loans backed by real estate.

So if the "record economic expansion" is mainly fueled by consumer debt, and something else happens so consumers can't pay back that debt, then credit defaults will likely increase.

We can already see this in the auto loan market. In Q4 2019, serious auto loan delinquencies (90 days or more past due) rose by 15.5% from a year ago. Auto loan delinquencies now represent $66 billion — a record high.

With too many defaults, you could have a debt bubble burst similar to the one that caused the last recession. Except with $4.2 trillion in debt outstanding, the weight on the economy would be unprecedented.

Billionaires have warned about debt, economists have warned about debt, even the Fed has warned of a debt bubble. Hopefully someone listens, but it might already be too late.

Shield your retirement from a potential debt bubble explosion

The debt that is fueling the "record" growth in the U.S. could quickly become a lead weight that could sink the economy. All it would take is for one thing to go wrong.

Which is why now is an ideal time to consider shielding your retirement from market cheerleaders who think "more debt is better" without considering the consequences of mindless growth.

So while you examine your portfolio for opportunities to diversify your assets and reduce your risk exposure, consider moving some of your funds into precious metals such as gold and silver.
 

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