How can the media be so gullible – and pliable? I don’t know either.
When Snap reported “earnings” this week – in quotes because it was its biggest loss ever – media headlines were euphoric, from TechCrunch (“Snap shares skyrocket on first earnings beat with revived user growth”) to The Wall Street Journal (“Snap Climbs Back Above IPO Price After ‘Shocker’ Earnings”).
The theory was that Snap had reported “better-than-expected earnings.” Thanks to these headlines, over February 7 and 8, Snap shares skyrocketed 48% to $20.75, though they have fallen off somewhat since then.
So here are some modest suggestions as to what the headlines should have been, based on Snap’s “earnings” report:
Snap losses surge 106% to $350 million in Q4, and 570% to $3.4 billion for the year, the most ever.
Snap lost more money than it generates in revenues; what is it doing with all this money?
Snap burned $820 million in cash in 2017, but still sits on $2 billion from investors and can keep going at this cash-burn rate through 2019, so no problem.
Snap Q4 loss soars to $350 million, on $286 million in revenues. Stop and think about that for a moment.
Losses are ballooning faster than revenues, and from a larger base, which is the road to financial perdition, but no problem for analysts.
Twitter also reported earnings this week, and the media headlines showered it with love, from The New York Times (“Twitter Has Good News for Once: Its First Quarterly Profit”) to CNBC (“Twitter rockets more than 20 percent after the company reports first-ever net profit”).
Twitter’s shares jumped 27% on the announcement, after they’d already soared 60% over the past year on takeover hype that never materializes but keeps getting trotted out time and again to pump up shares. Since the spike following the earnings announcement, shares have declined 10%.
So here are some suggestions for headlines to describe Twitter’s situation:
Twitter 2017 revenues shrink 3.4%, Q4 revenues inch up 2%, as company embarks on Cost-Cutting as strategy
Twitter makes $91 million in Q4 profit after gutting R&D and sales and marketing expenses, which might explain revenue stagnation. But still loses $457 million for the year.
Twitter cuts $68 million from R&D and $71 million from sales and marketing expenses in Q4, trying to shrink itself to growth. Good luck.
Even the ceaseless promos from President Trump and the media circus around his Twitter actions fail to boost Twitter’s revenues.
No other company has ever gotten this much constant and free promo from any White House, but Twitter still can’t make it work.
Tesla’s earnings report late Wednesday triggered more mixed and somewhat impatient headlines, as it is becoming increasingly difficult, even for the fawning media, to willingly and blindly fall prey to Tesla’s hype and broken promises.
So these mixed headlines ranged from The Street (“Tesla’s Earnings Report Was Remarkably Drama-Free, by Its Standards”) to CNBC (“Tesla shares fall as Wall Street doubts the slowing cash burn is for real”).
Before the “earnings” report, Tesla shares traded at $345, giving it an inexplicable market capitalization of $58 billion. Shares have since fallen about 10% to $309. So here are some suggestions, based on Tesla’s “earnings” report, for headlines that are less mixed:
Tesla loses $675 million, the most ever, in Q4, and nearly $2 billion for the year, also the most ever.
Tesla has no clue when or if its Holy-Grail $36,000 Model 3 will ever be mass-produced.
Tesla would lose so much money on its Holy-Grail $36,000 Model 3 that it cannot afford to mass-produce it, if it actually could mass-produce it.
Tesla shows “slowing cash” burn caused by its failure to mass-produce Holy-Grail max-cash-burning $36,000-Model 3.
Tesla cut capital expenditures by $223 million from guidance to show slowing cash burn, just when it should invest to get production going.
Tesla’s global market share is an invisible 0.1%. Why is its market cap $58 billion?
Tesla now ominously “targets” rather than “forecasts” a production rate of its Holy-Grail Model 3 of “2,500 by the end of Q1 and 5,000 by the end of Q2,” nearly a year behind prior hype, and might never get there.
Tesla is spooking people with it wishy-washy backtracking on prior promises. The production “forecast” has now been demoted to “levels we are focused on hitting.” So these are no longer “forecasts.” They’re now elusive goals. The true Holy Grail.
It adds even more ominously that “our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time.” OK, all prior statements are out the window.
So the most appropriate generic headline might have been best:
Nothing Tesla says can be believed.
There is no telling when Tesla’s nonsense will finally hit its shares as investors flee from this endless sea of fake promises. But for now, investors still cling to the magic.
For US consumers, it was one gigantic party. But wait… The State of the American Debt Slaves
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
“Losses are ballooning faster than revenues, and from a larger base”
AKA the Micheal Scott paper company, the more paper you sell the more money you lose. LOL
Tesla needs to scale up production and make each loss per unit sold up on volume, but they can’t even do that. So, the next best thing is resorted to, Tesla speak!
“I don’t care that were losing money on each unit. Well make it up in volume.”
Said every failed enterprise leader.
They made it up on volume.
Would this be an appropriate time to trot out the line from Forrest Gump :
“Stupid is as stupid does. ” ???
What with non-GAAP accounting, pie in the sky forecasting and stock valuations totally removed from reality, what could possibly go wrong ??
Is it my imagination or is Homo Sapien devolving into a multitude of “village idiots” ??
No, and, it would certainly seem so.
This reminds me of an old joke: two guys start a business buying cabbages from farmers, and selling them in the city from the back of their truck. They buy the cabbages for $1 each and sell them for 90 cents each. One guy says to the other one: we’re losing 10 cents on each cabbage we sell – how are we going to make any money?
The other guy says: “Easy – we’ll make it up through volume!”
Of course, these days they’d paint “Blockchain Cabbage Sales” on their truck, and sell shares…
You’re right. When it’s “mark to idiocy” time who knows what anything is worth. Add bogus government figures to the mix and we’re unable to determine where we stand as a society.
If the latest budget numbers are to be believed, we’re flat broke as a society.
Tesla will forever be the first car in outer space. That is real goodwill you can bank on. I think Musk is a genius in marketing too.
You can’t compare twitter to the real innovation coming from Musk companies. I can write twitter off the top of my head, it’s a ridiculous valuation.
https://www.politico.com/gallery/2018/02/09/the-nations-cartoonists-on-the-week-in-politics-002782?slide=12
Sometimes a picture is worth 10,000 + word’s
I’d be curious to read how anyone can consider the repackaging and selling of a more than century old technology that though somewhat improved still maintains 80% of all the glitches , foibles and problems ( weight -complexity -range – charing time – battery life – effects of temperature and altitude etc ) of that more than a century old technology pretty much intact … all wrapped up in substandard quality materials , workmanship and construction ( for the price ) as in any way shape or form being … real or genuine …. innovation
The Tesla Model X is the coolest thing out there, innovative, fun and real.
In other words, its sexy.
“Tesla will forever be the first car in outer space.” – Petunia
Is that where the rubber meets the vacuum?
Hahahahaha… I’m going to put this on a plaque and hang it on my wall.
When I read about his car going up in space I actually thought it was narcissistic to the extreme.
I appreciate him trying to push forward with new technology/electrification but, is he really capable or does he just have lots of money?
How does it benefit Tesla, and human kind in general, to have a car launched into space? Just wondering. . .
The real innovator was Nicola Tesla, not Elon Musk. In my opinion.
It’s not the first car in space. NASA built a car in 1971 that still sits on the surface of the moon, i.e. in space.
In fact, the Tesla is not even the second car. NASA also built several autonomous cars that are driving around the surface of Mars: Sojourner, Spirit, Opportunity and Curiosity. OK, the first two aren’t running anymore but it still counts.
Musk companies mostly harvest gov subsidies. He hasn’t really invented anything in Tesla or Solar City. Products and services cobbled together in money-losing schemes. Same for Amazon and Netflix.
“Musk companies mostly harvest gov subsidies. He hasn’t really invented anything in Tesla or Solar City.”
No He has just taken a bunch of concepts and put them together so as they work and are easily available, and USABLE. For the average end user. You do not see this as an achievement even though nobody else has done it.
Very similar to Henry Ford. Who incidentally never made much profit in his lifetime either.
Even when McNamara went to work at Ford after WW II it still was not profitable. Due to Ford’s abominable financial management. It was this lifelong abominable financial management.
Musk is doing some things that Humanity needs done. His companies dont make money. I wouldn’t invest in them. What he has and is producing and has achieved will be helping humanity for a very long time, even if he goes bankrupt and all his companies are wound up.
Is he a dream salesman. Probably, is he a Criminal Snake Oil salesman. Probably not..
Meanwhile he lays off his cleanup on the public:
https://www.nasa.gov/mission_pages/station/news/orbital_debris.html
Tesla Road-ster is the first car that will enter MARS, that will be great marketing tool. And that will start Tesla revolution.
I am not certain where the space-bound Tesla car is going, but it ain´t going to where they planned for it to go.
https://www.inverse.com/article/41075-astronomer-reveals-when-elon-musk-starman-will-return-falcon-heavy-tesla
I would not be surprised if it were to crash into Mars, or a large asteroid, or into the Earth before this 22nd century ends.
Both the Car and the Company are outta site — and I don´t know which will crash back to Earth first.
It will return in 1000 years as the heart of galaxy destroying machine searching for its creator.
“Tesla Road-ster is the first car that will enter MARS…” – Toyota
Just how deep will it enter into MARS?
Even if Tesla enters Hell, I will keep buying Toyota. Just bought a brand new Corolla, under 18K, something Tesla cannot do for low income people.
My first Corolla was at 145K miles, 16 years I owned, still on the road.
Tesla can go to Hell , Sun, Mars, or in the Ocean, I will keep buying Toyota forever.
Those Corollas are amazing cars. I’ll tell you, they will run and run and run forever.
Not sure. Perhaps the Cadillac Ranch is the model.
Like Wolf, it annoys me that Wall Street analysts and reporters continue to buy the BS from these “tech” companies that have no path to true profits. If US banks provided loans to any of these three companies, their regulators would force them to write those loans to zero immediately. Yet, WS investors value these cash burning companies at tens of billions. The bond market is much smarter than the stock market and TSLA bonds are junk rated and trading well below par. None of these companies will survive the next recession.
The fact that it has a bond at any price shows that the bond market is just as dumb as the stock market.
The company I am wondering about is Microsoft. Their portfolio is weak. Example, Microsoft purchase Linkedin, but Linkedin is only coming up with around a billion a quarter. Is the merger that good, I feel it is not. The media or wall street is very quite. Something to think about. Is Microsoft that good of a company…
LinkedIn was going downhill. It was acquired by Microsoft in a “friendly deal” to hide its decline. Smart move, I must say. At least LinkedIn employees cash out a bit.
“Cashed out” – past tense. Sorry …
The only people who think LinkedIn is of any use are recruiters. I get 40 messages a day from recruiters on LinkedIn and I of course ignore every single one of them. Do recruiters actually find anyone on LinkedIn? I guess only desperate techies with no actual tech skills would reply to a recruiter on LinkedIn. The only reason that I have an account on LinkedIn is because these recruiters keep asking what’s your LinkedIn profile.
Cloud.
I read an article this week on Forbes as I recall that showed msft made more revenue on cloud than it’s competition.
M$ Cloud is big. As is their SCCM.
I tried Microsoft cloud; more expensive than Amazon’s and not as user friendly. They want to compete, they better have a better price than Amazon.
Look … lets be blunt . The average rise in corporate earnings across all sectors since 2007 is 7% or less . Whereas the average stock market valuations of those same corporations are up some 38% or more . Creating a disparity of at least 38% .. if not more in many cases .
And the tech companies ? Especially the 21st century version of DeLorean ( TESLA ) Suffice it to say the gaps between profit and valuations are even wider and deeper
Which means the market is well overdue for a serious correction across the board . And if it doesn’t continue to happen gradually as it has this week ( actually since the SotU ) … it’ll erupt like a long dormant Icelandic volcano hell bent on global destruction wreaking havoc across the planet for years to come
Tesla will make the metamorphosis to Aerospace and Infrastructure. Both taking advantage of a deep pocketed Uncle. When the Model 3 and Giga Factory fail, Musk will point to his rockets and tunnel bores while shouting in his best PT Barnum: “Step Right Up!”
It’s called Tesla speak.
It’s the language of the Musk Rats.
Truly excellent comment Wolf.
There should be people in the MSM like you not the cesspool of the intellectually challenged that seem to populate most (thankfully not yet all) of the MSM now.
Most of these people like to tell us endlessly we must only listen to them on the full range of news because only they will tell you the truth when more often than not you get spin, biased opinion, half truths, deliberate failure to report, withholding of facts, the most blatant outright lies and news designed and structured to pursue and progress whatever is their political, social or financial agenda.
They also seem to believe nearly all of us as just as utterly as stupid as they are and are so gullible we cannot see through them.
As for the companies you have so well written about here, their managements particular strengths and talents seem to lie in endlessly losing enormous slabs of other people’s money.
Tesla’s market cap valuation is absurd and ridiculous at 52.4 billion at today’s lower price close given the string of large losses and when you examine and consider this against their somewhat depressing balance sheet. As this company is trending now shareholders and bondholders look like they are going to get scorched. It’s a shame because the company is building their product locally , employing many Americans and exporting product to foreign markets. Everyone wants to see US companies which are actually building tangible product, and manufacturing their product locally, succeed. Well , I do.
I love this one:
Tesla has no clue when or if its Holy-Grail $36,000 Model 3 will ever be mass-produced.
Tesla would lose so much money on its Holy-Grail $36,000 Model 3 that it cannot afford to mass-produce it, if it actually could mass-produce it.
RE SNAP from Business Insider – “Snap is trying to “”capitalize on its killer earnings”” by launching a direct assault on Instagram”
Too bad the killer earnings are not finishing the job of killing the stock prices of the company.
A certain trends forcaster use to call the MSM people “presstitutes”. I think he is spot on with that.
Musk seems to have managed to get his hands on the late Steve Jobs’ RDF ™ generator, because Musk is a genius on spin and using this ability to turn up funding. ( RDF = Reality Distortion Field ), Tesla Model 3s with portable flamethrowers included the next hot thing ?
The Genius of Apple is in not manufacturing- they design it, Foxxconn builds them. Musk needs to pass on the 3 to someone who isn’t learning to mass produce a budget car because they’ve been doing it for decades.
Try building a robot to install a glove compartment door AT ALL, let alone one that can compete with the Mexicans or Chinese.
The 80K plus S model is maybe a different story, but with a least a dozen CREDIBLE mass production outfits coming out with electrics, his niche will have to be pricey and market its cool factor.
Although this is purely a personal feeling. I like the idea of an economical electric- just to not put in gas.
But as for a sports car, I don’t care how fast it goes to 60 mph, I think its boring. I like the sound of the exhaust, and the faint vibration when the engine revs.
Way back, there were trials of turbine race cars. One of the reasons they were killed was that fans missed the sound.
Ya i know you could have electronic sound.
Don’t make it worse.
In terms of RDF manipulation, Steve Jobs would have had a long long way to go to touch Elon Musk. Steve Jobs actually built products that brought in tremendous profit. Elon Musk built unprofitable technological unicorns (“auto-pilot” that is nowhere near being real auto-pilot) but is still able to attract more funds and more admirers. (Yeah, the Model S and the Model X may be great cars but their price tags are near six-figures; they better be good.) That genius RDF manipulator.
I once heard the saying: “Whoever does not have elders, should buy them.” This refers to the wisdom that old people should have accumulated and the foresight & caution they should have acquired over the years; and which young people can (hopefully) learn something from. Today I see among the vast majority of my older/senior colleagues and acquaintances neither interest in leaving behind a legacy, nor any sort of desire to teach younger people something valuable. I have concluded that the reason behind this is their sheer lack of knowledge and wisdom. This group of people includes both “analysts”, “journalists” and “investors” who believe such pieces of news and dump their and other people’s money on such “opportunities”.
I think part of the reason for such investment decisions is practical: too low interest rates. People want/need to make money, so they are willing to go to extremes and consider options which years ago would have been laughed at.
Another part of the reason is, I think, due to (1) lack of proper financial education and (2) increased deadline pressure for (finance) professionals. Regarding (1), I think there are many widely used finance metrics or economic concepts and theories which, although proven by specialists to be flawed, are still widely used for decision-making. But from personal experience, studies and trainings have turned more into rote memorisation and mechanical appropriation of widely used methods. It is less so about delving into problems and coming up with the right (customised) solution. And here I go into point (2): the decrease in quality of analysis is for sure, to a great extent, due to the increased focused on speed of execution and volume. Quality seems to be less important, especially if revenue streams are not dependent on it.
Finally, I think none of this would have happened, if there had not been a shift in mentality, an obsession with the ever brighter future. We are promised at every corner that the world will be better tomorrow, no need to worry about high levels of debt and unemployment, there will soon be some technology or app invented for it. Of course I support technology improvements (which have tremendously improved life on Earth for many people), but I think one needs to acknowledge that at some point too much optimism leads people to not account properly for risks or outright illusions (in this instance).
To conclude, what I am trying to say is that in my humble opinion most people truly do not have the capacity to understand the situation and have taken on a role (that of the investor) without realising what they have got themselves into. As such, pity, rather than consternation, should probably be the more appropriate reaction…
Its a kleptocracy – with no rule of law and no enforcement when the chosen commit fraud like the stocks Wolf discusses in this post. Everybody is trying to get theirs or die trying.
Media is nothing more than a propagandizing extension of the corporate/govt leviathan of corruption and greed. Expecting truth from the media is akin to alchemy.
Finally, I think none of this would have happened, if there had not been a shift in mentality, an obsession with the ever brighter future.
Every tax dollar paid to the current form of government only buys more War-on-Everything, Mass surveillance, Military Bloat on Roids, and possibly a retaliatory nuke-out from Russia. Not much of a future, really, who’d buy into that?
So, We have to invest differently. The inevitable loss on Tesla stock can be offset on the tax returns meaning less support for evil.
Great post. Thanks
I’m a boomer, and I see the lack of market corrections distorting the perceptions of younger investors and homeowners. They need to see their 401K’s drop by 50% like they did with us. They need to see the sales price of their home drop by 50% like they did around 1990 and take a decade to rebound. Nothing like being tied to a house like a millstone around your neck, unable to move or retire because you can’t sell your house with the upside down mortgage.
Until then, the younger generations will believe anything and stay in overvalued bubble markets until they pop.
And get off my lawn. :)
It’s all part of what I call the pump’n’dump mentality permeating society.
Anya,
Your entire comment nailed it!! I keep saying the mentality of virtually everyone, and the actual state of our economy, is like the movie Speed. Keanu had to keep the bus above 50(??) Miles per hour or it would explode. With this society, not only do we have to buy more and more stuff to keep the bus going 50 mph at all times to avoid blowing up, but the speed needed to avoid blowing sky high is actually increasing as well; higher and higher expectations being fulfilled so far by more and more debt. 51, 53, 56 mph and increasing. Until the engine seizes……and there is no financial education or common sense needed now because it doesn’t pay. The advisor that puts 100% of his clients’ money into stocks, “because stocks have higher returns over time”, looks like a hero right now with markets manipulated higher for 9 straight years so far. Risk ain’t mattering to him at all because even tho he does have a license to sell investments he honestly does not understand how all this financial stuff actually works; and most advisors are there to make money for themselves no matter what anyway. There are a lot of these kinds of advisors and the rest end up having to follow because it’s too hard to teach financial discipline to a client when his buddies are making more than he is. So now you have all kinds of folks in the market that prob shouldn’t really be there, and most of those that should have money invested in stocks have WAY more than they are going to be comfortable with when this whole house of cards gets smoked back to reality. And they are going to freak……but then of course another QE and financial life support will kick in all over again, and we’ll start Bubble #4
the hyperloop will make busses redundant. well, unless they are tesla self-driving busses, in which case all the better. either way, problem solved.
progress is a religion.
I really don’t get why people still trust Musk. I mean sure, missed production deadlines and various other mishaps can be expected…..from a startup out of someone’s garage. But Tesla isn’t a startup anymore, hasn’t been for a while. So why do so many people keep drinking the Kool Aid? Cult of personality?
People are NOT thinking about whether Elon can deliver. They are thinking whether Elon can “convince” other people to believe he could deliver. The emperor has NO clothes and yet everybody is watching him parade naked and praise how beautiful the clothes he is wearing. Why? Although they know the fact of the emperor being naked, they also know that other people will NOT shout it out even though everybody knows he is naked. This is people guess what other people is doing and this has nothing to do with what is fact.
My spouse thinks Musk is a visionary and a genius. I try to mention the true state of his vehicle operations and am met with real anger.
I can not explain it to her or explain her blind devotion to this man.
Perhaps he is a genius…… at taking peoples money
People usually can NOT tell the difference between a product and the company’s value. Product can be seen, touched and felt. A company’s value need some brain power/effort to think. A money losing company may well burn lots of cash and build something sexy buy non-profitable. All people talk about is the obvious product but NO the value as a company.
Whether it is emperor has no clothes or pure devotion to a cult, these people know how to strum human emotional chords, and that power leads to their enrichment at the cost of everybody else.
It is a skill set I despise and yet I have to respect and deal with properly like a pernicious chronical disease.
Dave,
Here is some basic advice concerning Tesla/Musk and your spouse: don’t bring up Tesla/Musk, and if she brings it up, smile at her when she speaks, look her in the eye intensely and lovingly, nod understandingly and approvingly, and keep your Tesla/Musk thoughts to yourself — and then, in your free time, write a comment here to explain what you really think about Tesla/Musk.
Tesla isn’t worth getting in between you and your spouse :-]
Dave,
Some men but All women believe in dreams, Tesla is selling dreams, that explains its ridiculous market value and peoples love to this man and his products, don’t crush her dreams, accept this lie or you will be vindicated.
We are under no obligation to impart the truth to anyone who hasn’t asked for it: least of all, one’s wife! :)
Wow. That’s a helluva truth! But, it is true: I have seen it firsthand.
People don’t want the truth. Illusion is far more comfortable, even those illusions that are fatal.
They should coin a new phrase in place of FAANG. But instead use companies like Twitter, Tesla, Snap. I wonder what acronym you could make out of that. I suppose we should add a fourth to make it a quartet. Too bad Instagram is not a public, stand alone pile of crap.
MCH,
Here’s an old software word for you: Vaporware.
Vaporware: “Software or hardware that has been advertised but is not yet available to buy, either because it is only a concept or because it is still being written or designed.”
Personally, I think Elon Musk has some great ideas, but most of them seem to be vaporware. Disclaimer: I don’t think SpaceX is vaporware.
Snapchat: If it really disappears, why does snap pay billions for cloud services? (Google 2B over 5 years, AWS 1B over 5 years.) There’s has to be a lot of data storage in there with the services for an average of 600M a year. And now you know where a lot of that investor cash was spent. ;-)
Twitter: IMHO, other than humor, I have no idea how anything of real meaning can be said on twitter in 280 characters.
I can’t speak much to Dorsey or Spiegel, but I do think Musk is a genius. A genius in leveraging other people’s money to fulfill his dreams. He might die a pauper (Doubtful), but he’ll have lived a great life based on other people’s money. And it takes a degree of ingenuity to accomplish the things he has done.
As a car, Tesla is no longer vaporware, if we’re talking valuation, it’s a completely different thing. But whether you believe it or not, it certainly succeeded better than GM’s EV1. SpaceX is a different beast altogether, the technical accomplishments are amazing. But the key is that in both cases, Musk is targeting industries that are set in their ways, like Kodak making a fortune from chemicals, and then getting run over by the very digital cameras they created. Now, the car industry may not bend to his will, but the space industry is going to belong to Musk unless Bezos start offering real competition.
“A genius in leveraging other people’s money to fulfill his dreams.”
This also describes Bernie Madoff.
Actually twitter does have a good use. I use it to follow football matches being played in New Zealand whilst I reside in the Philippines. So I know in real time the results., can see photos of the match and some short video clips of a game when they are uploaded. Each of the 12 teams in the national league has its own twitter account so when not there its the next best thing.
And I don’t pay anything for the service. Its all free charge on the laptop.
Slapper
Ik think ToaST ia a fitting acronym for these companies. Now we only have to find some unicorns that start with O and A respectively.
Suggestions, anybody?
Have lost track of how many presstitutes have labeled Elon Musk “a real life Tony Stark” in their articles. Who’s paying them to fawn over him, Musk himself or Marvel Comics? What NASA could do with the tax dollars going to this reincarnation of PT Barnum.
PT Barnum sold peanuts and popcorn. If Musk sold peanuts and popcorn why they could lose $ billions more, pushing the stock to $400. The more money it burns the higher its stock seems to go.
What if they sold premiums suds to customers made thirsty from the all the salt on the popcorn and peanuts?
NASA could never compete with SpaceX because NASA’s funding comes from a constituency with no tolerance for failure. From what I’ve been told, NASA has a rocket program that is nowhere close to the innovation of SpaceX.
NASA built the most powerful rocket–actually, the most powerful machine–ever back in the Sixties. And got several, with their occupants, to the moon and back. Let’s keep things in perspective.
BTW, we know Musk wants to colonize Mars; you don’t suppose his spaceman in a Roadster is carrying a sperm sample, do you?
This blows my mind everytime (every quarter I guess), … I get it, fantasy accounting and fake profit are the new way of making money, but I believe gravity will win, eventually…
Wolf, could you do a similar report on Amazon?
It wouldn’t be quite the same. Amazon has been profitable for many years. It is at the core of the internet (AWS), controls much of the cloud, is a giant in the retail business, and a giant in the distribution business.
The stock is vastly overvalued – and I mean by a huge amount. But the company is a juggernaut with a real business with booming and massive revenues and a profitable business model (though not nearly as profitable as it should be, given its size). So it is very different from Snap, Twitter, and Tesla.
exactly. AMZN is overvalued in a matter of 15-20 fold. As $50-70 stock it would have been more or less decently valued.
Sap, Twitter, and Tesla should be renamed Snap, Crackle, and Pop.
“(though not nearly as profitable as it should be, given its size). ”
\
Has this got anything to do with the fact that it is still trying to kill much of the remaining competition??
Although Amazon is a much more sound business than Tesla and other unprofitable unicorns, they do share the common feature of “being new”. When FED showers money, if you are “new” people will pool money for you through equity and bonds and they allow you to make NO profit under the name of killing the “old”.
It is NOT the “old” is unsound, it is just the “new” can compete ouy the “old” since the old has to make profit and the “new” does NOT have to make profits.
Amazon is an example of “reasonable new” killing the “old”.
Tesla, Snap, is the “unprofitable new” crowding out the “sound old”. The “new” hires workers and the old has to raise salary. This is the consequence of FED’s printed unsound business. Wage inflation.
Why is the Media so bad about this? Budget cuts to newspapers, newspapers outright disappearing or going online only and then just becoming reblogging machines in a lot of cases
Tv news has been a “Ratings machine” for decades and so they only care about impact not truth.
Social Media is honesty not a place were you should get your news from and that’s all I want to say about that.
The Radio is… actually going quite well, at least as retractions and corrections goes.
And the biggest answer of all “Most people do not understand how this fancy thing know as ‘company earnings’ work.”
Wolf I don’t know if this fits the theme if this site, but could you do a report on how many important newspapers have closed down or gone online only in the last five years?
Because the death of newspapers is one of the reasons news are getting worse and worse.
‘The Radio is… actually going quite well, at least as retractions and corrections goes.’
The reason radio survives is that it doesn’t do news. The vast majority of radio broadcast is music and ads. Many stations are often unmanned, or robotic as they play through their pre-selected stuff.
You never have to retract music, as desirable as that might seem.
Even the small amount of talk radio with Rush etc. is essentially entertainment.
The genre is expected to die with his generation, joining the radio play of previous millennia.
But at the moment its the cheapest mass media and competes on price.
It is also the only one available to the motorist, or that you can listen so while working on something else.
It’s not a news medium.
Alternative view:
o Every 20 years or so, there’s a whole new generation who thinks they (and they alone) have the keys to understanding the universe (I certainly felt this way when I was in my 20’s…).
o A lot of this cohort is in the media business
o Very few truly traumatic impacting day-to-day USA life (yea, I know, ISIS is nasty, but most of them are in Syria or Paris; FBI spying on American citizens – who cares?)
o World events are blissfully ignored, and, unlike famine or WW2, it is easy to ignore the lessons of history (most of the new cohort doesn’t even know history)
B T Barnum was alleged to have said “…there’s on a sucker born every minute…” I suspect it’s more than one.
Chip the ‘sucker born every minute’ has also been attributed to a Barnum rival in a dispute over the Cardiff Giant. Interesting story and only a 5 minute read on Wikipedia.
raxadian,
I have been thinking about doing an article on the newspaper business. The print business is dying — and that was the profitable end. The online business is getting hogged by Google, Facebook and the like, and leftover revenues from online ads are not enough to run a classic news room. Even the NY Times, which is HUGE online, could not afford to maintain its former news room and shed many good reporters.
Because “cheap” is now the rule, papers hire young inexperienced college grads that have no idea about complex things like business and finance (NY Times business section is abysmal).
So this puts the newspaper business in a terrible spot. Papers get bought out all the time and then new management comes in and starts cutting costs, to make things worse….
There is a new trend, and I still don’t know what to think about it: billionaires buying papers — WAPO and now the LA Times. If they invest some real money and hire some real talent, it could turn out to be an improvement. I’m not any more concerned about a billionaire owning a paper than about a corporation owning it. It’s all the same.
That said, given the deterioration of the space, it creates some space for sites like mine :-]
“That said, given the deterioration of the space, it creates some space for sites like mine :-]”
√
Your trick has to be, don’t get to big.
Otherwise they will demand you sell to them and if you refuse, destroy you.
I do not know of any case of a multibillonarie buying a newspaper company actually ending with the newpaper becoming better.
Fun thing about the radio, people have been saying is gonna die since TV became a thing, that was like… how many decades by now?
And thanks to online streaming more radios exist today that ever before and some of them actually are about news.
Yes radio is cheap, very very cheap. I tend to like the BBC World News radio and any with lots of opera music on it.
But quality content costs money of course.
If the billionaire buys the paper as a hobby business or because they believe that newspapers serve a vital public function, then I have no problem. But far too often their intentions are less virtuous. The big problem with billionaires buying papers is how they use it to manipulate public opinion regarding their company and stealth lobbing.
Sheldon Adelson bought the major Las Vegas newspaper in part to shutdown/heavily stories about him and his business ventures. These are often hidden from readers.
Quite true: so much media is just pap. I come back to Wolfstreet because of the total absence of pap.
I am starting to believe that a low IQ and a disinclination to question whatever is popular and trendy are core requirements for being in Mainstream Media.
Do you REALLY believe that a guy like Jeff Bezos buys the Washington Post because he cares about journalism and/or that he can improve the profitability?
Bezos bought WaPo because he wants to control the narrative, nothing more. It is a grab for an organ of propaganda, an attempt to control public opinion.
There is no ‘Fourth Estate’. It is all a part of the corporatocracy. We’ve been had.
“Why is the Media so bad about this?”
Look at the peopel who own it. (they are actually a very small group).
Since the 70’s the media has been about selling advertising and Victimising/Demonising any who do not have the same political views or dislikes (I dislike the British royal/Israel family so I will destroy them/It) and agendas, as they do.
In the 70 you could read/listen to the BBC and be reasonably truthfully and well informed today you need major bias and truth filters for every article.
Even the British Govt has decided the BBC, is pro left, and against them
Let’s be honest here, the BBC was never truly neutral. It had always been about the good of the British Empire. It just looks neutral because CNN is definitely very bad at hiding how partial it is so it makes the BBC look good.
Just like the fabrication of the English Gentleman, the BBC serves the UK interests by making it look good.
And I say this as someone who actually likes Britain, even if nowadays you have to go Gibraltar to have a true English breakfast.
Do remember that Englishmen have no soul, but they have a sence of humour.
Hi Raxadian, totally agree the BBC has never been impartial. As an Englishman I had to Google what soul meant being as we haven’t got any lol. I do need to correct you on your English grammar, sence is spelt with an s. Right off for a full English breakfast with her majesty.
Reminds me of the 2000 DotBomb era. Analysts were saying that profits don’t matter.
2018 version: “trend lines toward profitability don’t matter”.
Wolf, this would make for a hilarious recurring bit on a late show, and in a more serious note, might actually draw attention the absurdity of press coverage of earnings reports.
I think the Tesla business logic is as follows:
o Musk is a visionary who is very successful at evangelizing electric cars (compare a Tesla to a Prius).
o Musk is spending OPM to improve battery technology & gain experience (if not cash) building a tiny volumes of electric cars.
o Musk is having some success selling cars directly to the public, breaking the hammerlock of distributors.
All those things are highly valuable if and only if Musk can make them work (aka get even close to profitable). At which time the legacy global car companies will swoop in, steal the concept, and ride Musk’s “evangelizing” to the stars (so to speak).
on the contrary take a look how the so-called market treats really good companies, e.g. MU (Micron) and WDC (Western digital). WDC for example has EPS of $14/share, provided even a better guidance and dropped like a rock to PE below 5. The stocks above is a good example how works this “casino on steroids” (expression from Karl Ichan interview)
Looks like Goldman has a “buy” for SNAP, obviously Goldman analysts can’t read a balance sheet? Where do I get a job like that?
They read balance sheets while doing Yoga i.e. upside down. That way the “bottom” number will ALWAYS be at least zero.
Someone at the squid obviously wants to unload a boatload of Snap stock They have always been a contrarian indicator much like Dennis Gartman or Jim Cramer IMO
Cramer is singing the Snap song. My best explanation of the motive is the search for the next rocket stock which must have our attention so that it can be monetized.
Yes, can’t say I trust Goldman given IMO, they’re a criminal enterprise. In this case though, it amazes me they’d make such a call given the high profile.
It means Goldman wants/needs to unload their oversized position.
These 3 need to merge and form a behemoth ala Alphabet called TSTF. TST does not stand for Tesla, Snap and Twitter more like Too Shitty To Fail.
how fast can i convince you to shut up and take my money?
Hi Wolf
The way to understanding Elon Musk and Tesla, is through Henry Ford.
Ford brought cheap reliable vehicles to the masses. Tesla is the other side of ego, the spiritual quest.
I have read “My life and work” written by Ford himself and based on it I can say that you are wrong. Unlike Musk Ford believed that prime challenge in car business is in manufacturing . Hence, to obtain manufacturing excellence he introduced a number of important techniques in car manufacturing like assembly line , standardization of parts and cars , deskilling jobs (i.e. To redesign a job so that less skill is required to carry it out) , etc. that is to say that Ford realized that , if he is to make car which is affordable to people with low income than , he has to innovate both “design of car” and “manufacturing process of the car”. Under Ford even machines for manufacturing cars were manufactured in-house. While Musk efforts were solely concentrated “Car design” while he neglected “manufacturing process” (source:-http://m.wardsauto.com/industry/tesla-s-hiccups-devil-details) . So , Musk and Ford may have similar vision but their understanding of Car business is drastically different. Furthermore , Musk is darling of wall street while Ford’s relation with wall street was very bad.
Off topic but I important to know: I finally managed to decode the FedSpeak phrase “Symmetrical Inflation Target”:
It means that IF we have been below the target for a long time (which we have), then it is ok to stay above the target for an (equally?) long time. In other words, it means that the person speaking does NOT want to raise interest rates for quite a while even if inflation quite overshoots the target !!
Case in point: Minneapolis FRB president Neil Kashkari making such a statement today, even though he is no longer a voting member of the FRB FOMC !! So Kashkari is basically trying to talk down the interest and talk up the stock market, but without having any voting power to keep interest rates down.
Yes, and there is a broader discussion at the “New” Fed what inflation targeting should look like and if there should even be an inflation target. The current 2% target was set by Bernanke as an initial justification for QE. Before then, there was no fixed numerical target.
Now Fed heads are speaking out with their own theories and numbers. Kashkari was the latest. SF Fed President Williams has been talking about changing inflation targeting for at least a year (he thinks inflation should be allowed to run “hot” to catch up with periods when it was below target). Others are talking about their own theories. So this is going to grow into a chorus in the future. And at some point, the Fed will likely change or abolish its current 2% inflation target.
My gut feeling is that they want more leeway – so a range. For example, one of the ranges I remember being mentioned is 1.5% to 2.5%. IT’s easier to keep inflation in a range, and that would make the Fed look more “successful.”
“SF Fed President Williams has been talking about changing inflation targeting for at least a year (he thinks inflation should be allowed to run “hot” to catch up with periods when it was below target). ”
Which means there is no allowance for any periods of correction, which means this is based in ever increasing endless growth. And the ever increasing population, Consumerism Pyramid. AKA Infinite growth.
Infinite growth, on a finite planet, is IMPOSSIBLE.
“My gut feeling is that they want more leeway – so a range. For example, one of the ranges I remember being mentioned is 1.5% to 2.5%. IT’s easier to keep inflation in a range, and that would make the Fed look more “successful.””
Logically probable.
I don’t quite understand the rage on Tesla. Must be because “they are getting away with it” or something!?
I think there is an impedance mismatch between the investor / business perspective of the world and what Tesla is supposed to do. I believe the purpose of Tesla is not to be a business, it is supposed to be a catalyst for change (a) and an offering to the gods of money (Caishen or Plutus, (b)).
a-
The world is very different now, back in the Apollo era our governments openly, on-TV, wanted to improve our lives and shower us with technical magic and miracles, except we had to work for it. Today our governments with unlimited funding seemingly can do nothing except start barbaric, un-winnable, un-declared wars and argue about internal minutiae and process while blaming Russia for their own incompetence and failure.
So, If we want moon-shots, mars expeditions, flying cars, sex-robots that can cook & clean too – it all has to come from corporations. Corporations have taken over the gap left by self-centred governments and are selling us dreams of great things. People with money are buying into it because – it is the only hope there is.
b-
From an investment perspective, The Biotech Revolution proved to my generation that it is a normal thing that enterprising investors into the first few transformative companies to break open an entirely new business and “change the investment landscape” so to speak – pretty much always gets their heads handed to them.
The second-comers likely will run with the winnings. But there won’t be any second-comers without the initial sacrifices. Thus a few people or foundations with a 20-year perspective on investment will make the initial offerings to collect later. These people are not stupid, they know very well that Tesla will probably go CH-11, but, they also know that seeds for 5-10 Teslas are being planted and some of those will grow big.
Thats, in my opinion, what Tesla is – An embodiment of dreams about a possible better world and an offering to money-gods. Thats why “they are getting away with it” and numbers don’t matter so much.
Investment is rarely all about Investment.
Yes. That’s how the railroads evolved in the US. The visionaries didn’t end up with the assets. The patient vultures did, and everything worked out for a long time.
The vast majoity of investors do not understand accounting or actuary science. These companies EPS estimates are BS. Western accounting standards are almost as screwed up a Japans were in the 80’s.
US Companies can be investment grade right up to the day they file for bankruptcy.
Yep. GE is a good case in point.
No mystery here…just the ‘tyranny of consensus’..!
No-one of rational mind wants to point out the obvious for fear of being cold-shouldered by the herd, or labelled a ‘naysayer’.
Is this a surprise to anyone..? surely not if they lived through 2000 or 2008, or..etc. etc.
Don’t forget: everythimg’s not just ‘awesome’ now – it’s ‘SUPER awesome’!
And if you think it’s merely all ‘awesome’, then you’re just being negative, and need to get with the plan.
1) Musk just sold lots of flamethrowers. He knows what toys big boys like. He can get cash whenever he needs it. I don’t mind the wait if it means a better car. There’s more to life than now now now.
2) The sports car launch was the most joyous moment in the US in at least 20 years maybe 30. I’ve been giggling like crazy since. What else has been worth observing in any media? What future has anyone else given us, except backwards?
Where there’s Musk there’s hope. Nowhere else, as far as I can see.
A better car than what? I can’t say I’ve ever been disappointed by any car I’ve ever owned, especially the more modern ones.
When something does go wrong, it’s usually a result my failure. And it’s amazing some of the poor repairs I’ve seen shops do, some really bad work.
A better car than it would have been if it had been pushed out too early.
I think you’re missing the point of the article.
The point was a put-down on 3 companies for continuing to make low profit. We’re advised not to invest in them.
I think you missed the points of my response: the incorrect and overwhelming attitude that nothing works and nothing is worth doing or paying for; fear and greed aren’t the only human motivators; time is not a little box that doesn’t extend beyond today’s desperate fist grab, unless, of course, you’re ready to kick the bucket right now.
I tried to be light, readable, and well formatted, otherwise comments are ignored.
I don’t think so. There are other, better things worth paying for and they do not include the companies in the article, because these companies employ dishonesty in order to accumulate personal wealth for their owners. It’s so uncool.
It’s fake. It’s phony. It’s not real. It’s not even fun. It’s unrealistic. SNAP and Twitter? Get off your smart phone and go take a walk. Go play a fun game with your neighbors.
Tesla? Not even close. The vast VAST majority of the driving population will never know what it’s like to sit behind the wheel of a Tesla. Time to move on to more healthy, realistic and better ideas for the human family and leave these Ponzis behind.
To Kasadour [no reply button offered]
Paragraph 2) I didn’t mention SNAP because I don’t know what it is. I didn’t mention Twitter because I’ve never used it. I have no Smartphone and no Facebook account either. I walk everyday but we have no neighbors nearby to play games with because we’re rural. You have someone else in mind.
Paragraph 3) Last I heard, Musk has very little money of his own because it is all invested in his companies. That may be old information, but to borrow from Taleb, Musk “eats his own cooking”.
I agree with the successful Venture Capitalists, that if you want to invest, invest in the person, not the product. If you know nothing about Musk, that’s your problem, not mine.
I’m 70 years old and remember the optimism. I’m with the kids on this.
What kids?
Young people. Not us.
Us? Speak for yourself! I’m not “old”. Not at all.
Why do you want to exclude old people, anyway?
That kind of hope seems rather close to despair…..
For some people it would be. For the young, it’s genuine. It’s the young who are the future. The rest of us will be gone.
Its really amazing, its like companies can only operate in 2 modes. You have the high flying tech companies like Tesla that will lose boat loads of investor cash into R&D with no proven path to being a profitable business.
Then you have the tightwad older companies making lots of money but cutting things like R&D to the point where they make second rate products.
For ad buyers : Snap delivering an ad to the 3-inch wide screen of a jobless 15-20 year old should have much lower value in actual sales than every other ad. The Snap Demographic shows 75% of users who are either too young to work, working entry level, or loaded up with student loans. These users have no spare money to buy anything.
If these companies are in such bad shape what’s the short interest?
Very high. Hence the spike in Snap shares… part of it was short covering.
I think that his cars are nice enough; however, if he can’t deliver on his promise(s), and he’s burning through investor capital at astonishing rates, it spells not only distasterous PR, but eventual disaster for his company.
The public has necessarily become resentful of his billionaire status, at this point.
Say what you will about Elon Musk but it is apparent that he is masterful as raising money, but not so much at making it. If Tesla ever reaches true profitability, Musk should get the praise he deserves, but until then, he’s just another snake oil salesman.
On a side note, sending a car into orbit is silly. Isn’t there enough space junk orbiting the earth? I get it’s a publicity stunt, but it’s just wasteful. IMO.
As for the other companies, same deal. Just schemes to raise investor capital.
Silly is important. It is an emotion. Memory is enhanced when under emotion. Most people use fear, greed, or other nasty emotions when trying to persuade and/or get remembered. Those have bad feedback. Ask your children/grandchildren. Do you remember that vengeful expression you got back from your bribery and threats? That’s why. Silly works. Now you know.
What’s that got to do with a running a successful business model? Weird.
Memory, persuasion. Fundamental to sales. Duh.
What sales? Re-read the article.
Long lines for Model 3 and Powerwall. Flamethrowers if necessary. The article is a bit off in places.
Which places are a “bit off”? Please tell!
And why limit the market of Tesla products to young people? That makes no sense.
Tesla can’t or won’t meet its production forecasts. It’s not even close to meeting its production forecasts. I wonder why that is. Hmmm.
“Long lines” (whatever that means) does not equate to sales unless you think sales is to take people’s money and not deliver the promised product. In the real world, that is called breach of contract and even fraud. You can’t take the money and not deliver the product.
However, producing a product that can be scaled and actually sold to both young and old alike, does equate to sales and it creates a sound business that can be respected and loved by everyone at any age.
I really dislike ageism. Anyone of any age should be able to access a Tesla product if they can afford it -most folks at any age cannot afford a Tesla, which is why most will never sit behind the wheel of a Tesla car, regardless of age. That Tesla refuses to meet its production forecasts is another reason why the vast majority of folks, young and old, will never sit behind the wheel of a Tesla car.
WHAT THE HEADLINES SHOULD HAVE SAID:
We at (Twitter, Uber, Lyft, Netflix, Blue Apron, Theranos, whatever – fill in the blank) have had another spectacular year of pissing away other people’s money. Remember, our corporate motto is “we have more eyeballs than you have common sense”.
We actually cannot believe our business has been this good, and we owe it all to you. No, really: we owe it all to you.
Our retained earnings are now so negative that we continue to set records for providing investment (see footnote #1) opportunities for ever greater fool(s). We expect this growth (see footnote #2) to continue indefinitely or until we’re forced to get real jobs.
——-
Footnote #1: “Investing” – you give us your money. Period.
Footnote #2: “growth” – as in growing the amount of OPM we piss away; not to be confused with…you know…actually making money.
Real, truthful news would be too disquieting for the vast majority of consumers. Snap, Twitter and Tesla are FUN!