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« WIll Tesla's Stock Hold Up Past Lockup? | Main | Tesla Does Cars the Silicon Valley Way »

Monday, December 27, 2010


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Mamma Boom Boom

You seem to be quite interested in this. Don't you think it's destined to be another 'Pet Rock'?


Yelnik - are you thinking it is likely to fill the gap on that chart?

PS - I think it is a bellweather too.


Joe, I think it will have a rough week, then it should bounce


Mamma, this pet rock is likely to be bought at a good premium. More broadly, I think that green energy will die the same death it did after the '80s: when the subsidies run out, it dies. But I view Electric Vehicles (EVs) differently. Whether we are at Peak Oil or not, we seem to be at Peak Cheap Oil. We need to find an alternative transport fuel to oil, and the two candidates are natural gas (which might fuel hydrogen fuel cells) and electricity. Put differently, EVs might become competitive with internal combustion.

Rather than showing what is wrong with green tech, Tesla shows what is right: a really good entrepreneur, and aggressive vision, and creating real value.


But I view Electric Vehicles (EVs) differently

Wouldn't GM be the better play - ?

Mamma Boom Boom

>Whether we are at Peak Oil or not, we seem to be at Peak Cheap Oil<

IMO, all that's needed is for one elected official, who is not sold out, who actually cares about the economy, to clean out the fraud at the New York Merc, and you would see oil below $20. That knocks the wheels off of Electric Vehicles.


Mamma, maybe so, but the problem is all the new discoveries are more expensive to extract. Oil is a magic elixir, and it used to be you out a straw in the ground for a couple of bucks and get oil worth multiples of the energy cost to extract. Now the ratio of energy to extract vs energy out is shrinking,


Joe, GM has a trivial amount of EV sales. Ford has more. GM is making money in Europe and China, but not in the US, and the Volt will cost it more than it makes back for a considerable time. GM only becomes an EV play when EVs contribute significant growth (and later profit).


You may or may not find this interesting – in 1979 my dad was director of operations at an oil company – remember the gas lines and all that - It went to almost 2 bucks a gallon? He told us, it was never going to go above that (in 1979 dollars I suppose) BECAUSE – they were already prepared to screw over OPEC and produce internally on shale. It would sell for 2 bucks a gallon and it would take less than 12 months to do it. They own much of the land that has good shale already.

SO I know oil has a ceiling. And by the way, not more than 1 in 4 attempts to drill produced a profitable well – at least then


For the people here that know nothing about TESLA.... they are providing the electric drivetrain for the 2012 electric Toyota RAV4. This will bring in $60 million to Tesla.


JT, thanks. Tesla has two businesses: its direct car sales & its OEM system sales to Toyota, Mercedes and Panasonic. It is the OEM sales that will get them bought. It just turns out that handling lithium ion battery packs is complex, and that is the Tesla secret sauce. The main battery competitor A123 is having difficulties with matching what Tesla can do.


By the way, looks like Xmas Retail sales were the best since 2007, which was a record year!


Doesn't GM control the batteries coming out of Korea - and are not those the cutting edge in this?


Joe, I am not sure where GM gets their battery packs from. I like the Volt - I have a blog post on it a few months back. GM may have done their own battery packs for the Volt. Good engineers at GM, trapped by stupid regulations (CAFE), excessive union blackmail, and weak management.


JT, I know you are excited about all economic indicators that support a bullish view. Retail back to 2007 means we have crawled back from the big drop. In the Great Depression, we never had similar drop in consumer spending. It is good to return to a little more normalcy, but please note that the problem in the GD and the problem today is business spending/investment, which is still poor. Krugman would try to have us believe it is all about consumption, but it is not ; it is about a return to business formation & investment. Instead, all we have is speculation and more temporary / part-time jobs than real jobs.


The older I get, the more my memory sucks -

I would like to say - have a happy new year - to everyone here. If I forget anything else, I would hate to forget to say that.


Account Deleted

Rising Wedge of S&P 500

Mamma Boom Boom


p.s. somebody tell the dumb-asses

Mamma Boom Boom

Isn't this pathetic: from 185 to 20, in ten years. And some people have the nerve to act like nothing is wrong.

We need open season on politicians, with a daily bag limit of 4.


DOW looking like tiny ending diagonal

Account Deleted

Dow Jones Resistance levels


"It is good to return to a little more normalcy, but please note that the problem in the GD and the problem today is business spending/investment, which is still poor." - Yelnick

Given what happened in Q4-2008 and Q1-2009, I am not at all surprised that it is taking a long time to return to "normalcy".

I've noticed that you have been constantly banging the drum that business spending/investment has not been occuring during this recovery, and that is the basis for your continued bearishness.

Tell me, what metric are you using to gauge business spending and investment?


JT, I use business spending in the GDP reports to gauge business spending in GDP. Reported every month with revisions, and gets lots of commentary.

I will post a discussion of GDP where the key takeaway is ALL the increase in consumption is due to transfer payments. We have been borrowing and transferring to buoy spending. It is not coming from any real recovery. This will continue at a lower level in 2011, although who knows what more redistributionist schemes are being cooked up to get by the new Congress. A poor way to run an economy. Better to fix the problems than paper them over.



The ability to expense 100% of new equipment investment for 2011 will most likely provide a fairly substantial shot in the arm to business investment. Not quite sure why you ignore that as we look out into 2011.

Take a look at IT spending, MSFT year over year earnings, and let me know if Business investment is still as bad as you say it is.

The market and more specifically the Nasdaq appears to strongly disagree with your bearish view.

Mamma Boom Boom

Very difficult to put any significance to this weeks trading.



JT - it is possible the expensing provision spurs some added business investment but commentators have been mixed on that. American business is sitting on record cash.

As to the Naz, it is hardly up because of business spending. It is up on consumer (Apple). I have commented on how the one area of business spending had been software, as companies use productivity tools to substitute for people. Same thing happened on the GD. But productivity enhancement is not the same as investing in growth, which is lacking.


So what do you propose to be done in order to facilitate investing in growth???

You've made numerous comments about how things are being "papered-over" yet I don't seem to recall you providing any answers to what you believe would spur business investment on a permanent basis.


PS. Chicago PMI showd the highest headline reading since July of 1988.

It also showed the highest production levels reached since Oct. of 2004, with new orders improving to 2005 levels. Employment also reached the highest level in 5 years.

Just the FACTS.


JT, I have dropped ideas periodically, and you can find some in relevant sidebar Yelnick Theme posts. Simply put:
- fix the banks, which remain insolvent, so they start serious commercial lending again
- cut spending and taxes (especially corporate) rather than continuing to push easy credit on the economy
- cut back regulatory schemes & uncertainty which freeze private action, especially around financial markets
- forget QE and focus on a strong currency, not a weak one
- forget the cheap interest rates, let them rise to market rates
- find a way to reintroduce a small IPO market by removing obstacles


JT, "Chicago PMI showd the highest headline reading since July of 1988. It also showed the highest production levels reached since Oct. of 2004, with new orders improving to 2005 levels. Employment also reached the highest level in 5 years. Just the FACTS."

Not really. These regional ISM reports are surveys and they tend to be noisy, Just a few months ago they were pointing down more than the national report. The national report is a better resource, and it comes out Jan 3. Similarly, the new unemployment claims is also preliminary when announced and has been revised upwards over the past few months after an initial optimistic report.

The current trend, however, is positive, and the unemployment trend is also promising, albeit moving more slowly than it needs to when new entrants to the workforce are counted. The trends as of last December were also positive. Despite that, we had the January drop and the April Flash Crash.

JT, one of the red flags is manufacturing jobs, which were trending up most of 2010 but have been down for the last four months.

Just for you, I will pull together a look at GDP next week. Instead of selecting isolated 'facts' of good news I will try to discern the trend.


Chicago PMI is spikier than the ISM because it's heavily influenced by automotive & rail shipping.

Trains are busy because of the commodities boom/bubble.

People are buying cars but there's also a strong multiplier because the suppliers (what's left of them at least) have all implemented the Toyota Production System with tight controls over inventory. When orders come in the whole supply chain snaps into a flurry. Conversely, if the rug is pulled out, the whole thing grinds to a halt. Tough to extrapolate trend information from such a volatile system.

There's also a China affect. The Chinese consumer is apparently buying cars. Also, the suppliers are increasingly buying their machine tools from mainland China. Most people don't realize how interconnected Midwest industry is to China nowadays. I would be more than a little concerned about the Chinese PMI the other nite coming in below estimates.

Yelnick you should take a look at the electric car and its affect on employment. In the old days they used to say that for every 1 job at a car factory, 3 or 4 jobs would be created by suppliers. For the Nissan Leaf, entirely done in house (non-union), the number is zero.


Virgil, good stuff on the PMI vs ISM.

As to the car question, the advent of EVs should shrink the car industry employment ie be a more efficient and productive auto sector. EVs need much less maintenance than internal combustion. This will occur whether or not a maker like Nissan does it all in house our uses a supply chain. That is not a question of total efficiency but a question of transaction costs. (Read Coase on this - he came up with the theory of the corporation, why they get big - to reduce transaction costs between branches).

One can decry this, but an economy grows not because a slavish devotion to "jobs jobs jobs" but a dedication to innovation & efficiency ('divison of labor' in Adam Smith terminology). The jobs may not be as visible as your 3-4x multiplier of cars, but they exist nonetheless. The industrial policy of the US, such as it is, has been hampering innovation for a decade, and promoting the wrong sorts of employment (such as public workers) over efficiency. The Great Recession has done more to improve efficiency than anything the government has concocted. Now we need to grow again, via innovation.

Chanel J12

Although time and distance separate us, we still remember the purest friendship and blessing.

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