Tag Archives: Tesla

WTF Just Happened? Gold And Silver Set-Up To Soar

According to the latest Commitment of Traders Report released Friday and which accounts for Comex trader positioning through Tuesday, August 21, the hedge fund net short position in Comex paper gold futures soared to an all-time high of 89,972 contracts. This represents nearly 9 million ounces of paper gold. It’s more gold than is produced by gold mines in the U.S. annually. As of Thursday, Comex vault operators reported a total of 8.4 million ounces of gold, only 282,000 of which were available for delivery.  In other words, the hedge fund paper gold short position exceeds the total amount of gold in Comex vaults.

Conversely, the Comex banks are taking the other side of the massive hedge fund short bet. Given the history of extreme positioning by the hedge funds and the banks (the banks are normally short paper gold – thus a long position by the banks is considered “extreme”), it’s a safe bet that at some point in the near future gold (and silver) are set to soar. Perhaps the more interesting question would be to ask why the banks have assumed a large long position in gold. What is it that the banks “see” that has them positioned for a big move higher in the precious metals?

Meanwhile, Tesla is the ultimate evidence that no price discovery is not possible in the U.S. stock market. In a market with true price discovery, TSLA would no longer exist. It appears as if Elon Musk was indeed under the influence of illicit psychotropic drugs when he claimed that funding was secured for a going-private transaction.

In this episode of “WTF Just Happened?” we discuss the massive hedge fund paper gold short position plus lift our leg the idea that Tesla will be around in two year (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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In the next issue of the Short Seller’s Journal I explain why the housing market is headed south quickly, update my homebuilder short ideas and discuss Tesla. You can learn more about this newsletter here:  Short Seller’s Journal information

In the next issue of the Mining Stock Journal, I dissect the latest COT report and update my favorite junior mining stock ideas, including a couple of interesting silver explorations stocks. You can learn more about this here:   Mining Stock Journal information.

More Evidence The Economy Is Deteriorating

“Financial-market and economic prospects remain far shy of the hype and headlines, amidst tanking consumer optimism and negative revisions to recent reporting.” – John Williams, Shadowstats.com

The economy may seem like it’s doing well if you are part of the upper 10% demographic. Though, in reality, for most of the upper 10%, doing “well” has been a function of having easy access to credit. NASA Federal Credit Union is offering 0% down, 0% mortgage insurance for mortgages up to $2.5 million.

Someone I know suggested the tax cut stimulus had run its course. But the narrative that the tax cuts would stimulate economic activity was pure propaganda. The tax cuts stimulated $1 trillion in expected share buybacks and put more money in the pockets of corporate insiders and billionaires. The average middle class household spent its tax cut money on more expensive gasoline and food. Since the tax cut took effect, auto sales and home sales have declined. Retail sales have been mixed. However, it’s difficult to distinguish between statistical manipulation and inflation. I would argue that, net of real inflation and Census Bureau statistical games, real retail sales have been declining.

As an example, last week Black Box Intelligence released July restaurant sales. While comparable store sales were up 0.54% over July 2017, comparable restaurant traffic was down 1.8%. On a rolling three months, comp sales are up 0.46% but comparable traffic is down nearly 2%. With traffic declining, especially a faster rate relative to the small increase in sales, it means the sales “growth” is entirely a function of price inflation. If Black Box Intelligence could control it’s data for price increases, it would show that there is no question that real sales are declining. I have been loathe to recommend shorting restaurant stocks because, for some reason, the hedge funds love them.

On Wednesday last week, the Government reported July retail sales, which were “up” 0.5% vs June. However, June’s 0.5% “gain” was revised sharply lower to 0.2%. Revising the previous month lower to make the headline number for the reported month appear higher is a mathematical gimmick that the Government uses frequently. As an example of the questionable quality of the retail sales report, the Government reports that sales at motor-vehicle and parts dealers rose 0.2% from June to July. But the auto industry itself reported a 4% decline in sales from June to July. I’ll leave it up to you to decide which report is more reliable…

Housing starts for July, reported last Thursday, showed an 8% decline from June’s number. June’s number was revised lower from the original number reported. No surprise there, at least for me. The report missed the Wall Street brain trust’s expectations by a wide margin for the second month in row. The downward revision to June makes the report even worse. Additionally, housing starts are now down year-over-year for the second month in a row.

This report followed last Wednesday’s mortgage applications report which showed a decline in purchase applications for the 5th week in a row. The housing starts number continues to throw cold water on the “low inventory” narrative. While there still may some areas of housing market strength in the $500,000 and below price bucket, the mortgage purchase applications data has been mostly negative since April, which reflects deteriorating home sales. This reality is “magnified” by the fact that home sales have declining during what should be the strongest seasonal period of the year for home sales.

Lending Tree, Zillow Group and Redfin are “derivatives” of housing market activity. They reflect web searches, foot traffic and sales associated with mortgages and home sales. Lending Tree stock is down nearly 42% late January. Zillow stock is down 26% since mid-June. Redfin is down 39.5% since the beginning of the year, including an 18.5% plunge two weeks ago. unequivocally, these three stocks reflect the popping of the housing bubble. The Short Seller Journal recommended shorting all three of these stocks before their big declines.

Normally I’m hesitant to discuss the regional Fed economic surveys because they are skewed by their expectations/outlook (hope/sentiment) components. However, the Philly Fed survey for August was notable because it reinforced my view that the economy and the “hope” for a better economy is fading quickly. The overall index crashed to 11.9 from 25.7 in July. This is lower than just before the Trump election, when “hope” soared. Wall Street was expecting a 22.5 reading on the index. The new orders, work week and employment components plunged. Shipments dropped, inventories rose and prices paid fell. This report reflects the view that economy is much weaker than is conveyed by the political propaganda coming form DC.

I don’t know what it will take to cause a plunge in the Dow, S&P 500 and Nasdaq but, as we’ve seen with homebuilder stocks, there’s a lot of opportunity to make money on economic reality in the lesser-followed sectors of the stock market.

Myself and my Short Seller’s Journal subscribers have been raking in easy money shorting the homebuilder sector and, of late, Tesla.  I’ve been including detailed analysis of Tesla, why it will likely be out of business within 2 years and ideas for using puts to short the stock.  You can learn more about this newsletter here:  Short Seller’s Journal information.

That egomaniac [Elon Musk] just paid for my new landscaping. LOL! Cashed in on some Jan 2019 100 & 200 puts for a 175% gain. Should be interesting to see how and how long this debacle plays on. – subscriber feedback.

WTF Just Happened: Gold Forms A Bottom And 420-Time For Elon Musk

Perhaps the most baffling aspect of the Elon Musk “Funding Secured” tweet is the number of financial media outlets and so-called “analysts” that are taking it seriously. The idea is a complete joke. Any valuation in excess of potential asset value minus the debt and other liabilities (included in “liabilities” will soon be a flood of lawsuits). Some bucket-shop stock analysts issued reports explaining why a buyout of Tesla could occur at an even higher price. We’re beginning wonder if the Tesla buyout idiocy will mark the end of the valuation insanity that has permeated the entire U.S. stock market…Meanwhile, hedge funds assumed a record short position in Comex paper gold futures. This along with the worst sentiment toward the precious metals since early 2001 and late 2015 suggest the potential for a bottom in gold, silver and mining shares.

In this episode of “WTF Just Happened?” we discuss these issues plus offer a view on the correlation between the dollar-price of gold and the $/yuan (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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Tesla is on its way to bankruptcy.  I don’t know how long it will take that to occur but the Company will be insolvent if it can’t raise money before the end of the year.  I explain why a buyout of the Company is next to impossible in the next issue of the Short Seller’s Journal and offer several ideas for using put options to express a bearish view of Tesla stock.

Visit these links to learn more about the Investment Research Dynamic’s  Mining Stock Journal and Short Seller’s Journal.   

Elon Musk Turns U.S. Capital Markets Into A Complete Farce

“Nobody, when they’re looking at a privatization, dangles this way and does this sort of teasing dance of choreography. Somebody only does this when they are trying to distract us with a shiny new thing…There’s a lot of problems here. He can’t afford to build the new factory that he says he wants to build. This is a distracting strategy like attacking the press” – Jeffery Sonnenfeld, Yale School of Management on CNBC

Elon Musk has turned the U.S. capital markets into a complete farce. He’s made of mockery of the fact that the regulators no longer enforce rule of law. The idea that any financial institution on earth would fund the largest leveraged buyout in history at a level that values Tesla on par with Volkswagen – the world’s larges car manufacturer – is beyond absurd.

We should hope and pray that some truth-seeking entity will hold Musk accountable for what is likely a highly fraudulent claim. Or, then again, perhaps Musk took one of his flying automobiles and went to Mars on Monday to “secure funding” from his Martian financiers.

A careful dissection of Tesla’s latest 10-Q reveals a Company with negative working capital and an unmanageable level of debt and other fixed commitments headed for eventual insolvency.

Beyond ranting about the obvious here, I’m posting an insightful, if not poignant, comment from a friend and colleague:

I am pretty amazed/disgusted that we haven’t come to terms (as a society) with social media. It is in this grey area where leaders of Government and corporations can walk a tight rope of truth/fiction without any consequence or regard for the affect of the immorality and illegality.  Narcissistic psychopaths like Musk utilize cult of personality to harness the power of the hopelessly ignorant looking for a guru; looking for a reason to justify their worst impulses and implausible fantasies. From a social science standpoint: it is interesting. From a person of the society: it is mindblowingly frightening.

Tesla’s Phony Quarterly Numbers

Tesla reported its Q2 numbers this past Wednesday. It reported $4 billion in revenue, up 43.4% year over year. Its net loss widened to $742 million, or $4.22 per share (some of you may have seen lower net loss and loss per share numbers but the numbers I’m using come directly from the SEC-filed 8-K, which means those are the “official” numbers).

The market was excited and the stock soared because the cash “burn” was lower than expected and Elon Musk reassured everyone that the Company is still on track to show positive net income and cash flow in Q3 and Q4. I can assure you that you have a better chance of standing on the eastern shoreline of Egypt and seeing the Red Sea part for Moses.

The cash balance of $2.23 billion that is presented on TSLA’s balance sheet was higher than expected – with an alleged implication that TSLA burned less cash than expected. But this was accounting sleight of hand. TSLA achieved this feat by stiffing its suppliers as evidenced by the ballooning of the accounts payable entry on the balance sheet. From Q4 2017 to Q1 2018, TSLA’s accounts payable rose $213 million, or 8.2%, to $2.603 billion. But from Q1 to Q2 this year, TSLA’s payables rose $427 million, or 16.4%.

In other words, TSLA slowed down the rate at which is pays suppliers by a considerable amount, which enables TSLA to hold the cash it owes to suppliers on its balance sheet, thereby giving the appearance of a higher cash balance.

Netting out customer deposits of $942 million, TSLA actually only has $1.29 billion in cash. That said, there are some other balance sheet items on the liability side of the balance sheet that increased and will require the use of cash, like “other long term liabilities,” that I won’t be able to analyze until the 10-Q is filed, which is when I can study the footnotes. Furthermore, the 8-K does not contain a full statement of cash flows – it’s missing the details of the “cash from operations” – which will enable me to determine other areas on its balance sheet TSLA stretched in order keep cash net of deposits above $1 billion.

All of that said, I have discovered a clever manner in which TSLA has rigged its financials to look better than they should by keeping cash expenditures it will have to incur off the income statement and balance sheet in Q2. To my knowledge, I am the only analyst who has figured out this devious form of accounting manipulation.

The commentary above is an excerpt from the latest Short Seller’s Journal, which was released today.  Tesla shares several traits with Enron and some parallels with Bernie Madoff.  Elon Musk is a gifted con-man.

In the latest Short Seller’s Journal I layout the methodical manner in which Musk’s financial architects manage to defer cash expenditures for the purpose of making the Q2 financials appear better than expected.  I suspect the scam was used to set-up an attempt to raise more money later this year.  You can learn more about my newsletter here:  Short Seller’s Journal information.

The Demise Of Tesla: We’ve Seen This Movie Before

Enron was a product of the late 1990’s dot.com / tech bubble.  Similar to Tesla’s “production tent,”  Enron would set entire floors of buildings to look like elaborate energy trading rooms.  The operations were nothing more than a fraudulent shell game, set-up for the benefit of Wall Street analysts and journalists.

Bear Stearns was a product of the mid-2000’s mortgage bubble.  It created catastrophically leveraged mortgage-backed securities hedge funds that would inevitably collapse.  The managers of these funds kept these funds alive by hiding positions from upper management and fraudulently over-marking the value of the underlying assets, which eventually proved worthless.

And now, Tesla’s path to demise seems quite similar to the recent implosion of Theranos.  Theranos was biotech company which collapsed after it was revealed that it had fraudulently promoted claims about its blood testing technology.   This story resonates in Tesla’s decision to skip a critical brake test in order to meet a superficial production goal last week.  Anyone who takes delivery and pays for a Tesla Model 3 is putting themselves and their families at risk.

While not widely reported, there has been a rapid exit of high level executives, including the chief engineer, who resigned the day after Elon Musk issued the command to skip the brake test.  After this story broke, one of my subscribers emailed me:  “I design and build (from my bare hands) electrical testing equipment for the automotive industry. Plants shutdown rather than let their stuff go out the door untested.”  Now we know why the chief engineer bolted from the Company.

The proprietor of the Adventures  In Capitalism blog published a comparison between Tesla and Theranos.  He focuses on the recent erratic behavior of the CEO and potentially lethal production decisions implemented:

The question is, who would want to invest new capital when Tesla is now admitting to knowingly selling cars without testing the brakes in order to hit some arbitrary one week production target? When a company admits that it will sacrifice vehicle quality and even risk killing its customers to win a twitter feud and start a short squeeze, regulators must step in. The question is; what else has Tesla done illegally to hit its targets? We know that Tesla long ago passed over the ethical threshold of selling faulty products that have killed people—what other allegations will soon come to light? Elon Musk demanded that Tesla stop testing brakes on June 26. Doug Field, chief engineer, resigned on June 27. Is this a coincidence? Of course not—Doug Field doesn’t want to be responsible for killing people…

You can read the rest of this here: Tesla Is The New Theranos

The only ingredient missing from the chain of events that precedes the complete collapse of Tesla is a table-pounding, frothing-at-the-mouth “buy” recommendation from CNBC’s Jim Cramer.

Another Blow-Off Top In Stocks?

And just like  that, the  VIX index crashes right back to where it was before the late-January 10% drop in the stock market – a reflection that the remaining stock market speculators and hedge fund bots have been completely cleansed of any fear impulse that hit daytrader keyboards in the first quarter of 2018:

Hedge funds went from insanely short VIX futures to long VIX futures after the market had dropped 10% and the VIX soared. They were slaughtered on their shorts, now they are getting bludgeoned on their long position. But guess what?  They went net short again about  four days ago.  Selling volatility again at the bottom of the volatility index.  Not a good omen for perma-bulls.

The Dow has recovered about 56% of the decline that occurred from January 26th to March 23rd. Correction over and on to higher highs? Possibly. The Russell 2000 broke out to all-time highs starting in mid-May. The Nasdaq hit an all-time high Tuesday. Everything appears to be heading higher…or is it?

The Dow is being driven primarily by Boeing (BA), Microsoft (MSFT), Caterpillar (CAT) and United Health. On Tuesday, I calculated by hand that the big move higher by AMZN was responsible for 43% of the performance in the S&P 500. If AMZN had just been flat that day, the SPX would have closed lower from Monday instead of up 8 pts. By all indicators, the move in the Russell is being driven by a short-squeeze. TSLA was up $28 – 9.6% – yesterday because Elon Musk whispered the phrase, “Model 3 production target,” into the ears of the romance-starved Tesla bulls. Also known as a “shot of short-squeeze Viagra.”

When the market was plunging earlier in the year, the hedge fund bots shifted from insanely long to recklessly short.  Now they are being squeezed.

The Italian debt and Latin American currency crises have not only not gone away but they are getting worse.  As long as the reports don’t hit the headlines, the problems do not exist for moronic daytraders and hedge fund computer program news spiders.

Economically in the U.S. the bold propaganda-laced, heavily “adjusted” Government-manufactured economic reports continue to diverge from the economic and financial reality on Main Street.  Housing, auto and retail sales are deteriorating now as the majority of U.S. households have found themselves stuffed like a French goose readied for foie gras production.

Of course, the smart money is not hanging around for Part Two of what’s to come.  The “smart money index” shows that professional money is leaving the stock market at a rate that has only been equaled in the last 20 years in 2000 and 2008…

There’s no telling how much longer this insanity can persist this time around.  But it brings to mind Hemingway’s description of how to bankrupt as conveyed in “The Sun Also Rises” – “Two ways: gradually then suddenly.”

By the way.  Keep an eye on gold. The majority of the market looking to the sky for stocks and down over the cliff for gold, we could get a surprise move higher in precious metals and mining stocks.

Economic Collapse, Overvalued Stocks And The Stealth Bull Market In Gold

The narrative that the economy continues to improve is a myth, if not intentional mendacious propaganda. The economy can’t possibly improve with the average household living from paycheck to paycheck while trying to service hopeless levels of debt. In fact, the economy will continue to deteriorate from the perspective of every household below the top 1% in terms of income and wealth. The average price of gasoline has risen close to 50% over the last year (it cost me $48 to fill my tank today vs about $32 a year ago). For most households, the tax cut “windfall” will be largely absorbed by the increasing cost to fill the gas tank, which is going to continue rising. The highly promoted economic boost from the tax cuts will, instead, end up as a transfer payment to oil companies.

The rising cost of gasoline will offset, if not more than offset, the tax benefit for the average household from the Trump tax cut. But rising fuel costs will affect the cost structure of the entire economy. Furthermore, unless businesses can successfully pass-thru higher costs connected to high the er fuel costs, corporate earnings will take an unexpected hit. Rising energy costs will hit AMZN especially hard, as 25% of its cost structure is the cost of fulfillment (it’s probably higher because GAAP accounting enables AMZN to bury some of the cost in the inventory account, which then becomes part of “cost of sales”). With the prospect of rising energy prices on the horizon, many businesses are looking for ways of reducing their energy costs. Some companies are looking to save money on energy by switching their energy provider. It is easy to compare business energy prices, and hundreds can potentially be saved on energy costs.

Gold is holding up well vs. the dollar. The dollar is at its highest since mid-November and the price of gold is trading 2% higher than it was at in November. Also, don’t overlook that the Fed began its snail-paced interest rate hike cycle at the end of 2015. Gold hit $1030 when the Fed began to tighten monetary policy. I thought gold was supposed to trade inversely with interest rates (note sarcasm). Gold is up nearly 30% since the Fed began nudging rates higher. Despite that it might currently “feel” like the price of gold is going nowhere, beneath the surface gold (and silver) have been staging a very powerful bull market pattern.

Kerry Lutz invited me onto his Financial Survival Network Podcast to discuss these issues and more. We have a good time catching up on a diverse number of topics – Click on the link below to listen or download:

Visit these links to learn more about the Investment Research Dynamic’s Mining Stock Journal and Short Seller’s Journal.

Mining Stocks Are Historically Undervalued

The mining stocks are more undervalued relative to the S&P 500 than at any time since 2005:

The mining stocks, especially the juniors, are more undervalued relative to the price of gold than at anytime in the last 18 years except late 2000 and December 2015. The poor sentiment and the constant price-capping of the sector by official entities has destroyed investor sentiment toward the sector. But the good news is that there are some incredible to be found right now. One of the stocks I recommended in my Mining Stock Journal is up 35% since May 17th, when I recommended purchasing it.

Bill Powers of MiningStockEducation.com invited me on to his insightful podcast show to discuss, among other topics, the precious metals sector and some specific mining stock ideas:

I truly believe that investing in certain stocks right now is the equivalent of buying into the internet stocks that survived the Dot.Com bubble. You can learn more about the Mining Stock Journal by following this link –   Mining Stock Journal information.