Chit Chat Stocks - TeslaCharts & the Bear Thesis

Episode Date: April 14, 2020

This week we have a special appearance from TeslaCharts (21:30), but before we get to that hosts Ryan Henderson and Brett Schafer have their news stories for the week. First topic discussed is the beginning of Jack Dorsey's Startsmall LLC (1:30). Afterwards, we discuss the "Too Big to Fail" of the coronavirus crisis in private equity (7:30). For the Current State of Fintwit this week we talk Michael Burry and taxes on share buybacks (15:50). TeslaCharts joins us at (21:30) to discuss under followed Tesla topics, counter the common bull thesis, and provide a comprehensive outlook on why so many are skeptical of the business. After the interview we have a special this week with Option Kings (1:16:18). Then as always, we have our Hot Water (1:19:19), FMK (1:25:25), & Anecdotal Evidence (1:27:59).  --- Support this podcast: https://anchor.fm/chit-chat-money/support Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, what is it, April 14th? April 14th, yep. That's right. Today we have an interview with Tesla Charts, TC, and that'll come after our news stories. Great interview. Thank you, TC, for coming on the show. But before we get to the interview, what's your story? Mine is private equity. They are in trouble because, you know, the economy is slowing down. everyone's been in trouble but they're such a large part of the economy that bethany mclean wrote a nice long piece for vanity fair outlining how they are kind of the too big to fail of this economic crisis interesting and then i'm going to be talking about dorsey's start

small initiative um which was in the news this week as well and we have current state of fin twit uh oh option kings is back because we bought a put right yeah one put don't spoil it uh it's yeah so exciting but uh singular not put put um and we'll kind of talk the thesis behind that and then as always we have our hot water fuck mary kill and our anecdotal evidence oh i got a juicy one too for anecdotal oh um yeah let's go All right, welcome in. I'm going to kick things off with my story for the week. Jack Dorsey announced this week that he's moving $1 billion of, what's 1 billion with a B, of square equity or 28% of his wealth to his new Start Small LLC,

which that's kind of a suck it to net worth Twitter, isn't it? Yeah. Yeah. I mean, you know, there is evidence that some people like, I think it was either Sergey Brin, one of the Google people did something like this, but they ended up just getting the tax benefits and then never actually starting the charitable things. But Jack, I think you have written down here, has an open Google doc. So he's doing it publicly. He's already started stuff. So I think they really can't. If you complain about how much he's giving or anything like that, I think you're just a little stubborn here, right? Yeah. I mean, 28%, I think less than five is kind of the threshold where you're like, really, that's 4%. That's like me

giving 800 bucks or something. You know what I mean? Yeah. It shouldn't really be a news story unless it's a large part of the wealth or something like that. Yeah. Right. So he did so through a series of tweets. And so the goal of Start Small is to initially fund COVID-19 relief and afterwards shift to girls' health and education along with universal basic income. He is keeping all the equity he sells on a Google Doc, like you said. So he's being pretty transparent with it so anyone can access it. Although, if you're listening, Jack Dorsey,

I tried to access it mobily today and it did not work, so maybe get on that. I had to go to my computer. Yeah, he's probably listening. Right. Right. So far, he's made two transfers, though. So the first one was a $100,000 donation to America's Food Fund, and the second was a $2.1 million donation to the Mayor's Fund of L.A., which is helping domestic violence victims, which, as we've seen on Twitter, has seen an increase due to the whole stay-at-home order. a lot of people have toxic homes and domestic violence is usually from the homes. So he's trying to aid in those two. And then he answered the question, why is he selling square shares

instead of Twitter? And he said, simply, he owns a lot more square, which is true. But if he was selling Twitter, do you think those activist investors would have had a problem with it? I guess that's a tough question. You're saying if he sold the Twitter shares to do it, i i really don't think they care all they want is control the company and then to get it to actually make as much money as it's worth as we've gone over before we both think it's way undervalued uh at least the way they monetize it so i don't think they really care and square is like 88 of his wealth or it was uh so yeah i mean seems fine to me seems logical although you just you brought up a good point and he was you know what was it sergey brand or whatever did this for the

tax benefits um so maybe these funds are fake funds you know like it's like oh he's being transparent with the i mean it's a little conspiracy theory but he donated to what was it mayor's fund of la maybe what if that's just an offshore account for him you know it could you know that's that is possible but i i think people would call him out on that i you know you know what i mean like since it's public they can't hide who they're giving to and things like that this is making it so if he was doing something fake it'd be super easy for a journalist uh or the charity organization to uh calm out on it so i think unless they got a benefit from it yeah he's paying off everyone yeah question though are we in favor of this sort of billionaire tax

avoidance if this is the sort of byproduct that comes from it i mean i don't know it seems like it's a good thing uh like in you know in a vacuum it's a good thing but do we really want tech billionaires controlling a lot of where the money goes in our economy who benefits whether it's a good thing whether you know what are they're giving to great organizations like it looks like he's doing uh i don't know if that's like the way we want it like the inequality increases and then the way people benefit the 90 like percent or the people that are below the poverty line or a need benefit is if some billionaire thinks that they should decide that they get the money um that doesn't feel very capitalistic to me or a democratic system uh but it looks you know he is

rich and he has all this money and this is probably the best thing to do with it yeah i think scott galloway had a good take on it on uh pivot this week and something that is positive coming from this is that he is like what like in his 30s he's not he's probably almost he's in his 40s definitely He's in his 40s, okay. I mean, he could have easily waited until he was 80 or retired to be doing this. Yeah, definitely. Yeah, he's like one of the best at donating, at least if he falls through on all this stuff.

But, yeah, you could complain about a lot of the other billionaires who would be fine donating 99% of their wealth, but they just choose not to for whatever reason. I will say we've had a rather pessimistic take or stance on Dorsey I think the way that he's handled coronavirus and this crisis we are amidst has changed my stance on him. He's still a bad CEO of Twitter, and he should be fired. Yeah, you know what?

And he should take vacations every week. If I really liked him and I thought he was that great, I probably would be a shareholder of Twitter, so I guess you are right on that. But right now, I think he might be the right guy for the job for Square. Maybe. Um, I mean, they're doing, it seems like they're doing good stuff in the midst of this like downturn for a lot of their partners. They're trying to be active. So yeah, it seems like he's doing fine. Um, no complaints from me, I guess, but that's

what's your story. All right. Uh, my story is the private equity. Uh, they are part of this crisis since they are a large part of the economy. Uh, so Bethany McLean, who is one of the top finance writers, probably her and Michael Lewis are the top ones. She wrote about how PE, which is just the short term for private equity is the under followed center of this crisis. So for a little context here, $2 trillion in taxpayer money is up for grabs, but as part of the new stimulus bill and lobbyists, you know, they're working overtime to try to get their companies or industries that part of it, because a lot of companies are probably going to go bankrupt up without it. You would think though that they would be fine because they have quote unquote

$1.5 trillion in dry powder and they have multi-billionaire executives. I think the Blackstone CEO is worth $17 billion. But McLean argues, and I think she's right, that these private equity firms will need a lot of money or else things will get bad. First big reason and probably the only one is that pension plans invest a lot in PE. uh one third of blackstone's funds come from pensions these fund retirement for american workers firefighters uh college students teacher or college professors teachers it goes all the way down the line police officers things like that uh they could have their retirement plans ruined uh if a lot of these companies or funds go bankrupt so do you think that this should call for

the uh you know quote unquote dodd frank for pe whatever that those terms may be so these firms are better prepared for the next crisis so the dodd frank is like that was like the financial crisis response right it was like the reform or whatever it was for the banks so the banks had all these new rules they couldn't get over lever they couldn't overextend themselves and then that uh has actually helped right now because the banks are in good shape they can take in more money, taking a lot more loans. When times are good, they're cautious, but when times get bad now, they have the opportunity to help out a lot of people by trying to fund the businesses they're partners with. Okay, question for you. What's the difference between private equity

and venture capital? Well, I have this as my next note. PE is different because they usually take over existing companies it's not uh what would you call it from like a startup at all so vc is more startup and they usually borrow a lot to uh fund them so they take in a lot of debt and they use that to uh take over the companies in the process but vcs that is raised money do a lot you know the seed rounds the series a series b and that's just taking an equity stake so pe is more debt and older companies and vcs is equity in general equity and younger companies huh huh yeah it's like now does private equity are a lot of those deals like the whole company like you're taking the whole company and owning it yes so say uh there's a restaurant chain or something

like that this is kind of popular i don't know what it would be say wendy's uh is struggling uh they have you know some distressed debt or something like that pe will you know lever like take on some debt buy out the entire company and then they don't have to be publicly traded anymore but it's still part you know they if they get all these profits they can still return you know like uh if they can turn the business around or something like that by giving them an influx of cash or whatever you know like a classic investment uh they can turn things around get a nice return and give back the money to their uh fund shareholders yeah i haven't really studied enough about private equity but obviously if there is this downfall that bethany mclean talks about

or there's this need for excess capital, we can't have the largest industries failing anymore. And so, I mean, do we just bail them out? Yeah, I don't know. I think we might have to at this point. She said that, I mean, the numbers look like we're going to have to. So we are in the era of low interest rates, which means that with these heavy debt acquisitions,

has helped them take on more debt and not have to pay down so much interest. And then actually, the 08 crisis might have saved PE from their mistakes because they've had a nice decade here of really low interest rates. And then according to McLean and other sources that are more connected to this industry, some of the companies have acquired so much debt that even a small slowdown would totally end them. So this is the portfolio companies within the PE firms. And then if they go bankrupt the pe loses all that equity value and then their funds perform terribly for the pensions and other organizations that have invested in them okay so question let's say so you said those pensions are invested in them do the pensions know that they're in

private equity or yeah it's just like a deal like they make a deal okay say i'm the state of california uh pension fund or whatever whatever it's called and we make a deal to invest eight billion into your PE fund at Blackstone. Blackstone invests that money and then they pay out the returns however many years down the line. And what, the $1.5 trillion or whatever in dry powder isn't enough to pay off the existing debt? Yeah, that's a confusing thing for me, but I guess not. And it would seem like the dry powder is there for a reason so they can do a lot of you know work here uh help their portfolio companies uh i don't know yeah that's that's weird to me i mean 1.5 you said what they're in total private equity's got 4.1 trillion in aom

and yeah that's my next note here so the past four years p has raised 500 billion dollars each year and now they have a total aum assets under management collectively of 4.1 trillion so they The $4.1 trillion, $1.5 trillion in dry powder, and they're struggling or need some sort of bailout. I'm not piecing that together. Yeah, I would think that the whole point is that the dry powder is there to help in times of need, but I don't know. Another note here for any more people that want to know some stats. PE now owns companies with 8.8 million American workers, so they collectively own the salaries and stuff. They're responsible for 8.8 million workers and account for over 5% of America's GDP.

And to top things off, they are still one of the organizations that charge 2 and 20. So 2% fee and then 20% on all returns, which is just crazy that that still happens. 20% on all returns or 20% on outperformance? No, that's how 2 and 20 works. 20% of returns, 2% of fees. Or sorry, 2% fee. Jeez. I've never heard of that.

That's ridiculous. You've never heard of that? No, I've never heard of 2 and 20. You're serious? Yeah. I thought most fee-based were like 1%. No, 2 and 20. That's how they all underperform.

All right. I was going to ask you, are you worried about P, the private equity? It seems like it could be the big banks that try to catalyze a big crisis here. is bethany mclean like the only one writing about this or is this like a thing that i just haven't been paying attention to i think other people are but she probably wrote the longest and most conclusive piece and she said that it's kind of the start that if they don't get help they could be in big trouble i don't know i don't buy the hype i don't 1.5 trillion in dry powder is an insane amount especially with 4.1 trillion altogether in aum that's like 40 that's like

30% of your portfolio is cash. Yeah, but there's a lot of debt. There's a lot of debt. Yeah, that's why you have $1.5 trillion in dry powder. All right. Well, I don't know. It seems like, yeah. I mean, it's not publicly traded entities,

so a lot of it's just kind of a black box. Does Bethany McLean probably know more than me? Yeah, but I don't know. $1.5 trillion, that's a lot of money. Okay, current state of Fintwit. You want to go first? Yeah, sure. So I got one.

I did a poll this week. uh, should share buybacks be taxed at a 20% rate. And I got about a 50, 50 split. My thought on that was, um, I actually, I like responded to one of Cliff Asness's tweets, which is kind of, it's weird that I can, uh, respond to him. Cause he's like a manager of a hundred billion dollars of one of the largest quant funds in the world. Uh, and he'll just like respond to a question I have if he tweets it. But besides that, I said, should tax it or should buybacks be taxed the same as dividends? If you believe that they are equal he said yes he didn't say if they should both just not be taxed but yeah what

do you think should uh buybacks be taxed the same as dividends if they're technically the same thing returning capital to shareholders are dividends 20 uh it's taxed at whatever the it's either long-term or short-term capital gains i think or maybe it's for corporations it is like your net income it's taxed like that so maybe it's at 18 right now but i'm sure there's loopholes and stuff like that yeah i was gonna say so i was i voted no on that poll that uh should it be over or under 20 basically i said under because long-term capital gains isn't that at 15 um i don't know i think it's at 10 it depends how much money you make but corporations it's not it's not to shareholders at all it's the corporation that would get taxed yeah i would keep it i would say

i would say keep it in line with like the dividend or the capital gains tax basically relatively in that ballpark just but yeah i wouldn't say 20 is ridiculous are buybacks not taxed at all i don't believe so that's why they're so popular now because dividends are taxed um as income i believe i don't know what the exact thing is but it's probably like 15 20 maybe a little more interesting okay um any other things you got for finn twit nope okay i only had one thing here um the goat is back the real goat i think last week i said the goat was back um but this is the real goat michael berry has joined finn twit i thought we talked about this last week no he came out i did i i thought i did no really yeah i'm confident maybe that was not on the show i was just talking

to you yeah no i'm pretty confident because i'm pretty sure you tweeted this recent week but um he started it out with basically a tweet storm and he is not happy about this stay at home stay in place order so i have a question do you agree with him that this was sort of preemptive by the government and wasn't really well thought out i know he's had a lot of tweets surrounding sort of infrastructure um sense but as far as the shelter in place order do you kind of agree with them that it has serious flaws uh i don't know dude i'm not smart enough to know that sorry was this was this what you were expecting from his twitter no i thought he was the i i mean from what i heard he's the soft-spoken genius um this does

not play well but a lot of people are different online so yeah dude i have no idea like anyone that pretends to know uh what should happen when no one knows uh the right way to do things is just like it's just being cocky um and arrogant and i think everyone that like tries to decide what we should do like come on you guys no one knows so i'm gonna stay say i don't know i i was just hoping for a portfolio update thesis behind his decisions like what was that didn't he used to just have a blog like wasn't that his thing yeah he was uh one of the like 2000s era bloggers old school 90s late 90s stuff like that that's what i would have wanted out of out of his twitter account um okay but that's gonna do it for current state of fin twit oh wait we gotta ask is tesla fairly

valued this week oh is that now uh most certainly not no well certainly not and you're about to hear why with our interview with tesla charts um what did you like about the interview well it was basically four parts we introduced you know introduced him said a few things about that we threw out some of the bowl thesis to him so he countered those and then we talked about some of the under followed things kind of the solar city lawsuit uh sudden unintended acceleration things like that and then we talked about maybe some of the projections that people have about where tesla goes from here if their factory is closing uh so it's basically the entire bear thesis so i'd recommended if you're long or short tesla or is interested in the most controversial stock on the

market right that's what i was going to say whether or not it might be hard to listen to for some bulls but if you're not clear on the bear thesis he gives a pretty concise um sort of look and glance into that i think and i think it's fair too it's not anything like he's not attacking bulls or anything like that right um so go ahead give it a listen here you go you Okay. Hey, today we are welcomed by TC, Tesla Charts. You probably know him on Twitter, at Tesla Charts, and we've got him on the show today.

So welcome on. Hey, thanks a lot. It's great to be here. For a lot of people, and we're obviously going to talk Tesla today. So for a lot of people, you usually don't start with a dislike for Tesla. There's kind of a moment when it kind of hits you that maybe it's not what it seems to be. What was that moment for you? What was this come-to-Jesus moment where you kind of turned or pivoted on Tesla and took a different stance?

Yeah, so first of all, it's great to be on, and I appreciate the invite. And I've coined a phrase for the phenomenon that you just described, which is, as I call it, the realization. And the realization happens when you happen to have a certain expertise, and Elon Musk wanders into that area and then says a bunch of stuff that makes you pause. and makes you question the person, the man. And, you know, for me, I had a favorable, if somewhat uninformed opinion of Elon for a long time. You know, when you walk through airports and you see his face on magazines

and sort of he's held up as this great innovator and entrepreneur, and I had no reason to doubt it until 2016. I had a background, I should say, you know, I am anonymous. I run Tesla charts on Twitter. I do have a PhD in one of the hard sciences, and I had a pretty good run in the corporate world, first as a scientist and then as a leader of scientists. And one of the areas I'd spent a lot of time in and became an expert in was solar technology. And my sort of come to Jesus moment, as you say, my realization was when Elon rolled out the now infamous solar roof, the Tesla solar roof, as part of an ongoing effort to get the solar city acquisition approved by shareholders. And so for the benefit of the audience that doesn't know the details, in October of 2016, Elon had a reveal, a product reveal, and he displayed what he was calling the Tesla Solar Roof. And based on my experience and my knowledge and many other people in the industry that I spoke to afterwards had the same opinion, that product that he held in his hand was fabricated.

It was fake and it couldn't work. Couldn't work in the way he described it. It was very clear from the presentation that he had virtually no idea about the technical and market challenges to producing such a product, let alone producing such a product profitably. And so I was just kind of dumbfounded. I had this positive impression of Elon Musk, the person and the innovator and the entrepreneur. and when i had heard at a party somebody tapped me on the shoulder and they knew my sort of

expertise in solar and they said hey elon musk is going to reveal a solar roof roof tile and i knew from personal experience that was a very very tough problem and then when i watched the youtube video live of him standing in front of that crowd holding what i knew in the moment to be a fake solar shingle tile i couldn't believe it my jaw hit the floor um and i could say that now that it was fake definitively because basically the subsequent depositions and variety of lawsuits confirm it um the product wasn't real it didn't exist and he stood up and pretended it did and so whenever you hear somebody um speak in your area of expertise and they speak profound nonsense uh it has a really big impact on you and so i was sort of startled and then

that sort of just led to me looking into the rest of the business and to every other vertical and And what you'll find is the collection of people that have come to have a pretty negative opinion about Elon and Tesla almost all have a very similar origin story, which is if you were a tunneling engineer and you see Elon standing in front of what is a basically small sewer tunnel claiming that he's reinventing transportation, it's hard to watch that presentation and then look at them the same after that. and it's the same thing with people with an expertise in autonomy it's the same thing with people with an expertise in automotive manufacturing um on and on and on and so for me it was the solar city solar roof reveal and from that day on um not only can't i look at him the same but my life has actually changed because it ultimately led to the formation of tesla charts and and the rest of the story which is beyond my wildest imaginations yeah i mean it's gotten uh the story has gone on for i think longer than many people have expected to uh and it seems like more and more people are

becoming to that realization especially maybe healthcare tech people now with the ventilator and such like that but why do you think i mean this is probably the most divisive company maybe of the last 30 40 years maybe of all time why do you think that and musk are so divisive That's a great question. And, you know, your assessment of Tesla begins and ends with your assessment of Elon. It is a one person company. and quite cleverly I think by design others say he's you know genuinely trying to solve important problems he's selected important scientific and cultural problems for which most people don't have a deep level of expertise to draw an opinion or to partition between sort of what's sensible and what's nonsense and he has wrapped himself in the global warming green

energy um veneer which does two things it sells hope to people um you know the the genius narrative is often a is often a sign that you should look for if you're looking for uh questionable companies um you know the the genius narrative and the and the cult-like leader um all those signs are here so he has wrapped himself in the global warming flag and has positioned himself to be viewed as the savior you know the uh the ecological warrior of our time and that does two things it builds this incredible fan base of what i think are largely ignorant people in their ignorant in the benign sense that they don't understand what they don't understand and then also because um our bureaucracy is set up to very much try to support such enterprises it allows them to get away with a

lot of things that if if you were running a coal business you would have been stopped by regulators a long time ago, but because he has this veneer of green eco-warrior slash the cult of genius, which I think, and we can get into, it's all been created, literally purchased. Those two things, I think, are by design. And so if you were going to set out to create this mirage, there'd be no better place to do it than in electric vehicles and solar technology, et cetera, because the government really wants those things to succeed. yeah i think i think that's spot on there's like a lot of uh we're pretty we're both pretty young um and people our age with any surface level understanding of elon is he's our savior he's

brilliant he's the engineer that's recreating the world um and he's done you said uh you said you were buying or not you uh elon like kind of buys the uh the cult of genius can you explain like maybe the origin on that or maybe the theories behind that yeah certainly and uh you know i like where you were going with the with the young folks and i get it like i'm not judging people that have a superficial knowledge of elon and are big fans of his because before i had my realization um i was in the same boat you know i had test driven a or i had to drive in a model s and it was a it was a nice car the acceleration was amazing the interior was a little cheap if you ask me but um i had a favorable impression of elon and this is a cool car and a cool brand

that impression was shaped um so if you dig deeper um elon is obsessed with controlling the media narrative um around him and and for me after watching the solar reveal the next jarring moment was reading about how brilliant and innovative this was and all of these you know um what i've come to know are basically mouthpieces of tesla electric and clean technica and tesla roddy um The articles themselves describing the solar roof were complete nonsense. And anybody with any knowledge in the field knew that this was never going to work and he was going to waste a lot of money and there had to be more of the story. And it turns out there was a lot more of the story,

but to your original question if you're willing to invest a lot of money in PR firms, you can get what looked like basically honest reporting paid for. And he does. And I think a key part of the con, um all critical the most important part of the con is the crazy genius narrative so um even people that are ostensibly skeptical of tesla always feel the need to start with well you know elon's a genius but well he isn't so um he often says dumb things um rarely says insightful things and when you listen to him talk this is not a man of deep intellect he's not an engineer um you used the word engineer earlier he's not an engineer the word engineer has a

specific meaning he's not one um he's just created this um mirage of genius as part of the con um it's a key element of it without it the whole thing would collapse um that's just crazy elon the genius pushing the boundaries because he's a disruptor uh is the classic excuse that he goes for. And if you read the history of Elon, and it's well written in books like Ashley Vance's book, and then Ed Dienemeyer's most recent book, Ludicrous, he is obsessed with and becomes very irate with any negative media coverage whatsoever, which has led to some of his biggest mistakes. Yeah, I totally agree. It's easy to surround ourselves with, I don't want to get clouded, like think everyone around me is thinking the same thing it's easy to kind of confirm that

bias especially when you have stuff like twitter um so we've proposed a few counter kind of bull theories um and see what you think about them we're not bullish so um we tried to come up with some um so the first one that we hear a lot is tesla's more than just a car company they sell solar panels they sell uh batteries and flamethrowers whatever they want to sell i guess um are they more than just a car company or is are they automotive um they're barely a car company um so 92 or 93 percent of their revenue comes from automotive um and including the servicing of automotive they run a vertical model of basically their own dealers um they don't make solar panels it's another common misconception um they resell solar panels imported predominantly

resell solar panels and and i did a whole podcast with quote the raven on that um that's basically a structured finance business where they're taking tax credits um and moving them from homeowners to wealthy investors who have losses to offset um that's a whole podcast in itself what the silver city business was and why it had to be bailed out um and then on the battery side um they make cells i'm sorry they don't make cells they repackage the cells into the the battery packs um and so you know to the extent that um they're mildly back integrated into an inferior battery technology i guess that's slightly different than being an automotive company but um they are basically a negative margin capital intense automotive company that makes low quality

vehicles uh in a tent and does a poor job servicing them i should warn for all of these bullish theories you're going to get i've heard them so many times uh and they are so um robustly at odds with the truth that it's just like one giant gas lighting exercise so i'm but I'm very happy to calmly rebut them all so that Tesla is a mediocre automotive company with a broken down sheet. Right. So I assume we will get a lot of answers like that. The second theory or sort of thesis that a lot of bulls stand behind is the autonomy part that I know a lot of people have said, well, they've got access to the most data as far as like driving for self-driving. um are they the leader in autonomous uh is it gonna come anytime soon and

also what about this robo fleet is that ever a viable like idea yeah so in the pantheon of Elon Musk nonsense this is the by far um the prize winner um Navigant Research put out uh an annual assessment of all of the people in autonomy and Tesla's dead last um tesla does not have sufficient sensor suites or computing technology in their existing fleet to reach anything beyond in my opinion and the opinion of several experts i've gotten to know and spoken to anything beyond level two they talk about fleet miles that's nonsense um those miles the data that they claim to be recording aren't being used uh in any way shape or form that will allow them an edge. They are literally dead last. I would argue that autopilot and full self-driving

are a giant liability for the company based on how much they've oversold it. They've been charging customers thousands of dollars for full self-driving vaporwares since October, 2016. There are people who have leased a car, driven the car for the entirety of the lease and turn it back in and never had full self-driving. They have an obligation to retrofit all of these cars. with state-of-the-art computers if there's a new computer that comes out that they claim will be necessary for full self-driving. Autopilot has been way oversold.

If you look at the NTSB and the comments that they've made at their recent board meeting, there's an ongoing regulatory dispute between the NTSB and the NHTSA. I think not only don't they have a lead, I think they're dead last. And I don't view their autopilot technology as an asset, I view it as a liability.

that's uh yeah that makes a lot of sense if they've been selling it for almost five years now uh one so when someone like us a bear says that you know the valuation is like 10 times or sometimes even 20 times a traditional car company a lot of the bulls counter and they say like well you know it's like an iphone a tesla is like an iphone they deserve a higher multiple because they have higher gross margins is that true at all so um where to begin um an iphone is not a car um a car for the so here's the sort of the tesla conundrum in order to grow into the valuation they're getting they have to dominate the market um so the world has to switch to evs and tesla has to have a dominant share and um an iphone the number of people can afford an iphone vastly

exceeds the number of people that can afford a 40 or 50 000 car that is basically a vanity purchase and so there's no question that there are some aspects of the tesla consumer base that gives just enough mimicking to the way people were enthusiastic about apple products that you could be excused for falling for that logical fallacy. And we're finding that out right now. So just for example, a long-standing counter-argument to the bull thesis in Tesla is that the legacy automotive manufacturers aren't participating because EVs are money losers.

And once they're forced to do so, Tesla will lose. If you look what's going on in Europe in Q1, the iPhone is getting beaten pretty badly. Tesla's market share just in the EV space went from something close to 40% in Q4 to something close to 7% in Q1. And there's a very good reason why that is. The EU has mandated through a penalty scheme

that the other OEMs basically finally start selling high quality EVs in the market. And when there's a wide variety of choices to make, consumers are flocking towards legacy automotive makers that have a brand that have a warranty that have the ability to service it um and you see tesla's market share collapse and that's not because of covid that's market share so you know presumably covid is impacting everybody equally um they basically have lost substantial share in in europe and so the bull thesis is evs will dominate the world and tesla will dominate evs and then the one market that is the most progressive

ie eu um the legacy automotive makers are eating their lunch if you look at norway the audi e-tron is outselling the entire u of tesla by a wide margin it baffles me that people still think that somehow this is a hundred billion dollar company yeah the uh that that definitely makes sense uh all right last question on the bull theories uh there's one that people talk about a lot it's kind of the long-term energy flywheel they say that they're you know people are going to have the tesla solar panels they're going to connect it to their tesla batteries and they're going to connect it to their tesla car and it's going to be a self-sustaining uh clean energy system does is that ever viable or is that just something that's going to take just hundreds of

billions or maybe not hundreds of billions but tens and tens of billions of capex and it's not even the technology might not even be there yet uh you might be surprised to find out that i strongly believe it won't ever be viable okay um i should say i'm pro ev in the sense that i do think there's some advantages to um removing the distributed emissions that come from the transportation choices we make and concentrating all the emissions at the electricity generation plant which makes it a far easier problem to sort of capture the carbon and deal with the pollution there. The vast majority of, not the vast majority, the plurality of our energy sources for electricity in the U.S. still come from coal. And so there is also this sort of

attractiveness towards the concept of having solar on your roof and then feeding a battery and then charging your car to get it. From an economics perspective, it'll never make sense. So solar is still prohibitively expensive compared to centralized power generation. And if you were to do solar, I think a far more efficient way to do it is in large centralized plants. But even then it doesn't really compete. Wind as a renewable resource has the challenge of calibrating the electricity flows to the market demand. And I have a lot of experience in the wind sector. It used to call on the producers of windmills in China. That's a long story, but basically there were so many windmills made all at once and nobody really thought about how

to integrate all these things into the grid that they stopped making windmills all of a sudden, because it was too destabilizing. These are all the nuances that appear when you go from seductive idea on paper into real-world implementation. And these are the exact types of nuances that Elon and the people that don't have expertise tend to just wave their hands and say,

oh, that's a solvable problem. So let me give you one example of how I knew Elon was spewing nonsense that day in 2016. One of the biggest challenges for Solar Roof, for example, which is one of the three legs of the stool that you just articulated as the long-term vision for Tesla. That's a really tough market to penetrate.

There's value chain captains in that market called construction companies. And the roofing industry is kind of a tough one. The labor skill is, let's say it's mixed. The number one thing that a contractor is worried about is completing the job well and honoring their warranty. The last thing they want is any headaches. Once they're done building the home, they're on to building the next home.

The person that you have to sell through to reach the consumer for new builds is a construction company. And then the cost of retrofitting your roof to a solar roof, as we're finding out now, is several tens of thousands of dollars. And the vast majority of people just aren't willing to put that money up front when they can just plug their car into a wall and get electricity right away. um so i i should say like i'm actually quite pro environmentalism i i drive myself a a chevy volt which i think is a superior technical solution to a full bev the chevy volt for those that don't know is a plug-in hybrid it gets 40 to 60 miles of pure ev range before the backup engine would kick in i have no range anxiety and 98 of my miles are driven um on the electric battery and i just plug it in every night in my garage right into the wall so i have substantially reduced the

carbon footprint of my transportation choices to the extent that i've at least removed it from being distributed out of my tailpipe and and instead have it still be concentrated where we we make our electricity at these large facilities but you know battery storage is a low margin commodity business around the world and just because you slap a tesla logo on it doesn't mean that suddenly it's going to be high margin. If you look at the numbers, the Tesla storage business is something like 5% to 10% gross margin. And then when we talk about high gross margin business, Tesla has a radically different definition of gross margin than all of its competitors. And there's a lot of evidence that there's some aggressive accounting going on,

stretching the interpretations of GAAP that allows them to have on paper a headline gross margin number that by the time you work your way down to the bottom line it all disappears and 17 years in existence they've never turned an annual profit um they've certainly grown there's no question about that there's more people that want the model 3 than i anticipated would given the build quality um but even that i think is starting to become exhausted so no i the long term vision of a solar roof with a battery pack on the wall and electric vehicle in your car is so far from economically viable today that the addressable market is puny and limited to very wealthy people that want to flex their environmental you know their

environmental um you know the word i'm trying to say yeah it's fascinating because that sells like that like the consumer hears that and it's like that's a brilliant idea and i think that kind of embodies the the sailman salesman that elon's come out to be um it's a leader i mean it's a veneer and you don't have to go so for example just one small example forgive me um he talks about solar-powered superchargers, you know. You with a pencil and a grade 11 physics class can very quickly determine that that is utter nonsense. Literally, I mean, unless you're willing to make,

just, it's just nonsense. He said it early on, he was called out for it for years, and he still says it today, that, you know, they will have solar-powered superchargers, and you know we're just going to take the energy for free from the sun you just can't do it it makes no sense the the area that you would need would be massive um you know people don't understand the difference between electricity and power and this these are the types of this is the classic sign of sort of a huckster like he knows that people don't understand the

nuance between electricity and power and that's exactly where he decides to manipulate and after a while if you see it in every single vertical that he's in um you begin to see a pattern and then you have sort of a true understanding of what's actually going on and so uh no uh it's it's just it's everything about this company is nonsense including that okay so i want to pivot to some uh some more underfollowed topics regarding tesla and one of those is the solar city lawsuit um i think the lawsuit came in 2016 uh during their acquisition of solar city what has this ended up resulting in what's uh it's obviously still going on what's it progressed to and how do you see it ending it's a complex topic um and for the benefit of the listeners i'm not an

attorney i have lots of attorney friends who are skeptical of tesla that i've consulted with And the lawsuit that you're referring to is just one of what I presume will be several. It's an important one. It's called a derivative lawsuit where basically shareholders in Tesla are suing board members for breach of fiduciary. And that is working its way through the Delaware courts. And I think the damage in that lawsuit is not so much the direct impact of that lawsuit. It's more the consequences of what a negative result for the Tesla board members would mean for other lawsuits, civil lawsuits that are in the pipeline.

The status on that case is all the board directors except for Elon have settled, and Elon is going to fight it, but the case has been postponed. It's in Delaware. The case has been postponed because of the COVID virus. The case itself flows from what I think is one of the most egregious self-dealing bailouts in the history of corporate America and goes back to the end of 2015 into the beginning of 2016.

Solar City, Elon is the chair of the board and the largest shareholder. He's also the chair of the board of Tesla and the largest shareholder in Tesla. And he's also one of the founders of SpaceX. And all three of these things are commingled in a way that

if any one of them collapsed, all three would probably fall onto themselves. And so what you had was SolarCity was basically going bankrupt. The court documents and testimony and other evidence that have been made public by my good friend Aaron Greenspan at Plainsight show pretty definitively that in the late fall of 2015, early 2016, SolarCity wasn't solvent. And the problem that Elon faced was not just reputationally and not just that he owned 20% of SolarCity and had pledged much of that stock for loans with various banks. The real problem was that SpaceX owned

a couple hundred million dollars plus of SolarCity bonds. And so you have this three company nexus that Elon sits in the middle of. SpaceX was on the losing end of SolarCity bonds. Elon owned a bunch of stock and had pledged it. And then, you know, so the most valuable entity in that nexus was Tesla and Tesla stock. And so he bailed out SolarCity in an all-stock deal using Tesla equity as currency to preserve the empire. And the lawsuit flows from people that own Tesla stock prior to that deal saying that this was sort of self-dealing.

And I think anybody but Elon, it would be obvious and there would be substantial consequences. But as we've seen over and over and over again, Elon effectively gets to be above the law. But the SolarCity lawsuit is rehashing basically an old transaction from 2016 that when pressed against the wall, Elon used Tesla stock to buy SolarCity. And by the way, back to my realization, the solar roof was, I believe, fabricated because the shareholder support for that deal was waning. The stock price of SolarCity was well below the bid, and he decided he needed to do something to convince investors to vote for the deal. And the thing he decided to do was fabricate a solar roof product. There's literally no difference between what he did that day and Elizabeth Holmes standing

up with a fake blood test. They're the same thing. And by the way, if you doubt me, you can go watch the video on YouTube. And the way you can tell they're fake is there's no wires on the back of the tiles. They've got to be plugged into something. How are you harvesting the energy? It's literally just a tile with something that looks like a solar cell in it. They're pretty.

The other thing is that the entire presentation was done on the set of Desperate Housewives. I mean, you can't make this up. And so, you know, in the middle of an existential threat to his entire empire, he did what he did. And, you know, full marks to him. It's worked. The stock's, you know, still at ridiculously high valuation today, and everybody still thinks he's a genius. And he's defeated the SEC, and he's defeated Vern Unsworth, and he probably feels like he's going to defeat the SolarCity lawsuit. He's above the law. All right. Yeah, that's, I mean, that is one of the largest backstories that shows where we've gotten to today. But one of the other things is Elon's margin loans. I know these aren't, I mean, maybe they are public, but there's just a lot of rumors around there.

Are there any facts about him having margin loans where he bought, I think, a couple of houses? And is there any impact that could have on the Tesla stock or business? So there's no direct knowledge. As you say, these are private transactions. I think coming out of the market correction and the, I think, the market crash and the Fed rescue of the markets, one of the things that I hope that the regulators take a hard look at is this practice of margin loans. that can give a bit of an education so if you're a majority shareholder or you're a shareholder with a large capital gain on your stock you don't necessarily want to sell your stock and pay the

taxes on it and you don't necessarily want to sell your stock and cede voting control over your corporation and so a loophole that wall street banks have created for such executives and founders is that they can borrow money from the banks and then pledge their stock as collateral in exchange for that loan. And then they can spend that money. And all they really need to make sure is that the value of their stock doesn't drop. Otherwise, they might get a margin call. And it's a bit of a nuance of banking, but if you get a margin call, you have to satisfy

it. And one of the ways you can satisfy it is to pledge more stock. And another way that you can satisfy it is to put more money in your account. Or a third way that you can satisfy it is to just let the bank sell your stock. So we just had that happen in another stock that has collapsed in a bout of fraud, which is Lincoln Coffee, this Chinese ADR that was listed in the US as similar to LK. Stock was called out by Muddy Waters, who's a great short seller and fraud detector as being a fraud.

And the chairman of Lincoln Coffee had pledged his stock to Morgan Stanley and Goldman Sachs, among other banks. And those banks were left holding the bag because when he got his margin call, when the fraud was uncovered and the stock collapsed, he just simply gave him the shares as part of the deal. Like, here, you can have my stock. We know that Elon has pledged stock for loans. We know that indirectly by reading the transcripts of various depositions. And we know in particular that his brother, Kimball Musk, who sat on the board of three of the companies, I believe, SpaceX, Tesla, and SolarCity. I'm not 100% sure on SolarCity, but he was a large shareholder of all three. and during late 2015 and early 2016 he was getting margin calls from his loans and that's all in black and white in the depositions and um was very concerned about the stock price of all three and of course he sat on the board of tesla and part of the delaware lawsuit originally you know one of

the complaints of the plaintiffs was that he was clearly conflicted the board was conflicted this was not an arm's length transaction. It was clearly a self-dealing bailout. So we know for a fact that Kimball received many margin calls. The exact nature and extent of Elon's pledging of his stock is not widely known. Occasionally you get a glimpse of it when they do a raise because the amount that he has pledged with the banks that are leading the raise is disclosed. But there's no question that he does it. And there's no question that in many instances where you see a precipitous decline in a stock forced selling by officers who have such margin loans often exacerbates the decline. In the Tesla story, I think it's a bit of a boogeyman. We've

often wondered where his margin loan cutoff would be. He has so much stock and he owns so much in Tesla that I suspect the stock price that he needs to fend off is much lower than maybe some people hope under follow topic is this random acceleration of vehicles uh i know the national highway traffic safety administration had or was reviewing a petition that named uh or that claimed tesla models are prone to like sudden acceleration has this resulted in anything what what's happened with it yeah so there's a um uh i felt about the name of brian sparks on twitter that put together a really comprehensive submission to the NHTSA around sudden acceleration events. It was well over 100 complaints in the database, which, if you look at the statistics, seems

to make Tesla be five to seven times more likely to have one of those events. I'm not very hopeful. One of the things that has perennially disappointed me is just the fecklessness of our regulators in this whole saga. The NHTSA in particular is either utterly incompetent or totally corrupted. There's no other way to explain how they've looked the other way over and over again on autopilot. And in fact, an expose by a reporter recently kind of proved that they effectively knowingly manipulated the data in Tesla's favor on autopilot safety. I don't know why the regulatory body that would actively run cover for Elon and Tesla is suddenly going to, you know, spin ankles and come down hard on them on sudden unintended acceleration.

But it's hard. I've read all of those reports raw. It's hard to read all of those and not come to a conclusion that there is an issue here, although it's outside of my zone of expertise. but if you do read all 110 or so reports it seems to be a substantial pattern of you know people slowly pulling into a parking spot with their foot on the brake and then the car just goes from you know zero to 60 miles an hour in three seconds um one of the things that's always irked me about tesla since um i've started studying it is this you know you wrap yourself in the veneer environmentalism but these are basically very heavy missiles that have amazing acceleration potential which is how they sell the cars um and then there's a fire hazard

too when they crash there's a lot of tesla fires and things like that um and in my mind like you can't be pro environment and care about zero to 60 times um these things are just incongruent i don't understand why um you know having a car that accelerates zero to 60 in 2.9 seconds somehow makes you um an environmental warrior um and then there's a downside to that which is the sudden unintended acceleration so if my volt suddenly and unintendedly accelerates there's only so much damage it can do you know um whereas these missiles they just fly by and they crash and they catch fire and it's um it's it's it's an interesting thing but um if you're thinking about you know from an investor perspective um i've always quite i think um i've come to learn the

hard way that waiting on regulatory intervention with this stock and this person is is a fool's errand right right uh that that is for sure all right last uh unfall underfollowed topic here uh that is the relationship elon musk and tesla has with the chinese communist party and then also uh the shanghai factory contract and maybe some of the details with those because i think uh from the overview i've looked at it they're very very interesting the chinese communist party I happen to know a fair bit about China. I travel there a lot, have many friends there. I make a significant distinction between the people of China

and the Chinese Communist Party. I love the people of China. I love my friends in China, and I hate the Chinese Communist Party. I think they're very corrupt. For whatever reason, I think I understand it, the Chinese Communist Party has embraced Elon and Tesla in a way that is utterly unprecedented for Western companies and probably unprecedented for even state-owned companies.

But from an analysis perspective, when I look at Tesla, I sort of draw two boxes. I draw China and I draw the rest of the world. And if you're buying Tesla stock today, you're really buying the rest of the world. I view the China entity as self-contained. So it's funded with local currency. The salaries are paid in local currency.

The car is paid for in local currency. so the revenue is all local and it's very very notoriously difficult for western-based companies to pull money out of china um this is an intra-china plant that is built by and serves the chinese economy and if he created a billion dollars in value there which i don't think he will you wouldn't be able to pull it out and pay bills in america based on that value is the way I look at, that's just my model. Of course, literally, it's not quite that way. And so I view Tesla, the entity that you're buying when you buy Tesla stock as the plant in Fremont, the plant in Nevada, and the plant in New York, and the forest in Germany. That's what you're

buying. But from Elon's perspective, China serves a very important purpose, which is it allows him to consolidate both the financials and the delivery numbers and make it look like that next leg of growth is real and he certainly used it for that end like just for example today we learned that you know they delivered 10 160 cars ostensibly in china but it looks like they all went to wholesale and so if did he sell them to an entity that's related we don't know like china is just sort of a black box they have different accounting standards the government can put their thumb on the scale for companies in a way that is unfamiliar to western investors that are used to investing in domestic companies. So I haven't spent a bunch of time analyzing the contract per

se, other than I know it was very favorable to the Chinese Communist Party. I suspect that that is a sort of a self-contained entity and it just sort of put it to the side. And I spent a lot more time as an analyst looking at how Fremont is doing and how Nevada is doing and how New York is doing and the speed with which they're going to allegedly build this plant in Germany. That's sort of where I live at my house because if it's a black box and I can't understand it and it's self-contained and I don't spend too much time analyzing it so when we look at uh sort of the coronavirus impact on uh the uh the factories there's been a little bit of rule bending by Elon obviously um but they I believe they are not operating uh right now and there's had to be some

costs cut in obviously with the salary cuts that we that came out i think was uh this this last week um how long do you think these factories can stay idle before they're going to have to raise more money well there's a bunch of questions buried in there and i'll try to unpack them so yes um the plant is currently not producing vehicles um there is some reports of elon smartly taking advantage of the plant shutdown to upgrade some facilities lord knows they need it if you've seen any of the pictures of of the tent um by the way i just have to say um the realization for many automotive manufacturing experts has been you know him bragging about the alien dreadnought automated manufacturing the plants can operate so fast

that you need a strobe light to see it. You contrast that, what was sold to investors in various raises in 2016 and before to basically hand-making low-quality cars in the tent. If there's anything that captures the essence of the Tesla story, it's that. But back to the factory, they're not making cars. We heard this week that the tentative restart date

is May 4th, which would be the day after The California shelter-in-place order is currently scheduled to expire. If that gets extended, it'd be interesting to see whether Elon gets an exception to that. He's in a bit of a pickle. Now, ostensibly, you shouldn't need to raise if you believe the financials. I happen to not believe the financials. But if you believe the financials, he has a lot of liquidity. He started the quarter with Q1 with $6 billion-plus in cash,

raised another two billion and a very well-timed equity deal congrats to him um but you know the the working capital needs of an automotive manufacturer with zero revenue coming in become pretty pronounced and in particular he's got a real problem which is um almost all of his sales come almost 60 percent of his sales say come in the last three weeks of the quarter and a lot of That is because of logistics. So he makes a car in Fremont. He's got to ship it to Europe. We have very good intelligence on and tracking data on these large ships,

row-row ships, roll on, roll off. You can see how many they're loading and where the ships are. It takes about 23 days to get a ship from San Francisco to Zubrog in Europe. And then they have to make them. They have to bring them to the port. They have to load them on the ship. then the ship has to sail 23 days and then they have to get unloaded and then they got delivered to the customers.

So the cash conversion cycle of that is, is pretty far stretched. And so I think if the plant doesn't open soon, like if it needs to open May 4th, they could basically lose the entire quarter in Europe just because of the length of that logistics supply chain. There's a few thousand extra cars left over from Q1 that haven't sold in Europe.

And then there's the question of demand. And so the whole narrative around Tesla has been that they're sold out and there's infinite demand. And, you know, the demand for the Model 3 is a million cars a year. We're running on, I think, probably just going to be seven straight quarters now of essentially flat sales. Despite, you know, all the new models and the Model 3 SR Plus and the introduction of the Model Y. You know, the Model Y, from all the data sensing we have right now, has been a flop. You can order a Model Y today and get it delivered in like two days. We've got lots of anecdotal evidence of that in the US.

Think back of when the Model 3 rolled out, how long they were legitimately sold out. They had multiple years of a waiting list of people waiting to buy those cars. The true run rate demand for Tesla, I don't believe was ever anywhere near what it was sold to be. And then now you layer in on top of that, what I think is going to be the greatest financial crisis that we're going to see in our generation. I don't know how they survive regardless of if they raise. There's just nobody buying cars right now. Are you buying a car?

Are you thinking about buying a car? If you're going to buy a car, you can buy an EV. Let's just say you're a consumer and you're thinking about buying a car. All of the legacy OEMs are sitting on inventory too. They're going to drastically cut prices. The used car market is going to collapse. They have an enormous amount of residual value guarantees for cars that they've sold in the past, largely fleet deals and lease deals, to make it more attractive to the people to buy the cars at the time to make their delivery numbers back then. All of those borrowing from the future are going to come due here.

And that all works great if you're growing, but if you're slow, it tends to put the brakes on pretty quick. And so he's in a very desperate spot. But it baffles the mind that the stock is worth more than $100 billion. Not that he takes any advice from me. I would sell every single dollar of equity I could immediately above $100 a share and sit there with a big pile of cash in the bank and hunker down. That he doesn't baffles me. If the plant doesn't open May 4th, let's just say it's even one week or two weeks away from there, he will miss the entire Q2 in Europe. seed more and more of that market to OEMs that are mandated to sell EVs in Europe.

And there's woefully insufficient demand to support the entirety of Fremont in the US. We've seen that already that basically the demand for cars in the US has flatlined to decline long before COVID. You mix in COVID and I don't see it now. The government could do another cash for clunkers. I fully expect them to, but it's not like the other OEMs aren't going to participate in that. The competition is real. And the other thing that the bulls confuse is, let's say GM and Ford file for bankruptcy. Those entities don't go away. It's going to wipe out the equity. The bondholders are going to take over the company. They might shut a few plants, but they're going to keep building cars. The UAW is going to get rescued by the government. Tesla's a non-union

plant. The unions are still a powerful political force. So if Ford and GM go bankrupt, that's not victory for tesla that's a loss for tesla because they're going to be incentivized to monetize their inventory as quickly as possible and convert it into cash which means they're going to cut price and so if you're a consumer and you want to buy a car you're going to buy a fully priced mediocre poor build model for your model y or are you going to go buy a brand new car from a company that um knows how to build vehicles uh from a long haul and so the the classic you know tesla's better than GM and Ford. I'm not long GM or Ford. I think the automotive business is a terrible business. And I just don't know how Tesla survives an extended plant shutdown without exposing all

of the bombs that are on their balance sheets. So yeah, I'm fascinated to watch it. If you would have told me that the plant would be shut down for at least the first five weeks of Q2 after delivering a sequential decline in deliveries of something like 25%. And the stock would still be above $100 billion market cap. It baffles the mind, but it is what it is. The stock is just disconnected from reality. Yeah. I mean, it's shocking. It's probably the most shocking ticker of the last few months here or a few weeks, I guess. But one more question about Tesla before we hit our wrap up ones. I know there's a lot of variables going on. So a lot of different ways could play out here but how do you see this story ending well there's an old expression that

says um it's better to flame out than fade away and i don't expect him to fade away so if it does end i expect it to be quick um i expect that you know you'll wake up on monday and tesla will be absurdly overvalued and you'll wake up on friday and he will have files um or some other major scandal that brought him down i don't think given the economic calamity that we're facing that he will reach escape velocity on this and somehow be able to you know keep the perpetual motion machine that is tesla going indefinitely certainly kept it going much longer than any skeptic could have imagined so hats off to him but i don't see it ending slowly yeah and that's the thrill of owning derivatives on tesla is that any day something drastic could

happen neither um we have two wrap-up questions here and they're more broad they're not really necessarily about tesla um i'll hit the first one breaking out the second one so the first one here is what is one financial saying that you disagree with so it's a good question um i would say in the current environment the one financial saying that i'm i now disagree with is don't fight the fed i think we're seeing headlines of trillions of dollars of government intervention in various markets i think they're pushing our rope i think they're shaking their fist at an oncoming tsunami of economic destruction the likes of which will be generationally remembered i think the shutdown of the u.s economy and the global economy for starting with the chinese economy is going to

have profound, profound impact on the economy itself and how we define it. To be clear, I view the economic destruction that we're about to face as inevitable, and I view COVID as just the catalyst. But historically, whenever we would confront a crisis like the financial crisis, the phrase is don't fight the Fed, which means if the Fed comes out and says they're going to bid everything up then you you go alongside them and you and you buy um that might work for a little bit here and the stocks the stock markets had a nice run we're recording this at the end of the week um who knows what will happen by the time you release it but by and large i think the era of don't fight the fed um is coming to an end and i think it's hard for me to envision scenarios where

we don't ultimately debase the currency and um you can own you know the venezuelan stock market did really great in Venezuelan dollars, didn't mean that you wanted to hold your assets in it. And I worry that that's one expression that new investors might fall victim to, which is don't fight the Fed. That's interesting. That's interesting. All right. Last question here. What is one piece of advice you have for anyone starting out in either the business or the investing world? I come from the business world, so I probably would answer that factor. Here's the most important advice that I give and I mentor a lot of people and in our business we interact with a lot of leaders um the single biggest asset you have is the present value of your future

earnings and so it's way more important to develop your skills and to embrace opportunity than it is to bargain over an extra nickel in salary and leave a bad taste in the mouth of somebody who's trying to give you a formative experience and a leg up in the long term so um when I was starting out in the business world. I never negotiated salary or benefits or anything. I was always just focused on what is the very best opportunity that I can get that will teach me something. Who are the smartest people I can learn from? What is my skillset? And what is that repertoire? And what can I do to improve it? And so I spent a lot more time fine tuning the engine than running the engine, so to speak. I was very, very much focused on skill development, data analysis,

visualization, networking, giving to your network, learning a new language, learning how to code, learning Photoshop skills, learning how to communicate, becoming a professional public speaker. The very best asset you have as a young person is the present value of your future earnings. And the number one driver of that parameter is how much time are you spending developing skills? So when I look at the young person, you know, the two main questions that drive future value creation that will swamp any sort of variance of pay and bonus and vacation time that you might get in your current job is how much time are you spending developing your skills and how effective are you at getting new skills? And so really sort of the masterclass

in developing a great business career is to become really good at developing skills. It's sort of a meta-analysis. If you can do that and you apply a solid work ethic behind it and you have a great mistake management system, it's almost inevitable that you will do quite well in business regardless of the stock market and currency debasement and the price of gold and everything else.

So if you're thinking 20, 30, 40-year time frame, your skills um skills skills skills skills yeah sort of that invest in yourself model um well that's going to do it uh thank you tc for coming on i really enjoyed it appreciate it it's been great uh come back i'll come back anytime okay welcome back thanks again to tesla charts tc for coming on the show really enjoyed it um but next up we have option kings are we going to be rich again uh there's a small chance i think uh but this is another what like decision we made a small amount of money like just about a you know 100 bucks which is still a decently small amount of money uh to for like an outcome that's probably not that likely but if it happens uh it could be

a large out like you know a large reward right so we bought one put of alibaba um and i'm gonna be totally honest if luck and hadn't gone if luck and hadn't been revealed as like a fraud i we would probably would have bought this yeah and i guess the thesis is if the chinese economy goes into shambles and which it looks like it's it's heading towards you know pretty bad scenario which is kind of weird it doesn't i don't know the stock market their stock market here doesn't seem like it's pricing in anything right now but that's a whole nother story uh if that happens and then uh oh a lot of people smart people you know there's a lot of anonymous people i guess on twitter that have been saying this but they've been talking about how alibaba is likely faking

their gmv numbers and there's a lot of evidence to back that up um i think i did tweet a couple links uh earlier but if that happens like the economy goes into shambles alibaba is going to have a lot of trouble uh keeping up these you know 50 percent revenue numbers 25 percent growth in gmb while they already have the same gmb as amazon and walmart which just doesn't make any sense to me uh so if that happens go ahead combined that's that's the same revenue as Or GMV as Amazon and Walmart combined, right? Yeah, which doesn't make much sense to me because Walmart is the leading retailer in almost every country

and Amazon's either one or two, or actually it's probably two in every other country besides China or some of the Southeast Asian countries and Japan. But yeah, if that's true and it comes out that they are fraudulent, I guess is the word for it, which we don't know for sure, we'd probably peg at, what do you think, like a 20%, 30% chance. if that's true a little lower than that but yeah yes it's a small chance but if it's true uh the outcome could be like 50x because the options are not priced uh very expensively at

all so we decided to do that have a little fun with some of the podcast money and it's gonna i think it'll be exciting or it'll just go to zero and uh you know it'll be fun either way but yeah i mean okay so this is and this is basically all our options is low probability high return um and it's all ad revenue so it's basically you guys listening hopefully provide some entertainment for you guys and hopefully it makes us rich in the process that'd be awesome yeah yeah quote unquote quote unquote rich uh hundred bucks but yeah yeah right um hot water though i've got a few this week uh okay go ahead here let me pull it up um okay the first one iger haters are in hot water and i was one of them so i'm in hot water uh everyone said him

leaving amidst the coronavirus coronavirus was kind of like a scummy move he's back i believe this morning he's the ceo he took it back right yeah either yeah uh i don't know i haven't after i sold my shares at disney um i stopped following that as much but i think he did come back and what was it either he's sincerely coming back because he cares a lot uh which is probably true or the board like forced him back it's like hey like you left at just the worst time like you you should come back it was a little bad for like both disney's reputation and his own and i think maybe this is his chance to sort of salvage that um second one though and i'm stealing a quote the raven take here from twitter dahlia was in hot water because bernie man was canceled i had this

too yeah tough tough tough and then the third one and this was hilarious uh bill gates is in hot water because john mcafee who to this day i don't know who he is or what he does said that he met bill gates once and that bill gates named his company microsoft after the size and condition of his penis. Of McAfee's penis? Of Bill Gates. Microsoft. It's a good joke.

Who is this guy? I think he's the founder of McAfee, the security thing, but he's just an absolute psycho. He said he's a huge Bitcoin guy. He was totally into the Bitcoin, probably dealing with some fraud

during the Bitcoin heyday. He said that if Bitcoin didn't hit a billion by the end of either or no sorry a million dollars a coin by either the end of this year or last year he cut off his own dick um so i don't think that's happening i don't think he's actually going to cut off his own dick obviously but he's an absolute psycho um and i really want to know the story behind it okay those are my only two hot waters what do you have all right i got the xfl so they are bankrupt which is just kind of some sports news but the wwe owner uh jim mcmahon who also owns the xfl i believe he said on an old conference

call that the wwe would not fund the xfl but the bankruptcy papers that came out today claimed that the wwe owned 23 of it uh looks like we're gonna have some lawsuits coming down the line a lot of illegal activity going down in the financial markets or at least it was going on and it's now coming to fruition okay question for you do you think the xfl may have survived had coronavirus not happened oh yeah it seemed decently popular on tv deals and stuff uh but i don't think that's like espn or whoever fox sports uh definitely not their priority at the moment okay what else do you have uh oio that hotel startup in the vision fund that we have been talking about before that did not have the best uh model for their business or at least we

didn't think so and it looked a little similar to we work uh they are going through some tough times they're laying off like 50 or furloughing 50 of their workforce and as you can probably say you know they're a hotel chain uh startup so like airbnb or something like that they're probably absolutely screwed they're you know probably 90 of their revenue is down but another note here that could get them into some extreme trouble. The founder borrowed $2 billion to buy more of the company's own shares in their last round that was valued at $10 billion, which was marking up the Vision Fund's own investment.

Poor Keith Raboy. Isn't he an investor? Keith Raboy? Yeah, dude. I don't know. I think I can't deal with the stupid VCs right now. Not all VCs are stupid, but whatever ones. uh next one uh i don't even know if this is hot water but remember there was that screenshot of

the dow of record high and then like 16 million unemployed right and people like even like aocs and politicians were getting into it did you see that there is a public company called bioanal systems yeah so i think it was like i don't know if that was just what they were projecting on that little ticker line because i think it's bio like analytics or it's still i like that too close like i was laughing i saw the ramp capital tweet i was laughing pretty hard that was unfortunate uh spelling whoever maybe the cnbc uh cry on person or whatever that thing's called uh should be fired it's the spring interns yeah spring interns suck uh they're working from home they didn't know what to do what uh what else do you have okay last one here uh the spy uh which

is the largest etf i believe uh it is skipping its quarterly rebalance i don't get that this so this actually triggered me this made me really angry um oh really yeah because it's like it's it's the principle of passive investing like the fact that someone has the ability to choose just to not do something, it's undermining the principle, which makes me so angry. Yeah. I didn't really get when people used to say there is no such thing as passive investing. And now I guess I kind of agree because whoever is running these funds, they always have to make the choice of what to do and they're not forced to do anything or maybe they're forced to do some things.

But I guess there isn't any such thing as passive investing. You're just investing in things called passive ETFs or index funds. Yeah, that definitely pissed me off. Fuck, Bury, Kill though this week. That was your last one, right? Yeah. Okay, Fuck, Bury, Kill this week is the theme of stocks I'm actually considering buying.

So maybe a little assistance here would be nice. Okay. I've got three here, Atlassian, Spotify, and MongoDB. Ooh, let me look up. I know where Spotify's trading, but let me look up where Atlassian is. I think I'll marry Spotify just because it's probably one of my top two or three. But let's see where Atlassian's at. It's really not down that much, but I don't know.

i would say throw them aside because i think mongo db has a longer uh runway for growth but as a shareholder of mongo db the shares haven't gone down very much uh so i don't think you're getting much value there right now so i'd marry spotify probably fuck mongo db even though i still like them uh for the long-term opportunity just not taking over the debt database market um or at least taking a lot of the market share from oracle and microsoft so it's a giant opportunity i think 70 billion dollars a year um atlassian does have a large market opportunity and they are seem like a well-run company but uh it's just not my favorite i think i'm gonna kill them yeah i might i might marry atlassian because i feel like there's just a long runway there and

you're marrying them for the rest of your life what's the bull so what do they do you've been researching them lately so god i'm trying to blank on his name i'm blanking on his name but it was The Motley Fool guy wrote about the one he's been adding to the most, and it's been Atlassian, but I'm blanking on the name, so I feel bad not giving him credit. Yeah, they are primarily like the B2B software. Sorry, I'm trying to think of the word for it. Yes.

Communication slash document sharing, like file sharing type of thing. Yeah, kind of like Google Drive, right? We did a show on them before. I mean, if I'm going to buy them, I'm going to sit down and probably do a little more research. But those are just three names that I'm kind of looking at. I might bang MongoDB too because I feel like they move the most sporadically. Spotify hasn't moved from my cost basis in eight months.

So that's cool. As long as the business is doing well. I mean, yeah. So I don't know how – and I have no idea how coronavirus has impacted on streaming or music streaming at least. Yeah, so those are my three fuckery kills. anecdotal evidence uh you want me to go first or you uh you can go okay this is pretty relevant so i rode in a model x this week first time i i believe it's my first time in a tesla

um and it was good experience okay so i'm not gonna lie so it's a cool product and he like stopped in the middle of the road and like sped up zero to 60 he did that whole thing so i got the whole like oh cool acceleration i was not amazed by the interior to be honest like the the leather and the seats um they've got that cool little computer looking screen ipad looking thing in the middle and it's got a little like like cool knickknacks here and there like software knickknacks so you can like put on a fire you can play video games while you're parked but polish i did not come away thinking this is a product that could transcend gap violations like i didn't think like okay this product will take them past

losing money well yeah you're saying that they shouldn't be valued at 16 times all their competitors and that a car that sells um for whatever that you know it has all those features can't beat out mercedes bmw audi ferrari lamborghini porsche um in europe in the united states and take out all that entire market that is correct i am saying that because and they lose money on every car they sell but whatever sorry i yeah i would rather drive that car that i was in than the car than my chevy traverse or whatever i have but that does not validate the business for me and you know what to tell you the truth this was the higher i mean it's the model x which is i believe the higher margin vehicle compared to the model three so

and it still didn't validate the business model for me so it's supposed to compete yeah with like a porsche what are those called the porsche cayenne or something like that shine it just didn't do it for me uh but good products i'm not gonna lie uh the acceleration thing was pretty cool so yeah i mean those yeah the cars um there's some evidence that the model three it doesn't have the greatest quality but the s and x um everyone thinks are fantastic products if it's what is the type of car you like you know what i will say and i think this is why most people buy the cars is you get cool looks when you get out of them oh yeah it's the definitely what do they call that um oh yeah it's the new like beamer you know how people say like you know make fun of

the guy that drives the bmw it's the guy that drives uh tesla's like you could just tell like if i got if people kind of looked when you got out and it was kind of like hmm what you know what do you do kind of thing oh yeah it's the uh and i think that's that's probably that's probably it's the i don't know it's probably why a lot of people buy the cars because they look and i guess the whole don't pay for gas thing that's nice but oh not anymore all right uh what do you have okay so you there was like viral clip this week uh chamath polyapatia a vc and he is a tesla bull but i tend to agree with him on pretty much everything besides that uh he kind of had a viral clip on cnbc maybe i'll include it in here um if not whatever i just forgot to do it

but are you suggesting you keep saying propping up zombie companies are you are you arguing to let airlines for example fail yes why i mean how does that make sense in the broader scheme of of the economy because it's not because when you look at what it means this is why i'm saying like this is a lie that's been purported by wall street when a company fails it does not fire their employees it goes through a package bankruptcy but he basically said you know Let them go to zero. Let the hedge funds go to zero. Let airlines go to zero.

And that is the equity and bailout, workforces bailout, Main Street. Do you agree? And I know this is a topic we've talked about for the last three weeks, but it's kind of boiled over here. Hopefully the debate can end shortly. I doubt it will.

Do you agree? Should hedge funds and airlines get bailed out? So when I first kind of took a look at it, I was like, all right, well, some companies need to get bailed out, all this stuff. And then I kind of – I did do some digging into like what all bankruptcy entails. It wasn't a lot, but –

Investopedia? Investopedia? I watched some YouTube videos. Chapter 11 isn't the end of the world, right? So it doesn't kind of give you like a chance at survival. You get basically a second chance. Yeah, Bill Gurley had a great tweet on it too. This – like you have to be able to fail.

yeah like okay here's what people are like the vcs they're just mad because it's like well the vcs are mad because one no one's ever bailed out the tech companies because they actually have good business models and two airlines have gone bankrupt i think like 40 times uh since 2004 i forget the stat there's they've gone bankrupt a ton like they can go bankrupt again right and And that's what I'm – I'm assuming they all filed Chapter 11. So, I mean, yeah, you'd let them fail, and it sounds bad, but they don't lose their jobs, right? Like people – the employees aren't gone. They don't lose it because the equity goes to zero, but there could be some second-order effects there.

my thinking is so say like uh all right we know we're bowing there's that stat 40 billion dollars in share buybacks um which has gotten into trouble because they don't have the cash balance because of all the trouble they're in my thinking is they should be forced to do raise as much equity as possible of any buybacks they've done so say it's going you have to raise 40 billion dollars in equity if the stock they can't raise equity anything above like 60 or 50 of their current market price uh traded price you know for their stock too bad you still have to raise it doesn't change the business um and then after that we can get into like bailouts and helping you know stuff but right like that idea no i like that idea yeah but yeah go ahead i mean sorry i'm

forgetting my take here but i'm blanking on okay yes i like that idea and i think chamath hit it right on the head and people constantly you're right the the tech companies don't get bailed out i did see a tweet or an idea that was like you know wouldn't you be upset if the companies were just sitting on cash the whole time waiting for a rainy day like don't you want them innovating it's like yeah okay i would you know what if i'm investing in a company i do want them i want a little bit of liquidity on the side but i want to constantly investing back into the business but buybacks isn't investing back into the business yeah also wimbledon bought pandemic insurance because if something like this happened they would have been screwed airlines i mean

information was out there i'm not an executive i shouldn't have known but they should have known why not buy some pandemic insurance it was out there companies i bet more companies will now obviously but yeah yeah i mean it was done wimbledon did it i don't i i am on the let them fail side now yeah and come on the executives will they're not suffering you know who's suffering the workers uh the people that are going to get you know the payroll they need the payroll funded stuff like that main street suffering wall street can suffer and not like actually like go into poverty right okay well that's gonna do it then right yeah that's it okay thank you guys for listening find us on twitter at chit chat money follow us wherever you're listening also you can

now email us um well i'm working on that right now but we had a little hiccup with that you can email us at chit chat money at gmail.com i'm hoping if not i will revise it put it out on Twitter. And next fundamental analysis episode, I'll let you know what the email actually is. Thank you for listening. We're not financial advisors. Anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. Thank you, guys. We'll see you next week. Smarter.