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Category: Trending Topics

Tesla’s Conference Call Smelled a Little Musky

Tesla’s recent quarterly conference call set the internet ablaze after the company’s founder, Elon Musk, complained about dry, boring questions from short-selling analysts. He said they were “killing him,” and he even threatened to take questions from YouTube!

The tough-guy attitude did not go over as he probably hoped.

The stock got hit hard, and $2 billion in market value was immediately erased. But the biggest laugher wasn’t even Musk’s performance on the call. Try this one: The company lost a record amount of money, an amount which nonetheless was better than expected.

That’s how counterintuitive the Tesla situation is at the moment.

The stock has rallied and recovered its losses. However, Musk is at it again, tweeting/promising/threatening a “short burn of the century coming soon”.

A little personality can go a long way, but ranting on Twitter against short-sellers is a far bigger red flag for me than expressing a lack of interest about a couple of questions on a conference call. It’s not a good look, and it’s disrespectful to shareholders and, more importantly, debt holders.

Frankly, if you don’t like to deal with quarterly conference calls, then don’t be a public company. Or, better yet, have someone else do that function. Steve Jobs was way too busy changing the world to deal with financial analysts. Apple CFO Fred Anderson conducted the calls.

I’ve listened in on more investment calls than I can count, and Musk’s attitude isn’t even close to the worst I’ve ever experienced. That prize goes to Jeff Skilling, the president of Enron, who once called an analyst an “asshole” when he was quizzed on why the company couldn’t produce a balance sheet with its quarterly financials.

We know how that ended.

A few months later, Enron rolled over, went bankrupt, and wiped out tens of billions of dollars of perceived wealth. And a few executives landed in jail.

Do I think Tesla will go bankrupt or Elon Musk will become a convicted felon because he doesn’t hide his dislike of analysts? No, probably not.

However, such an attitude shows a lot of arrogance at a time when the company faces loads of competition. Jaguar, Mercedes, Porsche, and BMW will all have premium offerings in Tesla’s arena within the next year or two. The window of opportunity for Tesla is small, and it’s closing.

Good stewards of capital don’t pick fights with short-sellers. Neither do they call analysts seven-letter words.

Instead, they focus on moving forward, deploying capital profitably, returning capital to shareholders when needed, and navigating the bumps in the road that all companies face.

While Tesla’s stock is back up in the short term, this sort of behavior is a long-term warning sign to watch closely. The real bozos in this situation might be the debtholders. They’re loaning this company beaucoup bucks at interest rates that don’t nearly justify the risks.

When Musk comes back into the market for ever more billions of dollars to plug the holes in his leaking ship, I’m sure his attitude will be much nicer. Hell, Tesla might even be a big winner from here on out.

But let’s face it. There are thousands of stocks to invest in, more than a few of them are winners, and there’s no need to entrust your money to someone who has no respect for you.

Good investing,

John

Is Automation Too Much
 of a Good Thing?

I’m all for progress.

But, sometimes, you can have too much of a good thing.

Take automation, for example. It’s a hot topic these days, and the trend has gone way beyond automated factories.

The juicy stuff is new technologies that impact our everyday life. Self-driving cars are a big one. It sounds pretty cool, and I can imagine sitting in the car doing something productive while the machine takes me to and fro.

Of course, someone can get run over and killed by a self-driving car while they’re legally crossing the street. It’s happened before, it’ll likely happen again.

But aren’t computer-driven cars supposed to be better than humans?

I’m sure, over time, these mechanical issues will be worked out, and driving will become safer. For now, though, I prefer to drive my own car, thank you very much.

Money is pouring into the automation and connectivity space. A company called IFTTT (not the most memorable brand name) just raised $24 million from the likes of Salesforce.com and IBM. IFTTT has created a platform that allows developers an easy way to connect apps across different devices. It’s trying to connect everything.

The company has 14 million registered users and 75 million applets (a program that’s much smaller in scope than an app) have been developed. Over 5,000 developers are hard at work creating software to connect disparate apps.

I’m skeptical because this was the company’s first round of fresh capital in four years and there’s a bit of mystery surrounding its operations. Also, once you connect all of your devices, you don’t know who’s watching. Our privacy will soon be a thing of the past (if it isn’t already).

In addition, when it comes down to it, I don’t want “constant connectivity!” Rather, I want to get away from too much technology. I recently started reading real books again – you know, real print, paper, and binding… Unmovable words are welcome relief from “always on” screen time.

There are other areas of automation that concern me. Recently, the travails of automation bubbled up in a sacred place: my beer glass.

Let me back up a moment. The gang here at Dent Research gets together in person about once every three months to talk about the markets and our products and to strategize and build camaraderie. After one of these meetings, at a nice downtown Baltimore hotel, we were given a card that allowed us to go up to a wall of beer taps to pour out a pint of our choice.

It was right out of The Jetsons: You set down your glass, swipe the card, press the button, and next thing you know there’s a nice cold IPA.

In theory.

The problem is that it didn’t work very well.

What you thought might be an IPA turned out to be a stout. The root beer spilled all over the place. Other taps ran out of beer half way through the pour. And, with no people around, it was hard to fix the problems.

It was an interesting concept that was a disaster in reality. I like having a bartender. I want a real, live person pouring my drink. I also want to converse with real, live people at a bar. It’s a social place.

It’s also part of one of my better business strategies.

I travel quite a bit for work. Prior to my departure, I scope out a good restaurant that serves food in its bar area. I prefer to eat there and hang out. I’ve made good business contacts by hanging out at a good restaurant’s bar, talking to actual people, and being served by a live bartender. This has happened too many times to count.

When all of our social experiences are eliminated due to automation, and we’ve completely succumbed to the seduction of our phones and other connected devices, society will be in big trouble.

It’s already happened to a large degree. Children don’t even learn cursive in school anymore. Why learn to write when you can hammer out an email?

I believe the key to success in business and life is communication. I don’t mean by typing out an email. I mean real interaction with real people.

While a lot of our communication at Dent Research is over email (and Slack, and Skype, and Zoom, and Box, and…), some of the best work gets down with folks sitting in a room together, figuring out what the next move is. Problems get solved more effectively and new ideas pop up more freely.

If we automate this, we’d be watering down our capacity for innovation and growth.

John

Is this the End of Facebook?

Facebook is under fire after one of its digital consultants, Cambridge Analytica, misused data on tens of millions of Facebook users. Now, Mark Zuckerberg, Facebook’s CEO, faces grilling from Congress on the company’s policies and pitfalls in securing its user data.

Facebook has been transformative in the way people connect and interact. Security breaches threaten to undermine not only the credibility of the company but the value it generates from the data it possesses.

The beauty of Facebook from an advertiser’s perspective is the data it has on its user base. With 2.2 billion users, 1.4 billion of which log in each week, Facebook is an advertiser’s gold mine. Every base is covered demographically and geographically that an advertiser could ever want.
As an advertiser, you only care about your target market reading your ad. If you sell gardening supplies and your target market is females aged 40-75 in the northeast, then what do you care about 35-year-old males in California? While mailing lists have been around for decades, the level of detail regarding how users interact and navigate the Internet is relatively new. It’s very powerful information and Facebook allows advertisers to target and test the effectiveness of their ads.

Facebook’s value could be greatly diminished by this security breach. The #deletefacebook movement is overblown. People are still going to want to stay in touch with family members and long-lost friends from high school.

However, the breaches could accelerate some social media fatigue. Is “liking” a friend of a friend’s post really a true social interaction? The threat of exposing your privacy will clearly lead people to reevaluate their use of Facebook.

But the biggest issue facing the company is regulation. Judging by many of the questions from Congress, our esteemed representatives are still using typewriters. They just don’t get it. The danger is that they come down with a heavy hand.Even a lighter form of regulation such as “opting-in” to share your data could lead to significant loss in value for Facebook. Less data equals less value for advertisers. This would cause rates to decline, if not crash, and result is significantly less cash flows for the company.
It’s tempting to “buy the dip” on leading stocks under pressure. But, just like Facebook was a gamechanger for advertisers this breach may very well be a gamechanger for its financial performance.

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