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David at Imperial Beach

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  • GM recall meter passes 20M with latest round [View news story]
    Seekingalpha is now referencing twitter as a source of articles? For shame! Get a real source or stop calling yourselves editors!
    Jun 16 04:35 PM | 6 Likes Like |Link to Comment
  • Bond funds to become Roach Motels? [View news story]
    Seems like a good way to precipitate the very thing they are worried about. Trying to implement exit fees would surely cause a panic sell-off in bond ETFs.
    Jun 16 04:32 PM | 5 Likes Like |Link to Comment
  • Tesla To $400? If Its Short History Is A Sign Of The Future, It's Possible [View article]
    You'll be waiting a long time. Probably a minimum of a decade and a half to be precise. Tesla is just starting its first gigafactory. It needs 20 to be the size of Toyota. It needs 200 to supply the entire auto industry with battery packs. It needs even more if it plans to supply SolarCity with stationary battery packs. Even if they are able to finance gigafactories 2-20 and beyond from cash flow from operations, you're still looking at a couple of decades of zero profits at the bottom line. And of course, they have to build out the rest of the company to the same capacity as the gigafactories.
    Jun 16 04:08 PM | Likes Like |Link to Comment
  • Tesla To $400? If Its Short History Is A Sign Of The Future, It's Possible [View article]
    I have to agree. I love Tesla, but (TSLA) is priced as if they've already built 10 gigafactories (capacity of 5M battery packs/year) and grown the rest of the company to 5M vehicles/year. Double the price to $400/share and their market cap will be as big as Toyota, and they should have 20 gigafactories and be selling 10M vehicles/year.

    Undoubtedly, when investors see that the next 10 quarters are in the red because of gigafactory expenditures for which they've already borrowed the $2B, many of them will toss in the towel and you will be able to pick up these same shares at much more realistic prices. Then factor in that it's only the first of many gigafactories and there's lots more capex on the agenda besides mere gigafactories...
    Jun 16 04:00 PM | 2 Likes Like |Link to Comment
  • Natural Gas Transportation: What's Taking The U.S. So Long? [View article]
    Good point.

    The point of electric vehicles, of course, is that you can replace one fuel with another in any mix on the grid at any time and still drive your car without any conversion or obsolescence expense.

    But it's going to be awhile before we see the first all electric long haul trucks. Might as well enjoy clean air while we wait.
    Jun 16 03:16 PM | 4 Likes Like |Link to Comment
  • How Amazon Could Augment Android And Attract Developers [View article]
    Both Amazon and Apple carry things to an extreme that is unhealthy for investors. Amazon should be making a reasonable profit. Investors apparently keep hoping this leopard will change its stripes and begin profiting from all its cancerous growth. Probably won't happen under Bezos. Apple still claims to be a growth company, but it acts like a cash cow. At Apple it seems to be all about maintaining margins to keep the profits as high as possible. They aren't investing as much as other large high tech firms in R&D. They aren't innovating at the same pace as they used to, the pace that is required to keep up their all-sacred margins. They insist upon staying at the high end of their markets and refuse to move downstream where the real money is to be made, because that money is made on volume. In the end, the market will go to Samsung and others at the low end where the volume is.

    There really is no question that the low end is where the action is. It's been proven time and time again in other markets. First you dominate the low end (by buying up competitors if you have to), then as your R&D spending outpaces the high end players they drop out of the race one by one. Eventually, you can have your pick of those for acquisitions at pennies on the dollar. Ever wonder why Audi is part of VW and not the other way around? Now you know!
    Jun 16 03:04 PM | Likes Like |Link to Comment
  • Tesla Motors tips off early 2015 Model X delivery [View news story]
    Do they? So far as I know, only a ballpark estimate of "slightly more expensive than the Model S" has been available. That hasn't stopped many people from getting in line and putting their deposit down. I read where someone was surprised that the third seat would be optional and complained that "it was just another way to increase the price of the vehicle", but they didn't make the all-wheel drive optional so that complaint rings untrue. If you search for "third seat optional" you will find that many SUVs offer the third seat as an option, not standard. The point though, is that people laid down deposit money without knowing what options were going to be available and what was standard.
    Jun 16 02:47 PM | 2 Likes Like |Link to Comment
  • Why Analysts Are Wrong About Apple [View article]
    Long term, Apple cannot keep it up. The stock is currently as high as it is because Tim Cook has financed it higher, not because the potential of iPhone 6 is that much better than everything that went before it. Contrary to the article's assumption, old smartphones don't immediately die upon arrival of the latest and greatest. People can and do put up with using last year's model. Especially in emerging markets, Apple has the wrong strategy and you should not be buying the stock if you expect them to take over Bangladesh like they have here.

    Android has not failed at all. It has taken the potentially most lucrative low end of the market, and now it's just a matter of time before there is a shakeout and consolidation among hardware vendors there. The heir apparent is obviously Samsung, but Samsung appears to want to abandon Android in favor of its own OS, Tizen. That's not a smart move on their part, and Google is only too willing to aid and abet others who will prove it to them. But for sure, Apple must win against Android in the marketplace, not the courtroom.

    Long term, it is open systems that will win, not closed ones. Apple has tried to be as closed as possible. It has been stupid about it as a matter of fact. It will lose. People enjoy freedom. They enjoy saving money. There were howls of protest over a mere 30 bucks to buy a new adapter when Apple changed a connector. Apple buyers are not immune or somehow different in that regard. The more Apple tries to rope consumers in and hogtie them to Apple's own more expensive "ecosystem", the more consumers will see the opportunity cost of staying with Apple and they will start jumping ship.
    Jun 16 09:50 AM | 2 Likes Like |Link to Comment
  • China: More Than A Change In Economic Time - Go Long [View article]
    I'm not sure I want to bet on either China or Europe. China could be the epicenter of the next financial earthquake if they start getting massive defaults due to lending practices akin to the US before 2008. Their lending was almost entirely based upon the valuations of collateral, mostly real estate, and not upon ability to repay. But if China sneezes, it will be Europe that catches the cold. They have done very little to prevent the banking system instability that developed in the wake of US defaults. Their banks are still ridiculously overextended.
    Jun 16 05:33 AM | Likes Like |Link to Comment
  • The U.S. Economy To Pick Up Steam? Not So Fast [View article]
    US growth at 4% for 2014 is now a totally false hope. We'll be lucky to see 2%. China has grown by 7.4-7.5%, by investing in infrastructure, but now they've got a lot of infrastructure lying idle. It was not a wise investment. How they are going to handle a real estate market overhang at least as problematic as what the US faced in 2008 remains to be seen. But the bottom has fallen out of the real estate market and nothing is moving right now. Since pretty much all loans in China are collateralized, and by far most of that collateral is real estate, this is a huge problem. However, they are a command economy and they may find a way of dealing with the problem that is less devastating than what the Fed was able to accomplish here. They also aren't suffering from decades of trade deficits and the loss of a huge part of their productive capacity to overseas outsourcing.
    Jun 16 05:18 AM | 2 Likes Like |Link to Comment
  • Will Iraq Make Gold Soar? [View article]
    I don't think that's ever going to come. There's too many long term reasons to be bullish on gold. It went up 11 years straight and after falling back is now barely above the cost to mine the stuff. What more proof does any investor need that gold is not dead yet and now is an excellent time to load up for the long term?

    Add to that the huge national debt and a continuing tradition of trade deficits that dictates what the Fed and the federal government can and cannot do, and you've got a recipe that dictates a lower dollar, and consequently a higher price for gold. There is nothing more indelibly or unambiguously written on this nation's financial future than the eventual rise in the price of gold.

    Then you take a look at the Q1 supply and demand report from the WGC and you discover that the recent "correction" ran in the wrong direction. That gold demand actually outpaced supply by 26.4 tonnes for the quarter, and is likely to do so again this quarter, especially after the erroneous "correction". Why do I insist that gold demand will likely keep pace or increase this quarter? Take a look at the categories that had strong demand: jewelry and other fabrication, and central bank buying. What is noticeably absent from the demand picture? Individual investors! They have already sold out and aren't buying yet. The other demand categories are not nearly as susceptible to manipulation by media pundits such as Goldman Sachs. They are more likely to buy bargain gold than to sell it. Only the individual investor is emotional enough to buy high and sell low in the face of limited supply.
    Jun 16 04:45 AM | 3 Likes Like |Link to Comment
  • Gold Rebounds, And It Just Might Continue [View article]
    I don't believe that for a minute. The only reason that gold might trade in the range you give is if central banks start selling again. And that's not happening until the US dollar is no longer the world's reserve currency, and probably not after that either.

    The US dollar is grossly overvalued. If it were fairly valued we'd have no trouble keeping jobs at home. As it is, we export not only factory jobs but computer programming jobs, help desk jobs, pretty much every job that doesn't need to be done on-site here in America. We've run trade deficits for decades. You simply can't do that forever. Other nations get tired of holding worthless pieces of paper with dead presidents printed on them. Perhaps more to the point, the people of this nation get tired of seeing their jobs go overseas.

    Last, but by no means least, this nation will not recover from the last recession until the debt load has been reduced, especially the national debt. Since it is too big to pay down without raising taxes to completely unacceptable levels, the only alternative is to inflate it away. The Fed has actually been trying to do this, but halfheartedly with sterilized methods that end up encouraging a carry trade that exports the inflation to emerging nations.

    But now we finally started to see an upturn in bank lending in December that had its predictable effect on inflation starting in Q1. It's still below the Fed's target, but for how long?
    Jun 16 04:12 AM | 3 Likes Like |Link to Comment
  • Gold Rebounds, And It Just Might Continue [View article]
    Well, if you look at the WGC report for Q1, you will see that jewelry demand in China vastly outweighs bars and coins, so it is all the Grandma Chins who are buying most of the retail Chinese gold.

    The speculators hoping to make a mint of money weren't and aren't buying gold. They bought mainly real estate, hypothecated it and bought more and now they can't get rid of it, just like in the US in 2008.
    Jun 16 03:56 AM | 1 Like Like |Link to Comment
  • Tesla Is Stuck In Neutral [View article]
    I wouldn't expect Elon Musk to buy any more shares of Tesla for his personal account. He's already up to his eyeballs in debt (to Goldman Sachs for no less than $275 million) for the shares he already owns to maintain controlling interest in Tesla. If interest rates rise substantially he may have to sell part of his holdings despite his pledge to be "the last one to sell." Fortunately for him, on paper he's a billionaire, but even billionaires run short of cash to pay interest every now and then.

    Assuming inflation remains low, I don't believe the Fed will raise interest rates for years. However, that's a big assumption. Oil has risen above $100 per barrel (WTI price), and gold is fast recovering from its recent drop. Other commodities have also risen substantially this year. Bank lending has increased since December and has had the predictable effect. The Fed could curtail this lending, but they actually want higher inflation than we've had up to now.
    Jun 16 03:41 AM | 3 Likes Like |Link to Comment
  • Tesla Is Stuck In Neutral [View article]
    Simple. Tesla had its high in early March, has not outperformed the market since, and has not responded to the latest good news: open sourcing of patents and deliveries of the first right hand drive Model S cars to UK, thus opening up another important market.

    Maybe it yet will. But OTOH, it appears that investors have turned away temporarily from such high-risk ventures as Tesla to hopefully more stable companies such as (KO) and (MCD).

    As I noted above, investors focused only on earnings should look elsewhere than (TSLA) since the company needs to reinvest all its cash flow for the foreseeable future. They will be building their first gigafactory over the next 10 quarters or so, a very cash-intensive operation. And the first gigafactory will only be the start of an exceedingly ambitious build-out if the company hopes to reach the size of the major players in the automotive market. It will take 20 gigafactories to reach the production capacity of Toyota, and Toyota is only about one tenth of the capacity of the entire ICE auto industry, so the entire industry will need about 200 gigafactories. And of course the rest of the company needs to be built out to the same scale.
    Jun 16 03:17 AM | 1 Like Like |Link to Comment
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