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David at Imperial Beach

 
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  • Tesla: A Valuation Model For A High Gross Profit Automaker [View article]
    The Tesla Model S gets incremental improvements whenever they manage to find a better way of doing things. These improvements can be generated from customer requests, software R&D, R&D into new advanced features such as autopilot, warranty part examinations, production process streamlining and redesign, redesign to reduce or mitigate accidents... In short, the team is constantly trying to improve the Model S. It's not a static target like other automaker's models, that get replaced with sweeping changes every few years, but somehow always seem to have the same old problems they've always had because the management never bothers to actually learn anything.
    Aug 27 11:59 AM | 2 Likes Like |Link to Comment
  • How Will A Surging Dollar Affect Your Investments? [View article]
    This statement is very insightful:

    <<We have mentioned several times before that a rise in interest rates will create challenges for traditional blue-chip dividend stocks. Investors who would prefer to have their capital in interest-bearing securities such as Treasury bonds or CDs have been forced to buy dividend stocks. This is because the yields on rate-sensitive income investments have just been way too low.

    With interest rates already starting to tick higher, these investors now have the option of moving back out of dividend stocks and into CDs and other fixed-income securities.>>

    Don't look for any permanent strength in the dollar, especially compared to precious metals. Demand will pick up again in the precious metals. In particular, seasonal demand for gold is just around the corner in the remainder of the second half. But in the intermediate term, flat gold prices have heavily impacted the availability of gold for recycling. It's down significantly from 316 tonnes in Q1 to only 263 tonnes in Q2. Gold from miners is up, but that won't last more than a few quarters before they run out of gold that can be produced at $1300 an ounce. Already they are cherry picking and have closed down less profitable mines and are concentrating on only the richest ores. Once those ores run out, they must have a price increase in order to go after the lesser ores. No price increase = dropoff in production.

    Turning to the dollar, strength is mostly in the headlines. If you read the bodies of the economic reports there's still a lot of weakness. The Fed will have no trouble at all justifying a very prolonged period of ZIRP if that's what they choose to do, and since jawboning and speculating in public is working so well, they might as well pump that well dry before moving on to their first rate hike.
    Aug 27 11:31 AM | 1 Like Like |Link to Comment
  • There's A Lot More Fuel In The Tank Than You Think [View article]
    One of the piranha once again has the first comment and takes the conversation off into Never-Neverland. Yes, the author should have mentioned that Tesla itself killed the Rav4 EV. No, the relationship did not go sour as speculated by Bloomberg and others. From the horse's mouth (Elon Musk) we learn that the parting was amiable and mutually agreeable. Thus, the speculators were in error (once again).

    The author should also have mentioned the most important strategic partnership of all, (NASDAQ:SCTY). How he could miss it when he was searching around for additional sources of revenue I have no idea, but Tesla plans to sell about 15GWh per year of stationary storage through its sister organization run by the cousins of Elon Musk.

    The article is a rehash and a disappointment because it offered nothing new.
    Aug 27 11:15 AM | 3 Likes Like |Link to Comment
  • Is Google Play Really Populated With Fake Apps? [View article]
    "Google announced in June that it will integrate Samsung's Knox Security technology into Android." I don't see any feature of Knox that would protect a user from a rogue app or Trojan horse. If it really is true that Android stores are full of untrustworthy apps, the only remedy is to vet them and purge the culprits. But I'm also not seeing the evidence that the alarmist news stories are true.
    Aug 26 04:58 PM | Likes Like |Link to Comment
  • Franco Nevada: The Valuation Dilemma [View article]
    I'd also like to express my appreciation for the article. I agree that the "optionality" of (NYSE:FNV) is very valuable, but I don't really have a clear idea of how to evaluate just how valuable it is or how long an investor would need to wait to see that optionality manifest into wealth.

    I also want to comment on a few specific statements:

    "... unless we see a sharp decline in global gold production this outlook [the company will be worth more in 20 years than it is today], when applied to Franco Nevada, is probably accurate." We probably will see a sharp decline in global gold production at some point in the future, almost certainly within 20 years. This last quarter we saw record sales of gold by the miners, but it included 50 tonnes of hedged gold. Mine production was down from previous quarters. We may have already passed the point of "peak gold". Right now, miners are knowingly concentrating on their richest ores in an attempt to maintain profitability at $1300 an ounce. Of course, this means that they are borrowing easy profits from the future; so we can expect that when these rich ores run out in the not too distant future, they will have to cut back on production, perhaps drastically, until the price rises enough to allow them to open up less profitable mines.

    But the higher gold prices will also benefit FNV, so even if it receives fewer ounces because of poorer quality ores in the future, it will be able to sell those ounces for much higher prices. In other words, a cutback in production will not necessarily be bad for FNV because such a cutback will also reduce supply and increase the price to compensate.

    "If executives at companies such as Detour Gold, Barrick Gold (NYSE:ABX), Kirkland Lake Gold (OTCPK:KGILF), and literally hundreds of other partners fail to execute Franco Nevada suffers." True enough, but this really is largely under the control of FNV management, and part of what makes the company unique. FNV is uniquely qualified to evaluate the management and the finances and other resources of each mine they choose to do a deal with, and they are apparently responsible enough to leave enough profits on the table to allow the miners to make money as well. If a royalty company is not able to do that consistently, they will not be successful, no matter how good their business model is.

    "... gold investors, ... wish to own gold as an asset that doesn't have counterparty risk." Gold investors should own gold bullion (coins or bars) before they consider investing in gold equities. Owning gold equities, options or futures does not substitute for owning gold. If you simply must stray, then buy silver bullion, or platinum or palladium bullion. Only bullion is free of counterparty risk. Only bullion is free of currency risk. Only bullion has intrinsic value. Read the definition of intrinsic before you let anybody tell you about the "intrinsic" value of an equity. They obviously have not reviewed their Webster's.
    Aug 26 04:30 PM | Likes Like |Link to Comment
  • Ford Gets First 'Very Juicy' Rating: We Love The New F-150 And Initiate With A $28.50 Price Target [View article]
    It should be noted by anyone interested in Ford, and especially those writing investment articles about it that the F-150 and the Mustang are far from the only new models introduced by FoMoCo in 2014. They are actually launching 16 in the US market and 23 worldwide. It is a great disservice to investors to value an entire forest based on only the most popular tree. One would hope that professionals would do a more thorough job than that. Objectivity would also be highly desirable. The last thing we need on Seeking Alpha is yet another glowing tout piece on FoMoCo.
    Aug 26 12:28 PM | 5 Likes Like |Link to Comment
  • Ford Gets First 'Very Juicy' Rating: We Love The New F-150 And Initiate With A $28.50 Price Target [View article]
    (NASDAQ:CENX) has been on a tear recently. Somebody likes it, a lot.
    Aug 26 12:16 PM | Likes Like |Link to Comment
  • Ford Gets First 'Very Juicy' Rating: We Love The New F-150 And Initiate With A $28.50 Price Target [View article]
    "Ford has the added class of having had survived the housing bubble financial crisis without the help of you - the American taxpayer." HOWEVER, that's not to say that Ford didn't have its hand out at the Federal trough when it came time to dishing out porkbarrel. Ford did avail itself of the same alternative energy loan program as Tesla, and Tesla paid their loan off, but Ford has not yet done so.
    Aug 26 12:14 PM | 2 Likes Like |Link to Comment
  • Mobileye pops after underwriters launch coverage [View news story]
    Mobileye uses the ARM instruction set in their EyeQ SoC. This is positive for ARM Holdings and negative for Intel.

    Mobileye may have a near-monopoly right now, but I suspect this is too critical a technology to go unchallenged by competitors such as Intel.
    Aug 26 12:08 PM | 1 Like Like |Link to Comment
  • Gold: More Hawkish Fed Minutes Could Create Headwinds [View article]
    There is very little likelihood of interest rate hikes anywhere near as robust as Bloomberg is predicting. The Fed is going to be very cautious and raise rates only a 1/4 percent at a time, or perhaps even less. And they will leave plenty of time between hikes to gauge the effects of each hike before proceeding further. Despite jawboning from some members of the FOMC, the Fed as a whole is well aware that all previous attempts at ending QE were negatively received. They also know without being told that the federal debt constrains them to at most modest nominal rates. Anything more and they precipitate a budget crisis with severe implications for the economy. Rates can be expected to remain below market, and perhaps even negative for the foreseeable future.
    Aug 26 11:40 AM | Likes Like |Link to Comment
  • The Silver-Gold Correlation Fell To A New Low [View article]
    I don't actually expect higher interest rates to have a negative effect on gold and silver. In the first place, the Fed indicates that they intend to keep the hikes very mild and the rates below market for a long time once they finally do raise rates. Secondly, the federal debt is a very big obstacle for any rate hike of substance. A substantial rate hike would provoke a budgetary crisis, and the Fed can't expect the economy to just tool along unperturbed if that happens. Third, both stocks and bonds are heavily over-priced while gold and silver are heavily discounted. When higher rates finally do get here, stocks and bonds will be affected at least as much, and will have much more to lose than either gold or silver.

    Unfortunately, we don't yet have higher rates. We actually have falling rates, and falling rates are very profitable for both stocks and bonds. Thus, silver and gold aren't attracting many investors yet. Furthermore, the economic "recovery" isn't generating any increased industrial activity that would boost demand for silver.
    Aug 26 11:17 AM | Likes Like |Link to Comment
  • A Simple Screening Technique To Improve Returns [View article]
    So far as I know, all the stock screeners available to me use a Boolean conjunction of whatever criteria you pick. If you tell the screener you want to see stocks with PEs under 15 and dividend yield greater than 3%, then you get a list of stocks that meet both criteria simultaneously (the intersection of the two sets). It's built into the logic of the screener; you don't have to do anything to choose that mode of operation, and in fact, there is no other option. No screener I'm familiar with uses averages of rankings (percentiles) as you allege that they do.
    Aug 26 11:03 AM | Likes Like |Link to Comment
  • Under What Assumptions Is Tesla Trading At Fair Value? [View article]
    "Under What Assumptions Is Tesla Trading At Fair Value?" Certainly not under any assumptions of EPS growth in the next decade or two. Tesla is explicit that they intend to reinvest substantially all of their cash flow into growth of the business. That is their primary means of capital acquisition. And they have at least a decade and a half, probably more like two full decades of growing to do in order to get to the same size as other major auto manufacturers, let alone enter a sky's-the-limit virgin industry like stationary energy storage.

    I think it's fair to project CAGR of 80-100% growth in units sold over the next decade. But that won't translate to consistent profitability over the same period. Tesla investors need to adopt the attitude of Amazon investors, that it's growth that counts, not profits. Tesla has much more justification than Amazon for sacrificing profits for growth. They are, in fact, growing a moat, whereas Amazon is not.
    Aug 26 10:34 AM | 2 Likes Like |Link to Comment
  • Market Outlook For The Coming Months: Stocks, Bonds And Gold [View article]
    Deflation in the euro can occur in conjunction with inflation in other currencies. It is a fallacy to think otherwise. American investors are by default subject to dollar currency risk, not euro currency risk. The dollar has been experiencing mild inflation this year, even while the euro has been, at best, flat.
    Aug 26 10:06 AM | Likes Like |Link to Comment
  • Report: China considering large investment in electric-car charging technology [View news story]
    What's fair about that? The Republicans and Democrats antagonized each other to the detriment of the country for at least a generation before Obama got into power. And Obama's "victory" is a disaster for the US healthcare system. His attempt to claim victory in the face of this horrible snafu is entirely unmerited, to say the least. Both parties long ago lost any sense of being sent to WDC to work for the best interests of ALL the people of the United States of America. I say through all the bums out and get a fresh batch. I refuse to waste my vote on a Republican or a Democrat any more.
    Aug 26 09:46 AM | Likes Like |Link to Comment
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