Seeking Alpha

Mark Bruns

View as an RSS Feed
View Mark Bruns' Comments BY TICKER:
Latest  |  Highest rated
  • PCEF: How Marginal CEF Investors Can Avoid Being 'Gamed' [View article]
    I am not sure that I understand the benefit of PCEF -- it seems that the one big flaw in PCEF is the additional drag from an additional 1.56% expense ratio ... it is not impossible, but as a general rule, it is really tough to overcome an additional percent and a half of expense. In other words, I am not convinced that PCEF's active approach to picking CEFs is sufficient to beat the 1.5% expense ratio.

    It really important to adjust yields factoring in distributions. There are different ways to do this -- the simplest method [appropriate for quick, short-term analysis] is to simply subtract dividends from market price.

    From February 19, 2010 until April 24, 2010, the cumulative rate of return (factoring in dividends) for PCEF is 17.31%. During the same period, the cumulative rate of return (factoring in dividends) for ADX is 20.65%. It is possible to obtain the price data and dividend data from Yahoo or a similar source.



    In spite of the slightly increasing discount, when distributions are factored in, the market price of ADX has slightly outpaced the Vangaurd S&P Index Fund over the last decade or so. If the discount actually continues to improve [like it has in the last couple years], the index-beating performance will likely continue.

    The main characteristic of ADX is low expense ratio of 0.55% and a very basic, very conservative portfolio that favors companies with a low price/earnings and price/book value. There those who would appreciate a fund such as ADX with a conservative, low-turnover investment style and a stable 6% distribution. ADX suffers from a lack of flashiness and excitement and a bunch of hand-waving magic, which is not entirely a bad thing in an investment. ADX does not have years with miraculously high returns or years where it disastrously underperforms the DJIA or S&P 500. It appeals to a retail buy-and-hold investors who do not want to spend too much time actively managing their stock market accounts; over the last decade there are fewer and fewer of those investors so the discount has widened gradually -- it is likely that the discount would shrink if we'd see the retail investor return to the world of stock investing.

    If the ADX discount persists, we will see a continued authorization of share buybacks -- if nothing else, this provides a bit of a ceiling on the level of the discount. Over time, this should result in a gradual reduction of the discounts. Since the buybacks can be done in light of current instantaneous NAV information, the buybacks essentially provides the fund manager with a means to incrementally increase returns by buying more aggressively on any temporary market overreactions in the ADX market price.
    Apr 24, 2012. 08:14 PM | 2 Likes Like |Link to Comment
  • IMF chief Lagarde has shown her political chops, netting enough funds to bring the EU firewall north of $1T, but this only encourages elites in the EMU to persist imposing crushing austerity on Club Med (with France sliding into the group), writes Ambrose Evans-Pritchard. Hollande at least talks about challenging this "economic suicide" - whether he can pull it off is another question.  [View news story]
    I think Mike Maher is right on target ... for both sides of the Atlantic ... probably the entire world! We also have plenty of people / politicians [in both Parties] in America who do not believe that there are real structural issues in the economy driven by a variety of government distortions that are so institutionalized we take them for granted.

    These folks want to believe in Santa Claus or the Easter Bunny -- they want to believe that everything's been fixed or is healing magically and this is ONLY a matter of providing liquidity and targeted bailouts. Without growth, the situation everywhere starts turning really bleak and stagnant, with the likelihood that things eventually get pushed to radical political extremes where the outcome is significantly worse than bleak.

    The only way to get growth is with at least a 25% reduction in public spending -- that means much more judicious and cost-appropriate regulation, less bureaucracy, fewer entitlements, a radically simpler tax system [without rebates/subsidies/dist... for favored private spending] to minimize the enormous deadweight losses of the current system that favored by lobbyists and political rent-seekers of all stripes.
    Apr 22, 2012. 09:13 PM | 2 Likes Like |Link to Comment
  • Don't blame CEO Stephen Elop for Nokia's (NOK) woes, says Juuso Myllyrinne. The problem lies in an ancient engineer-dominated culture that obsessed over hardware while failing to appreciate the need for an appealing, unified software ecosystem that consumers and developers could get behind. It's worth noting many of those engineers aren't happy with Elop.  [View news story]
    Use of the adjective "ancient" illustrates how emotional and biased that this critique of hardware engineers is. The effective result of Nokia's push to move to too rapidly to a software culture is the completely embarrassing software glitch that accompanied the Lumia launch. That software glitch shows that Nokia's cultural shift has been entirely mismanaged; problems of that magnitude simply do not fall through the cracks without someone seeing the problem.

    It's tough to say exactly what happened without having been on the inside ... but in all likelihood, there were people [probably engineers and engineering managers with a hardware background] who were not at all happy with what they were seeing and pressed for a slower, more prudent launch. Of course, software folks live in a half-baked beta world -- they always believe that it's easy to push out another software correction so they pressed to go ahead. Elop and other members of top management chose to discredit the "ancient hardware engineers," to shoot the messenger and to forge boldly ahead with expensive launch in spite of the software issues.

    Elop signed up to be the CEO -- regardless of what happens, the buck stops with Elop. Plenty of blame belongs on the sholders of Mr. Elop.
    Apr 16, 2012. 03:46 PM | Likes Like |Link to Comment
  • Abu Dhabi National Energy sells off its stake in Tesla Motors (TSLA -2.1%), according to reports. The state-owned utility company had held close to 7% of Tesla's shares. [View news story]
    It is sort of old news, but it's still relevant because it's still the 800-lb gorilla dominating the price movement in TSLA.

    The market is still trying to digest the impact of that many shares. It will be a lot tougher now to squeeze the shorts, but maybe not impossible if the buyers step in ... so far there hasn't been any heavy buying; there hasn't been a significant rebound. The buying we've seen looks like somebody has been trying to maintain levels in a stair-step fashion ... first about 35.25 last week, then this morning at about 33.50 in an attempt to keep the stock from falling too rapidly ... it's as if whoever is responsible to completely exiting the Abu Dhabi position is trying to exit as gracefully as possible as they let TSLA find a new level ... and along the way, other TSLA owners have been selling.

    UNTIL there is significant insider buying to offset the large amount of insider selling, we know that insiders don't want to put their cash back to work in TSLA shares and/or they believe that TSLA could drift lower. Given the glowing reports that have been flowing from Tesla over the past month, this would seem to be an excellent place for some heavy-duty insider buying or additional buying by the TSLA bulls [if they still have any money left to spend]-- TSLA should be really undervalued at these levels, right? The absence of insider buying means that the full digestion/indigestion of the Abu Dhabi stake is still very relevant.
    Apr 9, 2012. 02:05 PM | Likes Like |Link to Comment
  • "The economy is getting stronger all the time," Jamie Dimon tells CNBC, "I believe the threat of a double dip recession is behind us." Of China, he says the country will see a soft landing, disagreeing with his own analyst who last week said it's not a debate anymore, the country is already experiencing a hard landing. Shares reflexively move a bit off session lows, S&P -0.8%.  [View news story]
    HOLD your cards, we may have Bingo! ... we've all played the game before during teleconferences, speeches ...the game: Bullshit Bingo ... how many items on this list of "persausion tools" can you find in Jamie Dimon's interview? For that matter, it's a useful list to keep in mind for any guest on CNBC or any "expert" interview, speech or testimony that you hear anywhere where the questioners aren't necessarily all that bright (e.g. Congress).

    Perhaps I'm wrong ... but my take on CNBC is that CNBC tries to interview people who have previously established credibility (i.e. "has beens"), but NOBODY ever agrees to go on CNBC unless they have they have their manure spreader full of polluted stuff they don't want and they are anxious to unload some toxic waste that might not be the best fertilizer on someone else's field.
    Mar 28, 2012. 03:41 PM | 3 Likes Like |Link to Comment
  • Cramer's Lightning Round - Mattress Stocks Are Hot As A Pistol (3/19/12) [View article]
    Yes, I am a big fan of Ian and Joe ... I think it's worth studying their record and attempting to appreciate that insight. You are right, one cannot hope to replicate it or learn it ... but it's still a great story for anyone who's a fan of value investing!

    But generational turnovers happen, so there are very real reasons for doubting Leucadia's prospects for the future [especially given the turnover in assets in the last year, Ian's sales, etc, etc]. I don't mean to downplay Ian's sales at all -- it would be much more re-assuring if those sales weren't there, but I could certainly understand and support an owner/chairman's desire to withdraw capital to pursue other interests in a different stage in life. Even with those sales, Ian still owns 11.5% of Leucadia -- which is still a pretty significant stake in my book; hardly a complete exodus [at least not according the data I'm looking at].

    The gist of my comment is that I'm still a follower of Leucadia and I still might be looking for reasons to buy on dips ... but caution is in order; it's not Ian's and Joe's Leucadia. I was not actually long, either before when I made my first LUK comment or now. But I did have a tiny call option position when I posted the comment, which I've added to after March 22nd and it's still a tiny position ... still only calls.
    Mar 27, 2012. 07:47 PM | 1 Like Like |Link to Comment
  • Mar. Richmond Fed Mfg. Survey: -13, to 7 (above 0 = growth). Shipments -23 to 2, new orders -10 to 11, jobs -7 to 6.  [View news story]
    It is a complicated story. If your time horizon is on the order of decades, I think you have to look at trends that are decades long ... if you're time horizon is much shorter, then maybe there's no reason for you to invest in green bananas.

    If you horizon is a relatively long-term one, you have to factor in the unprecedented growth in the money supply ... every weapon in the monetary policy arsenal has been fired and the Chairman of the Federal Reserve has reiterated that the Fed will keep firing ... ordinarily, this kind of expansion should have been enough to produce hyper-inflation ... except that demand and growth are so anemic that the actual rates of inflation and nominal increase in asset values has been underwhelming, if not demoralizing. Monetary policy can be used to put a bandaid on a recession owie and the changes in levels of available cash/liquidity provide either an ice-pack / hot water bottle to an otherwise healthy economy -- monetary policy cannot fix things that are broken structurally.

    In order to examine what is broken structurally in terms of growth, innovation, drivers of productivity and new enterprise, you have to factor in the fact that government now represents 40% of GDP and you also have to factor in that there are those who think that the economy needs still more regulations, still more taxes, still bigger bets on stupid investments that have not worked such as housing, education, green energy, clean technology. The long term impact of growth in government is that more and more and more intellectual capital is dedicated to the deadweight loss of government -- it's not limited to bureaucrats; plenty of private sector tails wag in sympathy with the Big Government dog. There's no end to the list of people who spend at least part of their day optimizing something for Big Government consumption -- lobbying for advantages in regulations, contracts, subsidies, tax incentives, government loans; special interest groups and PR campaigns crafted for stakeholders and advantages in political campaigns; tax lawyers, tax accountants, tax advisers and even tax criminals working overtime to optimize tax treatment; ventures/investment companies created specifically for government loan/subsidy programs or for tax avoidance.

    In this environment, the intuition of the prudent business owner with a long-term investment horizon is to sit on cash, to resist placing too many new orders, to err on the side of caution in hiring, to avoid developing new enterprises or ventures ... it's a matter of keeping powder dry AND away from the $6T gorilla. The prudent business owner must continue to be abnormally stingy in deploying that cash because the $6T gorilla in loose in the room, has big appetite, believes everything in the room is fair game and has not been the least bit shy about wanting a bigger share of every possible place that cash could get deployed.

    Unless / until it looks like that $6T gorilla can control his appetites and behave himself, we are not going see much of an expansion ... for example, if that gorilla is chastised and humbled on Nov 6th, then it will be more likely that America is not going to start looking like Zimbabwe and we might be able to move forward. Unless a regime change in November becomes more likely, it's fair to predict that we can expect more of what we have seen in the last 3 1/2 years ... we are just one event away from the tension uncoiling and volatility breaking out again.

    The capitulation we have seen in the traded volatility funds is not necessarily a bullish signal ... it could be ... or it might be a signal of numbness from an overdose on cheap money and stress from being raped by the $6T gorilla. I am not at all sure about the best way to trade the "bubble" that has formed on faith in government ... there is no historical precedent for the failed academic theory that has been implemented in our monetary policy AND a government that is this badly out-of-control ... except maybe Zimbabwe ...
    Mar 27, 2012. 07:05 PM | Likes Like |Link to Comment
  • Why A Sprint Bankruptcy Is Unlikely [View article]
    My guess is that AAPL would prefer to lend Sprint cash for Sprint to buildout it's network ... AAPL would probably structure the debt deal with an option to buy [in case someone like Amazon came along] ... of course Sprint management understands that there are other interested parties in the shares of Sprint (S) so Sprint management would bargain for favorable terms [if it knows what is best for it].

    The bottom line is that there are several players in this space who either have an interest in making sure that the Sprint company stays functioning as a viable option OR they have an interest in acquiring Sprint (S) lock-stock-and-barrel and putting in their own management. Sprint management FINALLY seems to understand who they work for.

    That is why income is not really the driver when it comes to valuing Sprint (S) ... Sprint (S) shares are somewhat like a call option [not exactly, of course, but sort of] ... the shares of Sprint (S) represent the option to control the spectrum and other assets of the Sprint company that Sprint management is HIRED to manage -- if Sprint management can stop behaving like dufuses trying to reshape the company into a copy of VZ or T [so that they can move on to earn the big bucks in their next Chief Something Officer gig] and instead just PATIENTLY minimize costs, serves customers and executes a simple strategy to get the best return possible for shareholders, then Sprint Sprint (S) will work out just fine for Sprint (S) investors AND if that is true, then everything will work a lot better for Sprint management as well.

    Sprint (S) shareholders have nothing to fear but Sprint management itself ... the book value of Sprint (S) drives its value UNLESS management gets in the way and destroys the value that belongs to shareholders of Sprint (S). Sprint (S) is more special situation waiting to either develop into something in five years OR something that would be auctioned off to the likes of AAPL or AMZN or somebody else who was interested.
    Mar 23, 2012. 11:18 PM | 2 Likes Like |Link to Comment
  • Free-Fall Friday: Are There Any Dips Left To Buy? [View article]
    The following link is to an excellent "primer" on exchange-traded notes (ETNs). I would highly recommend the article even for reasonably sophisticated investors who are might already use the ETNs and/or options on ETNs as part of their strategy for managing portfolio risk or constructing trades. It's by Morninstar's ETF Analyst Samuel Lee. The title is "Exchange-Traded Notes Are Worse Than You Think"

    As the title, indicates the article covers some of the basic reasons why the public just can't trust these things very far ... or at all. The material might already be common knowledge to some, but I'd still recommend a quick review. It's a good article -- pertinent to TVIX and recent (March 21, 2012).

    Given the demand for these products, the glaring reality of ETNs being worse that most investors might want to think [as now proven by the TVIX poster-child for bad behavior] is particularly unfortunate. Hopefully, over time more competition in this space [along a few reputational black eyes for firms like Credit Suisse that fail to provide the leadership that they should have provided] will lead to better-performing, lower-expense, more competently managed transparent products that track the VIX futures contracts more closely and generally meet the demand for a relatively simple volatility hedge that walks and quacks like stock.

    That might be too naive ... too much to hope for ... but as John Bogle illustrated with the low-expense Vanguard Index funds, there are probably more than a few ways to offer an index fund/note that is traded on an exchange but is more fair and transparent to shareholders.
    Mar 23, 2012. 06:46 PM | 1 Like Like |Link to Comment
  • Cramer's Lightning Round - Mattress Stocks Are Hot As A Pistol (3/19/12) [View article]
    Normally, I don't pay any attention to Cramer, but if he really said that about Leucadia (LUK), I think it has to be one of the strongest reasons to be long ever. That has to be just about one of the most completely inane comments I've ever heard!

    Luecadia is a holding company [like Berkshire Hathaway is a holding company] ... it's NOT a [just] timber or mining or real estate or beef processing or manufacturing or securities and investment banking company. Leucadia invests in undervalued special situations and occasionally takes large positions in publicly traded stocks; it invests where it believes it has a significant margin of safety; Leucadia invests where its cash provides the liquidity to exploit singular unique opportunities ... not EVERY value situation immediately works out; some never do; some can go badly wrong [and there's no liquid market for an easy exit] ... so, yes, it might be a tad tougher to evaluate and analyze -- but the information ( and thirty-two-year scorecard ( of performance is out there.

    Leucadia is probably not a stock to trade ... so Cramer has no desire to steer anyone toward it because the herd that Cramer wants to manipulate should have its money in stocks that Cramer is trading. Leucadia is a stock to that you want to evaluate VERY CAREFULLY as a potential VERY LONG TERM holding that you would continue to treat as an OWNER [and continue to follow closely ... potentially bailing if the situation changes]. Look at the scorecard (; examine the performance of LUK over the last thirtysome years and compare it with any other investment you want to.

    The SEC annual reports and management's letters to shareholders couldn't be too much easier to understand. There are plenty of reasons to be skeptical of LUK but there many MORE reasons to be skeptical of Bank of America a few weeks ago. I have doubts about the generational turnover in Leucadia; I hope for the best but I urge everyone to exercise caution [and have an exit strategy] if the worst materializes and the successors are not equal to the managers of Leucadia over the last three decades. Generally I am optimistic because I have to assume that the guys who have been good at picking special situations over the last 30 years also will be pretty good at picking the next generation [to runs things for their families, friends after they are not in the picture].
    Mar 20, 2012. 04:15 PM | Likes Like |Link to Comment
  • Hedge Funds Love These 9 Clean Energy Stocks [View article]
    Responsible investors who are interested in these "clean energy" stocks should understand that any hedge fund that is run by any reasonably intelligent trader is to going to turn on a dime and trade in exactly the opposite way ... for example, any stock can be pummeled down by a [very long-term] bull who believes that [in the short- or intermediate-term] the trend is down and sells stock to take profits on the knowledge that the stock is overbought (i.e. the exuberant retail investors are mostly all in) -- when the large bulls take profits, the shorts jump in and follow, capitulation happens and produces plenty of opportunities to buy cheaper later.

    The definition of "hedging" is be long and short; it's a hedge fund manager's second nature reflex to flip long and short positions and to trade the reaction ... the primary requirement of being a smart trader is to NEVER be stupid enough to be philosophically or emotionally committed to a position -- a smart trader knows that he can never afford to believe that someone else doesn't possess information he doesn't have.

    All of this means that if the hedge funds are involved in these stocks [and I believe that the author is right], you should expect to whip-sawed. You can hang on to your position which you'll probably ride down to zero or if you're lucky you'll have a Ballard Power (BLDP) on your hands that has only lost 99% of your capital. You should be ready to take profits in stock and buy puts when the stock advances and puts are cheap when the crowd is exuberant ... that way you are positioned to be able to "grab the falling knives" when the stock falls and to sell your puts when crowd is afraid and collecting its senses.

    The only truly clean energy is NOT USING ENERGY -- the best investment you can make in conservation is to invest in ways that help people think smarter, to waste less ... for example, you might invest in products that help engineers design more efficient products in the virtual realm with CAD/simulation software rather producing / testing physical products any more than necessary. Being ultra-frugal is closest that anyone can get to being "clean." Consuming cleaner means thinking first, then creating something, growing a garden, entertaining yourself ... then consuming information ... then power and nat gas [that are likely plumbed into your home and don't require expending energy to get/deliver energy] ... then fuels that are delivered in pipelines ... then bulk solid commodities that are delivered efficiently by rail ... then competitively produced products that are delivered by large trucks ... then local products and services. Mostly, clean consumption is about THINKING and using only what you really need.

    There is no such thing as zero carbon, no-pollution energy consumption. Energy consumption is about consumption of resources -- you can tell how many resources you are consuming by looking at the cost, even if those resources are primarily spent in the construction, installation and maintenance of energy devices -- do not be fooled into supporting clean energy subsidies or stupid investments in money-losing companies.
    Mar 8, 2012. 01:10 PM | 7 Likes Like |Link to Comment
  • Buffett's Bursting Bubble [View article]
    This is a GREAT article. I heartily agree with the central premise, i.e. that we should appropriately discount how others attempt to spin what Warren Buffett says in interviews for their own purposes.

    The bubble is laughable, even troubling at times. The bubble on Buffett-speak is not necessarily driven by what Warren actually said; although Mr. Buffett has proven that he is probably more savvy than anyone else I can think of when it comes to managing his reputation -- he is not a simpleton, he is not just a shill, he is not that easy to psycho-analyze -- Buffett's reputation management game is significantly deeper than than his investment management game. Among some investors, Mr. Buffett is like the Dalai Lama, the Pope or even "more perfect than God." The bubble on Buffett-speak is based extrapolations, extrapolations of extrapolations and extrapolations of extrapolations of extrapolations of what Mr. Buffett probably said at one point in time.

    There are some "tangent" arguments that might be made from this article ... which are not really directly part of this article, but might be held by some others who agree with it.

    For example, I would disagree with any argument that Berkshire Hathaway (BRK.A, BRK.B) should hold any gold stocks; investors that want a pure gold play can find it pretty easily. As a general rule, the case for gold as a stand-alone investment is FAR overstated ... it's an asset that is held by people who have reasons to be afraid or who have not found ways to manage reel in their emotions. Gold is a hard asset that relatively frightened or pathetic people use to store wealth (i.e. a gold ring is an easy asset to carry). It makes sense for the leaders of poor, developing nations governments to hold gold because lack of economic power basically renders a currency worthless [and it is easier for leaders of poor, developing nations to grab some of the gold when all hell breaks loose]. It might make sense for individuals to have enough gold that one can carry in an emergency. In wealth developed economies, commodity markets and the holdings of industries that use commodities serve as a nation's store of value, i.e. the goldbug's arguments for nations to hold gold are based on the notion of very simple 18th century economies and very simple economies. But as a general rule, it costs money to store and protect gold ... a far better store of productive value would be land, facilities, equipment, proven capacities [ideally in different places, different industries]. As a general rule smart relatively wealthy investors hold hard assets that have productive capacity, e.g. railroads, food companies, power companies, materials companies, proven brands/franchises and other undervalued, under-followed "boring old companies" companies consistently producing positive free cash flow. Other than the gold used as a material for its chemical, metallurgical or electrical properties, gold IS a basically speculative commodity that is overused by people who are too afraid, too greedy ... but one should be cautious about over-generalization -- there are, of course, situations where gold would be held as part of an entire portfolio, as a tool for expediently constructing a hedge, etc.

    I also disagree that it is somehow disingenuous for an investor to invest in something that he views as being more dangerous than a lot of people understand ... it's the same whether we are talking about derivatives or a company like Kraft (KFT) that sells many food products that people should use with much greater moderation than they generally tend to exercise. One can make a pretty solid argument that obesity is a really big problem -- one can also make a pretty solid argument that many food products sold by Kraft ( tend to be used irresponsibly by people can't control their appetites. That does not make Kraft ( a bad company -- it would not be disingenuous for a health nut [who would almost never consume any food products from Kraft] to hold investments in Kraft ( -- even though, there are plenty of simple-minded [and probably not all that asset-rich] people who would regard a health-nut's holding of Kraft with suspicion.
    Mar 7, 2012. 01:14 PM | 5 Likes Like |Link to Comment
  • Tesla Battery Fiasco Shows 'It's Never The Event, It's The Cover-Up' [View article]
    Thanks to everyone for your helpful comments! I particularly enjoyed the angry emotional comments ... those comments, particularly the tendency to make ad hominem attacks, are especially helpful for understanding the highly emotional support for Tesla.

    In case, you missed the point of the article -- the title, the opening paragraph, everything about the article was about what the incident tells us about the maturity of Tesla's management, their tendency to go on PR/legal offensives and their capability for dealing small issues in a manner that builds brand loyalty and increases product knowledge. The article is NOT a discussion about an issue with parasitic charges, what can go wrong with batteries or an owner's responsibility for maintenance. My primary reason for writing the article is that I used to have a passionate interest in warranty management, corrective action and FMEAs -- the article was a way to share knowledge from that past. If I had a "hidden agenda" in writing the article, that agenda was to "stick a fork in the cage" and test the emotional reaction of a rabid "frothing at the mouth" hysterical fanbase. Thanks for helping out with that!

    I am both BULLISH and BEARISH about Tesla (TSLA); that means my trading positions are generally bets against Tesla (TSLA) standing still. In stead of betting on an up or down movement (either a long-term hold or a long-term short) -- I am betting on the extremes and against Tesla standing still. I believe that Tesla will move up and down as it has until after it demonstrated it can maintain positive margins like Toyota [TM] or Tata [TTM] OR the gas is out of the "bubble" like Ballard Power (BLDP), a former media darling and darling of undisciplined believers in any company with a "green" rulebreaking future OR Tesla is dead and gone, like DeLorean. Maybe I'm wrong, but I think Tesla will move up and down; it will oscillate MORE than Toyota, Tata, Honda, GM, Ford.

    I follow Tesla because I am interested in EVs and EV demonstration projects -- generally, I am bearish about EVs; my reasons are probably best describe in a paper by Lee and Lovellette ( ). Not acknowledging the obstacles faced by EVs and mfg'rs of EV technology makes it even more likely that those obstacles will not be addressed. There are plenty of reasons to short Tesla (TSLA) but I would not advocate a pure short -- there might be people/funds with deep enough pockets to do this, but I have tried to explain why think shorting Tesla (TSLA) is a bad idea ( see ).

    When the stock gets expensive, I sell my stock and I add to my inventory of puts; when the stock falls, I buy stock and then sell off puts. I was long until Thursday afternoon; I sold because it felt like the emotion of the push was done (i.e. it seemed as every bull that wanted to jump in had jumped in); as you might imagine, I was plenty nervous that I had sold too soon; basically I got lucky because the Tesla (TSLA) bulls probably should have pushed the stock back to 34.97 again if they really wanted to drive a short squeeze -- but then again, who knows -- maybe the real squeeze is coming ... when the stock went backing into "falling knife" mode, I stopped trying to buy more puts and shifted to buying stock. It's really not a very sophisticated strategy ... a bit more sophisticated than just being long or just being short ... it's a lot like Angry Birds, I just do this for fun!

    Speaking of Angry Birds ... thanks in advance for any extra emotional outbursts that this comment generates. "Acting out" like that in public really does provide the rest of us with some very useful information. I especially enjoy the comments from people who brag about being an owner of a Tesla Roadster ... you guys are just so special, you are an absolute treat!
    Mar 2, 2012. 06:07 PM | 2 Likes Like |Link to Comment
  • After Tesla's 'Bricking' Affair: The Costs Of Hedging 6 Car Makers [View article]
    If you look at the data on implied volatility in option prices ... or the historical volatility in stock prices ... or visually compare the graphs of Tesla (TSLA) to any other stock mentioned in your comparison, you will see that Tesla (TSLA) is a much more volatile and speculative company. Advances and declines of 30% have been ordinary for Tesla (4 big advances, 3 big declines since the IPO in 2010) ... in fact, the implied volatility and historical volatility essentially indicate that an advance or decline for Tesla (TSLA) of 45% to 60% would be quite reasonable to expect. The implied volatility rises as we go toward Jan 2013 and then levels [actually declines a bit] in Jan 2014 ... probably reflects the uncertainty associated with debug, installation, tooling buyoffs, run-at-rate, optimization of the new stamping and assembly equipment.

    Basically, the options markets are not really buying the assertions that there is really sufficient cash and that margins on the production automobiles will be positive -- by contrast, Toyota and the other companies that you mention have a solid record of production launches, positive margins and no uncertainties over cashflow. The market has priced risk in a relatively rational fashion.

    Tesla (TSLA) mismanagement of the bricking fiasco demonstrates that there is more than adequate reason for concern. It's not a battery issue; part of the issue is with parasitic current draws that drain a battery, but the MAIN issue with the "bricking" incident is how Tesla (TSLA) went after the customer rather than resolving the issue with the customer.

    Investors should think about what future customers in the mass market are going to think; those customers are not really going to care at all about the problem; all they look at is the poise of the company in providing the solution -- did the company step up and help OR did the company try to fix the issue in press, blame the customer for irrational fears, a nonsense issue. The MANAGEMENT of bricking fiasco demonstrates that risk was still not adequately priced into Tesla (TSLA) options ... that might be changing, but I still would not call the cost of hedging Tesla "excessive."
    Feb 27, 2012. 09:08 AM | 1 Like Like |Link to Comment
  • Tesla: 6 Reasons Why Put Options Look Undervalued Relative To The Risks [View article]
    I still like your short squeeze article ... it is still extremely relevant, a very useful article on the stock [as are your comments]. The point is well-taken -- a short position in Tesla is just not prudent.

    I would love to be proven wrong; I am fascinated by companies like Tesla, but I have to be bearish about EVs in general -- specifically, I am bearish, relative to what most reporters, bloggers, politicians and analysts believe, about EVs in the next 10 or 25 years -- it would appear that a lot of people have not looked at history or imagine that history does not apply. They underestimate the difficulty of the undertaking; they have not asked whether the "view is worth the climb" or whether the world really needs EVs. For example, do the believers in EV realize that EVs were commercially available and basically preferred over gasoline-powered cars before 1900. Do they understand that the first EVs were around in early 1800s?

    EVs had a huge first mover advantage, but there are both logistical and thermodynamic reasons why converting fuel to mechanical energy makes a lot of sense in an automobile [especially after the expertise and infrastructure is in place and entrenched for internal combustion engines].
    Feb 24, 2012. 11:03 AM | 1 Like Like |Link to Comment