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  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    Personal net worth, Musk beats Jobs by about $3 billion, currently. But, I think Jobs has Musk beat at this point in time as far as Apple's market cap ($581 billion) , cash hoard ($162 billion) and assets, versus Musk's endeavors. In terms of overall power and wealth, personal and corporate, I think Musk has quite a ways to go yet to over come Jobs legacy.

    Whether Tesla is profitable at this point in time is debatable. The story is still being written thanks to the lease/sale program and the resale guarantee.
    Jul 25 09:25 AM | Likes Like |Link to Comment
  • Linn Energy Is Set To Grow [View article]
    There are primers on MLPs which explain how performance is measured and why GAAP can distort actual economic reality. Here's a link:

    Wells Fargo continues to include inaccuracies in its primer. Here is what it says on page 47:

    "Depreciation and amortization expense versus maintenance capital expenditure.
    Per accounting rules, assets are depreciated over their useful lives as defined by GAAP. For example, pipeline assets are generally depreciated over 35 years. In reality, many pipelines are able to operate well beyond
    their depreciable lives with proper maintenance spending. Consequently, distributable cash flow (which deducts maintenance capex) should
    be higher than earnings (which deduct depreciation expense)."

    This makes it sound like GAAP is at fault here with the useful life being inaccurate "as defined by GAAP". And it appears a CPA has helped put this prime together, so that person should know better than to fault GAAP. I have to scratch my head on this as to how this can get past a CPA.

    GAAP does not specify useful lives for assets. Tax accounting does, but GAAP does not. I challenge anyone to show me where GAAP specifies the time period over which to depreciate pipelines. The length of time that pipelines may be depreciated under GAAP is left up to a company's management, to the best of my knowledge.

    "GAAP requires only that the method result in the allocation of an asset's cost over the asset's life in a systematic and rational manner." (Page 547, Chapter 11: Depreciation, Impairments, and Depletion, Intermediate Accounting, 13th edition, 2010, Keiso, Weygandt, and Warfield)

    If GAAP depreciation, depletion, or amortization is excessive, for whatever reason, and I am being told that is the case in the E&P industry, that is a management miscalculation and error in judgment, IMO, not related to GAAP principles/standards whatsoever. This doesn't make the GAAP earnings number any better, but it does explain who is responsible for the earnings distortion created, and it isn't GAAP principles or standards.

    In addition, when the estimate of an asset's life changes, such as for a pipeline or oil or gas reserves, under GAAP, a company is supposed to correct the miscalculation prospectively, and make adjustments in annual depreciation or depletion charges going forward.

    Because the definitions of Maintenance Cap Ex vary widely by company, a lot of leeway is left for companies to "manage" cash flow, just like they try to do with earnings under GAAP. The results are that Distributable Cash Flow is a highly subjective mathematical exercise, IMO, and we are dependent upon the reporting company for the accuracy of the reported DCF. That isn't a good thing, IMO.
    Jul 24 06:32 PM | Likes Like |Link to Comment
  • SEC to adopt money fund regulations [View news story]
    I'll simply keep my cash in my brokerage account. I assume that cash is not in a money market fund but in the brokerage account, ready to be invested at any time. Too bad, I had somewhere besides timed deposits (CDs, T bills) to put idle cash and earn some interest and be able to pull it out at anytime. Now that's gone. So am I. Hasta la vista, Baby.

    Sounds to me like Banks and savings and loans have a new way to acquire customer funds now that money markets will not be stable. They couldn't compete with money markets before. They should be able to now, and the money will be FDIC or FSLIC insured. USAA here I come. (Bank plus brokerage) Fidelity, I may transfer ALL my money to USAA, since I can transfer money from my savings account which is FDIC insured to my brokerage that way. You guys may have shot yourself in the foot.
    Jul 23 04:07 PM | Likes Like |Link to Comment
  • SEC to adopt money fund regulations [View news story]
    Oh BS. I can sell stocks in times of tumult, but not money market funds, without being penalized. What a crock.
    Jul 23 02:33 AM | 4 Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    Blue Ridge,

    I have been negative on Tesla on your article because Tesla is recognizing revenues and net income before it has been earned (non-GAAP). It's never a good idea to do that. I've also discussed the possibility of the resale value guarantee not holding up due to potential weaknesses of the Model S.

    However, to keep my own thinking balanced (not a Tesla proselyte nor basher) keep in mind that GAAP isn't perfect and has weaknesses of its own, resulting in material distortions of economic reality in some situations, two of those being: (1) MLPs who use derivatives to hedge their oil and gas production creates material GAAP distortions and whose GAAP depletion is at best an educated guess, and (2) the equity REIT industry which uses alternative measures of cash flow and profitability due to GAAP failing to mark Real Estate Property to FMV and educated guesses, at best, of depreciation of Real Property. Such uncertainties make GAAP results doubtful at best and absolutely wrong at worst.

    In Tesla's case, if the resale value of the Tesla holds up and most of the lease/sale transactions result in actual sales, in hind sight the current GAAP results will look like distortions of economic reality. It takes time for a startup to turn profitable. They have positive operating cash flow. Something to keep in mind.
    Jul 19 07:17 PM | 2 Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]

    I call it being a "cowboy". Yippie I O Kiyay. I do hope Tesla succeeds, but their financial disclosure has lacked something to be desired up to this point.
    Jul 18 02:36 PM | Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    I should have said that it is 600 plus miles from Dallas to Big Bend. It's over 1200 miles round trip. With no supercharger stations planned in West Texas any time soon, us Texans are simply out of luck with a Model S.

    Maybe they'll locate the Gigafactory in Dallas or San Antonio. That should speed up stations in Texas, else it will be tons of batteries with "no particular place to go", not good PR.

    At least you can still dance to Chuck Berry no matter where you are, eh?
    Jul 18 02:11 PM | Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    The Supercharger network still isn't sufficient for one to take a trip from Dallas, TX to Oregon. There is a 448 mile gap between Dallas, TX and Salina, KS. Then there is a 840 mile gap between Nephi, UT and Grants Pass, OR. Taking a long trip via a Model S still isn't viable in a large part of the country.

    A vacation from Dallas, TX to Big Bend National Park, TX is 600 plus miles. Not doable in a Model S. Lots of places in TX you can't travel via a Model S. Lots more super charger stations needed. The near term planned stations don't appear to support a trip from Dallas to west Texas, such as Big Bend. A trip to New Mexico from Dallas would be out of the question. Better not sell your ICE vehicle just yet.
    Jul 18 12:53 PM | 1 Like Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    "Unless and until Tesla takes a warranty charge to address the issue, it's not a financial concern. "

    Oh, that's like the non-GAAP numbers; Tesla regards the non-GAAP numbers as more significant than GAAP, so they violated SEC rules and gave the non-GAAP numbers greater significance in their shareholder newsletters, until the SEC ordered them to give GAAP equal or greater weight in their Dec. 5, 2013 communication to Tesla.

    When questioned about the greater weight being given to non-GAAP financial data, here is what Tesla had to say:

    “We comply fully with all legal obligations regarding each earnings release and 10Q,” Tesla spokeswoman Elizabeth Jarvis-Shean said in an e-mail. When I asked her to explain how the presentation in last week’s release complied with the SEC’s rules, she declined."

    Then the SEC orders Tesla to change their shareholder newsletter to give equal or greater weight to GAAP numbers in their December 5, 2013 comments to Tesla:

    "11. We note the subheading of your third quarter shareholder letter cites non-GAAP gross margin and net income without also citing the most directly comparable GAAP measures. Please revise to present, with equal or greater prominence, results on a GAAP basis throughout your press releases. Refer to Item 2.02 of Form 8-K and Item 10(e)(1)(i)(NYSE:A) of Regulation S-K.”

    The SEC comments also directed Tesla to be more transparent in their SEC reporting.

    Tesla didn't consider the violation as a violation. They disregarded the rules. Then the SEC ordered them to change their shareholder newsletter reporting of their financial data. Their cash flow numbers had to be restated for 2011 and 2012, and their internal control over financial reporting was deemed "ineffective" by their auditors in 2012 and part of 2013.

    Given the questionable accounting acumen of Tesla, I would not automatically assume they are following sound warranty accrual practices. Your statement lacks credibility because Tesla appears to lack basic skills in accounting and financial disclosure. It's very plausible they may be under stating their warranty expenses. They are also overstating their non-GAAP revenues and net income. By how much is not currently known, since none of the 3 year contracts on their leased vehicles has expired, but it is clear they are overstating their revenues and net income in their non-GAAP numbers. Whether that will be a material mount is yet unknown.

    However, the weight of the car, the very significant torque on the drivetrain, as well as the stress the deceleration of the vehicle places on the drivetrain makes me think that the premature wearing out of the drivetrain may be a problem Tesla has to address and a potential reason for the resale value not holding up at the end of 3 years of use. If the drivetrain has to be replaced during the warranty period, it will also need to be replaced AFTER the warranty period expires. FACT: Tesla is recording a material portion of its revenue before it is earned with the non-GAAP numbers, and it may in fact never be actually revenue, and is using highly aggressive accounting.
    Jul 17 11:44 PM | 4 Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    "Oh, by the way, Consumer Reports also says that the Tesla Model S continues to have the highest customer satisfaction of any car. Not just any -electric- car, but any car. Period."

    Here is what Edmunds had to say about replacing the drivetrains:
    "If I had to replace the engine on my car twice — hell, even once — I would swear off the brand forever. But after talking it over with some colleagues, I was reminded that the people who buy Teslas aren't just buying basic transportation. They are early adopters and willing beta testers of a shiny new piece of tech."

    Most Tesla owners have a religious fervor for the technology and the company. Even if the "thing" can only do 50 mph in a freaking snowstorm with no heat in order to arrive at the next charging station, the owner is still adamant that it's the best thing since sliced bread. Replacing drivetrains infinitum is no different to such "folks". So much for the consumer satisfaction surveys. As a result of understanding the average Tesla owner psyche, I have to largely discount the surveys.

    As I stated, I don't know how big a problem the drivetrain is. However, I am not a beta tester. After hearing of the drivetrain and tire problems, I would would wait to see how it all plays out and buy something else. I am not a Tesla proselyte. I buy a car for reliability and performance, period. I am very satisfied with my ICE Honda Accord. Traveling to Corvalis, OR from Wichita FAlls, TX, and back, at Xmas 2012, it performed wonderfully.............. of power (6 cylinder), was more economical than previously owned cars (27mpg vs 22 or worse), and it was very comfortable (leather seats and climate controlled heating and A/C). There was no concern for wearing out the transmission or tires, of having to go without heat in sub freezing weather, or of running out of fuel before the next filling station.

    I have no investment in Tesla, btw, not long or short.
    Jul 17 11:43 AM | 5 Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]

    Yes, I read the post. All the units are under warranty at this point. However, with three being replaced under warranty, it sounds likely that more will have to be replaced after the warranty expires. My post stands on its own merit.

    Think about it, not one unit had to be replaced, but three, thus far. OMG. Then there is Motor Trend's. What are the chances both are unusual, and not normal, problems when two agencies like this have the same problem? I would think those chances would be low. But, yes, I get it, you are a Tesla bull, therefore, you dismiss it. I try and view the evidence more objectively.

    Whether these concerns turn out to be material to Tesla remains to be seen. But, if the problem is related to the weight, torque, and deceleration, there may be some re-engineering required. For the current Teslas on the road, that would add up to added cost to Tesla if they want to retain a higher resale value on them. If this turned out to be a material issue, a good portion (material amount) of the resale guarantee currently booked as a liability would become an actual liability to Tesla, and not revenue. That would adversely impact their earnings as reported under non-GAAP. That is why GAAP is more conservative. It doesn't count its chicks before they hatch.
    Jul 16 06:48 PM | 2 Likes Like |Link to Comment
  • Tesla: 4 Reality Checks For Bulls To Consider [View article]
    "In 1975 when gas pumps were running dry and rationing was instated, it didn't help to drive a VW bug even though it was the most fuel efficient car on the road. No gas = no driving."

    It was late 1973, not 1975. The embargo was over in March, 1974. I don't recall rationing, but odd and even number days when you were allowed to fill up. There was never any concern on my part of being able to fill up. You seem to have not lived through this time, your remarks don't coincide with reality of what happened.

    I don't know if the drivetrain on the Model S is a widespread problem or not, but 4 have been replaced by Edmunds and two by Motor Trend. That does make me wonder if the torque on the Model S and the braking when you let off the accelerator, combined with its weight, may be too hard on the drivetrain, causing it to prematurely wear out. This could be a potential problem with the resale value 3 years down the road. Time will tell.
    Jul 16 12:41 PM | 8 Likes Like |Link to Comment
  • For Intel, Chromebooks Are The Latest Gimmick [View article]
    You were negative on INTC when it was at $24. Just a tad wrong. Just a tad.
    Jul 16 12:25 PM | Likes Like |Link to Comment
  • Omega Healthcare Investors Inc declares $0.51 dividend [View news story]
    I love this stock.
    Jul 15 05:01 PM | 1 Like Like |Link to Comment
  • Linn Energy: Learn To Love 'Boring' [View article]
    "If Bryce continues to attempt to prove a point that has been clearly shown by the US District Court to be wrong"

    Totally bogus. The Court has stated that LINE has not mislead or defrauded anyone, that all their disclosures have made it clear how they calculate adjusted EBITDA and DCF. The Plaintiffs alleged that LINE "mislead" investors. The Court disagrees that investors were mislead because they were upfront with all the disclosures, nothing was hidden. I have to agree on that.

    As the Court states, on page 15 and 16 of the Opinion: "In its financial disclosures, LINN used several non-GAAP metrics, which are metrics that are 'calculated and presented on the basis of methodologies other than in accordance with GAAP.....In other words, there is no uniform GAAP rule governing how these metrics are calculated. These metrics included: (1) adjusted EBITDA, (2) DCF, (3) the distribution coverage ratio, and (4) maintenance capex."

    What I interpret the Court as saying is that there is no "correct" way of calculating these measures, and since LINE didn't hide or misrepresent anything in regards to how they calculated the measures with their methodology, the case was thrown out. That is not a resounding affirmation of how LINE calculates the non-GAAP measures.

    The Court goes on to state: "In the end, Plaintiffs are really arguing that there were better ways for LINN to calculate its non-GAAP metrics--ways that would have more accurately forecast the decline in available cash that occurred during 2013. They may well be correct about that. But the federal securities laws do not protect the marketplace from flawed business decisions, which is what choosing to calculate a metric in a particular way is where, as here, there is no settled formula." (Page 44)

    This is not an endorsement of LINE's methodologies. The Court rules there is no settled formula or methodology in calculating the non-GAAP measures. As stated, the Plaintiffs methodology may be a better method, but the federal securities laws don't decide that one method is better than another or that one is "correct" and one is not. Hence, I have been proven wrong on nothing. I maintain there is a better way to calculate the non-GAAP measures, one which would better calculate available cash for distribution, and that LINE excludes cash expenditures which should be included in the calculation of DCF.
    Jul 10 12:00 PM | Likes Like |Link to Comment