The Tesla Coil

“There is no other company that is written about as much as Tesla, perhaps Apple is right up there. It is no coincidence that both companies make beautiful things and were/are spearheaded by obsessive leaders.”


 

To market to market to buy a fat pig Stocks in the city founded on a monster pile of gold added just over half a percent as a collective. Resources rallied over a percent and a half by the close, industrials added nearly half a percent and Banks slipped a little. Sounds like recent same old, I am afraid for the investors in financials and banks. Some of them look exceptionally cheap. Undue, or cheap for a reason? We will see what transpires with the Moody’s review and then I suppose most importantly, how the new issuances by Treasury are priced and what levels of interest they attract. I suspect that we will all be following those very closely for the foreseeable future. It is funny how you expect and take stuff for granted, until something changes, that is very, very important.

A crowd called Elliot, a hedge fund crowd from the US, have taken a 4.1 odd percent stake in BHP Billiton. They have requested that BHP spin off the US petroleum business, list that separately and then fully incorporate the business in Aussie (and not in two places), in order to be more tax efficient. Elliot have made a number of demands, the company promptly turned around and said that would be too expensive and wouldn’t work. Thanks for that Elliot, and then a wave. Get it? Elliot wave? BHP Billiton was one of the best performers yesterday, the stock was up three and three-quarters of a percent by the close of business in Jozi.

A stock just above that company, in terms of the day performance, was Mediclinic. There was news released by the company, simply titled Swiss regulatory update. It is more than a little complicated, I would urge you to read it from top to bottom. In short and to try and be as brief as possible, the canton of Zurich (the district) parliament voted not to institute a levy on a segment of private healthcare patients.

That is good news for Mediclinic’s business in Switzerland, it means that their more marginal users (sensitive to price) will not pay the levy (along with the wealthier ones, who pay top dollar for private healthcare). At least for now. The Hirslanden CEO says the following about the authorities, who “recognise that ongoing dialogue and engagement with the relevant public authorities is key to ensuring that we can continue to deliver high-quality, cost-efficient, healthcare to our patients.” I guess this differs on a canton by canton basis, they (cantons) are member states of the country. And guess what? Zurich has the highest population density amongst the 26 cantons of Switzerland, Hirslanden has two hospitals in Zurich. The next big one would be Bern (four hospitals), and then Vaud (where Lausanne is), with two hospitals, those are the next most populous regions of Switzerland.

We view this as a positive for their biggest business. We know that the share price has done badly, recently. Since their listing in London, where Mediclinic reversed into Al Noor, things have looked scratchy in the UK and that has impacted the Pound share price of Mediclinic. It should mean that the revenues and profits from their “offshore” (not from the UK) businesses should be good. Problems in the UAE with the integration of the two businesses and with the pay in (another state medical aid slippage in healthcare benefits) settling in the coming year or so, we should see some normalisation. I expect the business to do deals where they see fit, backed by an anchor shareholder in Remgro. We remain patient (no pun intended).


 

Across the oceans and deep blue seas, stocks in New York, New York settled lower from their best point, equally higher from their worst point. The Dow Jones Industrial Average added less than two whole points, up 0.01 percent on the session. Snooze and sleep another 7 (or is it 9?) minutes ….. The broader market S&P 500 added a mere 0.07 percent, whilst the nerds of NASDAQ added 0.05 percent by the time the closing bell rang. At one stage stocks were up half a percent, at another stage they were down nearly one quarter of a percent. The flat closing masks the intraday moves, the evidence lies in the VIX, which was up 9 percent on the session to a little over 14, the highest levels since early December. That tells you something, at least.

There was much chatter about the two Wells Fargo execs that have to hand back some serious tom, a 113 page internal report released by the company names some very high profile people who should account to the owners of the business (the shareholders) and broader society and most especially to their customers. Without the customers, there is no business whatsoever. John Stumpf, who was heading the business at the time and Carrie Tolstedt, head of the retail business were in the cross hairs of this report.

The upshot of it all is that there are cancelled options and clawbacks to the tune of 47 million Dollars for Tolstedt and 28 million Dollars for Stumpf. Tolstedt was found to have hidden the size and scale of the “cross selling”, Stumpf once called her the best banker in America. The independent board members have launched a scathing attack on the two, too little too late is the tarnished image of the bank, even though the scale of the abuse is relatively small in monetary standards, (an apple may not be a cart) the bad aftertaste will linger for some time.

I suppose the message is to send a solid warning to the custodians of shareholder capital, the independent board will act, and hopefully harshly in this situation. I wouldn’t feel too sorry for either Stumpf or Tolstedt, they are still “well off”. A quiet spot down in the Caribbean is perhaps the perfect place to go for a few years. It is like she has been removed from Wells Fargo history, sorry, the profile you are looking for has been fired. We have also cancelled 47 million Dollars of options she had pending. Have a nice day.


 

Company corner

And then a whole lot of “stuff” around Tesla. Again. The company that attracts an enormous amount of attention, warranted I think. There is no other company that is written about as much as Tesla, perhaps Apple is right up there. It is no coincidence that both companies make beautiful things and were/are spearheaded by obsessive leaders. The company, thirteen years old, now has a bigger market capitalisation than General Motors. Elon Musk, has in less than two decades shaken up the whole motoring world. He has made them all push for electric and driverless systems. My best guess is that he has succeeded and that he has set something in motion. Something big in the way that we transport ourselves across the length and breadth of the planet, and even beyond in his case (and Jeff Bezos), to Mars and beyond.

Tesla’s competitors think this is crazy, their valuation, based on the fact that the company does not make money. That is right, you read that correctly. The company is expected by some counts to be cash flow positive next year. They still produce only 100 thousand vehicles this year, all luxury ones, really. The Model 3 is the “next big thing” and may well turn out to be the catalyst for something bigger. Whilst I agree with the observations in this article – Tesla’s ‘crazy’ climb to America’s most valuable car company, there are many things about Musk and most importantly, the customers of Tesla that people have not learned.

For every bullish article about Tesla, there are almost three to four negative ones. That is what I have found. People cannot come to terms with the valuation that the market is affording the company. It is a company that investors and most importantly, customers, do not want to miss out on. If the customer can get their hands on a Tesla, they surely will. The company cannot manufacture these fast enough. There is a pretty cool SeekingAlpha piece on Tesla – 4 Myths And 4 Little-Known Facts About Tesla. A *nice* read, with obvious bias. We continue to stay long, it is a small interest investment at the fringes of the portfolios.


 

Linkfest, lap it up

Cannot trust a driverless taxi? You are not alone. Which is why these drivers think that their job is safe for now – Uber Drivers Aren’t Worried About Self-Driving Cars – Yet.

The self driving car revolution (another one) is much closer than many people think – Quarter of Miles Traveled in the U.S. by 2030 Seen as Driverless. The big number from the report is how much money the average person will save a year, it is estimated that the average person in Chicago will save $7 000 a year. With numbers like that people will move to self driving cars quickly. So who is right, the drivers or the manufacturers? The customers will dictate.

Thanks to the frackers, oil prices have come down. Will it remain at these levels though? – Oil surplus or scarcity? Shale makes it even harder to predict. As a consumer I hope the price movements are to the down side.

Always nice to see Jozi on the list, we punch above our weight, thanks to the Visual Capitalist for this wonderful bunch of drawings. The stock market here is the 17th biggest in the world. Bigger than Brazil, bigger than Spain. Bigger than Taiwan. What is most surprising is that Frankfurt (431 years old) and Bombay have the two biggest amounts of listings and companies available. They are possibly of a very low quality. The 20 Largest Stock Exchanges in the World.


 

Home again, home again, jiggety-jog. Paul clocked 1000 days of continuous running over the weekend. That is at least one mile (he averages closer to 15km) a day for the last 1000 days plus. This is an incredible achievement, keep it up. Next stop, 10 thousand. Stocks have started mixed to better on this side.


Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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