At the Consumer Electronics Show; My big call on the 3D printing sector six years ago; Take Your Victory Lap, Elon Musk; How Big Companies Won New Tax Breaks; Question No. 12 to ask before you marry someone

By Whitney Tilson

Tuesday, January 7, 2020

1) As you read this, I’m landing in Las Vegas to attend the Consumer Electronics Show (CES) today and tomorrow with my colleague Enrique Abeyta. We’ll be looking for good long and short ideas, so keep an eye on Empire Financial Daily over the next few days.

When I was at my first CES six years ago, it was during the peak of the 3D printing bubble. I was short all five publicly traded stocks in the sector, the largest of which were (and still are) 3D Systems (DDD) and Stratasys (SSYS). At CES, I gained even more conviction for my short thesis when I saw many Chinese competitors all selling knockoff printers at a fraction of the price of the market leaders, so I doubled down on my bet and went very public with my views. Here are two articles about it from Business Insider: Whitney Tilson Says 3D Printing Stock Is Going to Plunge 90% and Here’s the Hilarious and Brutal Chart That Whitney Tilson Sent Out to Explain the Crash in a Big 3D Printing Company.

It paid off spectacularly, as every stock dropped roughly 90% in less than two years (and they have never really recovered).

2) I’ve been a skeptic of Tesla’s (TSLA) stock and a critic of its CEO, Elon Musk, for being a pathological liar and narcissistic brat, but I have to tip my hat to him and his team for delivering on some major milestones: Take Your Victory Lap, Elon Musk. Excerpt:

The excitement over Carlos Ghosn’s escape to Lebanon from Japan may have obscured an equally impressive feat in the car business. Tesla Inc. is meeting its targets.

The electric-car maker said Monday its Shanghai plant is building 1,000 Model 3 sedans a week. That’s less than a year after Chief Executive Elon Musk stood in an empty 210-acre field and declared this factory would go up in “record time.” And on Friday, Tesla said it set another annual sales record and exceeded Mr. Musk’s ambitious goal of selling 360,000 vehicles for the year.

This Shanghai production achievement matters to a broader auto industry struggling to go global, succeed in the Chinese market, and go electric. But this latest “gigafactory” and the surpassing of its 2019 sales target also raise an important prospect. If Mr. Musk starts hitting his targets with regularity, Tesla will quickly go from interesting phenomenon to major industry player.

Shareholders were feeling good about Tesla even before this week’s news. After slumping much of last year amid profitability concerns and Mr. Musk’s battles with regulators, shares surged 74% in the fourth quarter. On Friday, they rose as much as 5.5% to hit an all-time high of $454 after the release of the latest sales numbers, which showed that Tesla is now outpacing brands like Porsche, Chrysler and Lincoln and roughly on par with sales of Cadillac. And Tesla’s roughly $80 billion market capitalization far exceeds the value of its Detroit rivals.

Tesla’s valuation is absurd, but I haven’t changed my view (first expressed in my e-mail on October 24, when the stock was less than $300 per share) that this is a bad short unless (or until) the current positive fundamentals change – there’s just too much risk of being run over by a cult stock. (For example, one of my readers e-mailed me: “Tesla will become a $5 trillion company. Shorts will help it get there faster. I’m going long with 500% leverage.” Good luck with that!)

3) Kudos to my friend Bill Ackman of Pershing Square, who had a monster year – his best ever: Bill Ackman Finishes 2019 With a Bang. Excerpt:

Ackman has defied the odds – and then some.

For starters, he’s still in the hedge fund business. And last year Pershing Square Holdings, Ackman’s publicly traded hedge fund, soared above the rest: It ended the year up 58.1%, far surpassing the stunning 29% return of the Standard & Poor’s 500, the broader market’s best performance in years.

It was a comeback Ackman had long predicted. When Institutional Investor profiled him in late 2017, after he lost a brutal proxy battle at ADP, he was reminded that his reputation was on the line. “I love all that,” he said. “When we make a turn, it’s that more rewarding.”

And what a reward it has been.

4) I think people from both sides of the political aisle will find this story as outrageous as I do – but lower-than-expected corporate taxes are great news for shareholders… How Big Companies Won New Tax Breaks From the Trump Administration. Excerpt:

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more – and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process…

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

5) The 12th and final question to ask before you marry someone:

Do you think he or she is attractive, and do you have a wild, passionate sex life?

A good sex life is an important element of a healthy marriage, but I have deliberately listed this as the last and least important question in part because so many young people seem to put it first. I can think of a number of guys who are trapped in miserable marriages with women who are just sort of mean, shallow or otherwise unpleasant – but, boy, were they hot and sexy! To quote the old adage, they let their little heads think for their big ones… and have been paying a big price ever since.

I’ve also observed that a couple’s sex life tends to follow the health of the marriage rather than the reverse. My warning to both men and women: if you think your marriage is OK, but sex has dried up, worry!

Best regards,


Whitney Tilson

Get Whitney Tilson’s Daily delivered straight to your inbox.

About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

Click here for the full bio.