Thursday, January 26, 2023

Don't miss Herb Greenberg's brand-new presentation; Tesla's earnings; Enrique Abeyta's TSLA trade; Elon Musk has gone off the deep end; Hindenburg Research's response to Adani Group; Skiing at Deer Valley with a lifetime subscriber

By Whitney Tilson

1) My colleague Herb Greenberg is at it again...

He has long been known for warning folks about fads and frauds in the markets... and his stock market analysis has even put corporate executives behind bars.

And now, in his latest bombshell warning, Herb is sharing the details about a series of "money blackouts" that could hit 235 U.S. cities this year. And he even believes you could collect hundreds-of-percent gains from the fallout – if you prepare yourself now.

That's a bold claim. But keep in mind that Herb has a knack for these kinds of predictions... and a habit of going "all in" with amazing timing.

If you haven't seen Herb's big presentation yet, don't delay – watch it here.

2) Tesla (TSLA) reported earnings after the close yesterday that weren't as bad as investors feared, so the stock was up strongly this morning.

Here are two articles in today's Wall Street Journal about it: Tesla Warns of Uncertainties as It Posts Record Profit and Why Tesla Is Still Gunning for Growth. Excerpt:

While tech companies are cutting jobs, Tesla is unapologetically still gunning for growth. This might be the only route it can take.

The electric-vehicle maker gave a target of 1.8 million vehicles for the year when it reported quarterly results late Wednesday, without specifying whether it was for deliveries or production. Assuming it meant deliveries, the number would be up about 37% on last year, but below a longer-term ambition of expanding by 50% a year. This signals a more cautious approach to managing expectations after the company spent last year fruitlessly chasing the target, raising concerns about demand.

Chief Executive Officer Elon Musk still made clear on a call that he is committed to expanding as fast as supply chains allow. That is consistent with the big price cuts the company made in China in the fourth quarter, and in the U.S. and Europe this month. It is early days, but so far these seem to have had the desired effect on sales: Mr. Musk said on a call that orders are currently running at twice the rate of production.

The trickier question is how much margin the company will sacrifice in pursuit of that goal. Tesla's income statement is already taking a hit. It reported an operating margin of 16% for the fourth quarter, down from 17.2% in the three months through September. And market conditions are getting more difficult, with interest rates rising and competitors launching new products.

Analysts' consensus earnings-per-share estimate for 2023 is now $4.68, according to FactSet. That would be about 15% higher than the $4.07 it made last year, but just four weeks ago analysts were expecting it to earn $5.53 this year. Given rapidly unfolding events, forecasting Tesla's profit right now is challenging: Falling prices will be somewhat tempered by falling unit costs as it ramps up production rapidly, but just how the balance will work out is open to wide interpretation.

Tesla's growth has certainly been impressive, as this chart shows:

In fact, Tesla's revenue growth since it surpassed $10 billion exceeds any other company in history, as this chart shows:

3) A hat tip to my colleague Enrique Abeyta, who saw that Tesla's stock was oversold and recommended it in mid-December in his Empire Elite Trader service, where he looks to hit consistent singles and doubles.

Enrique was spot on... He just closed out the position for a 28% gain in less than a month, or 387% annualized.

To learn how to profit from Enrique's incredible trading prowess – and find out how to gain instant access to his latest two trades, just published yesterday – click here.

4) I too was tempted to recommend buying TSLA shares when they bottomed close to $100 just three weeks ago, but I decided not to because I think CEO Elon Musk has gone from 80% genius and 20% lunatic to the reverse in the past year – as I explained in the below missive I sent yesterday to my Tesla e-mail list (to join it, simply send a blank e-mail to: [email protected])...

I have always had mixed feelings about Elon Musk, which I think is very rational, given how complex he is. He is, I have written, one of the greatest entrepreneurs and engineers in history to build Tesla and SpaceX (among other companies), to whom humanity owes a debt of gratitude. But I also wrote last October, in response to an article by Adam Lashinsky entitled Elon Musk is no Steve Jobs:

I come out in the middle – Lashinsky misses many striking similarities: Both were/are clearly on the autism spectrum, resulting in not being able to read people and often treating them very badly (e.g., Jobs refused to acknowledge paternity of a daughter); they were/are incredible visionaries, but also often thin-skinned, petty, and vengeful; they both had/have the ability to identify and hire type-A superstars and drive them to incredible achievements, but also burn them out; and they've both achieved extraordinary success in multiple, unrelated businesses, in part by living in a reality-distortion world, believing in impossible things, which is both a blessing (leading to unthinkable achievements), but also a curse.

In summary, I used to think he was 80% genius and 20% lunatic.

But in the past year, I think those percentages have reversed. Perhaps I'll write more about this later, but to start:

a) Listen to this interview of tech columnist Kara Swisher, Elon Musk: Somebody That I Used to Know (Apple podcasts; Spotify), who's been friends with him and interviewed him dozens of times dating back to the late 1990s. Excerpt:

Elon Musk is a puzzle, but if there's anyone who can make sense of him it's Kara Swisher. She's covered him since the late 90s – back in her early days as a beat reporter at the Wall Street Journal and she's had many in-depth interviews and exchanges with the tech titan since, perhaps more than any other reporter. She's also covered Elon's latest fiefdom, Twitter, before it even was Twitter. So today we turn the tables, and Kara Swisher is "On" with Nayeema Raza.

We'll unpack how Elon became Elon, why Kara came to believe he was one of the greatest visionaries in Silicon Valley, when exactly she soured on him – and why she still holds out some hope.

b) And then read this devastating, in-depth article about how, thanks to a toxic combination of hubris, incompetence, and meanness, he's utterly destroyed Twitter: Extremely Hardcore. Excerpt:

Musk offered to buy the company for the absurdly inflated price of $44 billion. The move thrilled employees like [Luke] Simon who chafed at Twitter's laid-back atmosphere and reputation for shipping new features at a glacial pace. Simon, who owned a ­portrait of himself dressed as a 19th-century French general, told his team, which managed advertising services, that he wanted to build an "impact-focused, egalitarian and empirical culture, where any team member, with a strong data-driven justification, gets the metaphorical center stage."

Other employees noted the darker motifs of Musk's career – the disregard he brought to labor relations, the many lawsuits alleging sexual harassment and racial discrimination at his companies – and found his interest in Twitter ominous. On Slack, a product manager responded to Simon's enthusiasm for Musk with skepticism: "I take your point, but as a childhood Greek mythology nerd, I feel it is important to point out that story behind the idea of the Midas touch is not a positive one. It's a cautionary tale about what is lost when you only focus on wealth."

The comment would prove to be ­prophetic. According to more than two dozen current and former Twitter staffers, since buying the company in October 2022, Musk has shown a remarkable lack of interest in the people and processes that make his new toy tick. He has purged thousands of employees, implemented ill-advised policies, and angered even some of his most loyal supporters. Those who remain at the company mostly fall into two camps: people trapped by the need for health care and visas or cold-eyed mercenaries hoping to ascend through a power vacuum.

Today, Musk has become notorious for the speech he suppresses, rather than the speech he allows, from ­suspending ­journalists for tweeting links to his jet tracker to briefly restricting users from linking to their accounts on Instagram and Mastodon.

In three months, Musk has also largely destroyed the equity value of Twitter and much of his personal wealth. He has ­indicated that the company could declare bankruptcy, and the distraction of running it has caused Tesla stock to ­crater, costing him $200 billion.

If "free speech" was his mandate for ­Twitter the platform, it has been the opposite for Twitter the workplace. Dissenting opinion or criticism has led to swift dismissals. Musk replaced Twitter's old culture with one of his own, but it's unclear, with so few workers and plummeting revenues, if this new version will survive. As one employee said in December, "Place is done for."

What happened to Musk???

My view is that the 20% lunatic side of him grew to 80% mostly because he had an incredible run of success, which made him think he was invincible and also created endless distractions. Also, in becoming the richest man in the world, he increasingly came to be surrounded by sycophants, so there were no guardrails or anyone to tell him when he was making terrible mistakes.

5) Following up on yesterday's e-mail about Hindenburg Research's epic takedown of India's Adani Group, here's Hindenburg's tweet this morning:

6) Susan and I are having a blast this week at the Deer Valley ski resort in Park City, Utah. There hasn't been any fresh snow, but it has been an epic snow season... so the conditions are excellent and the weather has been good: clear and cold.

We've been skiing with Andrew C., a doctor from Boulder, who's a lifetime subscriber to Empire Financial Research and shares my passion for skiing, tennis, travel, and daughters (he has two young ones). He texted me a month ago to introduce himself and I invited him to join us, so he drove here and skied with us Monday, Tuesday, and yesterday.

He said he listened to my book, The Art of Playing Defense (which I narrate), on the eight-hour drive – obviously he got the memo that flattery will get you everywhere with me!

Here's a picture of us – that's him on the right and another friend, Josh R., on the left:

By the way, keep this on the down low, but if you like tree skiing, I think Deer Valley is the best place for it because hardcore skiers who like tree skiing don't come here, so I'm finding tons of soft powder and fresh tracks in the trees – check out the video here (that's me in the first two clips, then me filming Andrew and Josh in the next two).

And because the Sundance Film Festival is going on right now, we haven't waited in even a 30-second lift line all week. Apparently the moviegoers and stars don't ski – who knew!?

See my Facebook post here for additional pictures and comments about the movies we've seen and the gear I've purchased to keep my fingers and toes warm when I ski.

Lastly, check out this picture from the World's Toughest Mudder two months ago – I'm wearing the same jacket and pants/bib!

Best regards,


P.S. I welcome your feedback at [email protected].