David Stockman hates Tesla

The points he makes are correct, though.  Posted at burning platform.

The Wall Street casino is now festooned with giant deadweight losses waiting to happen. But perhaps none is more egregious than Tesla—a crony capitalist con job that has long been insolvent and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.

That’s some hate!

Here are the points he makes, and why he’s right, and yet, not really all that right:

  • Tesla only loses money, and does not make money.  This is technically correct.  However, it is not like a turn of the century dot-com.  It has rapidly expanding revenue, and it has been investing money in R&D, manufacturing facilities, and infrastructure for vehicles on the road.  See the 2014 Annual Report.
  • Tesla has gotten a lot of money due to the Wall Street casino environment caused by QE.  Absolutely true.  This is smart on their part, although distasteful.
  • Tesla has bullied and begged their way to getting a lot of government money.  Again true, smart, and distasteful.  And they are getting that taxpayer cash in many ways.  Not only do they benefit from solar or alternative energy tax credits, they have really gotten a bonanza of tax benefits at their new manufacturing facilities.  Stockman says they got bailout money, too.
  • Tesla has gamed their accounting by opening their own financial arm and valuing the cars they finance at a high (too high?) value.  I would say, again, they have watched and learned.  GM and Chrysler got not only lifted out of bankruptcy but also got financial bailout money in 2008, using that exact scheme.

Stockman is correct about the valuation of Tesla.  The stock price is way, way overvalued.  He may also be correct that the company stands a good chance of imploding.  It’s certainly highly leveraged, and any number of things could cause unrecoverable problems.  But it’s not smoke and mirrors.  They are a real company, making a real product, that clearly has a real market.

 

 

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