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Bill Gross: “I Had Just Been Sentenced To Five Days In Jail…”

Bill Gross: "I Had Just Been Sentenced To Five Days In Jail…"

By Bill Gross, former Bond King and current Gilligan’s Island afficionado….

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This article was originally published by Zero Hedge

Bill Gross: “I Had Just Been Sentenced To Five Days In Jail…”

By Bill Gross, former Bond King and current Gilligan’s Island afficionado. Presented without commentary cause the piece alone is, well, just read it…

You Only Hang Twice

Just last week I was approached by a Hollywood producer to be the consultant on a new James Bond sequel to be titled “You Only Hang twice”. Having received a restraining order nine months ago in the famous Gilligan’s Island trial, I and my wife Amy had just been sentenced to five days in jail (with time off for community service) for playing 15 minutes of music at 9 pm in our backyard pool. The music was below city decibel limits but was somehow disturbing the peace of our noise-sensitive neighbor. NO police citation was issued but what the heck, a crime must have been committed if the neighbor simply called police and complained he couldn’t sleep at such a late hour.

Enter the hanging judge of the Laguna Beach shore, a 57-year-old lady with pierced nose stud and visible tattoos, to retry and rehang the highly visible target of Bill Gross – ex-Bond King and obviously still “full of himself” senior citizen. She would try me twice, she would hang me twice – thus opening a potential career in Hollywood for me and her at a point in my life when climbing the stairs was taking up an increasing amount of my daily routine. The judge I have since learned only does “restraining order” cases in Orange County, but these two trials encompassing four weeks of court time and hundreds of thousands of dollars in legal fees (a mere $1,200 fine for me though) could presumably be a stepping stone for the judge for greater court assignments. Even the appellate court. But perhaps my fury runneth over a little too much here. Time will tell but in any case, she’ll have a prominent place in the script and may even get to act in her own role. I’m too old for my part it seems. They’re thinking of Jake Gyllenhaal! But I would have preferred Tom Hanks.

Anyway, the interesting part of all this to me was our immediate assignment to the Santa Ana soup kitchen for two days of community service. No orange suit duty on the highway thank goodness, just two days at nearby Santa Ana where coincidentally I had volunteered several times in the past to serve Thanksgiving and Christmas dinners. Like one of my friends remarked at a lunch last week, “Community service? Gross has performed and provided more community service in the past 20 years than anyone in Orange County history!” But no matter – truth, justice, the American way, and judicial ambition would prevail.

But here’s the interesting part. Having volunteered at this same soup kitchen before, I was expecting a similar cast of “down and out” people in need of a hot lunch. Indeed, as Amy and I cut chicken for the soup and fruit for the fruit cups, we were then assigned to pass out what was actually a gorgeous enchilada lunch replete with cheesecake and chips when the doors opened at noon. Due to COVID, however, there was no indoor dining – in fact the new routine featured a drive-through lane where a large percentage of cars were nice SUVs and pickup trucks. “Say what?” I whispered to Amy. Each “customer” was handed a meal with more calories than the ones at a McDonald’s drive-through and in addition, many special requests were fulfilled. No downtrodden homeless people at this soup kitchen! There were vegan meals, gluten-free meals, five kinds of bread, and orders from the cars to skip the meal but to give them mini-sacks of avocados and artichokes for special diets later in the day. There was one request for a feminine hygiene package and several for prophylactics. But not to be outdone, requests for “doggie bites” and cat food kept Amy and I scrambling from noon to 3 pm. “Hundreds were served” to use the McDonald’s phrase, and well served I might add. We worked beside a volunteer who told us he came two days a week to feel good about helping other people. He was a little bedraggled looking and had to take the bus from Long Beach to get there. I told him that was a wonderful gesture but silently thought to myself, “Buddy, you’ve been screwed. They’re living better than you”.

And so perhaps we have all been screwed if the Santa Ana soup kitchen is any example. A trophy for every kid has moved up the maturity ladder to an artichoke for every adult. Many of those requesting vegan were well dressed and apparently not lacking in the finer accoutrements of daily life. “We can’t discriminate against those who have already been discriminated against,” remarked one of the permanent staff. “We can’t deny them twice”. Ah yes I said to myself – I know what you mean.

Over the years it seems, investors have been screwed many times, but usually just the pigs in the well-worn phrase of, “Bulls make money, bears make money, pigs get slaughtered.” Actually, bears have very little to show for their efforts in the past few years except for recent shorts in GameStop and AMC which I continue to recommend shorting with the caution that volcanoes erupt every once in a while. But it’s the bond market that may have seen its finest hour and is now a potential target for future bears. Readers are familiar I’m sure with all of the Fed speak and fears, or lack of fear, about future inflation. Like I’ve recently observed, markets have likely seen their secular, long term lows in interest rates but expectations for a 30-year bear market to match the previous 30-year bull market are way overdone. The 10-year Treasury now at 1.60% is likely headed to 2% over the next 12 months which is bearish and likely to provide a negative sign in front of 2022 total returns for bond holders, but that is no disaster. Bonds are “garbage” like I’d wrote last month but only in the sense that you’d be better off with alternatives like NUAN (a Microsoft acquisition likely to return 8% annualized before year end) or XLRN (a Merck acquisition likely to do the same). Bonds’ “days of wine and roses” may be over but the above artichoke and avocado recommendations may do nicely while investors wait out uncertainties related to the U.S. budget, GDP growth in China, and runups in energy prices as we approach winter in the Northern hemisphere.

My portfolio is also well stocked with natural gas pipeline partnerships that are listed on the NYSE and offer deferred tax payments on dividends that yield 7-10% at current market prices. Individual investors don’t like these companies because of complicated April tax reporting requirements and most mutual funds and institutions don’t buy them because they are technically partnerships and not stocks. Sponsorship therefore is lacking but that is why they yield 7-10% tax deferred. They are of course sensitive to oil prices so be careful but their prospects at $70-80 oil are good and 7-10% will likely be a pretty decent return if interest rates rise even a little toward 2%. For those investors willing to take the plunge, a natural gas pipeline ETF of substantial size that yields 7.2% and is technically a stock — not a partnership — might fill your portfolio needs. Its symbol is AMLP. No guarantees here – prices will fluctuate as they say – but then in this case you can only hang me once. I’ll reserve the second time for a later Investment Outlook!

Tyler Durden
Wed, 10/13/2021 – 14:40




Author: Tyler Durden

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Economics

Cryptos Crash Despite Tesla Leaving Door Open To Accepting Payments

Cryptos Crash Despite Tesla Leaving Door Open To Accepting Payments

Cryptocurrency prices plunged overnight with the selling pressure climaxing…

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Cryptos Crash Despite Tesla Leaving Door Open To Accepting Payments

Cryptocurrency prices plunged overnight with the selling pressure climaxing around the opening of the European markets, closing of Asia.

This left Bitcoin back below $60,000 for the first time in 11 days…

Source: Bloomberg

And Ethereum dropped below $4,000

Source: Bloomberg

There was no obvious news-driven catalyst for the drop and many investors were actually buoyed the last few days after a filing with the SEC suggested Tesla had left the door open to accepting Bitcoin for its products in the future.

“During the nine months ended September 30, 2021, we purchased an aggregate of $1.50 billion in bitcoin. In addition, during the three months ended March 31, 2021, we accepted bitcoin as a payment for sales of certain of our products in specified regions, subject to applicable laws, and suspended this practice in May 2021,” the 10-Q document reads.

“We may in the future restart the practice of transacting in cryptocurrencies (‘digital assets’) for our products and services.”

Additionally, CoinTelegraph reports that PlanB, creator of the popular Bitcoin Stock-to-Flow (S2F) model, called Bitcoin’s price retracement from the $60,000-level the “2nd leg” of what appeared like a long-term bull market.

In doing so, the pseudonymous analyst cited S2F, which anticipates Bitcoin to continue its leg higher and reach $100,000 to $135,000 by the end of the year.

The price projection model insists that Bitcoin’s value will keep on growing until at least $288,000 per token due to the “halving,” an event that takes place every four years and reduces BTC’s issuance rate by half against its 21 million supply cap. 

Bitcoin after the 2012, 2016 and 2020 halving. Source: PlanB

Notably, Bitcoin has undergone three halvings so far: in 2012, 2016 and 2020.

Each event decreased the cryptocurrency’s new supply rate by 50%, which was followed by notable increases in BTC price. For instance, the first two halvings prompted BTC price to rise by over 10,000% and 2,960%, respectively.

The third halving caused the price to jump from $8,787 to as high as $66,999, a 667.50% increase. So far, S2F has been largely accurate in predicting Bitcoin’s price trajectory, as shown in the chart below, leaving bulls with higher hopes that Bitcoin’s post-halving rally will have its price cross the $100,000 mark.

Bitcoin S2F as of Oct. 26. Source: PlanB

PlanB noted earlier this year that Bitcoin will reach $98,000 by November and $135,000 by December, adding that the only thing that would stop the cryptocurrency from hitting a six-digit value is “a black swan event” that the market has not seen in the last decade.

Despite the high price projections, Bitcoin can still see big corrections in the future. PlanB thinks the next crash could wipe at least 80% off Bitcoin’s market capitalization, based on the same S2F model.

“Everybody hopes for the supercycle or the ‘hyperbitcoinization’ to start right now and that we do not have a big crash after next all-time highs,” the analyst told the Unchained podcast, adding.

“As much as I would hope that were true, that we don’t see that crash anymore, I think we will. […] I think we’ll be managed by greed right now and fear later on and see another minus 80% after we top out at a couple hundred thousand dollars.”

Tyler Durden
Wed, 10/27/2021 – 08:23

Author: Tyler Durden

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Economics

Tesla Won’t Be the Only Trillion-Dollar EV Stock

Two days ago, Tesla (NASDAQ:TSLA) did something unthinkable – something that only four tech stocks in the history of capitalism have ever accomplished.
It…

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Two days ago, Tesla (NASDAQ:TSLA) did something unthinkable – something that only four tech stocks in the history of capitalism have ever accomplished.

It became a trillion-dollar company.

It joined Alphabet (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT) as the only U.S. companies to currently hold that distinction. Not only that, but Tesla cleared the trillion-dollar mark faster than any other company.

Source: Morning Brew
Source: Morning Brew

To a lot of folks, all of this just sounds silly.

That’s because, at a $1 trillion valuation, Tesla is now worth more than Toyota, Volkswagen, Daimler, General Motors, BMW, Ford, Stellantis, Volvo, Ferrari, Honda, and Hyundai combined – and most of those companies sold way more cars and recorded way bigger revenues than Tesla did last year.

So… Tesla at a trillion bucks… that has to be a bubble, right?

Wrong.

Because, last I checked, companies aren’t valued on how many cars they sell or how much revenue they rake in – they’re valued on profits. After all, to shareholders, how valuable is the sale of a $40,000 car if the automaker spent $40,000 to make, advertise, and sell the car?

It’s not valuable at all.

That’s the piece that Tesla bears are missing. Profits – not sales – matter, and Tesla is structurally and significantly more profitable than legacy automakers.

Why?

Let’s zoom out here. The reality is that, at scale, making an electric vehicle (EV) will be significantly cheaper than making a gas-powered car.

I know. That’s contrary to everything you’ve ever been told. And before you go pull up statistics showing me that EVs are more expensive to make than gas-powered cars today, let me tell you that the current EV production premium is exclusively because of the battery.

The battery comprises about 25% of an EV’s production costs. Strip out the battery and it’s way cheaper to make an EV than a gas-powered car, because there are way less parts.

With EVs, there’s no oxygen sensors, no spark plugs, no motor oil, no timing belts, etc.

The fewer parts you have, the cheaper it is to make.

So, the only thing keeping EV production costs higher than gas-car production costs is the battery – and those costs are plummeting. Between 2007 and 2020, the cost of EV battery packs has registered an average decline of 16% per year.

The more time goes on, the more battery costs go down, and the cheaper and cheaper it gets to make an EV.

Soon enough, battery costs won’t be a hurdle anymore. By that point – likely within the next decade – EVs will be significantly cheaper to make than gas-powered cars.

Not to mention, consumer demand is shifting toward EVs, so today’s prospective car buyers are willing to pay a premium for an electric car. That should result in higher sales prices for EVs, and reduce marketing costs for EV makers. Notice how Tesla hasn’t had to materially discount its cars, or how the company never runs any ads yet everyone still wants one?

In financial terms, the implications here are obvious. Tesla should sell its cars at higher prices than traditional automakers, and operate at significantly higher gross margins, with lower marketing spend, resulting in significantly higher profits per car.

Let’s put some numbers to this…

The average car sells for about $40,000. Tesla’s average sales price last quarter was $50,000. Higher sales price? Check.

Automakers typically run at 15% gross margins. Tesla clocked in at 30% gross margins last quarter. Higher gross margins? Check.

Your average automaker spends about 7% of revenues on sales and marketing, and another 5% on research and development. Tesla’s marketing spend rate is currently about 7%, and rapidly falling with an opportunity to hit 5% or lower at scale, while the R&D rate is already closing in on 4%. Lower operating expense (opex) rates? Check.

Add it all up, and the average automaker is netting about $1,200 in operating profits per new car sold, while Tesla is making about $10,500 in operating profits per new car sold – a near 9X increase.

So… significantly higher profits per car? Double check.

And that, in a nutshell, is why Tesla deserves its trillion-dollar valuation.

Elon Musk & Co. make about 9X more per car than other automakers, so TSLA deserves to be valued at about 9X your biggest legacy automaker, assuming Tesla can one day sell as many cars as that automaker (which we think is doable).

The biggest legacy automaker? Toyota. Its market capitalization? $240 billion. A 9X multiple on that is a $2-plus TRILLION potential valuation for Tesla one day.

This run isn’t over…

More importantly, though, the above “back-of-the-napkin math” is why Tesla won’t be the only trillion-dollar electric vehicle company.

Because Tesla won’t be the only company in the EV universe to benefit from economies of scale, lower production costs, and lower marketing costs. In fact, almost all pure EV makers will benefit from those dynamics, which means they will make about 9X as much profit per car sold as their legacy automakers at scale.

Therefore, while the auto industry titans of today are worth anywhere between $50 billion and $250 billion, we think the EV industry titans of tomorrow will be worth 9X that – anywhere between $450 billion and $2 trillion.

So what does that mean for you as an investor today?

Well, most EV stocks not named Tesla are worth less than $20 billion today.

That’s why – while we’re still bullish on Tesla – we’re much more bullish on other EV stocks whose best days are still ahead of them… stocks that we feel have 10X, 20X, even 30X upside potential.

The million-dollar – er, trillion-dollar – question is: What are the names of those stocks?

That’s what we aim to uncover in our most exclusive investment research service, Early Stage Investor.

For readers who are unaware, Early Stage Investor is our small-cap investment advisory where we focus on investing in the world’s most innovative companies and game-changing technologies… while they’re still in their early stages… before they soar thousands of percent like Tesla.

Very recently, we just launched a brand-new portfolio in Early Stage Investor called the 4 EV Stocks for Financial Freedom portfolio – and in that portfolio are the names of four EV stocks that we feel are best positioned to follow in Tesla’s footsteps, turn into giants of the future EV industry, and ultimately score shareholders enormous profits.

The best part? All four of those stocks are tiny and off the radar of most investors, so getting in now is like getting in on Tesla back in 2015… before Elon Musk was a household name, and before TSLA stock turned early shareholders into “Teslanaires.”

These stocks could do the same.

The only question that remains: Will you be one of them?

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

The post Tesla Won’t Be the Only Trillion-Dollar EV Stock appeared first on InvestorPlace.


Author: Luke Lango

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Economics

Energy Continues To Lead US Equity Sectors By Wide Margin In 2021

The reboot of energy stocks rolls on in the year-to-date sector horse race, based on a set of ETFs through Tuesday’s close (Oct. 26). The rebound in…

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The reboot of energy stocks rolls on in the year-to-date sector horse race, based on a set of ETFs through Tuesday’s close (Oct. 26).

The rebound in the previously faltering energy sector began a month ago. In late-September, CapitalSpectator.com reported that Energy Select Sector SPDR Fund (XLE) regained the lead for the major equity sectors in 2021. That lead has subsequently strengthened through October.

XLE is up an astonishing 61.3% so far this year, or roughly twice the year-to-date gain in our previous report from a month ago. Lifting the fund is a combination of surging oil and gas prices, which in turn is driving bullish earnings expectations amid mounting evidence that higher inflation may persist for longer than previously expected.

Not surprisingly, current conditions have triggered a bullish attitude adjustment for the sector’s outlook, reports Barron’s:

About 80% of all analysts’ profit forecasts for this year and next have been increased, higher than the 74% seen in September, according to Citigroup. That means more profit projections have been increased than reduced in the past month.

The strength of energy’s year-to-date rally is no less conspicuous when you consider that the second-best sector performer this year is far behind. Financial Select Sector SPDR (XLF) is up 39.5% — a strong gain in absolute terms, but nowhere near XLE’s surge.

The US stock market overall is posting an impressive rise this year via SPDR S&P 500 (SPY). But the ETF’s 23.2% increase so far this year pales next to XLE’s advance.

The weakest sector performer this year: Consumer Staples SPDR (XLP), which is higher by a relatively moderate 7.9% year to date. The sector, traditionally considered one of the more resilient, defensive corners of the market, is struggling to keep pace with equities overall (SPY), as this chart of relative performance history shows:

When the line is rising, the broad US equity market (SPY) is outperforming XLP. ON that basis, XLP’s defensive features have remained out of favor for much of the time since the market began recovering from the coronavirus crash in the spring of 2020.


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Author: James Picerno

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