Talk about unintended consequences. Tamper with the free market and it will usually blow up in your face.
You would have thought that U.S. Steel was going to announce blockbuster earnings in the wake of the new 25% steel tariff imposed by the administration, right?
Wrong.
Instead, it has triggered a disaster of epic proportions. The reasons why provide a crash course on how fast the modern economy is evolving.
Of course, the stock market didn't like it, the shares crashing some 17.1% since the announcement. U.S. Steel, far and away the biggest beneficiary of administration policies, is now down on the year.
You may recall that we made a fortune when we bought U.S. Steel last summer at $21 a share, well before the run up into the passage of the tax package. The shares gained a mind-blowing 127%.
Not only did the company deliver a shocking disappointment on Q1 earnings, bringing in net profits of only 10 cents a share, it guided lower for Q2. Expectations had been far higher. Still, that is far better than the $180 million loss it brought in a year ago.
The CEO, David Burritt, cited unexpected "operational volatility." Take that to mean the chaos created by the steel tariffs. There is also trouble with its Great Lakes factory.
Flat rolled steel used to manufacture cars swung from an $88 million loss to a $23 million profit. But tubular steel used for pipelines incurred a $23 million loss.
What is really amazing is that the company made only a dime per share off an increase in total steel shipments YOY of 15.6%. Clearly, there is trouble in Pittsburgh.
And here is what U.S. Steel didn't expect. Instead of paying the extra 25% for imported steel, many customers are simply designing steel out of their products to cut costs rather than shifting to (X).
Three decades ago, this might have taken years to achieve. Thanks to advanced software applications this can now be accomplished in weeks. Companies are vastly more sensitive to costs than they were only a few years ago, and mere pennies can make all the difference.
It's only a matter of time before the entire auto industry shifts to carbon fiber, which has four times the strength of steel at one fifth the weight. That gives you a 20X improvement in performance and safety. Cost and mass manufacturing are the only issues.
Tesla (TSLA) is planning to make the jump in a couple of years. Boeing (BA) and the U.S. Air Force already have.
Where is U.S. Steel in a carbon fiber world? Try Chapter 11.
In the meantime, U.S. Steel consumers are scrambling to get exemptions from the punitive tariffs, creating a bureaucratic nightmare for all involved.
Wilber Ross's Commerce Department has been flooded with some 3,500 requests, each one of which takes months to review. The agency has boosted staff, but it is still overwhelmed. It looks like the only new American jobs the tariff will create will be government ones.
It turns out that many types of high grade steel, such as for razor blades and specialized carbon steel parts, aren't made in the U.S.
To prove that I learn something new every day, I discovered that even France is an important steel supplier. And I thought it was all about wine, cheese, and those cute black berets.
The net result for consumers has been uncertainty in the extreme. That purgatory has just been extended with the government's 30-day postponement of the tariffs announced yesterday.
If companies wait long enough the tariffs will simply disappear. They will certainly be declared illegal by the World Trade Organization.
The national security rationale for the steel tariffs was always completely bogus and will be laughed out of court. If steel really were a national security issue the Defense Department would have its own steel mill, as it already does with semiconductors.
The chips in U.S. weapons systems are 100% made in the USA to keep foreign back doors out of the design process.
Wars of the future will be bought with software, not M1 Abrams tanks or battleships. If fact, they already are.
As for the shares of U.S. Steel, I'm not touching them here. If the economic data continues to weaken as it has, you don't want to be anywhere near this sector.
The stock market already has reached that conclusion.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/John-Thomas-on-USS-Missouri-story-1-image-4-e1525209087753.jpg259250MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-02 01:08:252018-05-02 01:08:25Trading the U.S. Steel Fiasco
The conventional wisdom on Electric Vehicles (EVs) is that they are here to stay.
The secular trends of harsher government environmental policy, a healthy global economic backdrop, rapid-fire technological development, and broad-based mainstream acceptance are the catalysts that will place EVs at the apex of the digital transportation movement for the rest of this century.
EVs are set to eventually capture more than 60% of market share, forcing legacy automotive and niche start-ups to reinvest into their operations in a fiercely competitive industry.
The EV industry still has a mountain to climb as it only represented less than 1% of total global auto unit sales in 2016. That percentage has gradually risen to 1.25% at the end of 2017.
The transition to 60% EV share of total units will organically occur in a slow and steady manner giving automakers ample time to shed legacy technology.
Cost is a major obstacle for widespread EV adoption. Many consumers cannot afford one, but price efficiencies are slowly dropping the cost of owning an EV, appealing to the masses with sleeker models possessing price tags similar to normal cookie-cutter sedans such as the Tesla Model 3.
EV makers have coped with the arduous task of constructing a car within truncated cost limitations. They make up the difference by offering a proliferation of premium add-ons such as souped-up engines and glitzy interiors that extract additional marginal revenue from well-off individuals.
EV technology advancement paired together with higher emission standards will narrow the gap between electric vehicles and the legacy internal combustion engine within the next decade.
Modern EVs new to market such as the Tesla Model 3 could serve as a springboard for able consumers to dive head in to EV revolution.
The disruption time horizon will take around 15 years and affect 80% of the market.
EV mania is destined to integrate with the traditional concept of a car to give transportation breakthrough A.I. functionality, user-friendly connectivity, and self-driving capabilities.
Let's face it, it's easier to install computer systems and software in an electrified platform, and the technologies complement each other.
About 60% of autonomous, light vehicle retrofits are constructed over an electric powertrain, and an additional 21% go with a hybrid powertrain.
Thus, owning the best autonomous vehicle (AV) technology stocks positions investors for the next leg of hyper-accelerating tech.
Waymo's leadership in the AV space is frightening for Tesla, which trails the Alphabet subsidiary that smoothly rolled out its for-profit service in Arizona in early 2018.
Aptiv PLC made a massive splash in the deep-end by acquiring the second best AV technology company NuTonomy. The Cambridge, MA-based tech firm spun off from MIT in 2013, for $450 million late last year and was spun out again in 2017.
Delphi Technologies spun out its legacy and tech business into two separate companies. The legacy part of the company is now the ticker symbol (DLPH), and the AV company became Aptiv PLC (APTV).
Spin-offs give organizations the opportunity to streamline operations and allow the market to value the company on an independent basis instead of the sum of the parts. This can lead to uncorking additional shareholder value.
Aptiv is the closest thing on the market you will find for an unfettered play on self-driving technology.
Management declined against merging its legacy and AV technology, which is a smart move considering legacy technology gets the wrong rub of the green by investors.
NuTonomy lags Alphabet's Waymo but has been operating robo-taxis in Singapore since 2016. Delphi has gifted additional engineers, reinforcing its fantastic technical talent.
Aptiv has split its business into two new different segments in the new company.
The Advanced Safety and User experience segment will act as the brain in the vehicle, emphasizing software know-how to guarantee user security while a centralized system maintains connectivity.
The new Signal and Power Solutions segment will act as the nervous system in the vehicle by enabling high-speed data fluidity within the next-gen architecture. This segment includes the cable management and connector products that contribute a further $1 billion of revenue to the top line.
In total, Aptiv procured $12.9 billion in annual revenue in 2017, which was a boost of 4.9% from 2016. Earnings per share growth was up 10.5% YOY.
Investors cannot reasonably expect AV companies to annually grow top line by 20% to 30% as cloud companies, and the margins are unfortunately less savory. The dynamics of the business are different, and the revenue guidance of $13.4 to $13.8 billion should keep investors happy.
The pipeline is in fine fettle with $19.3 billion in bookings, which represent the lifetime gross revenue for consummated contracts.
Some of the outsized awards came in the form of an active safety contract with an OEM alliance, a high-voltage mobile charger contract from a leading North American EV producer, and an architectural contract for BYD's SUV platform in China.
It's no wonder both of the newly crafted segments expect a 10% boost in revenue for 2018.
NuTonomy is such a gem of a company that it is shocking that a large-cap tech firm declined to swoop in.
Half a billion is peanuts for such valuable and innovative technology.
Level 4 and Level 5 grade technologies are already starting to mature.
Other minor acquisitions of analytics firms Control-Tec and Movimento will initiate data monetization opportunities that effectively analyze their aggregated data then translate data into actionable profit-making opportunities.
Big data analytics are needed to decipher the path forward after compiling millions of miles of auto-robo data. And algorithms needing refinement are starving for the data, too.
A fully connected user experience will become standard in these robo-cars, and an integrated, optimized architecture is the secret sauce to commercialization of Level 4 and Level 5 automated vehicles.
Aptiv and Waymo are the only end-to-end system providers of the integrated brain and nervous system in a vehicle.
By late 2018, NuTonomy will have more than 150 Level 4 vehicles in live action.
Aptiv forecasts about $300 million in revenue from Level 4 or Level 5 AV systems by 2025.
Level 4 is practically autonomous - ready with a driver waiting to take control if need be.
Level 1, 2 and 3 revenues will mushroom to $1.8 billion per year, more than tripling from $500 million today.
Ottomatika, a Carnegie Mellon University spin-off founded in 2013, which provides software for self-driving cars, and NuTonomy are the in-house duo entirely focused on complex Level 4 and Level 5 solutions.
The shared access to the system has been set up to allow multiple teams access to the algorithms and technology that feeds through to other parts of the business.
Aptiv PLC is the perfect company to place in a buy and forget portfolio because AV monetization is still in its incubation phase.
Just as investors of pure cloud plays recently have been rewarded in spades, pure AV technology companies will be rewarded as mass rollouts of for-profit services become commonplace.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/04/Recent-highlights-image-4-e1523483967315.jpg326580MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-04-12 01:05:182018-04-12 01:05:18The Big Play in Autonomous Driving with Aptiv
In 2014, the juicy sound clips recorded by NFL legend Chris Carter at the annual NFL rookie symposium would be enough for those at league headquarters to have nervous breakdowns.
During a keynote speech, Chris Carter recommended that every rookie about to kick-start a sports career should find a "fall guy" just in case they found themselves on the wrong side of the law.
Carter later rescinded his comments and sincerely apologized for insinuating marginal tactics.
Lo and behold, it seems the most attentive listeners at the symposium weren't the players but the swashbuckling chauffeur-share service that has become the "fall guy" of Big Tech, none other than Uber.
The great thing (read: sarcastic here) for Uber about killing a pedestrian with autonomous vehicle technology is that it does not need to change its Silicon Valley mind-set of "move fast and break things."
Everything Uber touches seems to turn to mush. At least lately.
This revelation is extremely bullish for the other big players in the A.I. (Artificial Intelligence) driverless car space, mainly Waymo and General Motors (GM).
Granted, Uber came late to the party, but that cannot be an excuse for the myriad of shortcuts it promotes to build its business.
Waymo, the autonomous subsidiary of Google (GOOGL), has been honing its software, algorithms, and sensors for the past nine years like a sage samurai swordsmith from Kyoto. This type of detailed nurturing has led Waymo to rack up more than 5 million miles of testing on live roads.
The company recently commenced the first niche ride-hailing service in Phoenix, AZ, and just announced that it will purchase up to 20,000 electric cars from Jaguar Land Rover in a $1 billion deal to outfit with its cutting-edge technology.
Every day is a joyous day for Waymo because the first mover advantage is in full effect.
GM, another laggard, though considered in the top three, won't commence its robotic car fleet until late 2019. However, by that time, Waymo could be on the verge of mass rollouts if there are no setbacks.
The cherry on top for Waymo is Uber's knack of making a dog's breakfast of anything it pursues, magnifying an insurmountable lead for Waymo to possess.
Granted, the autonomous vehicle brain trust expected casualties, and the firm that made news for this mishap would be stuck with this label along with suspended operations.
Waymo missed a direct hit thanks to Uber and Tesla.
Tesla also took a direct hit when it announced that Walter Huang, an Apple engineer, sadly was killed in a Model X accident last weekend while his car was on autopilot.
It capped a horrible week by announcing a comprehensive recall of every Model S made before April 2016 for a faulty part. After fighting tooth and nail to maintain the $300 support level, Tesla swiftly sold off down to $250.
The disruption fetish permeating the ranks of the tech industry has its merits. Often the end result manifests through cheaper prices and better consumer services.
However, Uber's over-aggressiveness has placed it at the forefront of the regulation backlash along with Facebook (FB).
Google has certainly been playing its cards right, and having not run over a pedestrian consolidates its leading position
Luckily, the National Transportation Safety Board does not punish every participant using this technology.
No news is good news.
An extensive review of internal processes will hit team morale, and the burden of blame with fall upon the engineers.
The fallout from the tragic incidents will set back Tesla and Uber at least three to six months.
The suspension of their operations is akin to a white flag because Waymo is currently leaps ahead and plans to ramp up the mass rollout in the next two years with technology that is best of breed.
The running joke in the industry is that Uber's autonomous vehicle engineers are comprised of Waymo rejects.
Waymo already has more than 600 for-profit vehicles in operation in Arizona. And as every day without a fatality is considered a success, the Jaguars are next in line to be tricked-out with sensors and software.
Unceremoniously, Waymo has focused on safety as the pillar of its autonomous driving operation. Its conservative attitude toward danger will serve it well in the future. Waymo even spouted that its technology would have avoided the Uber accident.
Waymo has no desire to physically produce cars, but it aspires to sell licenses to the technology that could be installed in trucks and delivery vehicles, too.
The licenses could act as de-facto SaaS (software as a service) reoccurring revenue that has catapulted cloud companies to untold heights.
Google would also be able to integrate Google Maps, Google Docs, and all Google services into the robot-cab experience. The robo-taxi would merely serve as an incubation chamber to use the plethora of Google services while being transported from point A to point B.
And with Uber temporarily wiped off the map, Waymo seems like a great bet to monetize this segment at massive scale.
Google is truly on a roll as of late, even finding the perfect fall guy for the big data leak that has roiled the tech world, inducing a wicked tech sell-off - Facebook.
Instead of extracting data from user-posted content, Google's search builds a profile on users' search tendencies, and it is just as culpable in this ordeal.
Ironically, all the heat is coming down on Facebook's plate, and Mark Zuckerberg's lack of tactical PR noise is cause for investor concern.
The mountains of cash vaulted up over the years has made barriers of entry into new fields simple.
For example, Amazon's desire to lead health care came out of left field, and 10 years ago nobody ever thought the iPod company would make smart watches.
The interesting development in broader tech is the disintegration of unity that once supported the backbone of these firms.
Tim Cook, chief executive officer of Apple, railed on Facebook's business model and trashed Mark Zuckerberg's blatant disregard for privacy in order to profit from people's personal lives.
Large cap tech has never had as much overlap as it does now, and the new normal is throwing others under the bus.
If Google is dragged into the Facebook regulatory orbit, the silver lining is that the world's best autonomous driving technology will soon transform its narrative and put its incredibly profitable search business on the back burner.
Markets are forward looking and reward outstanding growth stories.
Tech is growth.
Morgan Stanley issued a report claiming the repercussions of mass-integrating this technology would be to the tune of about half a trillion dollars. That includes the $18 billion saved in annual health costs to automotive injuries. Also, 42% of police work ignites from a simple traffic stop. This would vanish overnight as well as concrete parking garages that blight cities. Car insurance is another industry that will be swept into the dustbin of ancient history.
Yes, tech has evolved that fast when Google can start claiming its revered search business as the daunted L word - legacy business.
The fog of war is starting to burn off and the visible winner is Waymo.
The shaping of its autonomous vehicle business is starting to take concrete form and although this won't affect earnings in the next few years, it will be a game changer of monumental proportions.
Uber is seriously in the throes of having an existential problem because of Waymo's outperformance. Venture capitalists heavily invested in Uber because of the promises of autonomous vehicle technology.
This is its entire growth story of the future.
Without it, it is a simple taxi company run on an app. There is no competitive advantage.
Waymo is on the verge of creating a scintillating growth business that is effectively Uber without a driver while simultaneously destroying Uber.
Ouch!
It speaks volumes to the ascendancy. And if Waymo miraculously capitulates, Google can always call Chris Carter and find another "fall guy."
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-04-03 01:05:122018-04-03 01:05:12The Big Winner From the Phoenix Car Crash
Take a look at the worst performing stocks of the past two weeks and they all have one theme in common: artificial intelligence.
You can trace the beginning of the move back to the Arizona crash by an Uber AI autonomous driven car that killed a pedestrian.
As all those who have studied chaos theory in mathematics, it's like the proverbial butterfly that flapped its wings in a Brazilian rain forest, which then triggered a typhoon in Japan.
Never mind that the pedestrian was jaywalking at night wearing dark clothes. AI is supposed to see this. My guess is that only a sensor failure could have caused the accident, a dud $5 part, which means it has nothing to do with AI.
This is the second autonomous driving death in three years. The last one, involving a Tesla Model S-1 in Florida, didn't see the back of a white truck while driving into the sun, and crashed into it, killing the driver.
And here is the problem if you are a trader or investor.
Autonomous driving has been a major theme in the entire tech sector for the past two years.
You can start with the car companies, Tesla (TSLA), Uber, and Google's (GOOGL) Waymo, and extend all the way out through the entire ecosystem.
That would include the chip makers, NVIDIA (NVDA), which is suspending its autonomous program, Intel (INTC), Advanced Micro Devices (AMD), and the chip equipment maker Lam Research (LRCX).
So, is it game over for these companies? Is it time to pick up our marbles and play elsewhere (there is nowhere else)?
I don't think so.
Let's look at the hard numbers involving automobile accidents. During the same three-year period that AI cars killed two people, human drivers killed a staggering 100,000, and left millions with injuries.
So there is absolutely no doubt that AI is the superior technology. AI-driven cars don't text while driving, drink, take drugs, drive while tired, overdo it with an afternoon of wine tasting in Napa Valley, or look down at their cell phones, as did the safety driver in the ill-fated Uber car in Phoenix.
AI is not just a self-driving car theme. It is permeating every aspect of the modern economy and will continue to do so at an accelerating pace. It is no one-hit wonder.
All that is happening now is that AI and tech stocks in general are backing off from grievously overbought conditions.
As we approach the next round of earnings reports in a month, the market focus rapidly will shift back from tedious and distressful technicals. That's when they will rocket again.
There is an old market term for the current state of technology stocks. It is known as a "Buying Opportunity."
I haven't been able to touch stocks I love for months because they were completing upward moves of 50% to 300% over the past two years.
They have just become touchable once again.
To watch the video of the Phoenix crash and the expression of the clueless safety driver, please click here.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/03/uber-image-6-e1522274442669.jpg288480MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-03-29 01:07:562018-03-29 01:07:56Is It All Over for Artificial Intelligence?
One hundred years from now, historians will probably date the beginning of the fall of the American Empire to 1986.
That is the year President Ronald Reagan ordered Jimmy Carter's solar panels torn down from the White House roof, and when Chinese Premier Deng Xiaoping launched his top secret 863 program to make his country a global technology leader.
Is the End is Near for the US?
The big question today is who will win one of the biggest opportunities of our generation?
Some 32 years later, the evidence that China is winning this final battle is everywhere. China dominates in windmill power, controls 97% of the world's rare earth supplies essential for modern electronics, is plunging ahead with clean coal, and boasts the world's most ambitious nuclear power program.
It is a dominant player in high-speed rail and is making serious moves into commercial and military aviation. It is also cleaning our clock in electric cars, with more than 30 low cost, emission free models coming to the market by the end of 2013.
Looking from a distance, one could conclude that China has already won the technology war.
And the Winner Is...
General Motors (GM) pitiful entrant in this sweepstakes, the Chevy Bolt, has utterly failed to reach the firm's sales targets. Still, I receive constant emails from drivers who say they absolute love the cars, and at $36,620, with dealer discounts it IS cheap.
This is all far more than a race to bring commercial products to the marketplace. At stake is nothing less than the viability of our two economic systems.
By setting national goals, providing unlimited funding, focusing scarce resources, and letting engineers run it all, China can orchestrate assaults on technical barriers and markets that planners here can only dream about.
And let's face it, economies of scale are possible in the Middle Kingdom that would be unimaginable in America.
Nissan Leaf
The laissez faire, libertarian approach now in vogue in the US creates a lot of noise, but little progress. The Dotcom bust dried up substantial research and development funding for technology for a decade.
While China was ramping up clean coal research, president Bush was closing down ours.
Toyota Plug-In Prius
Mention government involvement in anything these days and you get a sour, skeptical look. But this ignores the indisputable verdict of history.
Most of the great leaps forward in US economic history were the product of massive government involvement. I'm thinking of the transcontinental railroad, the Panama Canal, Hoover Dam, the atomic bomb, and the interstate highway system.
All of these were far too big for a private company ever to consider. If the government had not funneled billions in today's dollars into early computer research, your laptop today would run on vacuum tubes, be as big as a skyscraper, and cost $100 million.
Check Out My New Laptop
I mention all of this not because I have a fascination with obscure automotive technologies or inorganic chemistry (even though I do).
Long time readers of this letter have already made some serious money in the battery space. This is not pie in the sky stuff; this is where money is being made now.
I caught a 500% gain by hanging on to Warren Buffet's coat tails with an investment in the Middle Kingdom's Build Your Dreams (BYDFF).
I followed with a 250% profit in Chile's Sociedad Qimica Y Minera (SQM), the world's largest lithium producer. Tesla's own shares have been the top performer in the US market in 2014, up from $16.50 to $392.
These are not small numbers. I have been an advocate and an enabler of this technology for 40 years, and my obsession has only recently started to pay off big time.
We're not talking about a few niche products here.
The research boutique, HIS Insights, predicts that electric cars will take over 15% of the global car market, or 7.5 million units by 2025. Even with costs falling, that means the market will then be worth $225 billion.
Electric cars and their multitude of spin off technologies will become a dominant investment theme for the rest of our lives. Think of the auto industry in the 1920's. (TSLA), (BYDDF), and (SQM) are just the appetizers.
All of this effort is being expended to bring battery technology out of the 19th century and into the 21st.
The first crude electrical cell was invented by Italian Alessandro Volta in 1759, and Benjamin Franklin came up with the term battery after his experiments with brass keys and lightning. In 1859, Gaston Plant discovered the formula that powers the Energizer bunny today.
Further progress was not made until none other than Exxon developed the first lithium-ion battery in 1977. Then, oil prices crashed, and the company scrapped the program, a strategy misstep that was to become a familiar refrain.
Sony (SNE) took over the lead with nickel metal hydride technology, and owns the industry today, along with Chinese and South Korean competitors.
BYD F3
We wait in gas lines to fill 'er up for a reason. Gasoline has been the most efficient, concentrated, and easily distributed source of energy for more than a century.
Expect to hear a lot about the number 1,600 in coming years. That is the amount of electrical energy in a liter (0.26 gallons), or kilogram of gasoline expressed in kilowatt-hours.
A one-kilogram lithium-ion battery using today's most advanced designs produces 200 KwH. Stretching the envelope, scientists might get that to 400 KwH in the near future.
But any freshman physics student can tell you that since electrical motors are four times more efficient than internal combustion ones, that is effective parity with gasoline.
Since no one has done any serious research on inorganic chemistry since the Manhattan project, until Elon Musk came along, the prospects for rapid advances are good.
A good rule of thumb is that costs will drop my half every four years. So Tesla S-1 battery that costs $30,000 four years ago, will run $15,000 today, and only $7,500 in 2022.
Per Kilowatt battery costs are dropping like a stone, from $1,000 a kWh in the Nissan Leaf I bought eight years ago to $200 kWh in my new Tesla S-1.
In fact, the Tesla, it is such a revolutionary product that the battery is only the eighth most important thing.
The additional savings that no one talks about is that an electric motor with only eleven moving parts requires no tune-ups for the life of the vehicle.
This compares to over 1,000 parts for a standard gas engine. You only rotate tires every 6,000 miles. That's because the motor runs at room temperature, compared to 500 degrees for a conventional engine, so the parts last forever.
Visit the Tesla factory, and you are struck by the fact that there are almost no people, just an army of German robots. Few parts mean fewer workers, and lower costs.
All of the parts are made at the Fremont, CA plant, eliminating logistical headaches, and more cost. By only selling the vehicle online, the expense of a huge dealer network is dispatched.
The US government rates the S-1 as the safest car every built, a fact that I personally tested with my own crash. Consumer Reports argues that it is the highest quality vehicle every manufactured.
My Personal Crash Test
Indeed, the Tesla S-1 is already the most registered car in America's highest earning zip codes. Oh, and did I tell you that the car is totally cool?
The New Tesla 3
Hence, the need for government subsidies to get private industry over the cost/production hump.
Nissan, Toyota, Tesla, and others are all betting their companies that further progress and economies of scale will drive that cost down to below $100 per kWh.
That will make electric cars cheaper than conventional hydrocarbon powered ones by a large margin. The global conversion to electric happens much faster than anyone thinks.
In a desperate attempt to play catch up, President Obama lavished money on alternative energy, virtually, since the day he arrived in office.
His original 2010 stimulus package included $167 billion for the industry, enough to move hundreds of projects out of college labs and into production.
However, in the ultimate irony, much of this money is going to foreign companies, since it is they who are closest to bringing commercially viable products to market. Look no further than South Korea's LG, which received $160 million to build batteries for the GM Volt.
Since then, all subsidies for electric cars have been eliminated by the tax bill passed in December.
Fortunately, the US, with its massively broad and deep basic research infrastructure, a large military research establishment (remember the old DARPA Net?), and dozens of still top rate universities, is in the best position to discover a breakthrough technology.
The Energy Department has financed the greatest burst in inorganic chemistry research in history, with top rate scientists pouring out of leading defense labs at Los Alamos, Lawrence Livermore, and Argonne National Labs.
There are newly funded teams around the country exploring opportunities in zinc-bromide, magnesium, and lithium sulfur batteries. A lot of excitement has been generated by lithium-air technology, as well as much controversy.
In the end, it may come down to whether our Chinese professors are smarter than their Chinese professors.
In 2007, the People's Republic took the unprecedented step of appointing Dr. Wan Gan as its Minister of Science and Technology, a brilliant Shanghai engineer and university president, without the benefit of membership in the communist party.
Battery development has been named a top national priority in China. It is all reminiscent of the 1960's missile race, when a huge NASA organization led by Dr. Werner Von Braun beat the Russians to the moon, proving our Germans were better than their Germans.
Anything for a Green Card
Consumers were the ultimate winners of that face off as the profusion of technologies the space program fathered pushed standards of living up everywhere.
I bet that's how this contest ends as well. The only question is whether the operating instructions will come in English or Mandarin.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Energizer-Bunny.jpg347290Douglas Davenporthttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDouglas Davenport2018-02-14 01:07:352018-02-14 01:07:35The Great Race for Battery Technology
Given that my friend, former Texas Governor, Rick Perry, was nominated for the position of Secretary of Energy yesterday, I thought I would recount a dinner I had with him.
The irony is great since Rick promised to close down the agency while campaigning for president in 2012.
It confirms my suspicion that many of the people Trump is appointing have the mission to destroy the agencies they will head.
As a precondition to joining a dinner with the former Texas governor, I had to promise a few things.
I was not allowed to bring up the fact that he shoots coyotes while jogging. I couldn?t mention statistics proving that 70% of the jobs created in his state during his 12-year tenure as governor were government, not private.
Having agreed to all of that, I was told, ?Sure, come along, we?d love to hear your questions and your insights.?
Perry was making his 12th?visit to the Golden State in the past two years to convince local companies, plagued with onerous taxes, stringent regulations and high operating costs, to pull up stakes and move camp to the Lone Star State.
When I first shook hands with the governor, I was surprised at how short he was. But then he wasn?t wearing the three-inch heeled cowboy boots that normally elevated him at home.
Then I mentioned my secret words: ?Go Aggies.? He recoiled.
?How did you know?? he demanded.
I told him that during the early 1970s, I drove my sister from California to his home state so she could attend Texas A&M University. Perry was a cadet then, and I speculated that they had probably dated.
He answered, ?Nah, I didn?t play around much in those days.?
Probably not.
But after that, he melted, only engaging me in serious conversation, while sticking to canned, stock answers to questions from everyone else.
I was Rick Perry?s new best friend.
As he spoke, I realized that he was much more reasonable in his views than when appealing to his ultra conservative base back home. That is simply the mark of a savvy and successful politician.
Perry said that the country needs both states to lead change and succeed, and that he rooted for California to do well.
The governor was still basking in the glow of Toyota?s recent announcement that it was moving 3,000 jobs from Long Beach, California to Texas.?
It has been a controversial win for him, as his state is paying $10,000 in subsidies per person to lure the white-collar work force.
I spoke to Toyota USA CEO, Jim Lentz, about this recently. He said the real reason had to do with working in the same time zone as the company?s large manufacturing facilities in Kentucky and Tennessee.
A lower cost of living, cheaper rents, and discount labor costs were also issues. Lower taxes were at the bottom of a list of ten priorities.
Past experience has shown that most departing workers, fleeing from California, return after three years. It seems the summer heat and humidity kill them.?
Thus chastened, they are more than willing to pay a premium for the lifestyle here, despite the higher taxes and earthquakes.
Perry says the US needs an ?all of the above? solution to its energy problems. It is not a good idea to be dependent on foreign energy sources, especially from unstable countries.
Despite its stereotype as an oil-based economy, Texas was now the top producer of wind power in the country. The installed base there now exceeds 12 gigawatts, making it the fifth largest in the world.
My friend, T. Boone Pickens, has been a major investor in wind power generation there.
An aggressive approvals process made possible the construction of long distance transmission lines needed to send it to other states and eventually to California itself, thus creating a national market for wind power.
The governor says that Texas will become a major exporter for liquefied natural gas within the next two years. Cheniere Energy (LNG), the front-runner in the field, has been a favorite recommendation of mine for the past five years, and? Trade Alert followers have chased the shares up from $6 to $70.
Despite the controversy over fracking wells polluting fresh water supplies, Perry says there has not been a single incidence of this occurring in Texas. This is no doubt a result of the state?s ferocious regulation of the energy industry, of which I, myself, have no small amount of experience.
Thanks in part to new federal regulations, air pollution has fallen dramatically in Texas. Ozone emissions have dropped by 23% since 2000, while nitrous oxides are off by 57%.
These, and other measures have enabled the US to cut its dependence on foreign oil imports from 33% to 15% since 2000. During the same period, natural gas production, which produces half the carbon of oil based fuels, has soared by 57%.
At that point, another guest raised his hand and asked his stance on gay rights. Perry opined that sexuality was a choice that could be controlled, and that gay marriage would never get his support. An audible hiss was heard in the roomwhich Perry stonily ignored.
That invited the question about the legalization of marijuana. He simply said that it would never be legalized in his state, and, ?If people want to get high, they can go to Colorado.?
Finally, a woman at the table asked about reproductive rights. When Perry said that he was proud to sign a Texas law limiting termination to the first five months of pregnancy, murmurs were heard. The law is not expected to survive a pending challenge at the Supreme Court.
Another attendee queried his view of Hillary Clinton. I braced myself. He then surprised me by saying that he thought she was ?a very capable Secretary of State and a great public servant.?
That spoke volumes to me. It meant that with access to all his private polling data, Rick Perry thought that Hillary would win the 2016 presidential election. As the astute politician that he is, Perry doesn?t want to burn his bridges.
Perry likes to tell people that he is probably the last governor who used an outhouse on a dry cotton farm near Abilene, West Texas.
He became an Eagle Scout and I confirmed this with the secret scout handshake.
He earned a degree in animal science at Texas A&M where he was also a Corps Cadet and a yell leader. His first part-time job was as a door-to-door salesman. When he graduated, he joined the Air Force and became a C-130 pilot.
Perry originally started in politics as a Democrat, getting elected to the Texas House of Representatives in 1984.
He worked on Al Gore?s presidential campaign in 1988. This was back when Southern Democrats were more conservative than the right wing of the Republican Party.Perry became a Republican in 1989.
He moved up to the governorship in 2000, when sitting governor George W. Bush was elected president. Perry has been reelected three times, making him the longest tenured Texas governor in history.
Perry said that his time spent as the front runner in the 2012 presidential election ?were the three most exhausting hours of my life.?
He then repeated his ?Oops? moment when, if elected, he couldn?t remember the third government department he would close (it was the Department of Commerce, in addition to Energy and Education). That was probably to head off someone else bringing it up first.
I told the governor I knew two facts about our respective states which I bet he didn?t know. He asked what they were.
I responded that California and Texas were the only two states that had been independent countries before joining the Union. California had been the Bear Flag Republic for six months until mid 1848, while the Republic of Texas stood on its own for a decade, until 1846. Texans have been regretting joining the Union ever since.
Today, the two states make up 19.1% of America?s GDP, and 20.4% of its population.
The other mystery fact was that while Texas was independent, it maintained an embassy in London, England on St. James Street.Today, the space is occupied by a pub and is across the street from the Ritz Hotel and next door to my old office at The Economist?magazine headquarters. Perry said he?d check it out on his next visit there.
As the dinner wound down, I asked the governor if he had ever driven a Tesla Model S-1. He said he hadn?t. I asked if he would like to because my own high performance model was conveniently parked out front. He said he?d love to.
At that point, the plain clothed Texas Rangers who accompany him as bodyguards noticeably tensed up.
I have some experience providing quick tutorials for the uninitiated on how to drive this incredible electric car from the future. My chassis number is 125 out of a fleet of 45,000 and is one of the oldest S-1s around.
Newcomers invariably underestimate the car?s power and acceleration, which works out to about 450 horsepower in the carbon world. This can be unexpectedly dangerous for newbies.
With some careful coaching, Perry gingerly drove the car a few times around San Francisco?s Huntington Park, atop Nob Hill with two nervous, but heavily armed, Rangers in the back seat.
When we carefully turned back onto California Street and came to a stop in front of the Mark Hopkins Hotel, Perry pronounced the vehicle ?a marvelous piece of technology?.
With that, Perry invited me to visit the governor?s mansion the next time I visited Austin, Texas.
I said I?d be honored, and silently drove my Tesla off into the night, thus christened by a true Texan.
https://www.madhedgefundtrader.com/wp-content/uploads/2016/03/Rick-Perry-2-e1481676091833.jpg288400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-12-14 01:06:342016-12-14 01:06:34Catching Dinner with Secretary of Energy Nominee, Rick Perry
The electric car industry is about to get turned right side up.
The dozen manufacturers out there have long struggled to achieve ranges that could match the 300 miles that is standard for competing gasoline engines.
All electric cars on the market today max out at 100-mile ranges or less. Except, that is, my Tesla S-1 (TSLA), which can drive 305 miles ? but for $110,000.
That is, unless I am driving back from Lake Tahoe. By descending 6,200 feet the regenerative braking system enables me to add 100 miles to my range, increasing it to 405 miles. All four wheels essentially act as electric turbines.
In a research paper published in the prestigious journal Science, a Cambridge University research team announced a major breakthrough in electrochemistry that would lead to a 500% increase in electric car ranges.
Expressed in terms of the S-1, it would drop the cost of the 1,000 pound lithium ion battery from $30,000 to $6,000, shrinking the overall cost of the vehicle to $86,000. That would enable it to compete with equivalent luxury models from Daimler Benz, BMW, and Lexus.
Alternatively, it could maintain the same battery weight and cost and boost the S-1 range to 1,450 miles.
Yikes!
The research was partially funded by the US Department of Energy. Cambridge University retains the patent, and is already working with several firms to move the technology forward.
The great leap forward is made possible through the use of a lithium-air formula in battery construction. The basic chemistry of lithium-air batteries is simple.
The cell generates electricity by combining lithium with oxygen to form lithium peroxide and is then recharged by applying a current to reverse the reaction. Making these reactions take place reliably, over many cycles, is the challenge.
The attraction here is that lithium air battery energy densities are ten times higher than the lithium ion batteries now in use. The Cambridge team was able to tweak battery performance through adding lithium iodide to the process.
Elon Musk has told me that he is shown dozens of new battery technologies every year. The problem is always the same.
The newfangled batteries can only be recharged once or twice. They develop ?tendrils? on the anodes and cathodes which make future recharges impossible.
The Cambridge professor, Dr. Clare Grey, says her team has been able to recharge their lithium air battery 2,000 times. That?s enough to get to the eight-year battery lifetime guarantee mandated by the state of California.
Tesla is no slouch. They have been tinkering with the electrochemistry of their batteries on their own. The recent series of cars has achieved a 5% boost in range to 290 miles through the addition of silicon to the battery cathodes.
Of course, it will take a few years before lithium-air batteries reach full commercial viability. New technology doesn?t exactly leap out of labs on to store shelves.
After all, current electric battery design is not too different from that first introduced in electric street trollies of the 1880s.
But my guess is that further research will bring greater battery ranges, not lesser ones.
The news could be better for Tesla. It has always been a ?faith? type stock, reliant on the development of futures technologies to achieve future profitability.
All of the profits announced so far have really been accounting tricks, reliant on generous government subsidies and the sale of carbon credits.
Shareholders have to believe that Tesla will become the world?s largest car maker in a decade, or they shouldn?t be in the shares. I believe Tesla can do it, but expect the road to be rocky.
Tesla is in effect a high risk venture capital investment that has already gone public.
Now, at last, we have the technology in hand.
For more background about this car from the future, read ?16 Facts and 6 Big Problems I discovered by Tearing Apart my Tesla S-1? by clicking here.? You must be logged into your account to view this article.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/09/John-Thomas6.jpg396371Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-09-26 01:06:022016-09-26 01:06:02Battery Breakthrough Promises Big Dividends
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