Global Market Comments
October 12, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or BACK TO THE NIFTY FIFTY),
(CAT), (JPM), (BAC), (NSC), (UNP), (V),
(MA), (FDX), (UPS), (IP), (AAPL), (TSLA)
Posts
My daughter needed a desk so she could go to high school from her bedroom. So, I drove around Northern Nevada to get the perfect piece, visiting Reno, Sparks, Carson City, and Minden. It is one of the most conservative parts of the country, probably 90% republican.
What I saw was amazing.
There were Biden/Harris signs everywhere. Yes, there will still some Trump signs, but they were in a definite minority. Four years ago, you only saw Trump signs. The rare Clinton/Kaine sign was full of bullet holes, torn down, or copiously marked with offensive graffiti.
I thought, hmm, there must be a trade here.
We seem to be on the verge of massive changes in the US economy. Get in front of them and you’ll make a fortune. Lag behind, and you’ll be seen driving an Uber cab.
Technology undoubtedly led the decade, bringing in a 30% annual return since 2009. Industrial and other domestic stocks brought in no more than 12%. The “Roaring Twenties” could bring the reverse.
Technology will continue to do OK. Ever falling prices and greater service is a tough business model to beat. But let’s face it, none of these things are cheap. Apple (AAPL) going from a 9X multiple to 45X?
Industrials could be playing a massive catch up game initiating a new supercycle as they did from 2000-2010 when tech lagged in the wake of the Dotcom Bust.
This switch is made easier by the fact that most big industrial companies are now de facto technology ones. They all now use advanced cloud software, sophisticated robots, and state of the art distribution systems. Caterpillar (CAT) even has a 290-ton dump truck that drives itself like a giant Tesla (TSLA)!
Many of these companies I have covered for nearly 50 years, when they last belonged to the Nifty Fifty. So, for me, it’s a matter of dusting off my old research, seeing who is left, and giving them a modern spin. The great thing about these stocks is that many pay decent dividends.
I’ll give you a short list of where to buy the dips.
Banks – JP Morgan (JPM), Bank of America (BAC)
Railroads – Norfolk Southern (NSC), Union Pacific (UNP)
Credit Cards – Visa (V), Master Card (MA)
Couriers – FedEx (FDX), UPS (UPS)
Consumer Discretionary – International Paper (IP)
Hmm, a market where everything goes up. I like it! Dow 120,000 here we come!
Trump ordered all Stimulus Negotiations to cease, and then changed his mind six hours later. Clearly, the president has given up on the election and wants the next administration to inherit a Great Depression. Or is this Covid-19 talking? It’s the perfect scorched earth strategy. Write off another 2 million small businesses. Down ticket republican candidates will be beaten like a red-headed stepchild. Stocks plunged 600, with airlines in free fall, then bounced 700.
Jay Powell REALLY wants a stimulus package, claiming the economy desperately needs fiscal help to maintain a recovery or face a prolonged depression. “The risks of overdoing it seem, for now, to be small,” the central bank chief told the National Association for Business Economics. Are his pleas falling on deaf ears in Washington? Trump just gave our Fed governor the middle finger salute.
Share Buybacks vaporized T\this year and will be miniscule next year, with companies whose earnings have been crushed by the pandemic not participating. The ban on bank share buybacks imposed by the Fed continues. This has been the largest portion of net stock buying for the past decade. The good news is that foreign investors stepped in as big buyers in 2020, taking the indexes to new highs.
Apple to announce new 5G iPhone this week. The release came a month late, thanks to the pandemic. Scheduled for October 13, the event is called “High Speed”. Apple’s biggest sales quarter in history has just begun. Buy dips in (AAPL).
The Election is Noise and its best to focus on the bull market that has just begun, says JP Morgan. Record fiscal stimulus and quantitative easing in the face of near-zero interest rates create a perfect storm in favor of equities. The best stock to own going into the October 13 Prime Day?
Weekly Jobless Claims edged down to 840,000, still missing 200,000 from California, due to an upgrading computer system. California stopped reporting data so they can rebuild the antiquated computer system of the Employment Development Department, which has been breaking down due to overwhelming demand. Some 26.5 million workers are now claiming unemployment benefits.
Banks are making record trading profits on the back of the US Treasury market where volume has exploded. Even though there has been little net movement in prices in six months, the two-way bets have been enormous. It helps to have a massive home refi boom, incredible QE, and a government that is printing new debt like there’s no tomorrow.
When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old.
My Global Trading Dispatch maintained a new all-time high last week by staying 100% in cash. I was just as grateful for having no positions on the up 600-point days as I was on the down 600-point days. Safe to say that I will be an increasingly more aggressive buyer on ever smaller dips.
That keeps our 2020 year-to-date performance at a blistering +35.46%, versus a gain of 0.5% for the Dow Average. That takes my eleven-year average annualized performance back to +36.14%. My 11-year total return stood at new all-time high of +391.37%. My trailing one-year return dropped to +44.26%.
The coming week will be a dull one on the data front. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 210,000, which you can find here.
On Monday, October 12 at 8:30 AM EST, the government is closed for Columbus Day so there will be no data releases, even though the stock market is open.
On Tuesday, October 13 at 9:00 AM EST, the US Inflation Rate for September is out.
On Wednesday, October 14, at 8:30 AM EST, The Producer Price Index for September is released. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.
On Thursday, October 15 at 8:30 AM EST, the Weekly Jobless Claims are announced. We also get the Empire State Manufacturing Index.
On Friday, October 16, at 8:30 AM EST, US Retail Sales are printed. At 2:00 PM we learn the Baker-Hughes Rig Count.
As for me, I eventually found the perfect desk on Craigslist Reno. It was from the 1930s and had once occupied the office of the Metropolitan Life Insurance Company of New York, complete with two inkwells.
The company logo was prominently displayed in its wrought iron legs. When the Metropolitan modernized its offices in the 1950s, it sold off its furniture, which has been in circulation in the antique market ever since.
I told the seller, who had just moved from the east coast, of my amazing connection with the company. My Uncle Ed spent three years on a Navy destroyer in the Pacific during WWII. Enlistees in the 1940s were required to take out life insurance policies before they went off to war.
When Ed passed away a few years ago, I went through his papers and what did I find but a life policy from the Metropolitan Life Insurance Company for $1,000.
Ever the history buff, I called the company to find out if the policy was worth anything 70 years later. It turned out to have a cash value of $100,000, which they paid out immediately. I divided the money among my mom’s 20 grandchildren to pay for their college educations. Several now have PhDs. Got to love that compounding of interest.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Bring on the Roaring Twenties
Global Market Comments
October 9, 2020
Fiat Lux
Featured Trade:
(THE NEW AI BOOK THAT INVESTORS ARE SCRAMBLING FOR),
(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
(TENCENT), (TSLA), (NVDA), (AMD), (MU), (LRCX)
Global Market Comments
October 2, 2020
Fiat Lux
Featured Trade:
(SEPTEMBER 30 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (AMD), (JPM), (DIS), (GM), (TSLA), (NKLA),
(TLT), (NFLX), (PLTR), (VIX), (PHM), (LEN), (KBH), (FXA), (GLD)
Below please find subscribers’ Q&A for the September 30 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Which is a better buy, NVIDIA (NVDA) or Advanced Micro Devices (AMD)?
A: NVIDIA is clearly the larger, stronger company in the semiconductor area, but AMD has more growth ahead of it. You’re not going to get a ten-bagger from NVIDIA from here, but you might get one from Advanced Micro Devices, especially if a global chip shortage develops once we’re out the other side of the pandemic. So, I vote for (AMD), and did a lot of research on that company last week. You can find the report at www.madhedgefundtrader.com but you have to be logged in to see it.
Q: Do you have any thoughts on the JP Morgan Chase Bank (JPM) spoofing cases, where they had to pay about a billion in fines? Is this a terrible time to invest in banks?
A: No, this is a great time to invest in banks because this is the friendly administration to banks now; the next one will be less than friendly. On the other hand, an awful lot of bad news is already in the price; buying these companies at book value or discount of book like JP Morgan, it's a once in a lifetime opportunity. All the bad behavior they’re being fined on now happened many years ago. So yes, I still like banks, but you really have to be careful to buy them on the dip, just in case they stay in a range. If you stay in a range, you’re buying them call spread, you always make money. The bigger drag on share prices will be the Fed ban on bank share buybacks but that may end after Q4.
Q: Is it time to buy Disney (DIS) after they laid off 28,000?
A: This is a company that practically every fund manager in the company wants to have in their portfolio. However, it could be at least a year before they get back to normal capacity in the theme parks, meaning customers packing in shoulder-to-shoulder. So, it could be another wait-for-a-turnaround, buy-on-the dip situation for sure. This company is so well managed that you’re always going to have to pay up to get into the Mouse House. By the way, my dad did business with Disney during the 1950s so we got Disneyland opening day tickets and I got to shake Walt Disney’s hand.
Q: How desperate is General Motors (GM) in buying the fake Tesla (TSLA) company, Nikola (NKLA), who've been exposed as giant frauds? Is GM hopeless?
A: Yes, the future is happening too fast for a giant bureaucracy like General Motors to get ahead of the curve. The fact that they’re trying to buy in outside technologies shows how weak their position is, and of course, it’s a great way to get stuck with a loser, as Tesla selling out to anyone. The Detroit companies are all stuck with these multibillion-dollar engine factories so they can’t afford to go electric even if they wanted to. So, I expect all the major Detroit car companies to go under in the next 5 years or so. Electric cars are already beating conventional internal combustion engines on a lifetime cost basis and will soon be beating them, within 3 years, on an up-front cost basis as well.
Q: Will Netflix (NFLX) pass $600 before the year's end?
A: I’m expecting a monster after-election rally to new all-time highs in the market and Netflix will be one of the leaders, so easy to tack on another hundred bucks to Netflix. That’s one of my targets for a call spread if we can get in at a lower price. And if you really want to be conservative, buy 2-year LEAPS, two-year call options spreads on Netflix, and you’ll get an easy 100% return on those.
Q: Who will win, Trump or Biden?
A: Neither. You will win. I am not a member of any political party as I would never join any club that would stoop to have me as a member. Groucho Marx told me that just before he died in the early 70s. Don’t ask me, ask the polls. Suffice it to say that the London betting polls are 60%-40% in favor of Biden, having just added another 5% for Biden after the debate. My expectation is that Biden picks up another point in the opinion polls in all the battleground states this weekend. So, Biden will be up anywhere from 6-10% in the 6 states that really count.
Q: What will the market impact be?
A: It makes no difference who wins. The mere fact that the election is out of the way is worth a 10% move up in the stock market.
Q: Should we keep the January 2022 (TLT) 140/143 bear put spread?
A: Absolutely, yes. That’ll be a chip shot and we in fact should go in the money on those number sometime next year. A huge cyclical recovery will create an enormous demand for funds and crowding out by the government will crush the bond market.
Q: Do you think it would be better to wait a week or two to lock in refis on home loans?
A: I think we are at the low in interest rates in the refi market. Even if the Fed lowers interest rates, banks aren’t going to lower their lending rates anymore because there's no money in it for them. It’s also taking anywhere from 2-4 months to close on a loan, as the backlogs are so enormous. If you can even get a loan officer to return a phone call, you’re lucky. So, I wouldn't be too fancy here trying to pick absolute bottoms; I would just refi now and whatever you get is going to be close to a century low.
Q: Why so few trade alerts?
A: Well, very simple. We only do trade alerts when we see really good sweet spots in the market. There aren’t sweet spots in the market every day; you’re lucky if you get 1 or 2 in a month. Then we tend to pour in and out of the market very quickly with a lot of alerts. There is no law that says you have to have a position every day of the year. That buys the broker’s yacht, not yours. You should only have positions when the risk reward is overwhelmingly in your favor. That is not now when our market timing index is hugging the 50 level. At 50, you actually have the worst possible entry point for new trades, long or short, so I’d rather wait for it to get away from that level before we get aggressive again. We have gone 100% invested multiple times in the last two months and made a ton of money. So, you just have to wait for your turn to get a sweet spot, and then you’ll make a very quick 10% or 15% in the market. Patience is rewarded in this business.
Q: Would you wait for the election because of the high implied volatility?
A: No, I would not wait. The game is to get in at the lowest price before the election. When the implied volatilities drop after the election, the profits you can make on these deep out of the money LEAPs drop by about half. Thank the volatility while it’s here because it’s creating great trading opportunities now, not in two months after the volatility Index (VIX) has collapsed.
Q: What about Zoom (ZM)?
A: As much as Zoom has had a 10-fold return since we recommended it a year ago, it looks like it wants to go higher. The Robinhood traders just love this stock; it’s a stay at home stock, stay at home is lasting a lot longer than anyone thought. Zoom is just coining it on that.
Q: Is the best outcome a Biden presidency and a Republican Senate?
A: No, that is the worst outcome. When you have a global pandemic going on, you don’t want gridlock in Washington. You want a very active Washington, controlled by a single party that can get things done very quickly. That is not now, which is possibly a major reason that we have the highest Covid-19 death rate in the world. It’s because Washington is doing absolutely nothing to stop the virus; the president won’t even wear a mask, so yes, you need one party to control everything so they can push stuff through. If it works, great, and if not then you kick them out of office next time and let the other guys have a try.
Q: Will property markets be up 20% by the end of the year?
A: If you live in a suburb of New York or San Francisco, then yes it will be up that much. For the whole rest of the country, the average is more like 5% gains year on year. In the burbs of these big money-making cities, prices are going absolutely nuts. My neighbor put his house up and it sold in a week for a $1 million over asking. So, the answer to that is yes, hell yes.
Q: Can you explain why the IPO market is suddenly booming now?
A: A lot of these companies like Palantir (PLTR) have been in development for 20 years, and prices are high. On valuation terms, we are at dot com bubble peaks now. That is the very best time to take your company public and get a huge premium for your stock. When the world is baying for paper assets, you print more of them.
Q: What is the best way to play real estate?
A: Buying the single home building companies like Pulte Homes (PHM), Lennar Homes (LEN), and KB Homes (KBH).
Q: What is your Tesla overview in China?
A: Tesla’s already announced that they’re doubling production of the Shanghai factory, from 250,000 units a year to 500,000. They built the last one in 18 months. It would take (GM) like 5 years to build something like that.
Q: Why has gold (GLD) lost its risk-off status?
A: It’s now a quantitative easing asset—like tech stocks, like bitcoin, and the stay at home stocks. It is being driven much more by QE-driven speculators flush with free cash than anyone looking for a flight to safety bid. When this group sells off, gold drops as well. The only risk-off asset right now is cash. That is the only “no risk” trade.
Q: What does reversal in lumber prices tell you?
A: Lumber was another one of those QE assets—it tripled. But you have this monster increase in new home building, huge demand for new homes in the suburbs, huge import duties leveled by the Trump administration on lumber coming from Canada. Also, a lot of people are getting COVID-19 in the lumber mills. So, they’re having huge problems on the production side in lumber, as a result of the pandemic.
Q: Are there any alternative ways to buy the Australian dollar besides (FXA)?
A: You go into the futures market and buy the Australian dollar futures. That is an entirely new regulatory regime so can be a huge headache. It requires you to register with the Commodities Futures Trading Commission, which is the worst of all the major regulators, but that is an alternative. If you’re an individual and not regulated instead of being a professional money manager, then it’s much easier.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Summit of Mount Rose
Global Market Comments
September 28, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DID THE ELECTION OR COVID JUST HIT THE STOCK MARKET?),
(SPY), (TLT), (GLD), (TSLA), (UUP)
Did the election finally hit the stock market? It could have been both or neither.
Certainly, the passing of Supreme Court Justice Ruth Bader Ginsberg was worth 1,000 points, and maybe more. It may open the door to a period in politics that is uncertain at best or become violent at worst.
But the Coronavirus is making a comeback too. The US topped 7 million cases and 200,000 deaths, more than any other country in the world. The president’s new pandemic advisor, Scott Atlas, seems to be advocating a “herd immunity” approach. If so, 53% of the population will get the disease causing a total of 3 million deaths. The pandemic will continue for years.
New cases are spiking in Europe. The UK, which was on the verge of ordering workers back to their offices is now going back to a total shutdown. That augers for a second big wave in the US as kids go back to school and universities reopen.
With the S&P 500 now down 1% on the year, 2020 basically never happened. We saw a whole lot of volatility with no net movement. It makes my own 34.50% profit this year look stellar by comparison.
With the twin challenges of Covid-19 and the election lower lows for the market beckon. The one-year charts show that a “head and shoulders” top is in place for the (SPY), so my downside target at the 200-day moving average stands. That would be 3,074 for the (SPX) and $84 for Apple (AAPL).
There is a chance that the Fed could intervene in the stock market one more time right before the election if the markets resume the cascading falls of the spring. If that happens, buyers will return in hoards. My view is that this is but another dip in a long-term bull market that started in 2009 and may run all the way to 2030. You especially want to load the boat with Apple again.
However, the mystery of why technology stocks are so expensive remains. Let me take another shot at this.
From a technology point of view, we have just completely skipped the 2020s and are already in 2030. A year ago, would you have ever imagined that all of the country’s children would now be going to school online or that you’d be sending your business suits to the Good Will?
Stock markets have yet to price in the 2030 level of technology and profit, so the stocks will keep going up. Maybe we are already at 2023 or 2025 prices. I’ll let you know when I find out.
Volatility rocketed last week, and stocks collapsed. Any chance of further Covid-19 economic stimulus this year has just been demolished. If you were worried about the presidential election eroding confidence in the market before, now you have to be positively suicidal.
Any doubts about traders going into cash before the election have been vaporized. A 4-4 Supreme Court now makes an election outcome uncertain, no matter what the actual vote. Price that into your dividend discount model!
US Corona Deaths topped 200,000, weighing heavily on the economy and the election. There is no sign that the death rate is slowing, possibly reaching 400,000 by yearend. I went out to dinner last weekend and one-third of all businesses were boarded up, with no sign of reopening, ever.
Twelve IPOs to hit last week. This is in the wake of the Snowflake (SNOW) deal last week that tripled off its initial price talk. Apparently, there is an extreme shortage of high-growth large cap technology stocks and Silicon Valley is more than happy to meet that demand. Flooding the market like this ends up killing the goose that laid the golden eggs and is a common signal of market tops. Existing stock holdings have to be sold to buy new ones, taking markets south.
The economy slows as stimulus hopes fade as confirmed by last week’s economic data. US Consumer Sentiment dove in August, while Weekly Jobless Claims hover just below a Great Recessionary one million. The pandemic remains the dominant economic issue unless you live online.
The NASDAQ whale continues to sell, as Softbank (SFTBY) continues to unwind its massive technology long options positions. Last week, it was Adobe (ADBE), Salesforce (CRM), and Facebook (FB) that got hit. We won’t know if they made money on these for months, but they certainly put the final spike top in for the technology bubble.
The biggest debt increase in history occurred, with Federal government borrowing up an eye-popping 59% YOY. Sell every rally in the (TLT). It’s just a matter of time before a flood of new issuance destroys this market. We are sowing the seeds for the next financial crisis. The government was running record deficits BEFORE the pandemic even started.
Existing Home Sales soared in August, up 2.4% MOM to 6 million units, the hottest since 2006. Prices are up a huge 11.4% YOY. Homes over $1 million increased by 44% YOY as both work and school move home. Properties sit only 22 days on the market to sell, a record low.
Elon Musk promised a $25,000 car in three years, fully autonomous with long range and no maintenance for the life of the vehicle. The lifetime cost would be half of conventional gasoline-powered cars. That was the outcome of Battery Day in Fremont, CA, attended by hundreds of devotees safely enclosed in Teslas who honked instead of clap. It is all the result of dozens of revolutionary design and manufacturing improvements currently in the works, like moving from lithium to raw silicon for batteries. If so, General Motors (GM) and Ford (F) have had it.
A US dollar crash is imminent, says my old Morgan Stanley colleague Steven Roach. The double dip recession is here inviting even lower interest rates. The current account deficit soared to record highs in Q2. Buy the Aussie (FXA), Euro (FXE), and yen (FXY) on this dip.
Investors pull $25 billion from Equity funds last week as a new wave of nervousness hit the market. It’s the third largest weekly outflow in history. Everyone and his brother is trying to get out before the election. Pick your conspiracy theory as to what could go wrong.
When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old.
My Global Trading Dispatch stayed level at just short of an all-time high this week. I dumped my last two positions at the Monday morning opening as I could see the 1,000-point drop coming from a mile off, going to a rare 100% cash position.
The risk/reward in the market now is terrible. I believe we have to test the 200-day moving averages before it is safe to go back in with the indexes and single stocks.
That takes our 2020 year-to-date back up to a blistering 34.50%, versus a loss of 7.00% for the Dow Average. September stands at a nosebleed 7.95%. That takes my eleven-year average annualized performance back to 36.06%. My 11-year total return returned to another new all-time high at 390.41%. My trailing one-year return popped back up to 54.09%.
The coming week is a big one for jobs data. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 203,000, which you can find here.
On Monday, September 28 at 10:30 AM EST, the Dallas Fed Manufacturing Index is released.
On Tuesday, September 29 at 9:00 AM EST, the S&P Case Shiller National Home Price Index for July is announced.
On Wednesday, September 30, at 8:15 AM EST, the ADP Private Employment Report is printed. At 8:30 AM EST, the final figure for US Q2 GDP is disclosed. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.
change.
On Thursday, October 1 at 8:30 AM EST, the Weekly Jobless Claims are announced.
On Friday, October 2 at 8:30 AM EST, the all-important September Nonfarm Payroll Report is out. At 2:00 PM The Bakers Hughes Rig Count is released.
As for me, we have another superheating of the climate in store this weekend, with San Francisco Bay Area temperatures expected to top 100 degrees. The fires are out now, but high winds are coming so PG&E is expected to cut off electric power once again.
I’ll be fine with my solar and battery back-up. The Tesla power management software knows in advance when this is going to happen and automatically goes into maximum storage mode. But just to be safe and to keep the trade alerts coming, I am charging up the car and every battery I own.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
September 24, 2020
Fiat Lux
Featured Trade:
(ELON’S BATTERY DAY BLOWOUT),
(TSLA), (GM), (F)
I have to admit that I have been buying into Elon Musk’s vision since I first met him more than 20 years ago, back in his PayPal days. He could see how the future would unroll for the next 50 years.
That has delivered the best investment of my lifetime, with my Tesla shares (TSLA) up 151X from my initial $16.50 cost.
Thanks to Elon, my home is now completely grid-independent, with 59 solar panels and three 13.5-watt Tesla Powerwalls. I am only connected to PG&E so I can sell them my excess power at afternoon peak prices. In the mornings, I recharge my batteries. That’s a cool thing to have when your local utility completely shuts off power for six days a year.
So it was with some enthusiasm that I attended Tesla’s annual shareholder meeting and Battery Day.
Elon Musk was there with all his swagger and confidence in front of a giant screen. The audience was limited to those sitting in Teslas to enable social distancing, and when they approved, they honked horns instead of clapping.
It was a noisy event.
The past five years have been hottest on record. Climate change is accelerating, so the time to step up the move to a truly sustainable grid is here. It is nothing less than a matter of survival of the species. As Musk spoke, pictures of San Francisco's recent orange days, when you could see 100 feet, flashed up on the screen. A hundred-fold increase in our efforts is called for.
The good news is that 76% of the new electricity generation built this year will be wind and solar, or 32 GW. In 2010, 46% of electricity was coal-generated. Today it is half. Trump promises to rescue the industry came to nothing.
Even if 100% of new electricity generation comes from alternatives, it would take 25 years to convert the entire national grid. There is not enough time left to accomplish this to avoid environmental catastrophe.
The three legs of the future of power are solar power, solar storage, and electric cars.
Tesla has made a major contribution so far in all of these, with over 1 million electric cars produced, 26 billion electric car miles driven, 5 GWh of stationary batteries installed (I have 40.5 Watts), and 17 terawatt-hours of solar power generated.
The Shanghai Tesla factory went from a pile of dirt to mass production in an amazing 15 months, and that facility will soon be doubled in size.
“Tera is the new giga,” said Elon. A terawatt is 1,000 times more power than a gigawatt.
The world needs 10 terawatt-hours of new battery production a year to transition the global car fleet to all-electric in 15 years. We need 1,600 fold growth in battery efficiencies to convert the entire grid to electric. That means we need 25 terawatt-hours a year for 15 years. That is Tesla’s goal.
Tesla’s present Nevada Gigafactory is producing only 1.5 terawatt-hours a year in batteries. Would need 135 more factories to meet the above demand with current technology.
To achieve this, Tesla needs to make cars cheaper. The cost per kilowatt is not improving fast enough.
Tesla’s current plan to cut battery costs by half working by improving every one of the dozens of steps of production.
The newest battery design brings 6X increase in energy density levels, will begin mass production in a year in Fremont. Interestingly, Musk relied on existing paper and mottle mass production as models. The design is too complex to describe here but is brilliant. It’s easier to understand with the graphics found in the YouTube video below.
Down the road, dry electrodes will bring further 10X improvement in power. New machine designs and processes will bring a 7X improvement in output. Tesla’s plan is to achieve a further 75% improvement in the cost of production. The eventual goal is to make Tesla the best manufacturer on earth.
By 2022, Tesla will see a 100 GWh production increase in batteries and 3 terawatt-hours by 2030. That is a 30-fold jump.
Silicon is the most abundant element in the world after oxygen and will be used to replace existing graphite chemistry. Moving from processed silicon to raw silicon will deliver cheaper anodes and an 18% cheaper battery. Cathodes will use nickel-manganese allowing an 80% cost reduction.
Some 100% of batteries are now recycled, will eventually become sole source of raw materials for new batteries. Thus, it will become a super-efficient closed cycle.
Tesla will also reduce car costs by casting the battery as a single piece of the car body. The aircraft industry first accomplished this with fuel tanks during WWII. This alone would eliminate unnecessary 370 parts.
The next upgrade in design and manufacturing will take three years to implement and deliver a 69% reduction in cost creating a “compelling” $25,000 car that is fully autonomous and will not need maintenance.
This chops the lifetime cost of Teslas by half when compared to conventional gasoline-powered engines. If Musk can deliver on this promise, General Motors (GM) and Ford Motors (F) are toast.
Tesla is also developing a new supercar. The Tesla Plaid Model S will have a 520-mile range, go from zero to 60 miles per hour in under two seconds, and offer a positively bestial 1100 horsepower motor. You can order yours at the end of 2021. No price was mentioned, but my guess is somewhere north of $250,000.
I already have the Model X with “ludicrous” mode that catapults from 0 to 60 in 2.9 seconds and just that presents a major whiplash risk.
After the event finished, it was clear that the stock market was not drinking the Kool-Aide, Tesla shares diving 5%. It turned out to be a big “buy the rumor, sell the news” event. When traders hear the words “long-term” they glaze over and run a mile.
We may need to wait for the next cycle of upgrades and product announcements to achieve a true upside breakout.
Global Market Comments
September 23, 2020
Fiat Lux
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(AN INSIDER’S GUIDE TO THE NEXT DECADE OF TECH INVESTMENT),
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