Whitney Tilson’s email to investors discussing Tesla earnings after the close; Elon Musk’s dangerous mind; How to regulate driverless cars; Snapchat update.
1) Tesla (TSLA) reports first-quarter earnings after the close today. If the level of desperation and delusion that CEO Elon Musk displayed during Monday’s “Autonomy Investor Day” is at all correlated with the earnings and guidance it provides, then:
a) The conference call this afternoon is going to be a sh*tstorm of epic proportions; and
b) The stock is going to take a bath tomorrow as investors finally wake up to the reality that the company is struggling to sell the cars it's producing and is rapidly running out of cash.
My Empire Investment Report subscribers can look for a follow-up report later this week after I've had a chance to digest the earnings announcement.
2) Peter DeLorenzo posted a scathing take on Musk's promises on his Autoextremist blog: A Dangerous Mind. It's a total rant, but I think he makes some good points, echoing what I wrote in yesterday's e-mail about Musk having gone off the deep end. Excerpt:
That this latest charade from Musk is yet another desperate act in an attempt at saving his floundering company is obvious. Where it differs from other Muskian braggadocio is the fact that he is insisting that his AV technology is safe for mass application and consumption. Sorry to disappoint all of the St. Elon acolytes out there, but this is the insane part.
Unleashing a fleet of zombie Teslas on the streets of America curated by a notorious nanosecond-attention-span personality such as Musk is the quintessential definition of flat-out crazy. You can't even squint hard enough to suggest that this is, in some way, shape, or form, rational thought. It's a case of an intermittently brilliant mind that has wandered over the line into the Abyss of Darkness. A dangerous mind that is so obsessed with pushing his perpetually sinking car company into some sort of elevated stratosphere that he is willing to treat real people as so much collateral damage.
(If you'd like to be added to my Tesla email list, simply send a blank e-mail to email@example.com.)
3) There is no chance that Tesla (or anyone else) will have the technology to widely deploy fully autonomous "Level 5" cars within a year (contrary to Musk's absurd assertions).
Still, this technology is advancing rapidly, which is presenting our legislators and regulators with numerous tricky issues. With 50 states all coming up with their own rules, a dangerous and deadly mess could ensue, especially when you add to the mix a megalomaniacal billionaire like Musk making dozens of false promises.
There are so many tough issues to consider. First, how will legislators and regulators test all of the competing systems and technologies and determine which ones to approve and under what conditions? Given how many lives are at stake, I think something like the extremely rigorous (and, yes, costly and time-consuming) Food and Drug Administration approval process for drugs is needed – but no such regulator exists, and it won't be easy to create one.
There are also difficult moral issues. Roughly 40,000 people die each year in the U.S. in car crashes, mostly due to driver error. What if we knew that if all vehicles had Level 5 autonomy, deaths from current causes would drop to 5,000 – but 20,000 people would be killed by computer malfunctions in which cars drove into each other, off bridges, into barriers, etc.? A utilitarian would say, "That's a net savings of 15,000 lives," and support it. But I'm not sure I would...
Plus, there is the huge issue of national security and the risk of terrorism. Hackers from hostile states have proven again and again to be capable of penetrating even seemingly secure systems. The implications are sobering. Remember the 2016 truck attack in Nice, France, that killed 86 and injured 458 more? Or the terrorist who rented a pickup truck in Manhattan in 2017 and drove it into cyclists and runners for a mile on the Hudson River Park's bike path, killing eight and injuring 11? Do we really want multi-ton vehicles able to be controlled remotely?
For more on these risks, I recommend these articles by my friend Anton Wahlman:
- Driverless Cars Will Be the Biggest Investment Write-Off Ever
- Chinese Auto Imports to U.S. Could Pose National Security Problems
Terrorists have one major difficulty in attacking American cities: Lack of people on staff. It's not easy to ask someone to blow themselves up in a car bomb.
However, if we ever get to driverless cars, it will be a bonanza for every evildoer in society – domestically and abroad. That driverless car could be controlled from a basement in Connecticut or from a cave in Afghanistan. Maybe it's not a bomb – but just something that gums up the Holland, Lincoln and Midtown tunnels entering and exiting Manhattan. The possibilities are endless for this tool to be misused.
See that total traffic halt at Gatwick Airport? Yeah, that's peanuts in comparison to how driverless cars could make drones look like a walk in the park.
Therefore, if driverless cars are ever made to "work" and become operational, it probably won't take all too long until they are banned. It may not happen right away. But once this technology becomes a tool of every foreign power, every terrorist, every other evildoer, the government will have no choice but to ban them.
Driverless cars – we will have hardly known you!
This is not to say that many of the technologies that go into driverless cars will not continue to become more useful. Cameras, radars and GPUs will continue to enhance the human driver's ability to drive better and more safely. Those investments and deployments are likely going to increase with no evident end in sight.
However, those companies which are basing their business models – and valuations – on a truly driverless future are going to be up for a major disappointment: If their product is ever made to work, it will most likely be banned.
That's a problem. And a major investment write-off.
4) A quick follow-up on Snapchat (SNAP), which I highlighted on February 8 as my Stock Idea of the Day and asked people who used the app to fill out a survey (I also wrote a follow-up on it 11 days later)...
The company reported first-quarter earnings after the close yesterday, and the stock is down 5% today (though it's up 23% since I first mentioned it).
A few more people filled out my survey – you can see the answers and comments from the 93 respondents here.
I don't think I'll ever get comfortable with recommending this particular stock, but I plan to keep looking at beaten-down tech stocks with a lot of loyal users...