The Beginning of the End for Tesla
The beginning of the end for Tesla... The SEC officially accuses Elon Musk of fraud... Italy is back in the headlines... Your last chance to be 'in the room' with us on Monday...
It was a tough day for Tesla (TSLA) shareholders...
Regular Digest readers know we're not fans of the troubled electric-car maker or its "visionary" CEO Elon Musk.
We've long believed it was simply a matter of time before the company's poor business model and Musk's questionable ethics caught up with it. However, we assumed it would be the former that ultimately led to Tesla's demise.
That's because it is a truly terrible business. Despite the benefit of government subsidies and practically no competition, it loses money on every car it sells. It is running dangerously low on cash. And it is now about to face significant competition for the first time.
Meanwhile, despite these problems... and despite missing virtually every production and sales target he's set, manipulating the company's earnings, and otherwise misleading investors time and again... Musk has been celebrated as a real-life superhero.
Today, we're not so sure...
Suddenly, it appears that Musk's luck has finally run out.
Earlier this month, we noted that the U.S. Securities and Exchange Commission ("SEC") had opened a full investigation into his claim that he had "secured funding" to take the company private.
Yesterday, it went one big step further: It has now officially accused him of securities fraud. This charge could result in significant financial penalties, and even his removal from the company. As the Wall Street Journal reported...
The SEC sued the Tesla chief executive for securities fraud Thursday, seeking in part to ban him from serving as an officer of a publicly traded company, a measure that is common in such cases, according to former SEC lawyers.
If Mr. Musk chooses to go to trial and a jury finds him liable for securities fraud, a federal judge would determine whether Mr. Musk should be banned from the securities industry for any period of time. If he and the government agree to a settlement before trial, both sides would likely negotiate any ban.
The complaint (which you can read here if you're so inclined) charged Musk with making a "a series of false and misleading statements" about taking the company private, when "in truth and in fact, [he] had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source."
In response, Musk issued a statement calling the charges "unjustified."
"Integrity is the most important value in my life and the facts will show I never compromised this in any way," he wrote, presumably with a straight face.
To be clear, the complaint is against Musk alone...
So any penalties would be levied on him rather than Tesla shareholders. Yet, we doubt that would be much consolation.
After all, without Musk, even the staunchest bull would have to admit Tesla is nothing more than a failing automaker. Whatever you think Tesla is worth today, it would surely be worth a heck of a lot less without him.
For once, it appears the market agrees. Shares plunged nearly 15% on the news today. They have now fallen roughly 30% since Musk's infamous tweet less than two months ago.
Elsewhere in the markets, fears of a European debt crisis are popping up again...
Back in May, we noted that Italian stocks and bonds plunged after populist "anti-euro" politicians gained a foothold in the country's government.
In short, investors feared the new government would reject the European Union's ("EU") strict austerity plan to reduce the country's massive debt loads... or worse, eventually decide to leave the EU altogether.
Last night, those fears resurfaced after Italy's government proposed a 2019 budget that would see its deficit rise to 2.4%... three times higher than the previous government had planned. As Bloomberg reported...
Italian assets tumbled after populist leaders Matteo Salvini and Luigi Di Maio defeated their mainstream cabinet rivals to set a budget deficit target that threatens the country's financial stability.
The European Union's economy chief said Italy is taking a risky bet on fiscal stimulus considering the scale of its debts, after the two deputy premiers defeated Finance Minister Giovanni Tria in their first battle to set next year's budget-deficit target at 2.4% of output. A 2% threshold had emerged as a litmus test for financial markets worried about a destabilizing spending spree.
Ten-year Italian bond yields jumped as much as 35 basis point to 3.24%, the biggest one-day rise since May. Meanwhile, the country's benchmark FTSE Milano Italia Borsa Index plunged 3.7%, its biggest one-day fall in two years. Shares in Italian banks – which remain among the weakest in the entire eurozone – fell almost twice as much.
Finally, as we noted in yesterday's Digest, we're headed back to Las Vegas next week for the annual Stansberry Conference...
And this year's event could be our best yet. The conference kicks off at 8 a.m. Pacific time with a presentation from keynote speaker Steve Forbes.
The Forbes magazine editor-in-chief and former presidential candidate is one of the few mainstream political leaders who truly understands the relationship between gold and fiat currencies. He's also well-versed on interest rates, the "flat tax" theory, and financial markets, and can even hold his own when it comes to discussing cryptocurrencies.
We aren't sure exactly what he has up his sleeve this year, but it's sure to be a hit.
Later in the day, longtime crowd favorite Carlo Cannell will take the stage...
Carlo founded Cannell Capital more than two decades ago with a $600,000 investment. Today, his hedge fund has nearly $1 billion under management.
Carlo has spoken at several Stansberry Research conferences over the years, and his presentations are always a must-see. At our 2016 event, he and fellow hedge-fund manager Scott Fearon had the crowd roaring as they discussed ridiculous businesses that predictably went belly-up.
This year, Carlo is planning to talk about a theme familiar to regular Stansberry Research readers: why "boring" businesses typically outperform "exciting" ones over the long term.
He'll also share his approach to short-selling... something his long/short hedge fund has done impressively well over the years. As he once told us, he looks for businesses "laying wounded on the side of the road, so I just have to put a final bullet in their head."
Attendees will also hear from a handful of the smartest (and funniest) minds in the financial world...
We're talking about folks like Grant Williams, editor of the Things That Make You Go Hmmm... newsletter. Last year, Grant regaled the crowd with one of the best presentations we saw all week. Based on what we've heard, his presentation this year could be even better...
Other speakers include legendary investor Robert Kiyosaki, whose book Rich Dad Poor Dad remains one of the most-celebrated personal-finance books of all time... famed entertainer Penn Jillette... and cryptocurrency expert Eric Wade. We'll also hear from The Gartman Letter editor Dennis Gartman, one of the world's foremost experts on currency trading. He'll talk about money flows, monetary policy, and how the midterm elections could affect your money.
And of course, the crowd will also hear from some of Stansberry Research's top analysts, including Steve Sjuggerud, who will update everyone on exactly where we are in the "Melt Up," as well as Ten Stock Trader editor Greg Diamond, Stansberry Gold & Silver Investor editor Bill Shaw, and Extreme Value editor Dan Ferris, among others.
Again, make no mistake...
We realize the hassle of traveling to Las Vegas – not to mention the expense of airfare and hotel accommodations – make attending this event in person difficult for many readers.
That's why we've arranged a way for you to be "in the room" for all of the action without having to having to step foot on a plane.
As we've done in recent years, we're "live streaming" this event so you can experience it all from the comfort of your own home or office. But this year, we've made it better and more affordable than ever before...
For just $699 – 70% less than it would cost you to attend in person – you can get our "online all-access pass" to watch every presentation live and in high definition. You'll also get access to live updates from the event, transcripts from each and every speaker, and a complete digital archive so you can re-watch individual presentations as many times as you'd like.
And this year, we're even throwing in $500 of Stansberry credit just for signing up. This credit can be used toward a new subscription to any of our products, including our elite Stansberry Venture Technology and Stansberry Venture Value advisories. For anyone interested in trying another Stansberry Research product, that's like getting up to an additional 70% off the already discounted price.
In short, we've done everything we can to make the 2018 Stansberry Conference accessible to as many of our loyal readers as possible. If you've ever wondered if this event is really as valuable, informative, and entertaining as we've promised, this is your chance to join us and let us prove it to you.
But if you're interested, time is running out... As we said, this live event kicks off Monday at 8 a.m. Pacific time. Click here to get your online all-access pass right now.
New 52-week highs (as of 9/27/18): Roku (ROKU), ProShares Ultra Health Care Fund (RXL), and T-Mobile (TMUS).
In today's mailbag: Well, it appears at least one longtime subscriber listened to our warnings about General Electric. What's on your mind? Let us know at feedback@stansberryresearch.com. And please, if you'll be joining us next week in Vegas for the first time – in person or online – do us a favor and let us know what you think.
"Thanks for the update on GE. I was wondering who talked about the GE situation that inspired me to invest in it. I have a Jan 17 2020 13.00 Put that is up 96%, and a Jan 18 2019 15.00 Put that is up 172%. Thank You." – Paid-up Stansberry Alliance member Gary H.
Regards,
Justin Brill
Baltimore, Maryland
September 28, 2018