Porter is facing off against Tesla's founders...

 The world's premier electric carmaker Tesla announced losses of nearly $62 million for the second quarter, up from a $50 million loss the previous quarter... and double the $31 million loss over the same period a year ago.

 

The company sold a record 7,579 vehicles in the quarter... So it's losing money on every unit and trying to make it up on volume.

 

Revenue increased to $769.3 million, up 89.9% year over year. So did stock-based compensation, from 19,259 a year ago to 35,783 shares today.

 

Tesla expects to produce more than 9,000 cars in the third quarter and deliver 7,800 Model S vehicles.

 

Even after reporting lackluster results, the stock is still up more than 6% since last Friday – sitting near its all-time high.

 

 And that's despite a negative report from Consumer Reports magazine...

 

Earlier this year, Consumer Reports named the Tesla Model S its "car of the year." This week, the publisher changed its tune... After driving the car for 15,743 miles, it saw some problems. From Consumer Reports...

 

[W]e had a problem with the automatic-retracting door handles, which were occasionally reluctant to emerge from the coachwork so we could open the driver's door. Tesla fixed that with an over-the-air programming update beamed to the car...   Just before the car went in for its annual service, at a little over 12,000 miles, the center screen went blank, eliminating access to just about every function of the car, including popping open the charge port. The shop, a newly opened service center in Milford, Conn., performed a "hard reset" that restored the car's functions. It also fixed a creak emanating from the passenger side roof-pillar area, disassembling and refitting some trim panels.   While it was at it, the shop took care of some additional odds and ends, all covered by warranty. One of the buckles for the third row had broken. The shop simply replaced the whole third row with a new, upgraded version. It also replaced the front bumper carrier hardware. On its own initiative, the shop replaced our 12-volt battery, the HVAC filter housing, and the powertrain battery's coolant pump.

 

 Of course, none of these issues are as serious as Tesla's cars spontaneously catching on fire... or that its batteries are only good for three years. As Porter explained in the July 9 Digest Premium...

 

So these leases for Teslas end after three years. How much is a car worth after a three-year lease? The answer is no one really knows, because a gasoline-powered car has a useful life of 10 years. So after a three-year lease, it could still have 60%-70% of its residual value. No problem. But what about an electric car whose battery pack costs $60,000 and only has a three-year lifespan? What do you think a three-year-old used Tesla with no battery is worth?   In its accounting, Tesla says it's worth $50,000. In the pro forma we've prepared, we believe it will be worth $25,000. And our assumption may be very generous. If you look at the three-year-old used prices of other electric cars, they're only worth about 15% of the original sales price. I'm quoting the price of the Nissan LEAF, for those of you who want to do your own work. Anyway, my bet is that all these investors who think that Tesla is worth half as much as BMW based on market cap are going to be very disappointed.

 

 Does the market know something about Tesla we don't? So far, our efforts to short the company have struggled. (Our short position in Stansberry's Investment Advisory recently stopped out.) So we're clearly in the minority with our hesitations about the company. But even if our timing has been off so far, we stand by our opinion: Tesla is an overly expensive company with a highly regarded – but questionable – product. If the facts change, we'll consider changing our minds... 

 

And if anyone can change our mind, it's Tesla Chief Technical Officer JB Straubel. Straubel is one of the company's founders... And he's speaking at our upcoming conference in Los Angeles. It will be one of the first appearances he has made like this.

 

 Porter and Straubel will discuss the company's future. We're sure Porter will make his opinion of Tesla known. But maybe he'll change his mind after the event... Maybe he'll leave with a brand-new Tesla.

 

 Either way, it's a can't-miss encounter. We hope you'll be there to experience it in person. In addition to Straubel, we have one of the most influential minds in technology, Chris Anderson – the former Editor in Chief of Wired magazine and founder of two cutting-edge technology firms. And of course, we'll also hear from Porter, Steve Sjuggerud, Kim Iskyan, and a host of other speakers.

 

The event takes place in Los Angeles on August 23. We're only selling tickets for a little longer. If you haven't been to one of our Stansberry Conference Series events this year, we hope you'll join us in L.A. – especially if you live in the area.

 

You can learn more about the event – and secure your seat – by clicking here.

 

 Private-equity firms are minting cash today... and announcing new and bigger deals almost every day.

 

Thanks to the Fed's "easy money" policies, these firms have access to huge amounts of money at record-low interest rates. They're using that money to buy high-quality assets. These companies typically buy other companies – often using investors' money – and reorganize and improve them before selling them for a profit (often through initial public offerings).

 

In one of the most recent deals, Blackstone Group (BX), the world's largest private-equity firm, is close to acquiring Shell's interest in the Haynesville Shale formation for $1.2 billion. Shell owns a 50% stake in the Haynesville, a 350,000-acre site in Arkansas, Louisiana, and Texas. Encana owns the other 50%.

 

But the land there isn't as valuable as the better-known shales like Texas' Eagle Ford or Pennsylvania's Marcellus Shale. Haynesville requires deeper drilling... which means it's more difficult and more expensive to get to the gas.

 

 S&A Resource Report editor Matt Badiali had this to say of the deal...

 

Shell is the big loser in the shale revolution. The stodgy old major proved too stiff to adapt and too slow to move. It overpaid, repeatedly, for its positions in the Haynesville and the Eagle Ford. That made it nearly impossible for the company to make money. Its competitors took a different route... with better results.   Large-cap independent Devon Energy was among the first companies to recognize the potential of the shale boom. It bought out the pioneer of the Barnett Shale – Mitchell Energy. Mitchell's team has kept Devon at the top of the list of shale producers ever since. And when oil giant ExxonMobil entered the shale boom, it went out and bought XTO, which had arguably one of the best technical shale development teams in the industry... and then left the team alone to keep working. Shell's approach was different and it failed.

 

According to the Financial Times, private-equity firms have changed their strategy of purchasing energy assets. They're no longer interested in flipping the asset to a higher bidder. Now, they're looking to extract the minerals themselves before deciding how to maximize profits.

 

 It's a tough time to make fake legs...

 

I just got a sneak peek at the upcoming issue of The Bonner Letter. As regular Digest readers know, Bill Bonner is among our favorite writers when it comes to history, politics, and economics. After 35 years in the industry, Bill is finally writing his own monthly newsletter.

 

His latest opens with the story of a prosthetic limb company getting hit with an Obamacare scam...

 

Apparently, folks are signing up for subsidized insurance, ordering a limb, and then canceling their policy. A 60-day grace period keeps them in the system, so when the prosthetic-limb company verifies the patient's coverage, it's approved. But by the time the company asks for reimbursement, it's denied.

 

Meanwhile, fake legs are going for $500 on eBay.

 

 That's not the only scam Bill has discovered. His whole issue is a selection of "scams, shams, grifts, and welfare state cons."

 

One of the biggest scams is disability. According to an NPR story from last year, the government spends more on disability than it does on food stamps and welfare combined.

 

But E.B. Tucker, who's doing research for Bill, can't even find a definite number for how much. The Social Security Administration (SSA) – which handles disability payments – doesn't even know.

 

Here's part of a letter he received from the SSA when he looked into it. It's nearly unreadable... But if you wade through it, you'll see there are half a dozen ways you can qualify for a disability payment...

 

The closest you can come is the Total number in the "Disabled, under age 65" row in Table 1. [Ed note: that is more than 14 million.] However, this number does not include the Social Security disability beneficiaries who are between age 65 and full retirement age, the Childhood Disability Beneficiaries who are aged 65 or older, and the SSI recipients who are aged 65 or older and receiving on the basis of blindness or disability.   In Table 2, the counts under the Disability Insurance section of the table represent all beneficiaries who are being paid from the Disability Insurance Trust Fund. [Ed note: That's nearly 11 million.] This includes dependent spouses and children who are not receiving on the basis of their own disability.   Conversely, of those being paid from the Old-Age and Survivors Insurance Trust Fund, all of the Disabled Widow(er)s receiving Survivor benefits, plus some of the Children of Retired Workers and the Children of Deceased Workers who are receiving Childhood Disability Benefits, are receiving disability benefits.

 

 As Bill notes, tough times have a way of convincing folks they're not as hale as they might have thought...

 

When the crisis came in '08-'09, the number of people with bad backs suddenly shot up. At one point, twice as many people were added to the disabled list as to the employment rolls. The total number of people receiving disability benefits rose 45% once the crisis began.   The typical Social Security Disability Insurance (SSDI) benefit is about $1,200 per month. But your spouse will get another $300 or so... and you get about another $300 for each minor child. It adds up... get disability with a spouse and four children and you've locked down $2,600 per month... with no taxes withheld! In Baltimore, that's about equal to a job that pays $4,000 a month – well above the national average.

 

 The real scammers, Bill says, are the folks who have "figured out how to make millions by helping poor people get other people's money."

 

Bill cites an Associated Press story about a disability lawyer in bed with a Social Security judge. They got more than 1,800 new people on the dole. And it paid. According to the AP...

 

The Social Security Administration paid Conn's firm more than $4.5 million in attorney fees from cases heard by Daugherty from 2006 to 2010. In 2010, Conn was the third highest-paid disability lawyer in the country, the report said.

 

 The letter lists nearly a dozen other "grifts" for your consideration. Bill, of course, takes the high road. He neither practices nor condones theft. But it does make for interesting reading.

 

 Bill and his publishers are still working out the details for his new letter. It's not for sale anywhere. But there is one way to get your hands on it... and on Bill's just-published book, titled Hormegeddon. Porter says Hormegeddon "will open your eyes in a way very few books can."

 

You can't buy the book on Amazon (or anywhere else) yet. But we've arranged a way for you to get an advance copy, plus access to Bill's newsletter, published by our corporate affiliate, Bonner & Partners.

 

We aren't giving his book away. You have to buy it with your own money. But it's worth much, much more than the small price you have to pay. For a full summary of Bill's brand-new book – and to get your own hardback copy – click here.

 

 

 New 52-week highs (as of 8/12/14): Advent Claymore Convertible Securities and Income Fund (AVK), Berkshire Hathaway (BRK), Flinders Resources (FDR.V), and Royal Gold (RGLD).

 

 Another quiet day in the mailbag. Which S&A recommendation is the biggest winner in your personal portfolio? What have you bought with the profits from following our advice? Let us know at feedback@stansberryresearch.com.

 

 "Jim is wrong. If you have $100,000 in your account and the bank charges you a negative interest rate of 1%, you will NOT have $99,999 in your account at the end of the year. You will have $99,000." – Paid-up subscriber Mike Altman

 

Goldsmith comment: Good eye, Mike. That was a typo on our end, not Jim's. We regret the error.

 

Regards,

 

Sean Goldsmith

Baltimore, Maryland

August 13, 2014

 

Jeff Clark: How to trade in today's market...

 

S&A Short Report editor Jeff Clark is one of the best traders we know. So when he talks about market conditions, we stop and listen.

 

In today's Digest Premium, Jeff breaks down the latest action in the market... offers a profitable trading strategy... and predicts where stocks will head from here...

 

To subscribe to Digest Premium and receive a free copy of Jim Rogers' latest book, click here.

Jeff Clark: How to trade in today's market...
 

Editor's note: S&A Short Report editor Jeff Clark is one of the best traders we know. So when he talks about market conditions, we stop and listen. In today's Digest Premium, Jeff breaks down the latest action in the market... offers a profitable trading strategy... and predicts where stocks will head from here...

 

 

 It's no secret to my S&A Short Report subscribers: I (Jeff Clark) have been cautious on U.S. stocks for several months.

 

I have plenty of egg on my face for taking that stance. I'm going to stay cautious. But markets don't tend to correct when everybody is looking for them. Everybody expects a large correction, and I think that has pushed things back a little.

 

The S&P 500 was recently about 3% down off its all-time highs, and people are once again calling for a large correction. Whether that takes shape, who knows. But right now, for the very short term, the momentum has changed from bullish to bearish.

 

When stocks fall as quickly as they did last week, that creates very oversold conditions... And oversold conditions usually correct with sharp bounces higher.

 

 If you're bearish, the way to trade this is to wait for those bounces and look to short stocks. You don't sell stocks short on weakness. Folks who do that tend to get clobbered. When you sell into weakness, you're selling into oversold conditions. Even though you might be right several days or weeks later, the immediate reaction tends to stop a lot of folks out of the short before they have a chance to capitalize on it.

 

For the next few days, I'm expecting the S&P 500 will probably come back to around 1,950 or 1,960, and we can take a look at the technical condition of the market. That will tell me whether there is an opportunity to short. If things bounce higher from here, we'll be able to determine if we have entered a correction phase or if we have one more shot at making new highs for the year.

 

September and October tend to be weak months for the market, so I think the next rally up will fail and lead to a sharp correction this fall. But that depends on how the next move higher develops.

 

– Jeff Clark

Jeff Clark: How to trade in today's market...

 

S&A Short Report editor Jeff Clark is one of the best traders we know. So when he talks about market conditions, we stop and listen.

 

In today's Digest Premium, Jeff breaks down the latest action in the market... offers a profitable trading strategy... and predicts where stocks will head from here...

 

To continue reading, scroll down or click here.