Wed, Jul 19, 2023|Whitney Tilson

Recent missives to my short selling, Tesla, China, Ukraine, Africa, education reform, weight-loss drugs, singles, fitness/adventure sports, and tennis e-mail lists

I have 20 personal e-mail lists covering all sorts of topics I'm interested in, so I figured I'd share my latest missives from the most active ones in case anyone wants to join one or more of them...

1) I've never mentioned this one before in this daily e-mail: my e-mail list focused on short selling, which you can join by sending a blank e-mail to: shorts-subscribe@mailer.kasecapital.com...

Here are two Bloomberg articles about activist short sellers caught up in the wild goose chase federal investigators are on...

I've said it before and I'll say it again: I'll be shocked if they discover that anyone is publishing short reports they don't believe in to falsely (and illegally) drive a stock price down to make a quick profit. So, when all is said and done, investigators will end up with nothing – but done a lot of damage to activist short selling, of which more, not less, is desperately needed in today's hype- and fraud-filled markets...

A) A recent article about my friend Andrew Left and how the wild goose chase federal investigators are on have upended his business – and his life: Short Seller Andrew Left Is Living in Fear of the Feds. Excerpt:

Once word of the investigation became public, Left said the consequences were immediate. "You go to apply to a country club or you go try to get your kid into a private school and the first thing that comes up is 'Oh God, the FBI, the DOJ,'" Left said.

Not to mention the impact on his business: "I've been taken out of the loop. Who's going to feed me information or talk stocks with me? I wouldn't talk stocks with me."

Left hasn't stepped back entirely. In April, he released a report on a financial services firm in Kazakhstan. In May, the company said it wouldn't file an annual report on time because an audit wasn't finished. Last month, the Nasdaq Stock Market warned the company could be delisted.

Yet, every so often, Left is reminded he's still being watched. Shortly after he deleted his Twitter account in March, the SEC reached out asking for a copy of all the tweets he ever published.

"I'm like, you already have all the tweets," Left said. "It doesn't go away. Just Google."

Despite that defiance, he's clearly on edge. In the hotel lobby, Left pauses at a television to read aloud a CNN headline that the Justice Department had warned Donald Trump he's the target of an investigation. Left ponders that bit of the process.

"OK, there you go," he said, lost in thought for a moment. "I don't know what that means for me."

B) Somehow I missed this article a year ago about another activist short seller friend, Carson Block, with a similar story: A Short Seller's Life Upended: Carson Block Questions Future. Excerpt:

With U.S. investigators rummaging through bank records and personnel files, Block questioned his old analysis that an occasional inquiry would be a cost of doing business. It now seems more existential. He wonders aloud how long he'll stick with the business.

"The guys who've been making cases for years based on our s---, if they think we're a f----ing problem, there's no end," Block said of the Justice Department. "There's no light at the end of the tunnel."

2) My Tesla (TSLA)/Elon Musk e-mail list (to join, send a blank e-mail to: tsla-subscribe@mailer.kasecapital.com)...

And people say I never send out anything positive about Tesla...

A) Kudos to this young man, who reminds me of my analyst, Kevin "100-bagger" (on TSLA) DeCamp! Tesla Investor Rode a 14,800% Gain Thanks to 27-Year-Old Analyst. Excerpt:

Owuraka Koney forms part of an elite group on Wall Street: Those who foresaw Tesla Inc.'s wild growth potential before it even went public.

Koney was just 25 when he stumbled across the fledgling electric-vehicle maker while researching other companies for Jennison Associates. He was immediately taken with Tesla's vision and by 27 managed to convince his colleagues at Jennison to gamble on the stock.

A dozen years and some 14,800% later, Koney isn't satisfied. He still sees lots of room for additional gains as the company releases a "tsunami" of new cars in the coming years. At the same time, he expects the auto industry to undergo a massive consolidation as it makes the challenging shift away from combustion engines.

Koney, talking for the first time publicly about how Jennison built a Tesla position now worth $5.9 billion, said the Elon Musk-led company built EV expertise early and has fine-tuned its products, positioning itself to be among the survivors. Koney thinks by 2026, Tesla could be pumping out twice the 2 million or so cars it's expected to deliver this year. That will set it up for further growth, even as dreamy notions of fully self-driving cars remain years away.

B) People love their Teslas! Brand Loyalty Is Weak for All Auto Brands – Except Tesla. Excerpt:

In the luxury brand segment, in the first four months of the year fewer than half of households bought the same brand when they returned to market. Only Tesla bucked that trend, with 68% of its owners buying another Tesla.

That was true even though Tesla's last new product launch was the Model Y in 2020, Libby points out.

BMW, Mercedes-Benz, and Lexus have been impacted "substantially" by migration to Tesla, says Libby. "If you have a narrow product portfolio it is difficult to have the same range of brand loyalty."

C) A 3-second clip of the Tesla cybertruck on the road near Tesla's old headquarters in Palo Alto.

D) Unsold EVs are piling up – see this article, "This is the final wake-up call" (it's in German, so open it in Chrome to translate into English), about a speech by VW's CEO to his team:

"The roof truss is on fire" – this is how Manager Magazin quotes VW brand boss Thomas Schäfer, who confronted his executives with the dramatic drop in demand for electric cars in a video broadcast. An immediate stop to spending is the short-term consequence in order to at least come close to the sales targets.

3) My China e-mail list (to join, send a blank e-mail to: china-subscribe@mailer.kasecapital.com)...

A) From the front page of today's New York Times: One Reason China Is Willing to Engage Again: Its Troubled Economy. Excerpt:

Three months ago it appeared that China's economy was on track to recover relatively quickly after being closed off to the world during the pandemic. Consumers were spending again. Exports picked up. Even China's beleaguered housing market gave hints it was stabilizing.

That is no longer the case. Official data released Monday revealed that the annual pace of growth in China's economy tumbled to just a little over 3% in the spring, well below the government's target.

Now the faltering economy appears to have helped prompt a shift in the willingness of senior Chinese officials to engage in diplomatic talks with geopolitical rivals abroad, and to show more openness on economic policy at home.

The change in tone is particularly visible in China's relations with the United States. Despite several years of fraying ties and concerted efforts to become less dependent on each other, the two countries remain closely linked economically, together accounting for two-fifths of global output.

In the past month, China has welcomed three senior American officials to Beijing, including John Kerry, President Biden's climate envoy, who arrived on Sunday, and Treasury Secretary Janet L. Yellen, who held 10 hours of meetings with top Chinese officials. Up to three Chinese ministers are expected to travel to Washington in the coming weeks as the two countries have begun discussing issues like trade and climate change. China's ambassador to the United States met last week with a senior Pentagon official.

The Chinese government has also been on a charm offensive directed at domestic and international business leaders.

B) From the Wall Street Journal two weeks ago: Taiwan's Impossible Choice: Be Ukraine or Hong Kong. Excerpt:

People in Taiwan have been following every twist of the war in Ukraine. But, while their sympathy for the Ukrainian cause is near-universal, the conclusions for the island's own future widely diverge.

To some, the takeaway is that even a seemingly invincible foe can be defeated if a society stands firm, an inspiration for Taiwan's own effort to resist a feared invasion by China. Others draw the opposite lesson from the images of smoldering Ukrainian cities. Anything is better than war, they say, and Taiwan should do all it can to avoid provoking Beijing's wrath, even if that means painful compromises.

These two competing visions will play out in Taiwan's presidential elections, slated for January, and shape how the island democracy revamps its defenses as China's military might expands.

The soul-searching inside Taiwan, and the determination with which it will strengthen its armed forces, is also bound to affect the extent to which the U.S. will get involved militarily should Beijing try to capture the island, home to 24 million people – and most of the world's advanced semiconductor production capacity.

While Taiwan has been living under a threat of invasion ever since China's Communist Party took control of the mainland in 1949, the Russian thrust into Ukraine drove home to many Taiwanese that war can erupt with little notice.

Chinese leaders have intensified their rhetoric around Taiwan, repeating that they won't rule out using force to achieve what they call "national reunification." Beijing has also ramped up naval and air probes around the island that wear out Taiwanese defenses. The U.S. Central Intelligence Agency estimates that Chinese leader Xi Jinping has set 2027 as the deadline for his military to be ready to take the island.

4) My Ukraine e-mail list (to join, send a blank e-mail to: ukraine-subscribe@mailer.kasecapital.com)...

Former Google CEO Eric Schmidt is embarrassing himself (like Elon Musk and some other tech bros before him) by spreading total garbage about how strong Russia is and how weak NATO is (video and transcripts here and here). My friend on the ground in Ukraine wrote: "Schmidt's a moron wannabe war profiteer with all sorts of DOD tech contracts which are nonsense. He has donated zero as far as I can tell."

In truth, Ukrainian forces are steadily degrading Russian ones – to the extent that there are reports that Russia has put nearly all of troops in the trenches at the very front, meaning when (not if) Ukrainians break through, there will be only weak resistance as they sweep the invaders out of their country.

Want proof that Schmidt has no idea what he's talking about? He said:

"I was shocked at how good the Russians were at electronic warfare and jamming basically everything you send into this battlefield, they jam everything GPS is jam but also communications is jammed so normal drones don't work."

While it's true that Russians are very good at electronic warfare, the Ukrainians are equally good (or better) and have been successfully developing and implementing countermeasures for the past 16 months.

According to my friend, "Our FPV operation has a 95% target acquired rate. So much for the great Russian jamming..." – and sent me this 38-second video from a few hours ago.

And regarding this statement by Schmidt:

(The Russians are using) 60,000 (shells) a day. The world production in the West can accommodate about 5,000 (shells) a day. I guess the Russians have been building artillery for about 50 years and they have an infinite supply.

Watch this video, Cluster Munitions & Artillery in Ukraine – Attrition, Ammunition & Adaptation in 2023, which is a fascinating, in-depth look at both sides' capabilities in the all-important artillery war. Key takeaways:

Cluster munitions are MASSIVELY more impactful against both men and equipment than regular artillery – and the U.S. has 3 MILLION rounds to give to Ukraine.
The headline that most countries in the world have banned such munitions is totally misleading because almost none of the countries that actually have it (including the five largest) signed on, so it covers only 10% of the global inventory.
Russia is firing more shells, but less accurately, and is therefore more rapidly burning through its inventories and (I didn't fully appreciate this) its gun barrels, which wear out after a few hundred to a few thousand shots.
The U.S. and especially the EU are MASSIVELY and rapidly ramping up shell production to over one million per year.

Overall, there's a lot of uncertainty about the future, but overall I'm heartened by what I heard.

And we have to remember: in a brutal, bloody war of attrition, 46% of world GDP will, over time, CRUSH 3% of world GDP...

Slava Ukraini!

5) My Africa e-mail list (to join, send a blank e-mail to: africa-subscribe@mailer.kasecapital.com)...

South Africa's struggles break my heart. I've been there three times – in 1992, 2008, and 2021 – and love it, especially Cape Town, one of the world's great cities.

My youngest daughter just arrived last week for a junior year semester abroad at the University of Cape Town, and we're coming to visit her when her program ends in November and go to Namibia and Botswana.

Here's an article from the New York Times: Mandela Goes From Hero to Scapegoat as South Africa Struggles. Excerpt:

In South Africa, Nelson Mandela is everywhere. The country’s currency bears his smiling face, at least 32 streets are named for him and nearly two dozen statues in his image watch over a country in flux.

Every year on July 18, his birthday, South Africans celebrate Mandela Day by volunteering for 67 minutes – painting schools, knitting blankets, or cleaning up city parks – in honor of the 67 years that Mr. Mandela spent serving the country as an anti-apartheid leader, much of it behind bars.

But 10 years after his death, attitudes have changed. The party Mr. Mandela led after his release from prison, the African National Congress, is in serious danger of losing its outright majority for the first time since he became president in 1994 in the first free election after the fall of apartheid. Corruption, ineptitude and elitism have tarnished the A.N.C.

Mr. Mandela's image – which the A.N.C. has plastered across the country – has for some shifted from that of hero to scapegoat.

6) My education reform e-mail list (to join, send a blank e-mail to: schoolreform-subscribe@mailer.kasecapital.com)...

This essay by my friend Scott Galloway, Super Drug, should be required reading by every politician, university executive and board member, and ed superintendent (city, state and federal) in the country.

We've always had an elitist system of higher education that disproportionately benefitted people like me (two Harvard degrees (last year of public school: 6th grade); not to mention my father (not one day of public school), grandfather (ditto), and great-grandfather, each of whom earned Yale undergrad and graduate degrees), but also provided an avenue for my mom and her three siblings to get a great education and achieve the American dream (her father was a Seattle fireman; not one day of private school through the University of Washington in the 1960s; all were able to pay the entire cost by working jobs like waitressing).

Look at us now. Yes, we have a hugely disproportionate share of the most incredible colleges and universities in the world, but:

Universities take pride – and are rewarded with high rankings – by barring the greatest percentage of students from enjoying the life-changing benefits of their education. (The admission rate at a public university like UCLA has dropped from 76% to 9%.)
The cost of higher education here is double that of any other country on earth.

Scott is right that there needs to be a huge shift, and he proposes many great ideas. But this has to be driven by the government, as any school acting unilaterally would be placing itself at a disadvantage.

7) My weight-loss drugs e-mail list (to join, send a blank e-mail to: weightlossdrugs-subscribe@mailer.kasecapital.com)...

A) In response to the debate I had with a friend about the new weight-loss drugs, my friend who has lost 90 pounds since last August on Mounjaro wrote:

Part of the issue of sugar compared to, say, smoking is that we, as animals, are biologically programmed to crave sugar and to seek it out.

As an animal, it was an important source of energy we needed to survive. Now "sugar in the wild" is way different than what people eat today that causes obesity, but our minds and bodies don't necessarily differentiate them.

So it's hard to put extreme prohibitions and taxes (as we did with cigarettes) on something that, biologically, we are programmed to seek out. It's very different from smoking, which created an addiction for something harmful.

Once obesity is properly viewed as an illness, it will help with how it is treated and start to move the needle on things.

PepsiCo has announced they are working to cut sugar levels in the EU by 25% by 2025 and 50% by 2030. I don't know what they are replacing the sugar with, if anything, but for me the jury is really still out on sugar-free sweeteners.

People still get "addicted" to sweet things even if that is Diet Coke. Unlike other addictions, obese people can't stop eating. An alcoholic can never have alcohol again. We really do need to re-teach people how to eat, but they have to want to change and that is hard. Plus there are so many reasons people eat: emotions, etc.

For me, I know if I have refined sugar, I want more sugar. I crave it. So I work hard to really avoid eating it. Fortunately, I am more a salt person than a sweet tooth. I still have sweet things, but now I reach for medjool dates or berries, which satisfy my craving without causing me to want more.

But the vast majority of obese people do not have my means to have such healthy options always available to them. Not to mention the endless advertising of food on TV, billboards, social media – we are bombarded by it. Make it really hard for people that have food noise to tune it out, especially since we have to eat and are biologically programmed to seek out sugar (and fat for that matter).

B) This article, Europe Is Probing Whether Ozempic Use Raises Risk of Suicidal Thoughts, based on reports from three people, initially struck me as ridiculous because I have no doubt that three people who took, say, aspirin in the past year also reported thoughts of self-harm...

But I didn't want to dismiss it without checking with the experts, so I e-mailed Kevin Maki and Jason Fung, who were kind enough to reply. Dr. Fung wrote:

It's always better to be cautious because rare side effects are not detected until a drug gets wide usage.

We know that some foods light up the reward centers of the brain, so a drug that reduces appetite may theoretically lead to dysthymia (like a mild depression) that may predispose to suicide. This is all theoretical, but better safe than sorry.

There are lots of drugs that we don't find the side effect out until way later and we don't usually know the mechanism prior: Vioxx, myocarditis with the COVID vaccine. rosiglitazone, and of course, the infamous thalidomide.

Additionally, this study in 2019 showed that bariatric surgery (RYGB) is associated with almost a doubling of suicide risk, so it wouldn't be unprecedented that GLP-1s also have a risk. It doesn't mean that these drugs won't be useful, just that we need to be cautious.

Dr. Maki added:

I agree that rare side effects do not always emerge until a drug is widely used. If a side effect occurs in 1 in 5,000 or 10,000 people and occurs with some frequency in the background in the population, it is difficult to determine whether the effect is causally related to the drug.

There was a drug for obesity approved in Europe but not in the U.S. called rimonabant, a cannabinoid-1 receptor blocker, that suppressed appetite and produced weight loss, but also increased depression and suicidal ideation. So, it is not out of the question that such effects could occur with other drugs that suppress appetite.

I think we can be confident that this does not occur frequently, but it is not possible at present to completely rule out a causal association.

Thank you!

8) My singles e-mail list (to join, send a blank e-mail to: singles-subscribe@mailer.kasecapital.com)...

A) This funny article from the front page of the WSJ last week, Advice to Harvard Students and Alums: 'Don't Gratuitously Drop the H-Bomb', reminded me of something not funny...

Years ago, I was hanging out with a female friend who has degrees from Harvard and Harvard Law School and she said, "Having a Harvard degree (much less two) kills my dating life. For guys, it's gold. But I can't tell you how many times I've been on a date, it's going well, and then it comes up that I went Harvard. With some many guys, I can instantly see the change – they turn cold and uninterested and the date's over."

I was recounting this story to another Harvard friend recently and she said, "Why do you think I didn't get married until I was 43?"

I'm just floored... Guys and their tender little egos. How can they be so stupid???

B) This is just weird: Majority of Tinder users are in relationships or married: survey. Excerpt:

About half of 1,300-some Tinder users, who took part in a survey, aren't actually looking for love – in fact, singletons admitted to using the app for pure entertainment, much like a revamped Hot or Not.

"The surprising part is that a big percentage, about half, were not going online to find dates," Dr. Elias Aboujaoude, a clinical professor of psychiatry and behavioral sciences, said in a statement. "It becomes an interesting question as to why someone would spend all this time on a dating app if they're not interested in finding a date."

Aboujaoude is just one of the authors on a new study exploring how people use Tinder, which has an estimated 75 million active users every month.

The Stanford Medicine researchers also unearthed another jaw-dropping statistic: More than half of Tinder swipers are already taken. To be exact, 65.3% of users reported being "in a relationship" or worse – married.

9) My fitness/adventure sports e-mail list (to join, send a blank e-mail to: beast-subscribe@mailer.kasecapital.com)...

A very interesting tweet that summarizes the research I've seen: there are tremendous benefits to exercise (and not just this area, coronary artery calcification), but at the extreme tail (this chart makes it look like top 30%, whereas I'd say it's top 1%), too much exercise can be bad for you...

10) Lastly, my tennis e-mail list (to join, send a blank e-mail to: tennis-subscribe@mailer.kasecapital.com)...

A) I was on a flight home from Stockholm during all but the last two games of the epic Wimbledon final, so I enjoyed these videos:

B) True: Carlos Alcaraz Shows Novak Djokovic That His Championships Are Numbered

C) Short video: Djokovic on Alcaraz: I haven't played a player like him, EVER

D) Video: The Alcaraz Phenomenon: 10 Reasons He's The Most Complete Tennis Player in History

E) Wow...

F) From 2017 – they're really talented! When Roger Federer, Novak Djokovic, and Others Showed Their Singing Talent at Indian Wells

Believe it or not, these make up only half of my e-mail lists, but they're the most active ones...

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.