Tesla, and extraordinary delusions and the madness of crowds


Sorry, but Tesla just isn’t different or revolutionary. There is nothing new or startling about Tesla electric vehicles, which after all, use a technology that has been around since the 1890’s. Ditto for Telsa’s announcement it will build batteries to store solar power for homes. Again, this has already been done by many other companies, and Tesla has no new ideas here. Further, Tesla is not profitable and will not be until at least 2020, if ever.

However, that one-man hype machine Elon Musk spins an alluring tale of a wondrous EV future with solar panels everywhere. In reality, his company is heavily supported by subsidies. Wall Street traders love the hype because they use it to manipulate the stock and make a profit out of air – hot air, to be precise.

Much of the hot air is uncritically accepted by publications that should know better. In May 2014, Quartz published this gem of deliberate confusion, pretending Tesla made money, if you just exclude a bunch of money-losing stuff from the balance sheet, that is.

Tesla just posted a quarterly profit of $17 million.

Actually, using generally accepted accounting principles, it lost $49.8 million, or $0.40 per share, in the quarter that ended in March. A similar thing happened a year ago, when the company posted a surprising profit, if you exclude certain items.

Non-GAAP accounting, simply put, is snake oil. It says, well, if we hadn’t lost a bunch of money in this area or didn’t have to pay unexpected amounts of money over there, then we would have made money. It is junk accounting. Wall Street cheers these delusions because it basically stopped caring about rational stock valuations long ago. If Telsa says they made a non-GAAP profit, then the stock will pop.Wall Street algos will trade and profit from it before you can blink, much less react to the news.

The speculative mania on Wall Street has reached such absurd lengths that Telsa is being heralded and valued as the second coming of Apple and its circus barker CEO, Elon Musk, as the next Henry Ford. Indeed, so raptured were the day traders and gamblers that in the short span of 33 months between early 2012 and September 2014 they ramped up Tesla’s market cap from $2.5 billion to a peak of $35 billion.

That’s a 14X gain in virtually no time—-and its not due to the invention of a revolutionary new product like the i-Pad. Instead, we’re talking about 4,600 pounds of sheet metal, plastic, rubber and glass equipped with an electric battery power pack that has been around for decades, and which is not remotely economic without deep government subsidies.

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