Liberty

When they reinvest less in the business. Ramping up production at 50%/year at the same time as developing at least two new models (Model X, Model 3, which is not a reuse of the existing platform, and they said they also want to do a pickup truck in the class of the Ford F150, so maybe they've started work on that), at the same time as building a $5 billion battery factory that will produce as much as the rest of the world combined, at the same time as building a network of fast-charging stations worldwide, at the same time as building stores and service centers on three continents, at the same time as hiring tons of software people to work on self-driving cars and rapid updates to the existing software, at the same time as developing an energy storage business for consumers and utilities, along with whatever they haven't announced yet, is kind of bound to have an impact on the income statement...

You'd also get a 300-mile range with the new 90kwh battery. How often do you wish you had a longer range on your 85? It doesn't work that way. Nobody is going to drive a P90D at 55 MPH in order to attain 300 mile range EPA estimate. My P85 starts out with 265 EPA range, but I only get 200 actual miles out of a full charge. I drive 75-80 MPH. Higher speed,more drag, less range. Where is the customer driving a car that sporty and adheres to 55 MPH? Musk is full of shit here, and IMP should stop bullshitting people. Don't be sneaky, you can just be honest and be less of a salesman. It won't hurt to come clean. Tell that to the EPA who makes the methodology for range calcs. At a certain speed, you get a certain range, if you go faster, you get less. Wind resistance increases exponentially with speed, so if you drive fast the impact gets significant. That's true for gas cars too, nothing special about the Tesla (except it's a lot more aerodynamic than most cars). And lots of people do a lot of city driving, leading to much lower averages speeds. And btw, the AWD "D" model gets more range on the same battery than the non-AWD, which you have. Seems counterintuitive if you're used to gas cars, which get worse efficiency with AWD, but with EVs having two motors allows all kinds of optimizations...

You'd also get a 300-mile range with the new 90kwh battery. How often do you wish you had a longer range on your 85?

Is that a typo? I'm not seeing it at 10 recently... I assume that's 10 USD for the shares listed OTC in the US. Quite a large drop today....no news that I can see. Ah, right, that must be it. I never looked at the USD version, and back when I owned ALS the CAD was on par with USD anyway..

Is that a typo? I'm not seeing it at 10 recently...

I've seen people make investment mistakes because they have bad data. Easy to make a bad decision if you don't have the whole story. Don't you get it, bad data is a big help, how else are you going to have a variant perception on a company? ;)

No, they don't. I just checked. 5 year data for free. Clicking on 10-year data lands on the $199 a year subscription page. 10 year financials used to be free. About two years ago Morningstar went to five years free and you had to pay for 10 years. That is when I started using my university's library, which had a subscription. I wouldn't mind paying, but if I can still get it free that is what I will do! That's probably what confused me. But I should just have checked first :) Thanks guys. Still looking for that service that has all the CAGRs and YoY percentages pre-computed..

Doesn't morningstar already give you 10-year data without subscribing? I thought that the subscription was mostly adding analytics stuff (from their analysts and screens/mechanical thingies). Or do you get more data if you subscribe? What I wish it I had a service with long-term data (10, 15+ years) with CAGR information pre-computed (kind of like in Markel's annual report, they have these CAGR lines, and rolling 5-year CAGR, etc). If anyone knows a service like that that doesn't cost a ton, please let me know. I like to be able to eyeball things quickly sometimes.

http://www.greaterfool.ca/2015/07/15/a-tale-of-two-nations/

Out of curiosity, what data service(s) do you subscribe to, Nate?

Looked at MIDD a couple years ago, really liked the ROIC, ended up passing. Obviously I should have bought :) Congrats on your successful long-term investment!

This one? http://www.amazon.com/Security-Analysis-Business-Valuation-Companion/dp/0470277343/ What would you say makes it better? Thanks in advance.

morningstar.com should be useful.

One of the best books I've read on valuation has a new edition coming out next month. This is the 6ht, the 5th that I've read had a red and white cover. Thought it'd interest some here: http://www.mckinsey.com/client_service/corporate_finance/latest_thinking/valuation http://www.amazon.com/Valuation-Measuring-Managing-Companies-Website/dp/111887370X/

Yes, I would absolutely make that comparison. In a raging bull market, companies are valued on blue sky potential. In a bear market they are valued on short term earnings and assets. Given that Tesla is consuming tons of cash, they are very dependent on the capital markets remaining favorable. What I'm seeing on one side is a promoter asset-gatherer who built a house of card that was bound to crumple in the next down cycle because the only thing that held it up was high commodity prices (on which he had no control). On the other, I see extremely brilliant technologists who built companies from nothing by creating things that are useful to humanity and that have the potential to transform for the better the industries where they are playing. Tesla is growing at 50% a year and constantly reinvesting massively in new things (Model X, Gigafactory, Tesla Energy, Model 3, Supercharger network, probably other secret things). That's why they're not profitable. They could be if they just dialed this reinvestment back (like Amazon), but it would be letting short-term win over the long-term. If you think they can't be profitable with the best, most desirable vehicle on the market that has had waiting lists since it came out, and with battery costs going down every year, then we'll have to agree to disagree. They don't need the equity market to survive, but having access to it can certainly optimize their rate of reinvestment since they don't generate as much funds as they can productively use. Batista was just doing highly leveraged bets on commodity prices, not designing space rockets and competing against government-entrenched monopolies... A very different animal. There's more to life than valuation (especially GAAP valuation - ask John Malone). Likening Holmes and Musk to Batista doesn't make sense to me.

Technology startups are not valued on their assets (at least not how you meant it here). What were Google's assets in 2001 or whatever? That's not what mattered. I understand the impulse to be skeptical, but comparing Holmes to Batista is just random and uncalled for IMO. Might as well compare Elon Musk to Batista while we're at it...

I see no reason to compare her to Eike Batista at this point. He was highly leveraged, operating in a fairly corrupt and bureaucratic country, in a cyclical, commodity industry, while being extremely promotional to push his public companies to ever higher valuations. She's been in stealth mode for 10 years working on technology and runs a private business that has only been valued by extremely savvy investors like Larry Ellison, and as far as I know they have no debt. If anyone smells a bit like Batista at this point it's Drahi, in my opinion...

http://goinglongblog.com/decoding-chinas-swoon-its-impacts/ Interesting read. What do you think, Inner Scorecard? Another interesting take on China’s market: http://scottgrannis.blogspot.ca/2015/07/china-stock-crash-index-up-only-72-in.html

http://youtu.be/QUbQRwKXeCU Found this Malone interview with Betty Liu from 2010 that I don't think I had seen before. Apologies if it's been posted here and I missed it. He says a bunch of interesting stuff on a variety of topics.

Shanghai's still up 70% TTM, so I guess the gains are in the trillions too. No idea how it'll all end... Sure, but 1987 was similar though U.S. stocks weren't up nearly as much as China is now. The stock market ended in the green, though it took it more than 2 years to regain its highs. I guess a one day drop of 22% is still enough to put you up there with the best of financial crisis regardless of that the 12 month rolling return was. That being said, stock markets all around the world crash on that day. Many by more than the U.S. I wouldn't have expected that type of market correlation back in the day, nor am a familiar enough to know what caused it, but I certainly don't think world equities will be insulated this time around either. My point was just that you can't look at the losses without also looking at the gains, and that sometimes it's important to zoom out a bit and keep things in perspective.

Shanghai's still up 70% TTM, so I guess the gains are in the trillions too. No idea how it'll all end...

Liberty, I think you gonna take this as attack on Theranos, since you are already defensive. However, it's clear that they can't make money on $3 test even with their automation. It is not almost free. They have to get the blood, which involves human work, the delivery is not free, the sorting and pass through is not free. Anyway, people don't order a single blood test, so the $3 tests are red herring really. The likely number is probably around 10 tests unless someone orders something nonstandard. It is not clear how many tests they can run on a single blood sample. It's probably not a very large number. Once again, don't take that as criticism since the common case is not someone ordering 100+ tests. Don't take this the wrong way, but I think you missed my point. I'm not saying that a $3 test is free in the abstract. I'm saying that the lab person who draws blood is paid by the hour and is going to get paid anyway. The truck that picks up the samples is going to come by anyway. The equipment has already been bought, etc.. So the marginal cost of that test might be almost free (as long as utilization isn't 100%). They're not sending a new truck for each new sample. They're not paying the person who draws the blood per sample, they're not buying a new blood testing machine every time, etc. Fixed costs, right? Some tests might require expensive consumables (chemicals?) or take a long time, so they are more expensive in time on the labs/on the equipment. But some tests might be super quick and use nothing more than the electricity to run the equipment, so could potentially be done for just a few bucks at a profit (because of the fixed costs + almost zero variable costs).

http://basehitinvesting.com/lessons-learned-from-a-history-of-oil/ Good read by John :)

The total for all tests is $3300. It's probably much cheaper (5x cheaper?) than regular labs, but still a huge amount if you wanted to have a complete blood test. I wouldn't be surprised if there are discount for multiple tests at the same time, since a lot of the process is the same regardless of how many tests you do (collecting blood, shipping it to lab, processing it, then sending back results). Possibly. Though Theranos clearly loses money on $3 tests, so they are probably assuming multiple tests per run already. Maybe they lose money, but once you have your fixed costs paid up, running a marginal test (especially if it's an easy one that doesn't require anything consumable) might be almost free. You already have your guy who picks up the samples, your lab and your equipment... as long as utilization isn't 100% and less profitable tests aren't displacing more profitable one, might as well run them.

The total for all tests is $3300. It's probably much cheaper (5x cheaper?) than regular labs, but still a huge amount if you wanted to have a complete blood test. I wouldn't be surprised if there are discount for multiple tests at the same time, since a lot of the process is the same regardless of how many tests you do (collecting blood, shipping it to lab, processing it, then sending back results).