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Tesla’s Elon Musk is a Snarky CEO

Books Recommended by Elon Musk

On the 02-May-2018 quarterly results call, Elon Musk, CEO of Tesla, snubbed Wall Street analyst who called his performance “bizarre.”

When Toni Sacconaghi, a senior sell-side equity research analyst at Sanford C. Bernstein, asked about the company’s capital expenditures, Musk responded, “Excuse me, next. Next. Boring questions are not cool.” When Joseph Spak of RBC Capital asked how many of those who’d reserved a Model 3 sedan have actually gone ahead with the reservation, Musk directed the call’s operator to switch to YouTube remarking, “These questions are so dry. They’re killing me.”

Prominent Tesla bear, Cowen & Co.’s Jeffrey Osborne, wrote a note where he declared that “Tesla’s earnings calls have always been one of the best free sources of entertainment out there, but this one was the over top [sic].” He added,

In one of the most bizarre earnings calls we have ever heard, Tesla refused to address analyst questions on capex, cash burn and other “boring bonehead questions” while providing commentary on “barnacle” like third-party contractors and anecdotes on an ineffectual “flufferbot”.

'Elon Musk' by Ashlee Vance (ISBN 0062301233) On the first-quarter call, CEO Elon Musk also promised a reorganization” this month. He said,

I’m feeling quite confident about hitting positive cash flow in Q3. This is not a certainty. It does appear quite likely in my view. We are going to conduct a reorganization, restructuring of the company this month and make sure we are well set up to achieve that goal. In particular the number of third-party companies we’re using has gotten out of control. We’re going to scrub the barnacles on that front.

Osborne had previously said,

The story keeps breaking down here in terms of the ability to hit overambitious targets from management … so the tone of the release last night certainly has been a bit watered down and I think they’re just starting to try to regain a little bit more credibility … but in general we just see continued execution delays, a lack of profitability over the next two to three years and, with Elon Musk’s world domination strategy, just with the additional factories he wants to build over about 15 to 20 billion dollars of additional capital that he’s going to need to build these battery and car factories in Europe as well as in China.

Tesla stock promptly dropped more than 5% in after-hours trading.

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Posted in Investing and Finance Leaders and Innovators

Take Care of Business by Posting Sincere Quarterly Results While Building Long-term Value

Balanced Shareholder Value Technological progress over the last decade—especially in communications—has accelerated the expansion of commerce, the creation of wealth, and the pace of living.

Consider a few statistics. There are now 15,000 communications service providers operating worldwide; just one decade ago, there were less than 1,000. Last year, enough fiber optic cable was laid to encircle the earth some 400 times. Internet traffic is doubling every 100 days. Nearly 350 million people are already online worldwide with 100 million more expected to join them in 2001. Buying and selling on the Internet, or ecommerce, has reached $700 billion worldwide—and is expected to approach $7 trillion in five years.

Technology and Growth

The technology industry has played a central role in contributing to this growth. Technology company is creating the systems and technologies that will make the Internet mobile and able to do things we can only dream of today. With the phenomenal growth of the Internet, the penetration of cable television and the rise of wireless communications, we live in a world where fact-based information, tailored to our individual tastes, is available 24/7 wherever we are. That is the bright side. On the darker side, the same technology is also delivering us rumors, innuendo, and blatant misinformation.

Pressures of Instant Information on Stockholders With our robust economy, expectations for a better life have never been higher. However, in many cases, high expectations give way to instant gratification and outright greed. Overnight wealth is now part of pop culture. The objective of corporations is to create wealth for shareowners by delivering products and services that customers find of value. You cannot do that if employees are in a free-for-all to undermine their colleagues. Creating value is a far different game than scheming to be the last person standing. And it requires far different behavior to succeed.

In any institution, you can find people who are out for personal gain at the expense of the enterprise. However, the lack of integrity catches up with them. It always does. At the same time, the business world does have its problems, real as well as perceived, including events that raise questions about corporate behavior.

Accidents happen. The Exxon Valdez oil spill was an accident. Manufacturing errors happen. That’s why Bridgestone and Ford are in the headlines today. And sabotage happens. How companies respond to these crises determines the size and healing time of the blemish on their reputations. Companies, like Johnson & Johnson, that are proactive and completely open with the public, recover fast.

Corporate reputations always seem to be under scrutiny. Corporations owe something to their workers, the communities in which they operate, shareowners, and other constituencies. Shortly after I joined technology company, the company held its annual Global Days of Caring—a worldwide employee volunteer effort in which tens of thousands of technology company people participate in worthwhile community projects, ranging from cleaning up parks, beaches and playgrounds, to assisting at childcare, senior citizen centers and homeless shelters. Making a difference in communities has become a central part of technology company’s culture.

Pressures of Instant Information on Stockholders

But meeting the needs of shareowners, employees, and the community is increasingly difficult, because companies face new pressures that are created by the combination of instant information and the growing notion of instant gratification by investors.

A few years ago, business could plan and execute for the long term. Sometimes that meant making sacrifices in the short term that retarded bottom-line growth for a quarter or two. But such sacrifices had the potential to create breakthroughs in technology that could change an industry, the way my company did with the invention of the transistor, lasers, and fiber optics—technologies that spawned new industries.

If a company was strong and had a reputation for making successful transitions and delivering value to customers, investors tended to show patience because they understood that efforts were being make for the long-term health of the business.

How to Beat Wall Street Reliably Today, instead of the idea of who will win in the long term, the market is focused on who’s winning this quarter, who’s winning today. Business has become a spectator sport, a high-stakes game that is played out daily by people who watch corporate box scores scroll across their PCs and television sets, by people who place instant online bets that are based on breaking news, rumors, or the body language of a CEO on CNBC’s Squawk Box—all designed to feed into Wall Street, which has become a casino as millions of new players ante up for the next deal.

Business journalists and financial analysts have the power to cut a company’s market value in half with a single negative comment, or instantly drive its value up with a glowing report.

With the constant bombardment of gossip, rumor, and sometimes deliberately misleading information, it has become increasingly difficult to determine what legitimate business news is.

The temptation to manipulate the system is as strong as the opportunity to do so. At Technology company technologies, we have regular contact with many financial analysts. In addition, the people we deal with are trying to do the right things. But they are under severe pressure in a world that’s been sped up and turned upside down. Their reputations have been built on solid analysis of income statements and balance sheets. That’s how value used to be determined. Now Internet upstarts with small revenue streams and losses instead of earnings can have huge market valuations. How do you analyze these companies and make recommendations to investors?

How to Beat the Street Reliably

'Investor Relations For the Emerging Company' by Ralph Rieves (ISBN 0230341969) Compounding the difficulty is the sheer speed of the market rollercoaster. One analyst recently said, “We live 12-week lives,” living quarter to quarter with the companies he is covering. That’s not healthy. That 12-week life involves predicting an earnings number with factors such as a company’s strength, the market’s strength, as well as a company’s own guidance on what it expects to deliver. They sit on the sidelines, watching and waiting. Meanwhile, companies are on the field competing—driving their businesses toward the finish line. They’re under phenomenal pressure to perform well and cross the finish line with increasingly higher results. It’s not enough to deliver what’s expected. The system rewards companies who under-promise and over-deliver. That’s the only way to consistently beat the Street’s expectations.

Not only are there expectations of a specific earnings number, there are expectations of a precision in delivering the number. In effect, the system is demanding perfect execution in every 12-week period. We have arrived at the age of instant analysis and sound bites that can cause major tremors in the market.

This is the reality companies face today as they work to serve their customers and build value for their owners clearly pressures are great to deliver strong quarterly performance—to “beat the Street”—and to do it consistently to keep the stock price rising.

Stock price was always the key measure of a company’s long-term health. But today stocks have become a strategic weapon. Stocks are the new currency for acquisitions of companies, technologies, and employees to bolster a firm’s competitive capabilities. Your stock price puts you in a position to be the parent or the acquired. Also, the value of a stock has a major impact on a company’s ability to attract and retain employees. Upstart Internet companies that are preparing to go public can be a huge temptation. Much is riding on quarterly performance. In striving not to disappoint Wall Street, companies are tempted to make short-term decisions that could be harmful in the long term. Worse, some companies are under such heavy pressure in the competition for investor dollars that they feel compelled to overstate their market performance and exaggerate their potential. So they provide a set of lenses for the fortunetellers. Sometimes it’s a microscope. Sometimes it’s a telescope. And very often it’s a kaleidoscope. Politicians call it “spin doctoring.” And some businesses have honed it into an art form.

'Using Investor Relations to Maximize Equity Valuation' by Thomas Ryan (ISBN 047167852X) If it works, it’s easier to do it a second time and a third time, until it becomes an addictive drug. Many companies have been on drugs. It’s time to get off them and begin managing their businesses, instead of managing their stock price. It’s a lot easier to cling to your values when you’re riding high. But the true test of a company’s character comes when it stumbles.

I believe that it’s the job of senior corporate leaders to step up to this challenge—to change the game by striking the right balance between the long- and short-term decisions that produce lasting health for companies. Business leaders must refuse to be drawn into shortsighted decisions that are driven by the media frenzy. They must resist being dragged to center-stage in the spectator sport that business has become. Business leaders have been entrusted to build strong companies by growing real value through innovating and delivering products that change the way people live and work. Instead of concentrating on what’s needed to make analysts happy, leaders should be focused of what they can do to serve their customers better. In the long-term that could mean facing up to the prospect of short-term pain if it’s necessary to sustain long-term gain.

Creating Balanced Shareholder Value Over the Long Term

Creating Balanced Shareholder Value Over the Long Term The system may be out of control, but the future is not. Value is not created overnight or over a 12-week period. Value comes from creating products and services that meet market needs. That’s not a short-term proposition. Companies experience vicissitudes. The fast pace of today’s marketplace requires constant adjustments and transitions. Often, companies that go through those transitions will pay the price for a quarter or two. But if they perform well, they come back quickly because of the bandwagon mentality of Wall Street’s fortunetellers.

Every year Fortune magazine compiles a list of America’s most admired companies. The criteria for the list range from long-term investment value to social responsibility. They are also viewed as the best places to work. These companies are taking care of business and meeting the needs of their shareowners, their customers, and their employees. And doing so has paid off. The top 10 percent of Fortune‘s list of most admired companies did twice as well in the stock market as the bottom 10 percent. That’s encouraging, because it says that in the end, good companies will always justify their value as long as they do the right things the right way.

Assess how well you balance short-term expediency and long-term growth.

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Posted in Management and Leadership

The Three Stages of a Bull Market

The Three Stages of a Bull Market

Legendary global investment strategists Barton Michael Biggs (1932–2012,) money manager at Morgan Stanley and founder of Traxis Partners, said “A bull market is like sex. It feels best just before it ends.”

Renowned investor Howard Stanley Marks (b1946) of Citibank, TCW Group, and Oaktree Capital Management identified three stages of a bull market:

Fortunately, one of the most valuable lessons of my career came in the early 1970s, when I learned about the three stages of a bull market: the first, when a few forward-looking people begin to believe things will get better, the second when most investors realize improvement is actually underway, and the third, when everyone’s sure things will get better forever.

Celebrated investor and philanthropist John Templeton, acknowledged that “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

Recommended Reading

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Posted in Investing and Finance

Books Recommended by Morgan Stanley

Morgan Stanley

Morgan Stanley recommends the following books to young employees, interns, and job candidates for their continued education of the financial industry.

History Tidbit: The Founding of Morgan Stanley

In 1933, the Glass-Steagall Act, and the broader U.S. Banking Act of 1933, mandated that commercial banking and investment banking operations could not function under a single holding entity. In response, the partners at J.P. Morgan & Co. led by Henry S. Morgan (grandson of the legendary J.P. Morgan) and Harold Stanley opened Morgan Stanley for business on 16-September -1935. Morgan Stanley currently has 60,000 employees in 1300 offices and operates in 42 countries.

Recommended Books on Legendary Investors and Personalities

Recommended Books on “The Great Financial Houses”

Recommended Books on Capital Markets, Financial Industry, and History

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Posted in Education and Career Investing and Finance