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Everything posted by Liberty
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I'm currently reading The Prize. Great book. You know how they got so rich, though, right? I don't think Tesla can have that level of control over the market today. They are already licensing. They are already doing what you're saying, and will no doubt sell batteries from the gigafactory to others. It would just be incredibly stupid to stop making cars, which is where most of the value is for them, since cars are a lot more differentiated and value-added than batteries and such. It's a lot harder for a competitor to replicate the Model S than to replicate a battery factory... If by 'more interesting' you mean 'less interesting', then I agree ;) If Tesla stopped making cars, it would be IBM in that example, not Intel. It would be giving an important part of its value chain to competitors through a strategic mistake. Apple's a lot more successful than Intel these days. For most of Intel's big run, PCs were not really sold as consumer products, but rather as beige boxes sold on price and performance, mostly to businesses. Cars will never be beige boxes sold purely on price (except maybe those sold to fleets), so that parallel doesn't work.
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Every year there are many announcements of lab breakthroughs for batteries that are "so much better". Some are vaporware, or startups raising money, or scientists trying to get a new R&D grant, etc. Some might be real, but what matters is when they come on the market.. That can take a long time. In any case, on this 'dual carbon battery': "Power Japan also claims that their battery has energy density comparable to state of the art lithium-ion, with manufacturing costs that are equal or lower." So not claiming a huge improvement there, and no real-world proof on the costs (things usually turn out more expensive than we expect, not cheaper). As for faster charging, how fast the battery can take power isn't the only limiting factor. It's not like home charging will ever deliver 100+ kW required for such fast charging, and Tesla's superchargers can already deliver around 120 kW of juice iirc, so it's not like current batteries are that limited when it comes to what they can handle. Maybe in a few years some new battery will handle 200kW at a charging station and people will save a few minutes charging when they take that long trip once a year, but definitely not a make-or-break situation. EVs are mostly charged overnight at home and are always full when you leave in the morning, all that matters is that they take less than a night to fully charge. Charging stations are definitely not as important as gas stations are for regular cars...
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He is a Chem E. by training and also an MBA. I guess the threat here would be a technology that comes out of the blue, which makes their Gigafactory obsolete. Still, I think commercializing one of those would take a long time by which Tesla may have already realized some return from their investment. One additional positive he focused on was leveraging the Gigafactory for other uses, specifically backup power supplies. Just thought I'd pass it along FWIW. The way I see it: 1) Tesla probably keeps as close tabs on battery tech as anyone else. They wouldn't be disadvantaged or caught off guard in a shift. 2) Better chemistries or not, you still need a certain amount of volume to make a mass-market car. A factory to make enough packs for 500,000 or 1 million cars is going to be big regardless of the chemistry. There's always going to be a need for scale and benefits that come from it. 3) Toyota is still selling hybrids based on NiHM chemistry and outselling its competition, some of whom are on lithium-ion. Tesla will have enough time to switch if there's a breakthrough. It won't be mass adopted instantly by the competition, and it probably won't utterly crush lithium ion at first (new techs need time to incrementally be polished for real-world applications). 4) Even if something comes out that truly revolutionizes batteries, I think that on the net it would be a good thing for Tesla, not a bad thing. Tesla's main competition is gas cars, not EVs. They'd lose money on some of their lithium-ion investments, but they'd immediately jump on the new thing and could now sell Teslas with 500 miles ranges for cheaper or whatever, and they'd still have the best car in the world to showcase that new better battery. It's not like GM, BMW and Nissan are held back from making better EVs than Tesla because they have inferior batteries... (in fact, Nissan's battery cells are custom-made for automotive applications while Tesla uses commodity 18650 cells, iirc).
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So be a commodity supplier of batteries and charging stations rather than a differentiated consumer business? Doesn't sound good to me. As good as the Tesla batteries and power electronics are, if you put them in a Camry, you couldn't sell it for 100k and it wouldn't get 99/100 in Consumer Reports... It's not what make people want to buy that car. If Tesla was a drivetrain/charging station supplier, it would have to compete mostly on price. Bad position to be in. If you listen to what Musk has been saying, he got in the business because he believes that transportation needs to be electrified (it's one half of his vision of 'produce clean energy/run things on clean energy' -- SolarCity is the other side of the coin of Tesla, basically). At first he expected other car makers to do it, but when he saw that they weren't willing/able, he decided to do it himself. So I'm sure Musk will do everything he can to catalyze the industry (he already supplies others, and his success is the best catalyst, creating followers), but now that he's making the best cars in the world, I doubt he'll just voluntarily stop doing that to make drivetrains and build charging stations for inferior EVs made by others... Tesla is an incredible brand that was built by taking huge risks, so why give that up or dilute it? I believe that supplying others could be a big business, but they'll never stop making EVs as long as they don't go out of business. Another way to put it: Batteries and charging stations are a competitive advantage for your product if they are better than the competition, but they're still only a small part of the overall product. But that's not where the business is. These things only store and provide energy, and other people can make decent batteries and charging stations. The real business is in the finished products; nobody else can make a Model S, have the whole package at that level of quality. It's like if Apple stopped making iPhones and became a supplier of A7 chips to others. Sure their stuff is better than the competition, but that's not where the real business is...
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Please ask your friend where he got it: https://en.wikipedia.org/wiki/Prius#First_generation_.28XW10.3B_1997.E2.80.932003.29 Even the Honda Insight only came to the US in 1999: https://en.wikipedia.org/wiki/Honda_Insight#First_generation_.281999.E2.80.932006.29
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I'm not dismissive. I've been a big fan of the Prius since the early 2000s when it came to North-America. I think it's a good thing that they've been putting the HSD in more models, and how they've inspired many other companies to make hybrids. But I'm saying that they held back their own success by not thinking big enough. I'm saying they could have done much better. 15 years later the Prius is less than 2x the efficiency of the original (though it's bigger, but still) and uses the same battery chemistry. Let's see where Musk is in 15 years (Mars?). And the Prius was launched in 1997 in Japan, not 1996. But it's only with the 2004 refresh that it started selling decently.
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The Toyota guy is particularly telling, IMO. Toyota had an unexpected win, but instead of being ambitious about it, they approached it as "oh, nice, we found a new small niche. let's do everything to keep it segmented away". Even with that attitude, it's the #1-2 best selling model in Japan and sells well in the US. What would it be if they handled it better? A more entrepreneurial spirit running that project would have switched the batteries from NiMH to lithium-ion long ago, added the plug-in capability by default and made an all-electric version, been more aggressive about weight reduction (aluminum, etc) and made the styling appealing to more people (don't need to look strange to have a low coefficient of drag, look at the Model S); something like a less upscale Lexus IS plug-in would've sold well. I think Musk and the RMI guys are right about this. Traditional car makers can't compete in EVs because they have such a huge investment in old technologies (steel stamping, huge supply chains for gas engines and transmissions, etc), aren't nimble enough, and to sell EVs properly means pointing out the problems with the rest of their lineups (which is why Musk wants nothing to do with third party dealerships).
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I asked a similar question here: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/als-to-altius-minerals/msg169386/#msg169386 You can see what was answered if you keep reading the thread from that point.
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All these experts made me go ::) I've been following Tesla since 2006, and every single step of the way experts have cogently explained why the company couldn't do what it said it would do and was bound to fail soon. These guys might know their narrow fields very well, but they don't know much about buildings products and companies. If Steve Jobs had told them his plans in 2006, they'd have explained why he should slow down an take fewer chances and be more like RIM and Nokia... Another way to put it: Who's more an expert on making this kind of stuff happen, Elon Musk or these R&D guys? Best to file this and look at it again in a few years when Musk is breaking ground on his second gigafactory and has over-delivered on the 30% cost improvement... Speaking of gigafactories, Musk says the world will need hundreds of them: http://www.bloomberg.com/news/2014-05-14/musk-sees-need-for-hundreds-of-battery-gigafactories-.html Which makes sense if you do the math.
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Thanks xazp, very interesting explanation on derivatives.
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This was mentioned at the annual meeting last year, if I remember correctly. I don't recall what was said verbatim, but the impression I was left with was that the tax deals at LVNTA had extremely high returns, but the money all came back very quickly and it was hard to find other deals to reinvest it in. I've never looked too deeply at those deals and they're probably extremely hard to understand anyway, but just a pointer to anyone trying that they should find the audio of that investor day from last year where both Malone and Maffei spoke about this.
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Thanks, EliG!
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Spot on, Gio. This board is our Munger.
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Side question: Does anyone have Akre track record, going as far back as possible? Thanks.
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Question for Canadian users of Interactive Brokers
Liberty replied to Liberty's topic in General Discussion
Interesting. Do you have a vanilla individual account or a fancier pro account? -
VRX - Valeant Pharmaceuticals International Inc.
Liberty replied to giofranchi's topic in Investment Ideas
When the bid was announced, they said that VRX and AGN had an overlap of 50% in shareholders without counting Ackman's 10%. Using the stock as currency shouldn't be that hard a sell for the shareholders since so many of them already own it. -
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Q1 is out: https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxiaW9zeWVudHxneDo5ZGI3YmEwZDM4N2U4NzA
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http://www.reuters.com/article/2014/05/15/us-comcast-charter-idUSBREA4E0MN20140515
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Question for Canadian users of Interactive Brokers
Liberty replied to Liberty's topic in General Discussion
Until the fall of 2013, IB Canada didn't, they had a 50% overnight margin requirement because they had to follow some US rules because IB US was doing various services for them and was regulated with US rules. But now they offer the Canadian 30% overnight requirements. What confused me is that they haven't updated many parts of their website to reflect that yet... -
http://rampantinnovation.com/2014/05/13/design-is-about-intent/ Icahn bought more AAPL: http://blogs.wsj.com/moneybeat/2014/05/15/icahn-discloses-new-stake-in-ebay-raises-stake-in-apple/
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Question for Canadian users of Interactive Brokers
Liberty replied to Liberty's topic in General Discussion
I found this: http://canadianmoneyforum.com/showthread.php/16154-Interactive-Brokers-Canada-%28IB-Canada%29 Apparently IB Canada is splitting itself more from the US parent and so won't have to follow some of the US regulations that affect things like this. I'd still love to hear from anyone with a Canadian IB account about their experience and what they know about all this. Is it possible that they've updated the margin requirements in Canada and haven't updated the materials on their site yet, which still talk about Reg T and 50%? TIA. Update: Well, to keep this back and forth with myself going... I spoke to IB Canada on the phone and apparently they've done the switch and Canadians aren't bound by the US rules, so eligible stocks have a 30% margin requirement. Not sure why their website isn't fully updated to reflect that yet. -
Hi. So I'm considering switching to IB Canada to reduce my fees and get a margin account. I've never used margin before, I've always been pretty vanilla for that kind of stuff, but I'd like to have as an extra tool in the toolshed to lever up a bit if there's some macro event (blood on the streets) or a salad oil scandal or whatever causing some of my watchlist to drop a lot and I don't have cash on hand. My question is about margin requirements in Canada at IB. Googling around, I've found many people talk about 30% requirements in Canada for stocks that are on approved lists and 50% for most of the rest. But here in the IB Canada FAQ it says: https://www.interactivebrokers.ca/en/?f=%2Fen%2Fgeneral%2Feducation%2Ffaqs%2FcanadaFAQs.php%3Fib_entity%3Dca And there's also this: https://www.interactivebrokers.ca/en/index.php?f=marginCA&p=stk This seems pretty clear to me, but I just want to confirm that the margin requirements for Canadians at IB is 50% except intraday and that I'm not missing something else that changes how this work? I suppose that the Canadians who are talking about getting a 30% margin requirement are at purely Canadian brokers who don't follow US Reg T..? 50% vs 30% makes a pretty big difference in how big your cushion is before you get a margin call (well, IB just liquidates apparently), so it's important, not that I think I'll ever get close to that limit... I just want to make sure I understand this correctly. Thank you in advance for your help.
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Maybe this has something to do with it: http://www.valuewalk.com/2014/05/tiger-eye-capital-dumps-liberty-media-time-warner-cable/