Our “No Forgiveness” Market

Oops! There goes Tesla, down a bunch past Monday morning. Good earnings at our major banks sent JP Morgan up 10%. 

We dwell in a no forgiveness kind of market that works both ways, up and down. Massive price reactions characterize our big capitalization paper. JPM rose 10 points on good quarterly numbers while Tesla shed a bunch. I own Citigroup which flapped its wings, too. 

What concerns me is not the gap openings where you miss by a yard, but it happens to polite stocks like JPM. As for Tesla it’s live by the sword, die by the sword ordeal. I remember the day they red-dogged Motorola some 50 years ago on reporting a bad quarter. There were no cell phones then. So you waited patiently on the pay phone line-Traders got the first calls, not analysts. 

Consider, I never liked Tesla as a stock or could stomach Elon’s greed. Go back several years and read the proxy statement where he awards himself Tesla,  some 20 or 25% of the company’s stock. Naturally, it’s pages long in legalese. My eyes crossed after a page,  so I gave up. Lawyers construct proxy statements as long and boring as possible. This is an acquired art and they are paid big money to do so. 

I gave up on Salesforce dot com too, but they fooled me. CRM became a big winner. Tesla dropped a couple of points while I was writing about their crassness and greed. If I can’t parse your annual report in a reading, I’ll give up on it. 

The only high tech annual I ever liked perusing is MIcrosoft’s. Everything is laid out in neat tables of stats. The prose is simple and clean.  Likewise,  unpromotional but you won’t fall asleep, particularly if you’ve held their stock for 10 years or more. As I write this paragraph, I see Tesla down $19 but JPM is buoyant, up $11. 

I was never secure owning bank stocks considering their mass stupidity in the crazy home mortgage fiasco of 2000 and 2009-’10. Even Merrill Lynch put itself out of business with a Bank of America merger.  

Some of the most spectacular plays I ever made started off as disasters like Merrill Lynch but were rectified after time. 

I always loved razor blade kind-of-plays where the story rested in repeated usage that becomes a tradition. Gillette became a great investment because management could grind out the concept of repeated usage. 

Unlike toothpaste which had nothing but shelf life going. Gillette was practically a man made monopoly. The razor blade concept is easy to understand and it works. Gillette, like Coca-Cola, became embedded in the culture of the country and its households. 

But, above all, cellular telephoning was my great opportunity for investment. It was capital intensive easy to understand. My son, Scott, was a star player for Nextel, a small operator, but an advanced player in the industry. The opportunity lay with those who had some imagination who could see cell phones as a worldwide market with billions of users. Think of color television. 

Everyone in the business underestimated the saturation  numbers for cell phones. Players in the industry who were very savvy in telephone usage put cell phones at a 10% saturation level. I never understood this and put saturation near 100%. Nextel, as my stock play went around the clock more than 10 times in a couple of years. 

What was capital intensive was building operating systems. Nextel was an easy 1000% winner in a couple of years before it sold out to a Far West utility. 

I learned never to accept original projections on any new industry would ever come close to the money.