Elon Musk"s First Payload To Mars: His "Midnight Cherry Tesla Roadster Playing Space Oddity"

In late November, we reported on Elon Musk’s desperate attempt to boost market confidence with a shock and awe performance unveiling Tesla’s new semi-truck and roadster. While the event was a thriller, it appears the laws of physics may have finally caught up with Tesla’s stock - now in a bear-market from September highs.

Musk is undeniably the greatest snake oil salesman modern financial markets have ever seen, and that is why he is planning the next spectacular event before a further correction.

On Friday evening, Musk tweeted what the payload of the Falcon Heavy would be— his “midnight cherry Tesla Roadster playing Space Oddity”.

But the story gets better, because the powerful Falcon Heavy rocket will launch his Tesla into the orbit around Mars. Musk added, the Tesla “will be in deep space for a billion years or so if it doesn’t blow up on ascent.”

Payload will be my midnight cherry Tesla Roadster playing Space Oddity. Destination is Mars orbit. Will be in deep space for a billion years or so if it doesn’t blow up on ascent.

— Elon Musk (@elonmusk) December 2, 2017

As Musk would say, the show must go on with the Falcon Heavy launch expected “next month” (January 2018) from Pad 39A at Kennedy Space Center in Florida. According to ARS Techinca, “a static fire test of the rocket’s three cores, and 27 engines, on the launch pad this month.”

Falcon Heavy to launch next month from Apollo 11 pad at the Cape. Will have double thrust of next largest rocket. Guaranteed to be exciting, one way or another.

— Elon Musk (@elonmusk) December 2, 2017

In simplest terms, the Falcon Heavy is three of the company’s Falcon 9 rockets strapped together. It will then create enough lift as proposed by Musk to propel his Tesla out of low Earth orbit onto a trajectory to Mars. When it comes to timing— don’t take the company seriously. Musk has pushed back Falcon Heavy’s maiden flight more than once: it was originally planned for a summer launch but moved to November and now to January 2018.

Musk said, at a press conference in July, that the Falcon Heavy might not even make it to orbit on its first attempt to leave the atmosphere. That means the upcoming event could turn into a very expensive firework showing.

While the practical use for a Tesla roadster on Mars is still unknown, it would buy Musk some time to keep the stock elevated for perhaps a few more secondly offerings. If Musk is successful in this latest endeavor, it would signal that NASA’s ambitions to Mars could be fulfilled by a Falcon Heavy. So far, no private company has launched a rocket beyond low-Earth orbit, nevertheless to another plant.

Phil Larson, an assistant dean at the University of Colorado, and a former SpaceX official said, “the launch of the biggest rocket since the U.S. Moon booster is a game changer for our country’s space exploration future and for national security. The fact that development of such a capability is coming from U.S. industry is a very positive sign for our economic competitiveness.”

As we have highlighted before, the short thesis for Tesla (see: Jim Chanos Adds To Tesla Short, Sees Musk Stepping Down) explains the financial circumstances of why Musk is attempting to conduct the great show ever known to man through SpaceX, as it means the cross promotion would keep his scheme alive. In the mean time, the short theses build:

1. Negative Cash Flows

“If you can’t make money selling a $100,000 car to rich people, how are you going to make money selling a $45,000 car to normal people?” Rocker told The Times. He was referring to the upcoming mass-market Model 3. “I’m saying they’re going to lose money on every Model 3 they build and sell,” Spiegel said. Based on Tesla’s Q4 2016 earnings report, he figured the combined average selling price for non-leased Model S and X is about $104,000 and the combined average cost of building them about $82,000.

 

2. Competition from the Big Guys

Electric vehicles are still only a tiny fraction of total new vehicle sales in the US. Tesla sold about half of them. In March, according to Autodata, Tesla sold 4,050 vehicles in the US, similar to Porsche. All automakers combined sold 1.56 million new vehicles. This gave Tesla a market share of 0.26%. “Tesla faces a formidable set of competitors, and they’re coming in with guns blazing,” Wahlman told The Times. “Once the market is flooded with electric vehicles from manufacturers who can cross-subsidize them with profits from their conventional cars, somewhere around 2020 or 2021, Tesla will be driven into bankruptcy,” Spiegel said.

 

3. Tesla’s vanishing tax credits

The federal tax credit of $7,500 that EV buyers currently get is limited to 200,000 vehicles for each automaker. Once that automaker hits that point, tax credits are reduced and then phased out. Of all automakers, Tesla is closest to the 200,000 mark. Under its current production goals, the tax credits for its cars could start declining in 2018. This would give competitors, whose customers still get the full tax credit, a major advantage. About 370,000 folks put down a refundable $1,000 deposit on Tesla’s Model 3, perhaps figuring they’d get the $7,500 tax credit. But as it stands, many won’t. Rocker thinks that this is going to be an issue. The refundable deposit “commits them to nothing,” he said. Those that don’t get the tax credit may just ask for their money back and buy an EV that is still eligible for the credit.

 

4. The Question of patent protection

Tesla has made its patents available to all comers, thus lowering its patent protections against competitors. Also, the key part of an EV, the battery, is produced by suppliers; they, and not Tesla, own the intellectual property. This is true for all automakers. But Tesla might still be closely guarding crucial trade secrets that are not patented.

 

5. Musk’s distractions from his day job

Musk has a lot of irons in the fire: Tesla, SpaceX (with which he wants to build a colony on Mars or something), solar-panel installer SolarCity which Tesla bailed out last year; projects ranging from artificial intelligence to tunnel digging; venture capital activities…. “He’s all over the map, from tunneling to flights to Mars to solar roof tiles,” Rocker said. These announcements have the effect of boosting Tesla’s stock: “It’s ‘Let’s get the acolytes excited. Implant in the brain! Let’s buy Tesla stock!’”

 

6. Execution risk

“Investing is all about possibility and probability,” Yusko said. “Is it possible that Tesla will produce 500,000 cars in the next two or three years? Yes. Is it probable? No.” Tesla has missed many deadlines and goals, and quality problems cropped up in early production models. As Tesla is trying to make the transition to a mass-market automaker, execution risk will grow since mass-market customers are less forgiving.

 

7. Investor fatigue

Having lost money in every one of its 10 years of existence, Tesla asks investors regularly for more money to fill the new holes. In March, it got $1.2 billion. In May last year, it got $1.5 billion. Tesla will need many more billions to scale up production and to digest the losses. Tesla has been ingenious in this department. But when will investors get tired of it? “We’re awfully close to the point where people wake up and realize these guys are seriously diluting our equity” with new stock and convertible bond issues, Yusko said. According to The Times, Yusko “is looking for the moment when the true believers begin to lose faith.”

 

*Update

8. Emerging solid-state battery technology

Musk has invested a lot into his Gigafactory and technology producing lithium-ion batteries. The EV game is all about the best battery technology and a new threat has emerged using solid-state technology. If Tesla does not adopt to these new battery trends consumers would likely gravitate to EVs who posses such technology, because of the longer distance and shorter charge time.

 

There Is Just One Thing Preventing Elon Musk"s Vision From Coming True: The Laws Of Physics

When Elon Musk stepped on stage at Tesla’s product-launch event earlier this month, he knew the market’s confidence in Tesla’s brand had sunk to an all-time low since he took over the company a decade ago. So, he resorted to a tactic that should be familiar to anybody who has been following the company: Shock and awe.

While the event was ostensibly scheduled to introduce Tesla’s new semi-truck – a model that won’t make it’s market debut for another two years, assuming Tesla sticks to its product-rollout deadline – Musk had a surprise in store: A new model of the Tesla Roadster that, he bragged, would be the fastest production car ever sold.

Musk made similarly lofty claims about the battery life and performance of both vehicles. The Tesla semi-trucks, he said, would be able to travel for 500 miles on a single charge. The roadster could clock a staggering 620 – more than double the closest challenger.

There was just one problem, as Tesla fans would later find out, courtesy of Bloomberg: None of it was true.

In fact, many of the promises defy the capabilities of modern battery technology.

Elon Musk knows how to make promises. Even by his own standards, the promises made last week while introducing two new Tesla vehicles—the heavy-duty Semi Truck and the speedy Roadster—are monuments of envelope pushing.

 

To deliver, according to close observers of battery technology, Tesla would have to far exceed what is currently thought possible.

 

Take the Tesla Semi: Musk vowed it would haul an unprecedented 80,000 pounds for 500 miles on a single charge, then recharge 400 miles of range in 30 minutes. That would require, based on Bloomberg estimates, a charging system that"s 10 times more powerful than one of the fastest battery-charging networks on the road today—Tesla’s own Superchargers.

 

The diminutive Tesla Roadster is promised to be the quickest production car ever built. But that achievement would mean squeezing into its tiny frame a battery twice as powerful as the largest battery currently available in an electric car.

 

These claims are so far beyond current industry standards for electric vehicles that they would require either advances in battery technology or a new understanding of how batteries are put to use, said Sam Jaffe, battery analyst for Cairn Energy Research in Boulder, Colorado. In some cases, experts suspect Tesla might be banking on technological improvements between now and the time when new vehicles are actually ready for delivery.

 

“I don"t think they"re lying,” Jaffe said. “I just think they left something out of the public reveal that would have explained how these numbers work."

While Jaffe seems inclined to give Tesla the benefit of the doubt, there’s little, if anything, in Musk’s recent behavior to justify this level of credulity. In recent months, Musk has repeatedly suffered the humiliation of seeing his lies and half-truths exposed. For example, the self-styled “visionary” claimed during the unveiling of the Model 3 Sedan that he would have 1,500 copies of the new model ready for customers by the end of the third quarter. Instead, the company managed a meager 260 models as factory-line workers at its Fremont, Calif. factory struggled to assemble the vehicles by hand as the Model 3 assembly line hadn’t been completed.

Increasingly agitated customers who placed deposits with Tesla back in March 2016 have begun asking for refunds, only to be chagrined by the company’s sluggish response. While nobody in the mainstream press has (somewhat bafflingly) made the connection, Tesla revealed earlier this month that it burned an unprecedented $1.4 billion of cash during the third quarter - or roughly $16 million per day - despite Elon Musk"s assurance that Tesla had its "all-time best quarter" for Model S and X deliveries.

And let’s not forget the fiasco surrounding Tesla’s autopilot software. Musk has repeatedly exaggerated its performance claims. And customers who paid more than $8,000 for a software upgrade more than a year ago have been repeatedly disappointed by delays and sub-par performance.

Musk’s exaggerations about the Tesla Roadster were particularly egregious.

Tesla claims that its new $200,000 Roadster is the quickest production car ever made, clocking zero to 60 in 1.9 seconds. Even crazier is the car’s unprecedented battery range: some 620 miles on a single charge. That"s a longer range than any battery-powered vehicle on the road—almost twice as long as Tesla"s class-leading Model S and Model X.

 

To achieve such power and range, Musk said the tiny Roadster will need to pack a massive 200-kilowatt-hour battery. That’s twice the size of any battery Tesla currently has on the road. Musk has previously said he won"t be making the packs bigger on the Model S and Model X because of space constraints. So how can he double the pack size in the smaller Roadster?

 

BNEF’s Morsy has a twofold answer. First, he expects Tesla will probably double-stack battery packs, one on top of the other, beneath the Roadster"s floor. That creates some engineering problems for the battery-management system, but those should not be insurmountable. Still, Morsy said, the batteries required would be too large to fit in such a small frame.

 

“I really don’t think the car you saw last week had the full 200 kilowatt hours in it,” Morsy said. “I don’t think it’s physically possible to do that right now."

Is it possible that, thanks to incremental improvements in battery density and cost, Musk somehow manages to hit these lofty targets? Perhaps, though, as Bloomberg points out, the fact that Musk is basing these claims on a set of projections that haven’t yet been realized is hardly confidence inspiring.

To be sure, there’s an important caveat to Musk’s claims. While they may be staggeringly exaggerated, there’s still the possibility that incremental improvements in battery technology will make these targets more feasible by the time the models hit the market.

Again, Musk may be banking on the future. While Tesla began taking deposits on the Roadster immediately—$50,000 for the base model—the first vehicles won"t be delivered until 2020. Meanwhile, battery density has been improving at a rate of 7.5 percent a year, meaning that by the time production starts, packs will be smaller and more powerful, even without a major breakthrough in battery chemistry.

 

“The trend in battery density is, I think, central to any claim Tesla made about both the Roadster and the Semi,” Morsy said. “That’s totally fair. The assumptions on a pack in 2020 shouldn’t be the same ones you use today."

However, in its analysis of the feasibility of Musk’s claims, Bloomberg overlooked one crucial detail: Back in August, the company"s veteran director of battery technology, Kurt Kelty, unexpectedly resigned to "explore new opportunities," abruptly ending a tenure with the company that stretched for more than a decade, and comes at a critical time for Elon Musk.

Kelty’s resignation – part of an exodus of high-level executives that is alarming in and of itself - hardly inspires confidence in Tesla’s ability to innovate. We’ve noticed a trend with Tesla: The more the company underdelivers, the more Musk overpromises.

In our opinion, this is not a sustainable business strategy.  
 

As Lithium Booms, Some Analysts Sound Note Of Caution

In “Mad Scramble for Lithium Mines From Congo to Cornwall”, Bloomberg puts some colour on current conditions in the red hot sub-sector.

For evidence of just how hot battery ingredient lithium is right now, look no further than Australia’s AVZ Minerals Ltd. A penny stock until a few months ago, the mining hopeful has surged about 1,300 percent this year. The proposition: recasting a remote, century-old tin mine in the Democratic Republic of Congo as a supplier of lithium needed to power electric cars. While its rise has been dramatic, AVZ isn’t alone in the rush to position for a rechargeable-battery boom.

In the U.K., a company (Cornish Lithium) founded by former investment banker Jeremy Wrathall Cornish Lithium is planning to tap thermal springs in Cornwall, a region more famous for its beach coves.

Cornish beach cove…but have you tried driving to one from London (takes hours).

Other companies are hunting for lithium deposits from Germany to Mali, and even Afghanistan plans to tender exploration permits.

As we explained last month, there is so much interest in lithium – mainly due to its application in electric vehicles and energy storage - that the Lithium and Battery tech ETF has seen record volumes and the LME is reportedly considering the introduction of a lithium (carbonate) contract.

While everybody has been fretting about the supply side, some analysts are starting to question whether the supply side will expand too fast in the coming years, as Bloomberg explains.

"You’ve got a scramble for deposits, a demand side that looks very impressive, the question is always around the supply," said Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London. In the rush to meet demand there is a risk too many mines will be developed and too much metal supplied, Gait said.

 

"When the tide goes out, those that do not have good geology will always be found wanting."

Bloomberg notes that uncertainty about global production growth has encouraged some users to lock-in future supplies of the metal.

However, while production might struggle at first to catch up with demand growth, lithium isn’t really rare compared with other battery metals like cobalt and graphite, according to Bloomberg Intelligence analyst Eily Ong. And mining history is full of cautionary examples of booms that ended in bust when the rush to boost supply overshot demand growth. Iron ore is a recent example, after a boom in Chinese steel production led to a push to build new mines. That turned out poorly for many of the iron ore upstarts that either struggled to build projects or brought mines into production just in time for prices to drop. Global lithium production increased by about 12 percent last year, with batteries accounting for about 39 percent of consumption, according to the U.S. Geological Survey. While Australia was the largest producer in 2016, its identified resources are dwarfed by Argentina and Bolivia, each with about 9 million tons and Chile, with more than 7.5 million tons.

 “This is not a metal that’s going to be exempt from the normal laws of commodity economics,” said Bernstein’s Gait. “Sooner or later we will over supply.”

Bloomberg cites a report from Liberum Capital, the London-based brokerage…

There are about a dozen projects being built or expanded around the world, according to Liberum Capital Ltd. Those, plus a handful of others seen as likely to proceed, could help nearly triple global lithium supply by 2025, but still fall short of expected demand. Beyond that, there’s a further eight projects that haven’t secured financing yet, but could possibly push the market into a surplus by 2025, Liberum said in a report. Lithium carbonate prices have more than doubled in the past two years, according to data from Benchmark Mineral Intelligence.

 

“With prices where they are right now, there’s not a potential lithium mine in the world that doesn’t make an extraordinary amount of money,” said Liberum analyst Richard Knights. “There’s every incentive to bring supply on.”

…and a report from BMO Capital Markets published earlier this week.

Current shortfalls may abate by 2019-20 based on the strong supply response, BMO Capital Markets analyst Joel Jackson said in a note dated Oct. 24. However, uncertainty about assumptions including electric-vehicle penetration, battery technology and lithium supply growth makes the market balance difficult to predict, he said.

The Bloomberg article circles back to AVZ Minerals.

In Congo, AVZ must still prove that extracting the lithium is economically viable. It will also need to rehabilitate an old power station to reach production and build over 600 kilometers (372 miles) of roads to connect the mine with the regional capital of Lubumbashi for exports. Still the project is attracting investors, including China’s Zhejiang Huayou Cobalt Co., one of the world’s biggest refiners of cobalt. "The biggest companies in China are just queuing up," AVZ Chairman Klaus Eckhof said from Dubai.

"They all want to be part of it because they don’t have a pipeline of supply, my phone keeps ringing."

The Death Of Petrodollars & The Coming Renaissance Of Macro Investing

Authored by John Curran via Barrons,

The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift...

In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U.S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U.S. Treasuries, basically financing America’s future federal expenditures.

Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U.S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U.S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U.S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U.S. economic growth over the subsequent decades.

An important consequence was that oil-importing nations would be required to hold large amounts of U.S. dollars in reserve in order to purchase oil, underpinning dollar demand. This essentially guaranteed a strong dollar and low U.S. interest rates for a generation.

[ZH: Still, the underlying concept of how Petrodollar recycling, or as some call it, petrocurrency mercantilism works, leaves some confusion. So in order to alleviate that, here courtesy of Cult State, is a quick and simple primer that should hopefully answer all questions. From CultState:

So what is petrocurrency mercantilism?

It’s when a national bank and an energy producer collude to generate artificial demand for a currency at the expense of the purchasing power of other currencies.

The flowchart below shows how it all works.

Given this backdrop, one can better understand many subsequent U.S. foreign-policy moves involving the Middle East and other oil-producing regions.

Recent developments in technology and geopolitics, however, have already ignited a process to bring an end to the financial system predicated on petrodollars, which will have a profound impact on global financial markets. The 40-year equilibrium of this system is being dismantled by the exponential growth of technology, which will have a bearish impact on both supply and demand of petroleum. Moreover, the system no longer is in the best interest of key participants in the global oil trade. These developments have begun to exert influence on financial markets and will only grow over time. The upheaval of the petrodollar recycling system will trigger a resurgence of volatility and new price trends, which will lead to a renaissance in macro investing.

Let’s examine these developments in more detail.

First, TECHNOLOGY is affecting the energy markets dramatically, and this impact is growing exponentially. The pattern-seeking human mind is built for an observable linear universe, but has cognitive difficulty recognizing and understanding the impact of exponential growth.

Paralleling Moore’s Law, the current growth rate of new technologies roughly doubles every two years. In the transportation sector, the global penetration rate of electric vehicles, or EVs, was 1% at the end of 2016 and is now probably about 1.5%. However, a doubling every two years of this level of usage should lead to an automobile market that primarily consists of EVs in approximately 12 years, reducing gasoline demand and international oil revenue to a degree that today would seem unfathomable to the linear-thinking mind. Yes, the world is changing—rapidly.

Alternative energy sources (solar power, wind, and such) also are well into their exponential growth curves, and are even ahead of EVs in this regard. Based on growth curves of other recent technologies, and due to similar growth rates in battery technology and pricing, it is likely that solar power will supplant petroleum in a vast portion of nontransportation sectors in about a decade. Albert Einstein is rumored to have described compound interest (another form of exponential growth) as the most powerful force in the universe. This is real change.

The growth of U.S. oil production due to new technologies such as hydraulic fracturing and horizontal drilling has both reduced the U.S. need for foreign sources of oil and led to lower global oil prices. With the U.S. economy more self-reliant for its oil consumption, reduced purchases of foreign oil have led to a drop in the revenues of oil-producing nations and by extension, lower international demand for Treasuries and U.S. dollars.

ANOTHER MAJOR SECULAR CHANGE that is under way in the oil market comes from the geopolitical arena. China, now the world’s largest importer of oil, is no longer comfortable purchasing oil in a currency over which it has no control, and has taken the following steps that allow it to circumvent the use of the U.S. dollar:

• China has agreed with Russia to purchase Russian oil and natural gas in yuan.


• As an example of China’s newfound power to influence oil exporters, China has persuaded Angola (the world’s second-largest oil exporter to China) to accept the yuan as legal tender, evidence of efforts made by Beijing to speed up internationalization of the yuan. The incredible growth rates of the Chinese economy and its thirst for oil have endowed it with tremendous negotiating strength that has led, and will lead, other countries to cater to China’s needs at the expense of their historical client, the U.S.


• China is set to launch an oil exchange by the end of the year that is to be settled in yuan. Note that in conjunction with the existing Shanghai Gold Exchange, also denominated in yuan, any country will now be able to trade and hedge oil, circumventing U.S. dollar transactions, with the flexibility to take payment in yuan or gold, or exchange gold into any global currency.


• As China further forges relationships through its One Belt, One Road initiative, it will surely pull other exporters into its orbit to secure a reliable flow of supplies from multiple sources, while pressuring the terms of the trade to exclude the U.S. dollar.

The world’s second-largest oil exporter, Russia, is currently under sanctions imposed by the U.S. and European Union, and has made clear moves toward circumventing the dollar in oil and international trade. In addition to agreeing to sell oil and natural gas to China in exchange for yuan, Russia recently announced that all financial transactions conducted in Russian seaports will now be made in rubles, replacing dollars, according to Russian state news outlet RT. Clearly, there is a concerted effort from the East to reset the economic world order.

ALL OF THESE DEVELOPMENTS leave global financial markets vulnerable to a paradigm shift that has recently begun. In meetings with fund managers, asset allocators, and analysts, I have found a virtually universal view that macro investing—investing based on global macroeconomic and political, not security-specific trends—is dead, fueled by investor money exiting the space due to poor returns and historically high fees in relation to performance. This is what traders refer to as capitulation. It occurs when most market participants can’t take advantage of a promising opportunity due to losses, lack of dry powder, or a psychological inability to proceed because of recency bias.

A current generational low in volatility across a wide spectrum of asset classes is another indicator that the market doesn’t see a paradigm shift coming. This suggests that current volatility is expressing a full discounting of stale fundamental inputs and not adequately pricing in the potential of likely disruptive events.

THE FEDERAL RESERVE is now in the beginning stages of a shift toward “normalization,” which will lead to diminished support for the U.S. Treasury market. The Fed’s total assets stand at approximately $4.5 trillion, or five times what they were prior to the financial crisis of 2008-09. The goal of the Fed is to “unwind” this enormous balance sheet with minimal market disruption. This is a high-wire act a thousand feet in the air without a safety net or prior practice. Additionally, at some not-so-distant future date, the U.S. will need to finance enormous and growing entitlement programs, and our historical international sources for that financing will no longer be willing to support us in that endeavor.

The market participants with whom I met theoretically could have the ability to accept cognitively the points made in this article. But the accumulation of many small losses in a low-volatility and generally trendless market has robbed them of confidence and the psychological balance to embrace any new paradigm proactively. They are frozen with fear that the lower- return profile of recent years is permanent—ironic in an industry that is paid to capture price changes in a cyclical world.

One market legend with whom I spoke suggested he wouldn’t have had the success he enjoyed in his career had he begun in the past decade. Whether or not this might be true, it doesn’t mean that recent lower returns are to be extrapolated into the future, especially when these subpar returns occurred during the quantitative-easing era, a period that is an anomaly.

I have been fortunate to ride substantial bets on big trends, earning high risk-adjusted returns using time-tested techniques for exploiting these trends. Additionally, I have had the luxury of not participating actively full-time in macro investing during this difficult period. Both factors might give me perspective. I regard this as an extraordinarily opportune moment for those able to shed timeworn, archaic assumptions of market behavior and boldly return to the roots of macro investing.

The opportunity is reminiscent of the story told by Stanley Druckenmiller, who was promoted early in his investment career to head equity research at a time when his co-workers had vastly more experience than he did. His director of investments informed him that his promotion owed to the same reason they send 18-year-olds to war; they are too dumb to know not to charge. The “winners” under the paradigm now unfolding will be market participants able to disregard stale, anomalous concepts, and charge.

RELATEDLY, THERE IS a running debate as to whether trend-following is a dying strategy. There is plenty of anecdotal evidence that short-term and mean-reversion trading is more in vogue in today’s markets (think quant funds and “prop” shops). Additionally, the popularity of passive investing signals an unwillingness to invest in “idea generation,” or alpha. These developments represent a full capitulation of trend following and macro trading.

Ironically, many market players who wrongly anticipated a turn in recent years to a more positive environment for macro and trend-following are throwing in the towel. The key difference is that now there is a clear catalyst to trigger the start of the pendulum swinging back to a fertile macro/trend-following trading environment.

As my mentor, Bruce Kovner [the founder of Caxton Associates] used to say, “Nobody rings a bell at key turning points.” The ability to properly anticipate change is predicated upon detached analysis of fundamental information, applying that information to imagine a plausible world different from today’s, understanding how new data points fit (or don’t fit) into that world, and adjusting accordingly. Ideally, this process leads to an “aha!” moment, and the idea crystallizes into a clear vision. The thesis proposed here is one such vision.

Tesla's Veteran Battery Technology Director Unexpectedly Quits

Stormy weather was unleashed in Tesla longsville today when the company"s veteran director of battery technology, Kurt Kelty, unexpectedly resigned to "explore new opportunities", abruptly ending a tenure with the company that stretched for more than a decade, and comes at a critical time for Elon Musk: just as Tesla enters "production hell" after it delivered its first Model 3 electric car to the general public with a dramatic production ramp up expected in the coming weeks. Kelty joined Tesla in 2006 and was one of the longest-serving executives at Tesla after Elon Musk.

Kurt Kelty is seen at the company"s new sales outlet in Osaka, Japan"s in August 2015

“We can confirm that Kurt Kelty has left the company to explore new opportunities and we want to thank him for everything he’s done for Tesla,” the company told Bloomberg in an emailed statement, adding that his responsibilities will be “distributed among Tesla’s existing teams.”

Ominously, Kelty previously worked for 14 years at Panasonic, Tesla’s critical partner on the battery-producing gigafactory in Reno, Nevada. Kelty was the Tesla point man in negotiations with Panasonic on the plant, according to his LinkedIn profile.

Tesla remains so reliant on its battery technology, or lack thereof, that last month when Tesla failed to meet expected Q2 deliveries of its Model S and Model X cars, it blamed a "temporary shortage of 100 kWh battery packs."

Tesla and Kelty’s previous employer Panasonic have had a close partnership, with the two in a supply agreement for 1.8 billion battery cells through 2017 for the Model S and Model X. For the Model 3, the companies jointly developed new, slightly larger cylindrical battery cells than those used in Tesla’s existing models.

Adding to Tesla"s headache, Tesla hopes to make 20,000 Model 3 cars per month by December, a ramp-up phase that Musk described to employees as “production hell.”

Kelty is the latest in a long-list of Tesla executives to have departed the company, with at least 20 names counted in just the past 12 months in the following list of TSLA executive departures compiled by @WallStCynic. While the real reason for Kelty"s departure remains unknown, judging by the list below, shortsville may just end up having the final laugh.

Tesla reports Q2 earnings tomorrow after the bell: the circumstances around Kelty"s departure will be one of the key questions asked.

Visualizing "Things To Come" - A Timeline Of Future Technology

Making predictions about future technology is both fun and notoriously difficult.

However, as Visual Capitalist"s Jeff Desjardins explains, such predictions also serve a very practical purpose for investors and business leaders, since failing to adapt to changing industry paradigms can completely decimate a business venture, turning it into the next Blockbuster, Kodak, or Sears.

Today’s infographic from Futurism rounds up some of the most interesting predictions about the future, from trusted sources such as Scientific American and The National Academy of Sciences.

MACHINES, BIG AND SMALL

The confluence of robotics, artificial intelligence, and increasing levels of automation is a prevailing trend throughout the projected timeline of future technology.

In less than 10 years, we will be able to control machines based on eye movements, while ingesting nano-sized robots to repair injuries from within our bodies. Later on, it’s also expected that the next wave of AI will be a reality: by 2036, predictive AI will be able to predict the near-future with impressive precision. Elections, weather, geopolitical events, and other dynamic systems will be analyzed in real-time using thousands or millions of data streams.

Even further down the line, human brains and machines will be continue to become closer to interfacing directly, creating all kinds of possibilities.

THE ENERGY REVOLUTION CONTINUES

If you think the current progress in clean energy is exciting – wait until you see the technologies in the queue.

The future of battery technology will include carbon-breathing batteries that turn CO2 into generate electricity, as well as diamond-based “nuclear batteries” that run off of nuclear waste.

Meanwhile, solar power will be even cheaper as cells operate at near 100% efficiency, and commercial fusion power will be available by 2044. Climate change will also be tackled by interesting techniques, such as geoengineering with calcite aerosols, and carbon sequestration.

MORE ON FUTURE TECHNOLOGY

Want to see more bold predictions about the future of technology?

Check out the future of alternative energy, the military, or the futuristic tech that could be inside your home.

Lastly, check out some very speculative predictions about what the world could look like, 100 years from now.

$20 Trillion Debt – It's Time To Start Believing In The Impossible

Authored by Simon Black via SovereignMan.com,

I’ll start today with a confession: I’m an unabashed optimist.

I believe that this is one of the most exciting times in all of human history to be alive. And with good reason.

Think about it– compared to thousands of years of violent warfare that ravaged most of the world’s major cities, we live in an era of relative peace.

Pockets of conflict will always exist. But right now there’s no major world war… no persistent threat of nuclear annihilation.

We also live in a time when more than 1 billion people in developing countries are rapidly rising into the Middle Class.

Their standards of living are improving like never before seen, and this creates an abundance of compelling opportunity.

Also, we humans now have the capacity to live longer, healthier lives… and to stay productive for longer than ever before.

Just a few weeks ago, a Texas physicist named John Goodenough invented revolutionary new battery technology.

He’s 94, and he insists that he has plenty of great ideas left to invent.

Most of all we live in a time of astonishing technological transformation.

Entrepreneurs can start businesses in minutes and reach customers on the other side of the planet.

Consumers can find products from around the world and seek funding online through Peer-to-Peer websites instead of traditional banks.

It’s amazing what we’re able to do and achieve now thanks to modern technology, jus compared to even 10 or 20 years ago.

I count myself among the countless individuals who have been able to benefit from these exciting trends.

I’ve been able to travel to more than 120 countries, start (or acquire) successful businesses around the world in industries as diverse as agriculture (Chile), manufacturing (Australia), banking (Caribbean), and media (Asia).

Very little of this would have even been possible at the time of my birth 38-years ago.

And I marvel that so many of my employees are from former republics of the Soviet Union… something else what would have been impossible just 26-years ago.

Yet despite so much progress and extraordinary opportunity, it’s also important to stay realistic: the world has gotten itself into a twist.

Nearly every major western government is bankrupt with woefully unsustainable finances.

The United States leads the way with $20 trillion in debt and a total negative net worth of MINUS $76.7 trillion, according to its own annual financial report.

The US government loses money each year with no end in sight, posting a staggering loss of $1.05 trillion in 2016.

And relative to the sizes of their own economies, Japan, Greece, Italy, Spain, France, and the United Kingdom are not far off.

Moreover, pension funds across the world are in dire condition.

In the United States, Social Security and Medicare report each year that their programs are rapidly running out of money and have even calculated the date of their own insolvencies.

This isn’t some wild conspiracy theory, these are public reports signed by the Treasury Secretary of the United States.

We also see major risks with global central banks.

As I wrote to you just three days ago, the Federal Reserve is nearly insolvent.

And as they continue to increase interest rates throughout this year, they will effectively engineer their own bankruptcy.

In addition, major financial markets are extraordinarily overvalued.

Stocks in the United States trade at valuations only seen just prior to major crashes.

And as the Wall Street Journal reported just -this morning-, “insiders”, i.e. key shareholders and managers who have inside knowledge of their businesses, are actively selling their stocks.

Economic growth in most of the developed world has also fallen flat– just 1.6% in the United States in 2016, 1.4% in Canada, and 1.9% in Germany.

These are hardly inspiring numbers, especially given that inflation is rising around the world.

According to the US Labor Department, inflation reached 2.7% last month, which was higher than 2.5% in January, which was higher than 2.1% in December, which was higher than 1.7% in November.

Do you notice a trend?

On top of everything else, we also happen to be living through a period of rapidly deteriorating personal freedom.

Spy agencies are engaging in brazen surveillance on… everyone. Citizens. Allies. Everyone.

Civil Asset Forfeiture also continues to reach new heights; according to Justice Department data, total “financing sources”, i.e. money that the government stole from its citizens, more than doubled from 2015 to 2016.

And countless laws, rules, and regulations have turned the Land of the Free into a place where children can be arrested for eating French Fries on the metro.

These risks are already looming, and the potential consequences are severe.

We likely all remember what happened the last time a stock market bubble burst.

When central banks go bust, the impact can be even more substantial.

It happened in Iceland in 2008, and the country had to suffer through 8 years of capital controls as a result.

And we can see the impact of governments going bankrupt each day in the news headlines, primarily with Greece.

These risks are real. But they’re no cause for panic.

A rational, successful person merely needs to acknowledge the risks, and take some sensible steps to ensure that you’re not a victim.

If your stock market is massively overvalued, for example, consider rebalancing your investments into safer assets in markets that are deeply undervalued.

If your government is totally bankrupt, don’t keep 100% of your assets within its reach.

These are simple but effective concepts.

Join me in today’s podcast in which we outline even more of these common sense steps.