Thursday, August 16, 2018

Mark Cuban on Elon Musk and Tesla: "You're Investing in an Entrepreneur"

Well the long knives were certainly out for Tesla (TSLA) and its CEO, Elon Musk this week.

Wall Street, legal firms, the SEC, and media talking heads were all roused to action (or comment) over Musk's recent proposal to take the company private at $420 per share.

After floating the idea (via Twitter) of a private buyout of Tesla on August 7, Musk wrote to Tesla employees and shareholders about his vision for running Tesla as a private firm in a blog post entitled, "Taking Tesla Private".

Among the advantages of operating Tesla as a private firm (as well as the disadvantages of being a publicly traded company), Musk lists the following: 

"...First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. 

Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. 

Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company."

In Elon's view, Tesla and its shareholders are currently weighed down by unfair attacks from short sellers and unscrupulous journalists. Going private would eliminate the distractions faced by fighting short sellers and may also reduce the high media glare.

Additionally, Wall Street's notorious short-termism and quarter-to-quarter view of a public company's prospects often clash with the longer-term vision of entrepreneurial company founders such as Musk.

Speaking to that point of entrepreneurial leadership, Mark Cuban recently shared his thoughts on Tesla and Elon Musk's vision in an interview with CNBC.


 
Leading off with his main point, Cuban reminds all of us that "when you invest in an entrepreneur, you get the entrepreneur!". An entrepreneurial founder is going to have a long-term vision for the company that a professional outside manager or CEO won't have.

When you think of the best, most disruptive companies of the last 25 years or more, you are invariably thinking of an Apple, a Netflix, or an Amazon. These are the company founders, people like Steve Jobs, Reed Hastings, and Jeff Bezos, who confounded the public and the Wall Street analysts early on with their unorthodox thinking and approach to running innovative, publicly-traded companies.

As Mark Cuban points out in his interview, "At one point everybody complained about Steve Jobs (who was fired in the '80s)... everybody complained about Jeff Bezos [no profits, no quarterly guidance]. Reed Hastings, same thing...

...Everybody complained about 'the fundamentals' of all these companies... these guys [founders], they don't cash out like me. They stay there because they're committed and dedicated. You've got to take the uniqueness of each person as part of what you're invested in."
 
On the subject of short sellers, Cuban added, "I would tell Elon that the shorts are your friend. The beauty of shorts is, if you have a great quarter and you do your job, they have to buy back their position [at higher prices]. Rather than getting upset about shorts, know that the more shorts you have, the more buyers you have in waiting."

Note: this point about Tesla shorts adding fuel to the fire was made here last year. 

Great entrepreneurs want to stick around for the long haul and tackle the issues their companies face. As Mark Cuban reminds us, founders like Musk, who "sleeps in the factory", are uniquely driven and have their own unique way of communicating with the public. That's part of what makes these entrepreneurial tech companies so exciting, so competitive, and ultimately, so successful. 

Disclosure: I currently own a very small amount of Tesla (TSLA) shares via the ARKW etf.

Related posts:

Tesla is Exciting... But Its Stock is Stagnant

Elon Musk: The Future We're Building at TED

Reed Hastings, Netflix CEO Interview w/ Charlie Rose

Tuesday, June 19, 2018

Interview with Relentless author Tim Grover: Michael Jordan's Personal Trainer on Mindset and Performing Under Pressure

"The one thing that Michael [Jordan] has, that really stands out, is that he doesn't compete with anyone else. He competes with himself." - Tim Grover.


Michael Jordan Air Jordan slam dunk contest free throw line
Air Jordan free throw line slam dunk

How appropriate that this interview with Michael Jordan's personal trainer and Relentless author, Tim Grover should appear in issue #23 of the Finance Trends Newsletter.

Although I had planned to highlight Tim Grover's excellent discussion on mindset and champion-level performance in our very next newsletter, I did not anticipate this fortuitous numbering sequence. Actually, I hadn't noticed it until I typed up today's email subject heading while counting back through our prior issues.

I'm excited by the coincidence, but it's only because I'm even more excited to share Tim's message with you. You might say that his interview struck a chord with me.

But first, let me briefly tell you why I find this interview to be so crucial. Our mindset and our beliefs around what is possible dictate what we can achieve in life. If the winning mindset is not there, the desired results will not materialize for us.

In trading, business, and sports, we are entering a global playing field of high-level competition. We're not only competing with the people (or organizations) in our immediate orbit, we're increasingly competing against those half a world away.

We're also competing with ourselves. As many great traders and investors have remarked, the greatest obstacle to success is not other traders but ourselves - our own psychology.


This is also the theme of Tim Grover's quote (see above) about Michael Jordan, the consummate competitor.

Tim Grover trains with Michael Jordan, with Kobe (right) via Sports Illustrated.

Now, if I can spend an hour or two with the guy who helped turn Michael Jordan "NBA Phenom" into Michael Jordan "6x NBA Champion" (he has helped Kobe and other NBA stars get there too)... well, you can bet I'm going to listen well and then do my best to apply what I've learned.

 
Interview with Tim Grover: Relentless author, trainer to Michael Jordan and Kobe Bryant.

Some highlights from the interview...

Tim grew up in Chicago and played college ball at UIC, but realized that he would not realistically make it to the pro level. That realization was brought into sharp focus as a college sophomore when he squared up on the court against a high school junior named Tim Hardaway.

"I still wanted to be involved in sports, ideally basketball. Let me figure out a way to help other athletes reach the top of their game. I studied kinesthiology... and worked with anyone I could to learn to apply it."

Grover asks, "You know how I choose a client or [collaborator] someone to listen to? They have to be as fucked up and as crazy as I am!"

He is not one for the philosophy of balancing yourself with a partner of differing personality. He wants someone as intense and driven as he is. In his view, you don't want a partner who is pulling you away from the person you really are.

Tim shares a great story (which I won't replay here) of how he finally connected with Michael Jordan and why "the best of the best" was motivated to work with him.

"A lot of individuals, especially in this generation, are jumping around too much these days. They're using this trainer one week and another next week... or this mentor one week and this person on YouTube over here... they're getting all this conflicting information."

Michael and Kobe mastered one aspect of the game. Then they moved on to a new aspect of the game. Master one thing at a time.

Grover divides performers into 3 levels of effectiveness: Coolers, Closers, and Cleaners. The "Cleaners" are top level, clutch performers who always reach down inside themselves to nail the winning shot. They are instinctual in their approach, deeply focused on the task at hand, and they set the standard for excellence.

"Your obligation to yourself to be the best has to be greater than any outside pressure on you." Tim cites Tom Brady and MJ as athletes who exemplify this trait.

"We're not born with greatness. That's bullshit! You earn greatness. You have to fight like hell to get to paradise. People don't know how to fight anymore. People quit [too often these days]... It's the icons who fight like hell to succeed."

Top level individuals stand alone. The inner circle of the "greatest" individuals is so small. Distance becomes their best friend. Most people want to join the group, the in crowd, the fraternity. "Who do you idolize the most? The ones that stand alone."

As Tim points out, the conventional wisdom of "surround yourself with positive people" is bound to backfire if all those people just smile and tell you what you want to hear. You need to surround yourself with people who will straight up tell you the truth (on this point I agree 100%).

We're all going to fail at something. It's only failure if you don't bounce back.

On dealing with pressure: "Everybody can handle pressure. Most people decide not to. We run from it. Stress is just pressure you won't deal with." 


The Importance of Mindset: "Before you have an exceptional skill set, you need to have a great mindset. Michael and Kobe weren't the greatest athletes I have ever worked with. They were great athletes, but their mindset is what separates those individuals.Tom Brady was drafted 199th (6th round)... he wasn't the best athlete. But from a mindset standpoint, he is a killer!"

Related posts:

More from Tim Grover, author of Relentless: From Good to Great to Unstoppable

Interview: Tim Grover, trainer to NBA stars, talks Jordan, Kobe, Lebron and Durant 

Developing Your Mental Trading Edge: Webinar with Dr. Andrew Menaker

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Friday, April 06, 2018

Unlocking Valuable Info: Moe Berg, Espionage, and Investing

Welcome, readers. This article on the life of ballplayer/CIA operative, Moe Berg and the role of information gathering in espionage and investing first appeared last month in the Finance Trends Newsletter.

Spring, when a young man's thoughts turn to baseball, young ladies, and... espionage?

Well, that last part may seem unusual, but allow me to explain.

I've been a baseball fan all my life. Even in recent years, when I have rarely felt the urge to watch professional sports, I often find myself reading about the great ballplayers of my youth or watching highlights of games from the past.

One of my great pleasures as a boy was reading about baseball's earlier eras and its great heroes (or tragic figures) and colorful characters.

Yes, in the pre-internet world we read tangible books. One of my early favorites was a book entitled, Baseball Anecdotes. If you have a baseball fan in your family I highly recommend it. Paperback copies are inexpensive and the book can be easily read 1 or 2 chapters at a time.

Here was my early introduction to a journeyman ballplayer of the 1920s and 1930s named Moe Berg.


Moe Berg Baseball Card 1933 Goudy


Berg was a journeyman in more ways than one. In addition to playing for six major league teams (including two separate runs with the Cleveland Indians) in his 15-year career, Moe was an avid traveler who spoke seven (or more) languages with great skill. He was also a spy.

Moe parlayed a 1934 trip to Japan into a clandestine sightseeing tour of Tokyo. With a newsreel film camera hidden in his kimono, Berg managed to sneak up to the roof of a tall hospital building and film the Tokyo skyline and its harbors! For years it was believed that his film footage, loaned to the U.S. government, was helpful in aiding WWII bombers in their air raids on Tokyo.



Moe Berg Japan Tokyo 1934 Film Camera Spy


What is certain is that Moe Berg was recruited into the war's new intelligence program, the OSS, an early forerunner to today's CIA.

In fact, while watching SportsCentury's episode on Moe Berg, I noticed that several of the interviewees were not old teammates and sportswriters, but OSS spies and CIA historians!


 

This aspect of Berg's life and work was expanded on in an episode of the Baseball Phd podcast.



The following is taken from CIA historian Linda McCarthy's portion of that podcast, as she describes Berg's value to the war's intelligence program: 

"Moe Berg had this tremendous intellect...like a chess master who can envision what his opponent's next move and next 20 moves will be..."

"The problem we have in today's intel field is we have so much information coming at us. The real skill comes in being able to sift it down into something that is a) accurate, b) readable, and c) has value."

"I've been told that his CIA field reports had some of the best writing that they [fellow officers] had ever seen. I tell new hires, if you want to know how to write a decent cable from the field, you need to study Moe Berg." - Linda McCarthy.

This ability to take in a great deal of information and hone in on the truly important items is crucial not only in espionage, but in the field of investing.

Not only was Moe Berg able to obtain crucial wartime intelligence data, he was uniquely skilled at conveying that valuable information in a highly readable way.

As traders and investors, we need to parse out the signal from the vast fields of noise. Whether we are taking in company fundamentals, technical price data, or industry news and opinions, it is imperative to focus on only the core data that is most useful to our particular strategy and needs.

When we go beyond that, and begin taking in less useful information and opinions, we subject ourselves to the problem of information overload.

As the "noise" increases, we lose the valuable signals within a sea of data, subjecting ourselves to the fear and emotions of outside "news" and opinion. We may also find ourselves subjected to "analysis paralysis", or the inability to take decisive action when we are bogged down with too many options.

Here is what legendary investor and American statesman, Bernard Baruch had to say about the problem of information overload back in the 1950s: 


"If anything, too much information may be available today. The problem has become less one of digging out information than to separate the irrelevant detail from the essential facts and to determine what those facts mean. More than ever before, what is needed is sound judgement." - Bernard Baruch, 1957

I hope you enjoyed this week's letter and will find time over the weekend to delve into the related podcast and video on a fascinating figure in American life, Moe Berg. You can read more about Moe Berg's life in baseball at the Baseball Hall of Fame website.

Moe Berg Baseball Chicago Photo Spy Espionage

Perhaps you'll also draw some useful parallels on good intelligence gathering and active investing! I hope they will serve you well in the future.

Related posts:

1. Maximize Your Trading Gains, Not Wins: William Eckhartd Interview.

2. William O'Neil Interview: How to Buy Winning Stocks.

3. Babe Ruth on Persistence: Keep Swinging Your Bat.

Tuesday, April 03, 2018

Abnormal Returns Interview: Finance Blogger Wisdom

Head on over to Abnormal Returns for this week's Finance Blogger Wisdom interview series. 

You'll find a daily Q&A session on investing with some of the top financial bloggers, and a new topic of discussion is offered up each day. Topics this week include: the future of pension fund returns, lessons of the post-financial crisis decade, investing in new ETFs, the IPO market for new companies, and some shout outs to our favorite under-the-radar bloggers and investing writers (look for that on Friday).

Abnormal Returns logo finance blog links investing

Once again, AR has been kind enough to include Finance Trends in their ongoing interview series. Thanks to Tadas Viskantas at Abnormal Returns for hosting us and giving us all a platform to speak on the financial topics of the day.

Subscribe to the Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter. 

Thursday, February 08, 2018

Earnings Season Stars: Twitter and Snap Spike Higher

Welcome, readers. This post was sent out to Finance Trends Newsletter subscribers earlier today. Subscribe now to get all our email updates as soon as they are published.

You may have heard of Snapchat (certainly your kids or your younger nieces and nephews have) and its parent company, Snap Inc (SNAP).

The youth-targeted social messaging and live-streaming app IPO'd in 2017, but quickly disappointed investors with a slow decline from its early highs near $28 into the mid-teens (how appropriate, given their demographic).


Well, after a nearly year-long decline, SNAP shares are roaring back in a big way. The stock surged higher this week on its first earnings beat (the company still reported a loss of -13 cents per share) and increased revenue Y-O-Y.

 

Here is the SNAP chart I shared yesterday on Twitter, with the following note: "There's the high volume, gap up move after earnings. Buyers, Wall St. proving their interest. Powering out of last year's downtrend."
 
SNAP Snapchat stock price chart earnings spike gap

 As noted earlier this year on Twitter, I could see a potential new uptrend shaping up in SNAP but my entry into the stock, on the initial trendline break, was just too early. That quick burst of strength faded and I was soon stopped out for a loss.
 

You know the old saying on Wall Street - "too early is just another way of saying wrong.". Now the stock is providing us with a message, "something has changed!", and the buying interest to go along with it.
 

If SNAP can hold on to some of its newfound momentum and continue moving higher in the coming weeks, then we may see a real turnaround taking shape. As it stands, the stock is now trading at 6-month highs on strong volume, an encouraging sign.
 

Now let's take a quick look at today's earnings season standout, Twitter (TWTR).
 

The company reported its first-ever quarterly profit (finally!) and the stock jumped 25% higher in early morning trading. As of this writing, midday New York time, TWTR is up 17% on the day. If the stock can close above $30, it will mark Twitter's highest closing price since late 2015.

This new uptrend in TWTR is gaining momentum. Here is an updated chart that shows the stock's recent upward progress and its slow climb out of a 2-year downtrend. Note the green uptrend arrows signaling a series of higher highs and higher lows, plus the recent 2-year high.

 
TWTR Twitter stock chart price earnings gap high

We don't know which company will ultimately "win" the social media landscape, but we can plainly see by the charts that SNAP and TWTR are signaling that they are back in the game. Only time, and price, will tell if these stocks (not to be confused with their underlying companies) are strong enough to hold their recent gains and continue higher.
 

Longtime Finance Trends readers have heard me say this about TWTR in prior years:
 
"...While I have been an avid user of Twitter since 2009, I have never owned the stock. I have owned Facebook shares in the past, despite never having used the service (in fact, I can't stand Facebook).

Why? Because I am a trader who prefers to buy stocks in uptrends. That means I want a stock that will continue to move higher. I want to own stocks that are being bought by professional investors and are increasingly being discovered by the wider investing public..."

 
TWTR and SNAP are showing us that things have recently changed for the better. Wall Street is starting to bet on these two social media stocks again. That means Facebook (FB) is not the only game in town anymore, so we have to change our minds and act accordingly.
 

For me, that means I have to be willing to step in and buy SNAP again. Maybe not today or tomorrow morning, but soon, given the proper risk vs. reward setup and a stop loss in place. It means I also have to look at TWTR as a stock to buy instead of a perennial loser. I can manage my risk and get over my hesitation with small initial long positions.

More on that (how to pull the trigger and buy or sell) in a future newsletter!