David Stockman on Tesla/A bonfire of the vanities

[Titus Andronicus]

I have always sort of resented David Stockman for the rude way he treated President Reagan after he had been his budget director and after they had had a falling out ...

However, he seems to have sized up Elon Musk and Tesla correctly and colorfully, calling him a Circus Barker and Tesla a "Wall Street scam in plain sight."

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http://www.theglobeandmail.com/glob...true-bonfire-of-the-vanities/article23883288/

Excerpted from the linked column by Jeremy Cato:

"Musk, says Stockman in his Contra Corner blog, is a “circus barker” and Tesla “a crony capitalist con job that has long been insolvent.” Tesla survives not on the merits of the product, but thanks to “fat taxpayer subsidies” and a “free money” monetary policy. I’d add a gullible and ill-informed media as co-conspirators – willing or unknowing – and an analyst community whose evaluations of stocks in general are often suspect.

As Stockman suggests, the Model S/70-$ is not “a revolutionary new product like the i-Pad,” but “about 4,600 pounds of sheet metal, plastic, rubber and glass equipped with an electric battery power pack that has been around for decade.” Tesla is a “fly-by-night company” making “essentially vanity toys for the wealthy.”

Stockman says Tesla is nothing more than “a Wall Street scam in plain sight” – a “bonfire of the vanities” boasting financial statements filled with “horrific figures.” Hard words."

 

[DrVenkman]

I have always sort of resented David Stockman for the rude way he treated President Reagan after he had been his budget director and after they had had a falling out ...

However, he seems to have sized up Elon Musk and Tesla correctly and colorfully, calling him a Circus Barker and Tesla a "Wall Street scam in plain sight."

..................................................................................................................................................................................


http://www.theglobeandmail.com/glob...true-bonfire-of-the-vanities/article23883288/

Excerpted from the linked column by Jeremy Cato:

"Musk, says Stockman in his Contra Corner blog, is a “circus barker” and Tesla “a crony capitalist con job that has long been insolvent.” Tesla survives not on the merits of the product, but thanks to “fat taxpayer subsidies” and a “free money” monetary policy. I’d add a gullible and ill-informed media as co-conspirators – willing or unknowing – and an analyst community whose evaluations of stocks in general are often suspect.

As Stockman suggests, the Model S/70-$ is not “a revolutionary new product like the i-Pad,” but “about 4,600 pounds of sheet metal, plastic, rubber and glass equipped with an electric battery power pack that has been around for decade.” Tesla is a “fly-by-night company” making “essentially vanity toys for the wealthy.”

Stockman says Tesla is nothing more than “a Wall Street scam in plain sight” – a “bonfire of the vanities” boasting financial statements filled with “horrific figures.” Hard words."

I dont know this Stockman but he sounds very misinformed. Actually, he sounds like someone who works for Ford or GM.

Of course Tesla gets a ton of subsidies. They make clean and renewable fueled autos. While they may not be for everyone, the company is still very early in its development. When the next model arrives and one can obtain it for for $400-500/month in net costs, we all could see a lot more Teslas on the road.

 

[Titus Andronicus]

I dont know this Stockman but he sounds very misinformed. Actually, he sounds like someone who works for Ford or GM.

He definitely has never worked for Ford or for GM. He was once a congressman from Michigan and later became the director of the OMB under President Reagan, where he famously hired Larry Kudlow as his top assistant. He later gained infamy by deriding "Reaganomics" as simply a euphemism for "Trickle-down," which of course caused us believers in Supply Side Economics to sort of go "Huh?" In my own view, this comment opened the floodgates of criticism for policies of smaller government and the stimulation of faster growth derived from the private sector. All of the snarky commentary directed toward policies of lower taxation track back to Stockman's single comment.

However he has redeemed himself in my view, through his harsh criticism of the nonsense that has prevailed in government policy since.

I would suggest that you read a few of his articles. You will find that he is incredibly well-informed.

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From his website:

After leaving government, Stockman joined Wall Street investment bank Salomon Bros. He later became one of the original partners at New York-based private equity firm, The Blackstone Group. Stockman left Blackstone in 1999 to start his own private equity fund based in Greenwich, Connecticut.

In his newest New York Times best-seller, The Great Deformation: The Corruption of Capitalism in America (2013), Stockman lays out how the U.S. has devolved from a free market economy into one fatally deformed by Washington’s endless fiscal largesse, K-street lobbies and Fed sponsored bailouts and printing press money.

...

“ … Stockman is a distinctly angry man with a lot to say … he believes that the American government as badly lost its way … because crony capitalism has perverted policy making and upturned free market principles. As a result, the country is drowning in debt that will eventually bring it down and destroy the credibility of the Fed.” — Financial Times

Stockman’s vision in creating David Stockman’s Contra Corner was that it be “the place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked.” Toward that aim, Stockman has brought together leading contrarian thinkers on politics, the economy, and the financial markets in the Contra Club section of the website, in addition to featuring his own analysis and musings about the current state of the world in Stockman’s Corner.

 

[CarolinaHawkeye]

Perhaps he can explain why the oil and gas industry has been subsidized since 1904!

 

[Titus Andronicus]

Perhaps he can explain why the oil and gas industry has been subsidized since 1904!

Have you looked at the taxes some of those companies pay? They certainly do not look very "subsidized" to me.

In fact, if we provided some tax relief to that industry, the price of gasoline, electricity, etc. would all trend lower and you would not require an electric car. You could quite possibly afford a "gas-guzzler."

Let's do just that and subsidize ourselves.

F-350's for all!

 

[CarolinaHawkeye]

Have you looked at the taxes some of those companies pay? They certainly do not look very "subsidized" to me.

In fact, if we did indeed provide some tax relief to that industry, the price of gasoline, electricity, etc. would all trend lower and you would not require an electric car.

Let's do just that and subsidize ourselves.

F-350's for all!

Only about 12% of the total of government subsidies, which is slightly less than that our gas and electric utilities. And this does not include the amount of public land for which they pay little or no rent on. It also does not include the depletion allowance they are allowed to take on the reserves which are on these public lands. And obviously you have never lived where smog is an issue. The fact of how much fossil fuels contribute to our health care costs is even something a simpleton as your self should understand.

 

[22*43*51]

Elon Musk might be in bed with Wall Street, but that doesn't take away from the fact that he is one of the greatest innovators of our time.

 

[darkstar]

Couldn't it be argued that the building and funding of the transcontinental railroad was "crony capitalism" as well? I would think there is a reasonable argument to make that an affordable electric car, like the transcontinental railroad, should be subsidized because of the benefits it could give to our country.

 

[DrVenkman]

Couldn't it be argued that the building and funding of the transcontinental railroad was "crony capitalism" as well? I would think there is a reasonable argument to make that an affordable electric car, like the transcontinental railroad, should be subsidized because of the benefits it could give to our country.

In addition to this, if Elon and Tesla are successful in mass producing the lithium batteries for commercial/ residential electric power and storage than the company could be very exciting from here. Even if they are successful in getting 10% of the current power use off the electric grid it would be a trememdous reduction in the overall needs for electric power generation for the entire country

 

[Titus Andronicus]

Couldn't it be argued that the building and funding of the transcontinental railroad was "crony capitalism" as well? I would think there is a reasonable argument to make that an affordable electric car, like the transcontinental railroad, should be subsidized because of the benefits it could give to our country.

It has been awhile since I have read anything about that but my recollection is that railway construction was funded mostly by the private sector. I have seen that period of time compared to the late 1990's and the dot.com bubble.

It was more of a speculative binge than "crony capitalism." ... unless you know something I do not. Tax breaks? accelerated depreciation? Pay to play deals? I guess the government did grant some land to the railroads, but the land had little value otherwise and these deals were no sweeter than any of the homesteading deals.

At the end of the day, most of the initial capital put into railroad construction was lost. Those who made money came in later and bought the assets out of bankruptcy.

 

[PhantomFlyer]

Couldn't it be argued that the building and funding of the transcontinental railroad was "crony capitalism" as well? I would think there is a reasonable argument to make that an affordable electric car, like the transcontinental railroad, should be subsidized because of the benefits it could give to our country.

Just because we might have made mistakes in the past doesn't mean we should compound that by making mistakes in the present/future. The gov't shouldn't be in the business of picking winners and losers. Crony capitalism is even more offensive than welfare handouts. Much more offensive. Those dollars aren't going to the best alternative fuel sources, etc, they are going to best politically connected. It's why you give Solynda money, to a company that was a nightmare in operating their books. If the electric car is such a big money maker in the future, someone will invest private dollars to support this cause. The market is the best to reward the winners, and flush out the loser ideas. This is how we get the best ideas, not letting corrupt politicians determine who should be declared a winner/loser in the "Who should get some fed dollars" game.

 

[PhantomFlyer]

It has been awhile since I have read anything about that but my recollection is that railway construction was funded mostly by the private sector. I have seen that period of time compared to the late 1990's and the dot.com bubble.

It was more of a speculative binge than "crony capitalism." ... unless you know something I do not. Tax breaks? accelerated depreciation? Pay to play deals? I guess the government did grant some land to the railroads, but the land had little value otherwise and these deals were no sweeter than any of the homesteading deals.

At the end of the day, most of the initial capital put into railroad construction was lost. Those who made money came in later and bought the assets out of bankruptcy.

I believe you are correct. The early subways were also funded by the private sector. Kevin Williamson has written several articles pointing out the flaws in the "gov't needs to fund it" thinking. Peter Schwiezer's book, "Throw Them All Out", should make us all pause when it comes to crony capitalism.

 

[Titus Andronicus]

In addition to this, if Elon and Tesla are successful in mass producing the lithium batteries for commercial/ residential electric power and storage than the company could be very exciting from here. Even if they are successful in getting 10% of the current power use off the electric grid and at prices below those currently available, it would be a trememdous reduction in the overall needs for electric power generation for the entire country

I corrected your post slightly ...

Here is a picture of another big-time automotive entrepreneur ... one who also managed to lure (mostly foreign) governments into becoming co-investors. He ended up with a car cobbled together with parts from all over the world and assembled in (I believe) Ireland. I met him one time when he was out on tour with a prototype and he was an extremely nice guy. I think he was sincere but that his dream was simply not technically possible, particularly after making so many compromises in an attempt to please so many different government entities.

 

[Hawkeyemc]

In addition to this, if Elon and Tesla are successful in mass producing the lithium batteries for commercial/ residential electric power and storage than the company could be very exciting from here. Even if they are successful in getting 10% of the current power use off the electric grid it would be a trememdous reduction in the overall needs for electric power generation for the entire country

The real gap here is that the government and regulators are bending over backward for the solar industry and innovators like Musk through tax incentives and rules that are essentially unfair to the utilities that make these business models feasible. Without the grid, there is no solar industry. Additionally, solar and battery technology introduce significant imbalance to the power flow on the grid and without significant investments in the grid by utilities, these new innovations can bring problems with power quality as the scale grows. However, these Investments by utilities are not "sexy" and therefore support for them through regulatory commissions has been spotty.

 

[DrVenkman]

I corrected your post slightly ...

Here is a picture of another big-time automotive entrepreneur ... one who also managed to lure (mostly foreign) governments into becoming co-investors. He ended up with a car cobbled together with parts from all over the world and assembled in (I believe) Ireland. I met him one time when he was out on tour with a prototype and he was an extremely nice guy. I think he was sincere but that his dream was simply not technically possible, particularly after making so many compromises in an attempt to please so many different government entities.

i would simply argue there was little to nothing that was entrepreneurial about DeLoreans autos. His vehicles had no economic return to its consumer, for one. In fact it was quite the opposite. JD was a great GM reject. His big contribution was to make the body stainless steel.

Musk is a great deal more than just a great salesman. Will the cars keep selling? I think sounless the US finally passes legislation that allows for widespread use of nat gas engines.

 

[dgordo]

I thought the railroad was funded by government bonds?

 

[Titus Andronicus]

It appears that in the case of the "Transcontinental Railroad," there were some monies borrowed from the government which were later repaid in full. These appear to have been second mortgage bonds and were matched dollar for dollar by first mortgage bonds sold to the general public.

I did not double check any of the other railroad construction projects, but as I stated above, my recollection is that nearly all of these projects were funded privately.

https://www.gilderlehrman.org/histo...st/essays/financing-transcontinental-railroad

 

[jbincr]

That well-known automotive expert, David Stockman, apparently knows more about cars than Car and Driver magazine, which named the Tesla Model S a Top Ten Car of Year, or Motor Trend, which named the Tesla Model S the 2013 Car of the Year. Smoke and mirrors always fool the auto enthusiast mags. It's not like they actually test and drive the cars they report on.

 

[darkstar]

It appears that in the case of the "Transcontinental Railroad," there were some monies borrowed from the government which were later repaid in full. These appear to have been second mortgage bonds and were matched dollar for dollar by first mortgage bonds sold to the general public.

I did not double check any of the other railroad construction projects, but as I stated above, my recollection is that nearly all of these projects were funded privately.

https://www.gilderlehrman.org/histo...st/essays/financing-transcontinental-railroad

The railroad companies also received land grants for building the railroads

 

[darkstar]

It appears that in the case of the "Transcontinental Railroad," there were some monies borrowed from the government which were later repaid in full. These appear to have been second mortgage bonds and were matched dollar for dollar by first mortgage bonds sold to the general public.

I did not double check any of the other railroad construction projects, but as I stated above, my recollection is that nearly all of these projects were funded privately.

https://www.gilderlehrman.org/histo...st/essays/financing-transcontinental-railroad

The railroad companies also received land grants for building the railroads

 

[cigaretteman]

The railroad companies also received land grants for building the railroads

Yep, alternating sections of land on both sides of the tracks for miles and miles, many of them still held by railroad companies. Not to mention the incentives local towns paid them to route through their communities.

 

[cigaretteman]

Without the assistance of the U.S. government, railroad construction between 1860 and 1900 would have been greatly curtailed. Building a railroad was an expensive venture. Private banks, fearing the railroad companies would need a long time to pay off their debts, were reluctant to loan money to the companies. To remedy the situation, Congress provided assistance to the railroad companies in the form of land grants. The land grant railroads, receiving millions of acres of public land, sold the land to make money, built their railroads, and contributed to a more rapid settlement of the West. In the end, four out of the five transcontinental railroads were built with help from the federal government.

The following are a map of land Congress turned over to the railroads in the form of land grants and an announcement for the sale of railroad lands. Why do you think Congress made land available to the railroads in the places and configurations shown on the map? What incentives did the Burlington and Missouri River Railroad Company offer to potential land buyers? Why do you think the company chose to use the poster as a marketing device? Do you think it is effective?

The document on the left is from American Landscape and Architectural Design, 1850-1920. The document on the right is from American Time Capsule: Three Centuries of Broadsides. Click on the images below to view a larger image. Use your browser's Back Button to return to this point.


U.S. Western Railway Land Grants


Millions of Acres

http://www.loc.gov/teachers/classro...tations/timeline/riseind/railroad/grants.html