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April 3 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader April 3 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: I’ve gotten a lot of newsletters but not many trades. Why is that?

A: Perfect trades do not happen every day of the year. They happen a few times a year and they tend to bunch up. Most time in the market is spent waiting for an entry point and then piling on 5 or 10 trades rapidly. We’re letting our profits run and waiting for new trades to open up, so just be patient and we’ll get you more trades than you can chew on.

If you have to ask this question, you are probably overtrading. The goal is to make yourself rich, not your broker. The other newsletters that offer a trade alert every day don’t publish their performance as I do and lose money for their followers hand over fist.

Q: Are we on track for a market peak in May?

A: Yes; if we keep climbing up, eventually hitting new highs this month, then we are setting up perfectly for a pretty sharp pullback around May 10th. That would be a good time to get rid of all your longs and put on some short positions, certainly deep in the money put spreads—we’ll be knocking quite a few of those out in the end of April/beginning of May.

Q: Are you worried about the Russell 2000 (IWM) climb?

A: I’m not. If you look at the chart, every up move has been weak, and every down move has been strong. Looking at the chart, it’s still in a clear downtrend dragging all the other markets, and this is because small-cap stocks do poorly in recessions or market pullbacks.

Q: How severe and how long do you see the coming bear market being?

A: If history repeats itself, then it’s going to be rather shallow. The last move down was only three months long and that stunned a lot of people who were expecting a more extreme pullback. I don’t see conditions in place that indicate a radically deep pullback—25% at most and 6-12 months in duration, which won’t be enough to liquidate your portfolio and justify the costs of getting out now and trying to get back in later. They key thing is that there are no systemic threats to the market other than the exploding levels of government borrowing.

Q: If you had the Tesla (TSLA) April $310-$330 vertical bear put spread, would you keep it?

A: Probably, yes, because you have a $15 cushion against a good news surprise and a lot less at risk. I got out of my Tesla (TSLA) April $300-$320 vertical bear put spread because my safety cushion shrank to only $5 and the risk/reward turned sharply against me.

Q: Should we be buying the Volatility Index (VIX) here for protection?

A: Not yet; we still have enough momentum in the stock market to hit all-time highs. After that, you really want to start looking at the VIX hard, especially if we get down to the $12 level. So good thinking, just not quite yet—as we know in the market, timing is everything.

Q: Are you getting nervous about the short Disney (DIS) calls?

A: I’m always nervous, every day of the year about every position, and yes, I’m watching them. You are paying me to be nervous so you can go play golf. We may take a small hit on the calls if the stock keeps rising, but that will be offset by a bigger gain on the call spread we’re long against.

Q: When is the quarterly option expiration?

A: It was on March 15 and the next one is June 21. This is an off-month expiration coming up on April 18th, and that’s only 12 trading days away.

Q: If you get a hard Brexit (FXB) in the next few weeks, what will happen to the pound?

A: It’s risen about 10% in the last few weeks on hopes of a Brexit outright failure. If that doesn't happen, the pound will get absolutely slaughtered.

Q: If China (FXI) is stimulating their economy, will that eventually help the U.S.?

A: Stimulus anywhere in the world always gets back to the U.S. because we’re the world’s largest market. So, yes, it will be positive.

Q: Would you consider trading UK stocks under Brexit fail?

A: Yes, and there is a UK stock ETF, the iShares MSCI United Kingdom ETF(EWU) and you’re looking at a 20%-25% rise in the British stock market if they completely give up on Brexit or just have another election.

Q: What are your thoughts on the China trade war?

A: The Chinese are in no rush to settle; that’s why we keep missing deadline after deadline and all the positive rumors are coming from the U.S. side. It’s looking more like a photo op trade deal than an actual one.

Q: If we get a top in stocks in May, how far do you expect (SPY) to go?

A: Not far; maybe 5% or 10%, you just have to allow all the recent players who got in to get out again, and if the economy slows to, say, a 1% rate in Q1, that’s not a panicky type market. That’s a 10% correction market and what we’ll probably get. If the economy then improves in Q2 and Q3, then we may go back up again to new highs. We seem to have a three quarter a year stock market and therefore, a three quarter a year stock market. Q1 is always a write off for the economy.

Q: Do you still like Amazon (AMZN)?

A: Absolutely, yes—it’s going to new highs. And it’s also starting to make a move on the food market, cutting prices at Whole Foods, which it owns, for the 3rd time this year. So, it’s moving on several fronts now, including healthcare. There’s at least a double in the company long term from these levels, and a triple if they break the company up.

Q: If you bought the stock in Boeing (BA) instead of the option spread, would you stay long?

A: I would, yes. It’s a great company and there's an easy 10% move in that stock once they get the 737 MAX back off the ground again which they should do within the month.

Q: What do you think about food stocks with big name brands like Hershey (HSY)?

A: I’ve never really liked the food industry. It’s really a low margin industry. You’re looking at 2% a year earnings growth against the big food companies vs 20% a year growth in tech which is why I stick with tech. My advice is always to focus on the few sectors that are the best 5% of the market and leave the dross for the index funds.

Q: With the current bullish wave in the market (SPY), what sector/stocks do you think have the most momentum to break out another 10% to 15% gain in the next one to three months?

A: The next 10% to 15% in the market will only happen after we drop 5-10% first. I believe this is the last 5% move of the China trade deal rally and after that, markets will fall or go to sleep for six months.

Q: Do you expect 2019 to be more like 2018 or 2017? We know you are predicting the (SPX) will hit an all-time high of 3000 in 2019. Do you think it zooms up to a blow-off top in Q2/Q3 and then pulls back in Q4, like 2018? Or, do you expect a steadier ascent with minor pullbacks along the way (like 2017), closing at or near the year's highs on Dec 31? This guidance will really help.

A: I think we have made most of the gains for 2019. Only the tag ends are lifted. We have already hit the upside targets for most strategists, and mine is only 7% higher. After that, there is a whole lot of boring ahead of us for 2019 and the (VIX) should drop to $9. After complaining about horrendous market volatility in December, traders will beg for volatility.

Good Luck and Good Trading
John Thomas
CEO & Publisher
Diary of a Mad Hedge Fund Trader

April 3, 2019

Diary, Newsletter, Summary

Global Market Comments
April 3, 2019
Fiat Lux

Featured Trade:

(WHO WILL BE THE NEXT FANG?)
(FB), (AMZN), (NFLX), (GOOGL), (AAPL),
(BABA), (TSLA), (WMT), (MSFT),
(IBM), (VZ), (T), (CMCSA), (TWX)

Who Will Be the Next FANG?

Diary, Newsletter

FANGS, FANGS, FANGS! Can’t live with them but can’t live without them either.

I know you’re all dying to get into the next FANG on the ground floor, for to do so means capturing a potential 100-fold return, or more.

I know because I’ve done it four times. The split adjusted average cost of my Apple shares is only 25 cents compared to today’s $174, so you can understand my keen interest. My average on Tesla is $16.50.

Uncover a new FANG and the riches will accrue rapidly. Facebook (FB), Amazon AMZN), Netflix (NFLX), and Alphabet (GOOGL) didn’t exist 25 years ago. Apple (AAPL) is relatively long in the tooth at 40 years. And now all four are in a race to become the world’s first trillion-dollar company.

One thing is certain. The path to FANGdom is shortening. It took Apple four decades to get where it is today, Facebook did it in one. As Steve Jobs used to tell me when he was running both Apple and Pixar, “These overnight successes can take a long time.”

There is also no assurance that once a FANG always a FANG. In my lifetime, I have seen far too many Dow Average components once considered unassailable crash and burn, like Eastman Kodak (KODK), General Electric (GE), General Motors (GM), Sears (SHLD), Bethlehem Steel, and IBM (IBM).

I established in an earlier piece that there are eight essential attributes of a FANG, product differentiation, visionary capital, global reach, likeability, vertical integration, artificial intelligence, accelerant, and geography.

We are really in a “What have you done for me lately” world. That goes for me too. All that said, I shall run through a short list for you of the future FANG candidates we know about today.

Alibaba (BABA)

Alibaba is an amalgamation of the Chinese equivalents of Amazon, PayPal, and Google all sewn together. It accounts for a staggering 63% of all Chinese online commerce and is still growing like crazy. Some 54% of all packages shipped in China originate from Alibaba.

The juggernaut has over half billion active users, and another half billion placing orders through mobile phones. It is a master of AI and B2B commerce. There is nothing else like it in the world.

However, it does have some obvious shortcomings. Its brand is almost unknown in the US. It has a huge problem with fakes sold through their sites.

It also has an ownership structure for foreign investors that is byzantine, to say the least. It is a contractual right to a share of profits funneled through a PO box in the Cayman Island. The SEC is interested, to say the least.

We also don’t know to what extent founder Jack Ma has sold his soul to the Beijing government. It’s probably a lot. That could be a problem if souring trade relations between the US and the Middle Kingdom get worse, a certainty with the current administration.

Tesla (TSLA)

Before you bet on a new startup breaking into the Detroit Big Three, go watch the movie “Tucker” first. Spoiler Alert: It ends in tears.

Still, Tesla (TSLA) has just passed the 270,000 mark in the number of cars manufacturered. Tucker only got to 50.

Having led my readers into the stock after the IPO at $16.50, I am already pretty happy with this company. Owning three of their cars helps too (two totaled). But Tesla still has a long way to go.

It all boils down to the success of the $35,000, 200-mile range Tesla 3 for which it already has 500,000 orders. So far so good.

It’s all about scale. If it can produce these cars in sufficient numbers, it will take over the world and easily become the next FANG. If it can’t, it won’t. It’s that simple.

To say that a lot is already built into the share price would be an understatement. Tesla now trades at ten times revenues compared to 0.5 for Ford (F) and (General Motors (GM). That’s a relative overvaluation of 20:1.

Any of a dozen competing electric car models could scale up with a discount model before they do, such as the similarly priced GM Bolt. But with a ten-year lead in the technology, I doubt it.

It isn’t just cars that will anoint Tesla with FANG sainthood. The firm already has a major presence in rooftop solar cell installation through Solar City, utility sized solar plants, industrial scale battery plants, and is just entering commercial trucks. Consider these all seeds for FANGdom.

One thing is certain. Without Tesla, there wouldn’t be s single mass-market electric car on the road today.

For that, we can already say thanks.

Uber

In the blink of an eye, ride sharing service Uber has become essential for globe-trotting travelers such as myself.

Its 2 million drivers completely disrupted the traditional taxi model for local transportation which remains unchanged since the days of horses and buggies.

That has created the first $75 billion of enterprise value. It’s what’s next that could make the company so interesting.

It is taking the lead in autonomous driving. It could also replace FeDex, UPS, DHL, and the US post office by offering same day deliveries at a fraction of the overnight cost.

It is already doing this now with Uber Foods which offers immediate delivery of takeouts (click here if you want lunch by the time you finish reading this piece.)

UberCopters anyone? Yes, it’s already being offered in France and Brazil.

Uber has the potential to be so much more if it can just outlive its initial growing pains.

It is a classic case of the founder being a terrible manager, as Travis Kalanick has lurched from one controversy to the next. The board finally decided he should spend much time on his new custom built 350-foot boat.

Its “bro” culture is notorious, even in Silicon Valley.

It is also getting enormous pushback from regulators everywhere protecting entrenched local interests. It has lost its license in London, the only place in the world that offered a decent taxi service pre-Uber. Its drivers are getting beaten up in Paris.

However, if it takes advantage of only a few of the doors open to it, status as a FANG beckons.

Walmart (WMT)

A few years ago, I was heavily criticized for pointing out that half the employees at my local Walmart (WMT) were missing their front teeth. They have since received a $2 an hour's pay raise, but the teeth are still missing. They don’t earn enough money to get them fixed.

The company is the epitome of bricks and mortar in a digital world with 12,000 stores in 28 countries. It is the largest private employer in the US, with 1.4 million workers, mostly earning minimum wage.

The Walmart customer is the very definition of the term “late adopter.” Many are there only because unlike Amazon, Wal-Mart accepts cash and Food Stamps.

Still, if Walmart can, in any way, crack the online nut, it would be a turbocharger for growth. It moved in this direction with the acquisition of Jet.com for $3 billion, a cutting-edge e-commerce firm based in Hoboken, NJ.

However, this remains a work in progress. Online sales account for only 4% of Walmart’s total. But they could only be a few good hires at the top away from success.

Microsoft (MSFT)

Talk about going from being the 800-pound gorilla to an 80 pound one, and then back to 800 pounds.

I don’t know why Microsoft (MSFT) lost its way for 15 years, but it did. Blame Bill Gates’s retirement from active management and his replacement by his co-founder Steve Ballmer.

Since Ballmer’s departure in 2014, the performance of the share price has been meteoric, rising by some 125% over the past two years.

You can thank the new CEO Satya Nadella who brought new vitality to the job and has done a complete 180, taking Microsoft belatedly into the cloud.

Microsoft was never one to take lightly. Windows still powers 90% of the world’s PCs. No company can function without its Office suite of applications (Word, Excel, and PowerPoint). SQL Server and Visual Studio are everywhere.

That’s all great if you want to be a public utility, which Microsoft shareholders don’t.

LinkedIn, the social media platform for professionals, could be monetized to a far greater degree. However, specialization does come at the cost of scalability.

It seems that the future is for Microsoft to go head to head against next door neighbor Amazon (AMZN) for the cloud services market while simultaneously duking it out with Alphabet (GOOGL).

My bet is that all three win.

Airbnb

This is another new app that has immeasurably changed my life for the better. Instead of cramming myself into a hotel suite with a wildly overpriced minibar for $600 a night, I get a whole house for $300 anywhere in the world, with a new local best friend along with it.

Overnight, Airbnb has become the world’s largest hotel chain without actually owning a single hotel. At its latest funding round in 2017, it was valued at $31 billion.

The really tricky part here is for the firm to balance out supply and demand in every city in the world at the same time. It is also not a model that lends itself to vertical integration. But who knows? Maybe priority deals with established hotels are to come.

This is another firm that is battling local regulation, that great barrier to technological innovation. None other than its home town of San Francisco now has strict licensing requirements for renters, a 30 day annual limitation, and a $1,000 a day fine for offenders.

The downtowns of many tourist meccas like Florence, Italy and Paris, France have been completely taken over by Airbnb customers, driving rents up and locals out.

IBM (IBM)

There was a time in my life when IBM was so omnipresent we thought like the Great Pyramids of Egypt it would be there forever. How times change. Even Oracle of Omaha Warren Buffet became so discouraged that he recently dumped the last of his entire five-decade long position.

A recent 20 consecutive quarters of declining profits certainly hasn’t helped Big Blue’s case. It is one of the only big technology companies whose share price has gone virtually nowhere for the past two years.

IBM’s problem is that it stuck with hardware for too long. An entrenched bureaucracy delayed its entry into services and the cloud, the highest growth areas of technology.

Still, with some $80 billion in annual revenues, IBM is not to be dismissed. Its brand value is still immense. It still maintains a market capitalization of $144 billion.

And it has a new toy, Watson, the supercomputer named after the company’s founder, which has great promise, but until now has remained largely an advertising ploy.

If IBM can reinvent itself and get back into the game, it has FANG potential. But for the time being, investors are unimpressed and sitting on their hands.

The Big Telecom Companies

My final entrant in the FANGstakes would be any combination of the four top telecommunication companies, Verizon (VZ), AT&T (T), Comcast (CMCSA), and Time Warner (TWX), which now control a near monopoly in the US.

There is a reason why the administration is blocking the AT&T/Time Warner merger, and it is not because these companies are consistently cited in polls as the most despised in America. They are trying to stop the creation of another hostile FANG.

Still, if any of the big four can somehow get together, the consequences would be enormous. Ownership of the pipes through which the modern economy courses bestows great power on these firms.

And Then….

There is one more FANG possibility that I haven’t mentioned. Somewhere, someplace, there is a pimple-faced kid in a dorm room thinking up a brand-new technology or business model that will take the world by storm and create the next FANG.

Call me crazy, but I have been watching this happen for my entire life.

I want to thank my friend, Scott Galloway, of New York University’s Stern School of Business, for some of the concepts in this piece. His book, “The Four” is a must read for the serious tech investor.

Creating the Next FANG?

March 29, 2019

Diary, Newsletter, Summary

Global Market Comments
March 29, 2019
Fiat Lux

SPECIAL FANG ISSUE

Featured Trade:

(FINDING A NEW FANG),
(FB), (AAPL), (NFLX), (GOOGL),
(TSLA), (BABA)

March 26, 2019

Diary, Newsletter, Summary

Global Market Comments
March 26, 2019
Fiat Lux

Featured Trade:

(WHY I’M SELLING SHORT TESLA SHARES),
(TSLA)

Why I’m Selling Short Tesla Shares

Diary, Newsletter

The news is out that new Tesla (TSLA) new car registrations in the major states are falling off a cliff. California, New York, and even Texas are the major culprits.

The company says the ramp up in mass production of the Tesla 3 is the main reason, and that car registrations, in any case, are a deep lagging indicator. (No kidding! I bought a Model X P100D in Nevada in November and it is still not registered).

Analysts say it is because the electric car subsidy was chopped in half by the Trump administration this year from $7,500 to $3,750 per vehicle, and it is going to zero next year, thus demolishing the Tesla 3 market for entry-level low-end buyers. They also point to the company’s fragile financial condition which could be going bankrupt at any time.

For whatever reason, I believe that the shares will break two-year support on the charts and plunge to new lows. At the very least, Tesla shares are capped for the time being.

I, therefore, sold short Tesla shares yesterday.

As much as this looks like a great short-term trade, I love Tesla long term and see it as a potential ten bagger from current price levels. Tesla will become the world’s largest car company within a decade and become the first car company with a $1 trillion market valuation.

As long as I have been following Tesla since the early venture capital days, it has been going bankrupt. It was going bankrupt during the move in the share price from $16.50 to $394, and it is going bankrupt today.

When I pulled up to the Fremont factory last week, I couldn’t believe what I found. There was a version 3 supercharger that would top up my battery at the staggering rate of 1,000 miles an hour!

That meant that with 50 miles of range left on my 300-mile range Model X battery, I could get a full charge in 15 minutes! The electric power was coming down the cable so fast that it had to be liquid-cooled.

I pinched myself to make sure I hadn’t fallen into a Star Trek movie. The V3 supercharger will soon be available across the country. No other car company is close to achieving something like this.

The fact is that I have been subjected to an unrelenting torrent of bad news, rumors, and envy since I first bought the shares at $16.50 ten years ago. This is the most despised company in the universe and regularly sits among the top five companies with the greatest short interest, often above 25%.

But I guess this is what happens when you take on big oil, the Detroit big three, the advertising industry, labor unions, and the entire Republican party all at once. By my calculation, Tesla is a disruptive threat to about 50% of the US GDP all at once.

I ignore them all and just look at the numbers. Here they are.

1) Tesla has increased its total production from 125 when I bought my first Model S1 in 2009 to 245,519 in 2018. It should hit 500,000 by the end of this year when the Shanghai factory comes online. They have gone from employing 100 people to 50,000.

2) With the completion of the Sparks, NV Gigafactory, battery prices are collapsing and are now 50% cheaper per mile than any other competitor, 4.1 miles per kWh versus 2.5 miles.

3) Tesla’s costs for batteries have cratered from $1,000 per kWh ten years ago to $100 per kWh today and are expected to drop to $75 per kWh in a few years. Below $100 per kWh Teslas are cheaper to run than conventional gasoline-powered cars, even without the tax subsidy.

4) Tesla now makes half the lithium batteries in the world, and that figure is growing by 50% a year.

5) Tesla’s vast national charger network will soon become the country’s largest electric power utility and that will also become an enormous money-spinner. They just raised prices to 30 cents per kWh versus a cost of 5 cents. Assuming that 5 million cars buy a 70-kWh charge three times a week, that works out to a $13.65 billion a year profit.

6) Anyone who actually reads Tesla’s balance sheet can see that the company is now spinning off $1 billion in free cash flow. It is investing in new plant and equipment at a prodigious rate.

7) With a market capitalization of $44.5 billion, Tesla just trails General Motors (GM) at $51 billion, but surpasses Ford Motors at $34 billion, and therefore can raise new capital to finance its hyper-growth any time it wants.

More product at high prices at a prodigiously falling cost sounds like a pretty good business model to me. Oh, and climate change is about to become the top political issue for the 2020 presidential election. Who is the big winner in that case?

Tesla.

March 7, 2019

Tech Letter

Mad Hedge Technology Letter
March 7, 2019
Fiat Lux

Featured Trade:

(WILL NIO EAT TESLA’S LUNCH?),
(TSLA), (XPENG), (NIO)

March 7, 2019

Diary, Newsletter, Summary

Global Market Comments
March 7, 2019
Fiat Lux

Featured Trade:

(BETTER BATTERIES HAVE BECOME BIG DISRUPTERS)
(TSLA), (XOM), (USO)

Will NIO Eat Tesla's Lunch

Tech Letter

The death of Tesla.

There is a sudden existential threat for one of the transformational American companies of the century created by Elon Musk.

And you can thank China for it.

If you didn’t know it, there are over 500 electric vehicle (EV) firms in China and the most widely known is NIO Inc.

NIO’s production chain spans just 20% the size of Tesla and has only delivered just a few thousand cars to this point.

Part of the reasoning for Tesla’s Musk to roll out a cheaper version of the Model 3 sedan was in reaction to the potential pipeline of China manufactured EV cars coming online.

The mushrooming of the electric car industry in China could be a death knell for Tesla.

Not only is the company battling stand-alone Chinese companies now for market share, but they will need to overcome the support of the Chinese communist party and the unlimited funds they throw at these types of national initiatives through generous subsidies.

As we speak, the communist party is starting to consolidate the national automotive industry and China’s National Development and Reform Commission will pour resources into the certain firms they believe can become national EV champions.

As it stands, China's sold more than 1 million electric vehicles in 2018 and could sell 2 million EVs by 2020.

And by 2030, China could dominate the global EV market by snatching 50% of the market.

I believe Tesla has absolutely zero future in China because of the explicit fact they are not a Chinese company and at this stage of the game, China and its home-grown tech are comfortable enough to stand behind the quality of their tech no matter how they acquire the secrets.

In fact, NIO Inc. produced an EV car that is above average quality and will improve with each iteration.

Headaches have already started to compile for Tesla as well when 1,171 Model 3 sedans arrived at industrial city Tianjin and were duly blocked with customs unhappy with the sticker labeling.

This nitpicking is a warning sign for things to come and Tesla will be hard-pressed to become what Apple was in China before Chinese consumers stopped buying iPhones. Or it may be just another iteration of the trade war, now a year old.

Don’t forget that US imported automobiles are exposed to high 100% customs duties that were infamously present even before the trade war began.

A Tesla factory in Shanghai is in the works with the $2 billion loan coming from a state-owned Chinese bank which vanishes any in-house knowhow Tesla planned to keep under wraps.

American high-end products will have to take on a bevy of domestic competitors, even some that possess borrowed foreign technology.

Along with the headwinds of battling state subsidies, Tesla will have to grapple with the price points at which Chinese EV companies sell their cars.

NIO’s ES6 is the follow up to the first all-electric SUV called the ES8 and deliveries start in June.

The car will go on sale for 358,000 RMB, or about $51,000, and that’s before government subsidies.

The 70kWh battery pack offers 254 miles of range and mimics Tesla features with an 11.3-inch touchscreen.

And if you thought Tesla could absorb the heavy blow from a $51,000 price point before government subsidies, then there is burgeoning EV firm Xpeng that crashes the price points even further.

The founder of Xpeng, Henry Xia, has conceded publicly that he was deeply influenced by Tesla and admitted his company was open-sourcing their patents.

The Xpeng G3 starts at 227,800 RMB, equivalent to less than $33,000, once again, before any government subsidies.

The product copies Tesla-style touchscreen features on the dashboard and has battery range capabilities of around 230 miles.

And here is the game changer, the effect of government subsidies could crater the price of these two types of Chinese EV cars to less than $9,000 for the consumer.

Game over for Tesla.

I surmise that once these Chinese EV cars cross the threshold of quality that puts the Chinese variant close to 75% as good as Tesla’s version, potential customers will flock to cheaper Chinese EV firms will a deluge of mass orders.

The global EV industry is the next high-tech industry to get hijacked from the Americans by the industrious Chinese who collaborate with state financial power to take down foreign competition.

Tesla, its leader Elon Musk, and every other high-end German car company are facing down a barrel of a gun that will prove to be an existential crisis of epic proportions.

This is all part and parcel of China’s plan to reshape the global export value chain.

China’s response is to crash the price of EV’s and use state support to outlast external competitors.

Equally as important, China has a massive shortage of EV infrastructure posing problems for Tesla cars to charge up outside.

This could be the trick up the sleeve of Beijing, they could easily squeeze Tesla out of the mix by allowing only home-grown EV cars to charge up at public charging stations citing security concerns of American technology.

The effect would be that Tesla owners would only be able to fill up in the confines of their own house which is problematic since most urban Chinese who can afford Teslas live in skyrise apartments without a personal garage.

The Middle Kingdom is also facing an ecological crisis at home and an exaggerated migration to EV cars is the state’s solution to cleaning up the domestic environment.

The long-term vision appears to have no place for Tesla in the Chinese economy – they already have their own Tesla’s and more imitations in the pipeline hoping to crash the price points even further.

Even more frustrating, 2020 or 2021 is the timeline to get Tesla production up and running in Shanghai, but by then, Tesla and Musk might be fighting from a position of weakness.