Investment
We could all learn some investment lessons from Taylor Swift
John Ray, the man who sorted out Enron, and who has now been drafted in to try and clear up the mess left behind by Bankman-Fried and his small gang of millennial crypto idealists, commented acidly that there was “a complete failure of corporate control”.
Whether it was fraudulent or not will be up to the courts to decide, but there can be no question it was a hopelessly badly run business.
Who knew? Well, as it turns out: Taylor. The company made a huge effort to try and secure her endorsement, and also to sponsor her massive Eras tour. The singer, however, we learned this week, had a few questions. “Just tell me that these are not unregistered securities, right?” she asked before committing to anything.
We already knew that Swift was a savvy businesswoman as well as a fine singer and songwriter. We can see that in the way she has expertly managed her career, taking back control of her catalogue and re-recording her old albums to ensure she earned the money from them. Now she appears able to spot a financial fraud that had eluded almost everyone else.
The technique, however, was a very easy one. Unlike many other celebrities who got caught up in the bandwagon, she just checked it was a real business doing properly regulated stuff. In fact, asking very simple questions is one of the best ways to avoid making very basic mistakes. There are lots more straightforward questions that should be asked of fast-expanding companies a lot more often. Here are a few we could be starting with.
Does the company actually make any money? There are a surprisingly large number of seemingly very successful businesses that don’t actually make any money. Instead they are kept afloat on wave after wave of fresh capital. Very occasionally, after lots of investment they become very profitable (like Amazon, for example).
More often, once the funding dries up, they collapse like a house of cards. If a business isn’t profitable after a couple of years, it probably won’t ever be. Even if the answer is yes, it is worth also asking whether it is cash-flow positive, or whether it consumes more cash than it manages to generate. If that box is not ticked as well, there is probably trouble ahead.
Next, has the product been launched yet and if so is anyone buying it? It would be a lot easier to run a company if you never actually had to go to the trouble of actually selling anything. Plans and projections are lots of fun, and might convince investors for a while. But it is only when there are actual people buying the product every day that you know whether the company is real or not.
Thirdly, how long has the chief executive been in the job, and what kind of team do they have around them?
In fairness, it is sometimes possible for a brilliantly talented entrepreneur to emerge straight from college, with no real experience especially in new technology. Bill Gates or Mark Zuckerberg are both obvious examples, even if both of them were quickly surrounded by more knowledgeable executives. But it is very rare. Typically, people need a few years at least working for an established organisation before launching something of their own.
Finally, is there lots of hype? If the founder spends most of his or her time on building their personal image, on magazine covers and winning awards, hobnobbing with former presidents and prime ministers, they are probably not putting enough time into the hard work of building the business. Bankman-Fried spent far too much time on his personal profile, and far too little checking the paperwork was all in order.
Investing doesn’t need to be very complicated. A company makes stuff, or provides a service, charges money for it, and makes a profit. And, well, that is basically about it. When it gets any harder than that to understand it is usually a swindle.
Taylor Swift could see that, and saved herself a lot of embarrassment by refusing to have anything to do with FTX. If a few more investment professionals could do that well the financial world would be a safer place.
Investment
Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.
The stock is now showing a 16.1% gain for the year after rising the past two days.
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
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Don’t let the haters get to you. Never ever get back together. Oh, and never leave your red scarf behind if you break up with someone. There are no doubt lots of lessons in life and how to manage its ups and downs that we could all learn from listening to Taylor Swift. And now it turns out that we can learn something else as well: how to manage our investments.
The American singer spotted that the crypto currency trading platform FTX was a flimsy, over-hyped ego-trip by just asking a simple question about what it was up to. If we all did that a little more often, the financial markets would be a far safer place.
Just a few months earlier, major celebrities – not to mention some of the world’s most prestigious investment houses, and a few major league politicians – were queuing up to do business with Sam Bankman-Fried’s fast-growing FTX crypto empire.
The American football star Tom Brady and the supermodel Gisele Bündchen were among its celebrity endorsers. Bill Clinton and Tony Blair showed up at conferences it sponsored, effectively lending it some of their gravitas. It was the second biggest sponsor of Democratic candidates at elections, and sprayed money around on what it called “effective altruism”, as well as making donations and investments in Left-leaning news organisations.
Its advisers included Wall Street royalty such as JP Morgan and Goldman Sachs. Heck, why would anyone not want to get involved? At its peak last autumn, Bankman-Fried was worth an estimated $26bn (£21bn) and was ranked as the 60th richest person in the world, and the exchange was dominating the expanding market for digital money. Yet it turns out that FTX was a chaotic mess.