Elon Musk Supports His Business Empire with Unusual Financial Moves
wsj.com
wsj.com
>I wonder why WSJ and conservatives set a target on Elon.
"WSJ has a target on Elon Musk's back. Every week they post something negative about him or his companies. I have a couple of WHITE friends who have an irrational hatred for Elon. They rail how everything Elon Musk does is a "scam". The WSJ comments are a reflection of that mindset. More broadly, I wonder why WSJ and some WHITES set a target on Elon. There are literally a gazillion subsidies, tax credits, offshore accounting going around. For example, Hollywood shoots their movies wherever they get tax credits. Texas has attracted large back office operations using tax credits. Data center locations are chosen based upon which state government throws in the most benefits. It seems odd that they would spent so much energy on Musk, whose subsidies are probably a rounding error. It makes me wonder if there are bigger things at stake. Are the WSJ overlords really scared that he is making material changes to energy and transportation that could hurt them ?"
Because he has made some very powerful enemies. SpaceX encroached on ULA's turf in the military satellite launch business with a vastly more cost-effective solution. SolarCity is making energy utilities across the country nervous because it threatens their monopoly (just read about the so far successful push from Buffett's NV Energy to stop the advance of distributed solar in the state of Nevada). Tesla just sent Detroit into catatonia with the Model 3 launch and their (almost sure to be a) half-million reservations for a car that will exist only in two or more years.
None of these forces will go silently into the night. This feels like a deliberate, coordinated attack that hits Musk personally, and all three of his companies at once.
Elon Musk wants to tackle climate change, build safe open artificial intelligence and go to Mars...
Conservation as a general concept is about preservation, tradition, limiting change. I'm sure there's plenty of people who align with conservative values for other reasons (as I'm sure most don't have a problem with Elon), but that doesn't change the fact that a lot of people are opposed to change in general. They like the way things have been and the way things are. They have a good thing going. They don't want to risk a future they might not like. They don't want to have to learn a new future. They don't want to have to worry or think about learning a new future.
Hell, I get it and I consciously chose to go in to web dev! I can find out about a new tool that will make my life easier and still have an initial reaction of "damn it, not another one!".
Elon Musk is the symbol for a lot of change.
Or that if Tesla issues more shares for capital, Elon Musk is the primary buyer.
Or that if there really WAS a costly issue that made the shares plummet, they will plummet further when he gets a margin call.
WSJ was also super-negative on Theranos, just to throw it out there, as tech press was being busy singing accolades to yet another unicorn.
Every year of delay in renewables supplanting fossil fuels means hundreds of billions of dollars to the fossil fuels industry.
Perhaps you would explain to which oil subsidies you are referring?
Renewable energy subsidies are not even 1% of them aggregate.
* Consumer purchases of the final products of oil are heavily taxed (especially in Europe).
* Oil companies pay significant income tax. Exxon alone paid over $5.5B, or about 25% of net profit, in taxes last year, while in 2013 they paid closer to 42%. [1]
* After they pay income tax, their dividends are taxes again.
I'm sure there are other invisible taxes throughout the production and rights-acquisition process.
[1]: https://finance.yahoo.com/q/is?s=XOM+Income+Statement&annual
Or maybe I misunderstood and you are trying to make a different point?
You need to show what portion of the road cost is paid for by income taxes before you can claim the rest.
I don't understand why you brought any of this up. A subsidy is a subsidy no matter who pays.
I took the parent at face value for the claim that 50% of roads are funded by use fees. That means the other 50% are paid for with general income taxes. Nearly all income taxes are paid for by the top half of earners. If we assume that everyone drives about the same amount, then the bottom half of the country gets the full value and use of roads while only paying for 25% of the total cost.
I bring this up because the parents point seemed to be that road subsidies are an implicit subsidy to oil companies. But people need to get around somehow, and the current way of funding roads should be perfectly compatible to conventional morality.
At the same time, I oppose all subsidies and can only imagine the amazing methods of transport that would exist if the government did not actively interfere and manage this market.
For this sub-thread, that is where. Unless you think the US military is out defending foreign oil companies?
What is the salient data point from that link that you would like to highlight?
Which part confuses you?
You left out the part where the report covers the period of 1950-2010 - a 60 year period. A multi-decade accounting isn't useful when we are discussing the current state of subsidies across industries.
The tax-based "subsidies" appear to just be referring to the ability to write off expenses, an aspect of the tax code that is nearly universal to every industry in all nations. There are very, very few examples of income taxes that do not allow the write-off of expenses.
The second part of that summary, referring to "exemptions" from economic regulations, is bizarre. We don't generally have price controls or limits on the rate of return in the United States. It seems like that report probably just chose arbitrary numbers for what it felt the profit rate should have been, and added the difference between that and the real numbers into the subsidy number. That is more an argument for communism than anything related to a discussion about subsidy policy.
You also left out the part where the real subsidies, those to the renewables industries, are actual giveaways of money.
I'm not sure how an honest inquiry could make these mistakes and engage in these false comparisons, which probably explains why you used a throwaway account to post.
http://www.imf.org/external/pubs/cat/longres.aspx?sk=42940.0
http://www.theguardian.com/environment/2015/may/18/fossil-fu...
Repealing farm subsidies isn't the best way to use your precious political capital as President. The fact that these programs are so hard to repeal is the reason why Republicans are obstructionists. A government program is the closest thing to eternal life in this world, so the best chance to stop it is at genesis. An honest leftist understands this too and accounts for it in their policies.
Also, it's not really true that oil is that subsidized in the US. Most of the headline numbers include general foreign tax credits and business expense and R&D write-offs, which have nothing to do with oil in particular, as well as heating assistance for poor families.
Is your claim that solar energy would not collapse if subsidies were removed? I can think of a few examples of solar firms that failed even after being given massive subsidies.
I'm not sure to which conflict you refer when you mention an alignment of interests between fossil fuels and conservatives.
And I'm not sure how the conflict, whatever it is, relates to whether or not solar companies have a viable business model.
Many car companies have collapsed over the last century. I assume the intention of a subsidy is to support the industry as well as the specific company?
You can actually make exactly the same argument about renewable energy. We invested in clean energy because it is a superior, but more expensive product. Fossil fuels are able to compete unfairly by selling a dirty product for less. Without subsidies solar would be forced to track the price of fossil fuels. As oil gets cheaper, solar becomes less profitable.
- Harmful emissions killing thousands [1]
- Degradation of environment such as water contamination.
- Geo-political implications.
And I'm not sure how you are relating that point to "clean energy". You say solar should be subsidized because it is a superior product. Are American farm products somehow superior as well? Is grain from the mid-west some how better than grain from Europe? Or is corn syrup cleaner than sugar cane from Cuba?
And unfair? We use that word to describe cars, steel, electronics but not grain? A Brazilian farmer can grow grain, haul it using donkeys to a barge, sail it down river to the coast, pay for shipping on a grain scow, and load it on a train to Chicago, for less than farmers in Iowa can afford to grow it. Its got to mean miserable working conditions for people in that whole chain. Is this any different from clothing or iPhones?
Source?
My roommate in college worked on his parents farm every summer and while he worked a lot of hours, he made would make about $25,000 dollars. That's more than any of anyone I know made during the summer except for me (I only made more cause my company paid for my hotel that I lived in plus the taxes on it which were both ludicrous).
I strongly assert that you do not understand the political impetus behind farm subsidies, the damage they do, and the strong economic case that they should not exist
People focus on SpaceX's government contracts, disregarding the MASSIVE subsidies ULA receives and disregarding the fact that SpaceX is dropping the price of rocket launches like a brick off a cliff, which will (obviously??) save far, far more taxpayer money in the long run than if SpaceX had not done this.
People focus on Tesla's subsidies, but ignore the massive bailouts given to the other auto manufacturers and ignore the future potential of Tesla to bring large amounts of jobs and money into the US as the cars are exported around the world. They ignore how much money will be saved by a cleaner environment in the long run, in healthcare costs and environmental costs. They overlook that Tesla paid back all its government loans with interest, making it a solid investment. They ignore everything relevant.
And with SolarCity, people focus on it having received some small amount of subsidies while disregarding the fact that a future where we don't have to pay electric bills or gas bills will save us all far more than we might have to spend in taxes now.
These people seem to imagine that Musk's companies are taking up valuable money that could have been used elsewhere, but truly, what better use for money than to break the mold of dysfunctional legacy infrastructure?
Your argument seems a little silly.
That seems much more clearcut than who exactly benefits from various economic policies and government actions.
A few reasons why it's silly. You can't accurately measure it, so it's a somewhat useless metric. Also, everything is interdependent if you look at it that way.
Rich people are being subsidized by landlords due to rent control!
Alcohol companies are being subsidized because they don't pay for crashes caused by drunk drivers.
It goes on and on and it doesn't add much value.
E.g. healthcare costs go up with age because that's when people start dying. Smokers die at an earlier age, so they experience those costs earlier. Is this correct? Who knows, but it's one of the many ways in which the argument you wrote could be invalid.
Furthermore, healthcare costs don't reflect the complete picture. Firstly, lost productivity is an issue. Secondly, we may not want a society where ritual suicide is encouraged at a pre-determined age with the goal of reducing healthcare costs.
Obviously I know this isn't what you're arguing. You're right in saying that alcohol and tobacco taxes aren't used to offset higher costs to healthcare. In most cases they're supposed to be a cost pressure to change consumption.
Smokers are subsidizing everyone!! How do you solve for that?
is a really impressive moment in history
Once Tesla stabilises, they'll be looking to move manufacturing jobs offshore, just like any other manufacturer. 'Future manufacturing jobs aplenty', without some significant social changes, is a pipe dream.
I'm sure that some jobs will be created offshore, but I doubt that the worlds largest battery factory is just going to be shut down and moved to Shenzhen.
By subsidizing Tesla, the Federal Government is effectively investing in it. Tesla then utilizes tax concessions from Nevada to reduce the cost of building and operating the gigafactory. So in a sense, Tesla is spending the money invested by the Federal Government wisely.
If voters are not happy about the subsidy strategies of the government in general, they should be aiming their ire at their political representatives, not the companies that benefit from the subsidies.
If the banks were to do this, in theory this would hurt the companies. Right there is where my understanding drops off. Can someone else finish the narrative? Why would the banks selling off the stock collateral hurt Tesla ? How is it any different from me selling my stocks and someone else buying them? How does Tesla lose anything there?
That and if people hear that the banks are selling stock they could think: omg must sell now before loosing everything because they must have reasons to sell it
That's my 2 cents not an economist in any way
1. Tsla is quite volatile. 2. If it drops significantly by some Y%, Musk's shares which are used as collateral would be called. 3. When that margin call gets triggered he'd be forced to sell X shares to meet it. 4. X is very large. 5. Since X is large, you have a ton of tsla on the market with no demand. Price will drop like a rock, by some Z%. 6. Say I and you hold Tsla shares. Obviously we are OK with a price drop of Y%, because we know the damn thing us volatile, yet we chose to buy into it because we believe in its upside. 7. But just because we are OK with Y% drop due to some macro event doesn't mean we are OK with this Z% additional drop due to the way Musk structured his personal investments.
In other words, ordinary investors could end up losing a ton of money (y + z) for no fault of their own, than if they had just lost y% which they had signed up for. Depending on what numbers you attach to y and z, you can make the case this is unfair or very unfair. For his part, Musk claims the probability of the above is low, though definitely nonzero in today's uncertain market conditions.
Who sets "the price"?
I understand that if a large amount of shares appear on the market with no demand, the entity selling them will lower the price in an effort to sell them. But how does that factor into "the price" that the stock is worth across the market from any/all sellers? How is that calculated? Is it just whatever the stock last sold for?
If you are looking at a stock trading platform, you will usually also see "Current Ask" and "Current Bid" representing standing sell and buy prices (respectfully) for the stock.
BTW, if you don't see "reply" under this comment like I don't for yours, you can go to my profile page and "comments" and then you will see the "reply" link.
I don't know, but maybe donating securities to charity and accepting a takeover bid could be considered examples of off-exchange trading.
If an authorised entity wanted to set an unusual "bid" or "ask" price, I think that would either trigger a trade (if it made the "bid" higher than the "ask") or (otherwise, assuming other authorised entities don't follow suit) merely signal that particular entity's unwillingness to trade that security at that the prevailing market price and have no effect on the market price.
I don't know whether this differs from exchange to exchange.
Example:
Price Buy Sell
124 € 130 pcs 50 pcs
125 € 120 pcs 90 pcs
126 € 70 pcs 90 pcs
127 € 30 pcs 100 pcs
In this case, the price would be 125 €. 90 transactions can happen at this price; there is no other price which allows more transactions to happen because of the supply and demand constraints.
(Though that's probably true anyway if the banks decide to call the loan. By doing so they're basically saying they don't believe the company can repay its debts, and other potential lenders would either stay away or demand more onerous terms.)
Note I said "could" -- the actual effects depend on how much stock is being pledged and how quickly banks would try to dump it. Regardless, it would be huge negative news and affect the stock price negatively. Look at how Apple's stock got punished because iPhone sales have stopped growing.
Do these people not understand that money is fungible? It's like pouring two glasses of water into a pitcher and then trying to separate them again.
I don't know all the details, but it seems a little strange.
edit: (It does also mention the large personal loans)
The bond purchase would have been approved by the board which would have considered if it was a good investment, those details we do not have. Maybe they were tax exempt, highly rated, secured and carried higher interest?
The lease says that if you default on the lease, by missing a single payment, SolarCity has the right to take back the panels, but you are still liable for the remainder of the lease payments even though you no longer have the panels.
https://www.solarcity.com/sites/default/files/sc-contract-re...
Default is also triggered if you sell the house, the person buying it assumes the lease, but later has his credit rating drop.
Still, definitely not a good thing to sign though.
If you follow TSLA, they play with their financials as well; unusual metrics, things vaguely reported, metrics disappearing.
At best, it's risky. Personally, I think it's a tad shady. But around here it's fine, because it's Elon Musk not a banker.
Seems a bit disingenuous to cite a stock price recovery without mentioning its preceding collapse. (they do have a more balanced chart later on in the article)
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