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With Elon Musk’s public behavior becoming increasingly erratic, irrational and bizarre – just over the weekend trolling Warren Buffett that he is “super serious” about attacking Berkshire’s Candy moat, just hours after he threatened Tesla shorts with “unreal carnage” in a tweet that some have alleged is a violation of securities laws – the Tesla bears have been getting increasingly more vocal.

And it’s not just Jim Chanos: while the famous Exxon nemesis remains certain that Elon Musk’s resignation and Tesla’s doom  are just a matter of time, others have been just as vocal in their skepticism, so much so that Tesla is now the most shorted stock in the US market, much to Elon’s volatile chagrin.

Yet while most shorts believe there is at least some value in Elon Musk’s car company, Mark Spiegel of Stanphyl Capital Management is convinced that when the dust settles, Tesla will be “a zero” (whether or not Musk will be “bankwupt” is another matter). He made this clear rather early on, in fact on the front cover, of his 156 page slideshows that he delivered at the Kase Learning short selling conference.

While we present the whole powerpoint below, here is the exec summary and some of the bigger picture observations:

3 Broad Reasons Why The Equity in Tesla Is Worth “Zero”

1. Tesla’s financials are horrible and worsening even BEFORE massive competition begins arriving later this year
2. Tesla has no “moat” of any kind and in fact now possesses trailing technology in all facets of its business
3. A “bet on Elon” is a bet on someone who can’t be trusted -he has a long track record of making hugely misleading statements

A snapshot of the company’s current financials:

A look at Tesla’s financial “scale”:

But the key investment – or rather its opposite – highlight of Spiegel’s bear thesis is the same one we noted last week in Tesla’s “Other” Biggest Risk, namely the armada of electronic vehicles coming down the pipe, many of which are newer, more advanced, and generally cooler than Tesla and have the financial backing of auto giants which have billions in positive free cash flow which can fund the EV design and production process for years if not decades, a luxury the cash bonfire that is Tesla does not have. Here’s Spiegel:

A massive number of long-range electric cars will soon be on the market, often at prices subsidized by profits from their makers’ conventional vehicles, an option Tesla doesn’t have. Additionally, here in the U.S. Tesla’s $7500 tax credits will expire in late 2018 while competitors will just be starting to use theirs, so pricing pressure on Tesla will be intense. Here’s the competition Tesla faces in electric cars…

And then there is the biggest risk of all: Tesla’s constant need for more, new capital, which so far investors have been all too eager to provide to Tony Stark.

All this and more, including a debunking of Tesla’s “battery advantage” moat, its existing supercharger station “headstart”, Tesla’s autopilot safety record, its lac of preparedness to service its fleet, and much more in the full presentation below.

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Martin Shkreli’s reputation for lashing out at journalists, critics and (former) presidential candidates is once again coming back to haunt him.

The former Turing Pharmaceuticals CEO – who is currently serving a seven-year sentence at a minimum security “Club Fed” in New Jersey – is being sued by a former executive at Turing who is arguing that he repeatedly threatened her with firing, while also making false statements about her and sullying her good name, according to the Daily News.

“He undertook a campaign of harassment and character assassination against (Costopoulos), both internally via email, as well as publicly on social media platforms such as Facebook,” the lawsuit says.

Costopoulos argued that Shkreli he continued to exert his influence at Turing in his role as the company’s majority shareholder even after he was fired as CEO – despite being indicted on securities and wire fraud charges.

Ultimately, Costopoulos was fired in 2017, she says, because Shkreli was angry that he could no longer control the company’s management team. Costopoulos says she was singled out when executives at the company refused Shkreli’s demand to dial into company meetings. They also refused to make him a paid consultant of the firm.

In the lawsuit, Costopoulos compared Shkreli’s campaign of revenge with how he offered $5,000 to any fan who could grab one of Hillary Clinton’s hairs – a “threat” that prosecutors used to successfully revoke Shkreli’s bail.

“If an agency as powerful as the Secret Service voiced concern about Mr. Shkreli’s threat directed at Secretary Clinton, imagine the impact and distress that continuous threatening emails and Facebook posts had on Plaintiff, who did not have the benefit of any protection, let alone that of the United States Secret Service,” the lawsuit says.

Costopoulos says the only reason she was fired was because Turing’s board at the time was stacked with Shkreli loyalists.

To be sure, it’s unclear what, exactly, Costopoulos is seeking from this lawsuit. It’s widely believed that Shkreli has been effectively bankrupted by his legal troubles and several poor investment decisions that he made in the aftermath of the drug price-hiking scandal that first brought him to national attention.

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Via Greg Hunter’s USA Watchdog blog,

Two time best-selling book author Nomi Prins says the rescue policies of the 2008 financial crisis are still with us today. Prins is out with a brand new book called “Collusion: How Central Bankers Rigged the World.” 

The enormity of our current global debt problem is caused by central bankers.  Prins explains, “It is huge…

“The debt is between two and a half to three times global GDP, which is an historical high.  Debt to GDP throughout the developed world is higher than it has ever been, and it continues to grow.  Why?  Because money continues to be conjured up and rendered cheap for the participants at the top of the financial system.  The banks, the major corporations, the people who make money out of that, and it hasn’t washed down to the rest of the economy.  This is why most people feel this anxiety about another potential financial crisis, but also about what happens every day in their own pocketbooks. 

So, it is worse.  These central banks today, 10 years after the financial crisis occurred, that was supposed to be an emergency situation.  They have $21 trillion worth of conjured money in return for debt assets, stocks and corporate bonds around the world. 

If they pulled that plug, if they were to take down any of the $21 trillion, even a little bit . . . it would begin to create a major rupture in the financial system.  This is why I say the central banks are the market.  Without them, the markets would be nowhere near these highs. If they pulled their help and subsidies, the market would plummet really quickly.”  

Prins admits this has gone on for longer than most believed possible, but says it can’t go on forever. How does it all end?  Prins, who was a former top Wall Street banker, says,

“We will eventually get a crash because, at some point, the amount of quantitative easing, or conjured money to buy assets out of the market to pump up the…financial system, will come to this head where even though these major central banks are continuing to dump money in. 

There will be ruptures at the bottom of the economy . . . even though they are borrowing cheap money, they just can’t make enough money to service very cheap debt.  Consumers, who are at all-time debt highs, don’t have enough to continue to service their debt.  When these things happen at the same time in terms of lack of payments, delinquencies and defaults, then money will be taken out of the stock markets to plug the gap, and then the stock market comes down.  It will start with debt disintegrating, defaulting or having delinquencies…

The behavior that happens after this is the seizure of credit and lack of confidence everywhere.  When the cracks start, they will get bigger and bigger faster, and that’s when we have a crash.”

Will the next crash be worse than the last one? Prins says, “Yes, it will because we will be falling from a higher height. 

…The idea here is you are sinking on the Titanic as opposed to sinking on a canoe somewhere.  All of this artificial conjured money is puffing up the system, along with money that is borrowed cheaply is also puffing up the system and creating asset bubbles everywhere. 

So, when things pop, there is more leakage to happen.  The air in all these bubbles has created larger bubbles than we have had before.”

How does the common man protect himself? Prins says,

“They have to own things, and by that I mean real assets, hard assets like silver and gold.  That’s not as liquid, so taking cash out of banks and sort of keeping it in real things and keeping it on site . . . keeping cash physically.  You need to extract it from the system because the reality is when a financial crisis happens, banks close their doors to depositors. . . . Also, basically try to decrease your debt.”

Join Greg Hunter as he goes One-on-One with two-time, best-selling author Nomi Prins, who just released “Collusion: How Central Bankers Rigged The World.”

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President Trump will not be interviewed as part of Special Counsel Robert Mueller’s Russia probe, according to former Trump lawyer and U.S. attorney Joseph diGenova, who told Fox News Sunday that the investigation is now in “bad faith.” 

“The president will not sit down for an interview because this investigation has reached a level of bad faith,” said diGenova “This is no longer a good faith investigation.”

Joe diGenova: “The president will not sit down for an interview because this investigation has now reached the level of bad faith, this is no longer a good faith investigation.” #FoxNewsSunday https://t.co/F6gn4EkMZJ pic.twitter.com/LD09KWXSNl

— Fox News (@FoxNews) May 6, 2018

DiGenova suggested that the judge in Paul Manafort’s case, T.S. Ellis, “did something very important on Friday. He started a civics lesson about what the constitution is about, and about what the powers of a Special Counsel are,” adding that Mueller “should be ashamed of himself” over the way the FBI conducted the raid on Paul Manafort’s home – pulling him from his bed and handcuffing his wife at 3 a.m.

Yesterday we noted the intense courtroom battle which played out on Friday between Judge Ellis and Mueller attorney Michael Dreeben in which Ellis put the Special Counsel in its place six ways from Sunday during a motion-for-dismissal hearing – giving prosecutors two weeks to produce evidence that Manafort was colluding with the Russians. 

That is what elicited Judge Ellis’s response that we don’t want “unfettered power.”

Judge Ellis continues, saying he’s not going to be persuaded that Mueller has “unlimited powers to do anything” Mueller wants. pic.twitter.com/rysP4lIH9x

— Techno Fog (@Techno_Fog) May 5, 2018

Joe diGenova on Manafort raid: “Bob Mueller should be ashamed of himself to allow that to happen on his watch.” #FoxNewsSunday https://t.co/F6gn4EkMZJ pic.twitter.com/fkyWwzYg4S

— Fox News (@FoxNews) May 6, 2018

President Trump has repeatedly expressed a willingness to testify in front of the Special Counsel, mentioning as recently as last week “I would love to speak… I would love to go through with it, if I thought it was fair to override my lawyers.” 

Red-faced Rudy

Both diGenova and Harvard Law professor Alan Dershowitz have dinged Rudy Giuliani over comments made last week that Trump reimbursed his personal attorney, Michael Cohen, for a $130,000 payment to adult film star Stormy Daniels. 

🚨 Giuliani says Trump repaid Cohen the $130,000 used as hush money for Stormy Daniels pic.twitter.com/pqNtZthgwf

— Jon Passantino (@passantino) May 3, 2018

DiGenova says that Giuliani’s comments are a “nothing buger,” that serve “no useful purpose in terms of the facts.” 

“If it is a purely personal matter, which this clearly has to be, it doesn’t matter what its relationship was to the timetable in a campaign,” –Joe diGenova

Giuliani has since been making the media rounds trying to smooth out and clarify his comments – with the grand takeway being that the payments to Daniels (real name Stephanie Clifford) were perfectly legal.

Alan Dershowitz, meanwhile, told NBC’s Meet the Press on Sunday that Giuliani’s comments (whether intentional or not) “plays into the hands of Mueller’s tactic to try at any cost … to find technical violations against lower-ranking people so that they can be squeezed.” 

The Harvard Law professor emeritus also said that Trump’s team is “admitting to enough that warrants scrutiny,” and that it’s been a “bad week for both sides.”

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Authored by John Rubino via DollarCollapse.com,

The past few months have seen some unusual, maybe even unique, developments in the gold and silver futures markets, with gold becoming extremely bearish and silver almost ridiculously bullish.

Neither imbalance has amounted to much in terms of price action, so it’s not clear whether the most recent changes matter. Still, the action in both gold and silver futures remains unusual enough to bear watching.

Beginning with gold, large speculators have lately been hyper-bullish and commercials extremely bearish. Since the former tend to be wrong at the extremes and the latter right, that was disturbing for anyone who didn’t like the idea of gold tanking in the short term.

Gold did fall a bit lately, to the low $1,300s, and that seems to have been enough to cause futures players to start unwinding their extreme positions. Speculators cut their net long bets by about 30,000 contracts and commercials cut their net shorts by a similar amount, which in the scheme of things is a big change. Another few weeks like this and both speculators and commercials will be close to neutral, which is positive for gold’s price going forward.

But silver has been and remains the really interesting case. Speculators – who are almost never net-short – spent a few weeks in that state before briefly reverting to slightly net long. But last week they jumped back to net-short in a big way (the bottom row shows the change in each position).

Here’s the action presented in graphical form, with the gray bars representing large speculators. Note how in the previous couple of cycles (early and late 2017) the speculators’ net positions got close to zero but then bounced back quickly to the more normal net-long. But in the current cycle they’ve been net-short for most of the past two months.

This has flummoxed industry analysts and led to some silver-to-the-moon predictionswhich, based on the rising volatility in the broader financial markets, are at least plausible.

Gold-Silver Ratio Also Looks Good For Silver

An intermediate-term indicator that’s also good for silver is the metal’s price relative to that of gold. As you can see, it’s getting to levels that over the past decade have seen silver subsequently outperform gold for a while.

To sum up, gold’s technicals are improving and silver’s are so positive that you have to wonder if there’s a catch, though what that would be isn’t obvious.

Which leads to the “how do you buy and store it?” discussion, which is more important with precious metals than with any other asset class. It’s actually possible to be right about the direction of these metals but so wrong about acquisition/storage strategy that you end up losing rather than making money. So research the dealer you eventually buy from, and keep what you buy in a safe place. Secure vault storage for gold and silver is a good way to diversify your holdings beyond what you keep at home or in a bank safe deposit box.

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With less than a week to go until Donald Trump withdraws from the Iran nuclear deal on May 12 absent some last minute diplomatic miracle (the recent discovery of John Kerry’s covert involvement to preserve the deal will only cement Trump’s resolve to abandon Obama’s signature foreign diplomatic treaty), Iranian President Hassan Rouhani warned the US of “historic regret” if it pulls out from the nuclear deal.

“If the United States leaves the JCPOA, you will soon see the historic regret which the move will bring about for Washington“, Rouhani told a crowd in Sabzevar in northeast Iran.

Under the deal, technically known as the Joint Comprehensive Plan of Action (JCPOA), signed in 2015, the U.S. and other world powers agreed to lift some of the economic sanctions imposed on Iran in return for the latter agreeing to rein in its nuclear program. The biggest, impact, however was lowering the price of crude, as the global market suddenly had access to nearly 1 million in Iranian oil output; and one of the key reasons why the price of oil has spiked in recent weeks is the market’s growing confidence that Trump will dump the JCPOA.

Whereas Trump has called the pact “one of the worst negotiated agreements” he has ever seen, and has repeatedly threatened to pull the U.S. out of the deal and has to make a decision on whether he will do so by May 12 deadline, Rouhani said Iran has been “loyal to its promises”.

“But it is explicitly telling the whole world, Europe, America, the West and the East that we will not talk about our country’s weapons and defense with anyone.”

“We will build and store any amount of weapons and missiles needed by the country.

It is none of anybody’s business what decision the Iranian people have made for their defense. We will not talk about the precision [of missiles] and defensive power with anyone,” Rouhani said.

Still, with the deal effectively over, Rouhani also said that Tehran has plans in place for a worst case scenario: “We have plans to resist any decision by Trump on the nuclear accord,” Rouhani said at a rally in northeast Iran, according to Reuters.

“Orders have been issued to our atomic energy organization … and to the economic sector to confront America’s plots against our country,” he added during the remarks, which were broadcast on state TV.

Last October, Trump disavowed the deal but stopped short of withdrawing the U.S. from it. Instead, he demanded that negotiators fix what he has deemed as holes in the agreement.

Trump has set a May 12 deadline for deciding whether to withdraw from the Obama-era multinational agreement, which provides Iran with sanctions relief in exchange for curbing its nuclear program.

The problem, with a US withdrawal virtually assured, is two-fold: oil prices are set to surge even higher, undoing all the economic benefits to US households from Trump’s tax cuts, as discussed previously, while the mere hint that Iran is no longer constrained from making nuclear weapons would be sufficient to prompt a military offensive by Israel, which for the past 7 years has repeatedly warned that even the suggestion of Iran developing nukes is a “red line” and would lead to a “defensive” strike by Israel.

In short: commodity and input price inflation may be about to soar, with gas prices set to revisit levels not seen in 4 years, while the Middle East is about to get far more volatile.

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As excerpted from the latest Weekend Notes by One River CIO Eric Peters

Today’s greatest challenge in asset management is that the biggest pension funds need to generate 7.5% returns in perpetuity or face insolvency. An annual loss would be debilitating, a multi-year loss devastating.

For a couple decades, the solution has been a portfolio of risk assets paired with a hedge (gov’t bonds). They’ve leveraged the bonds so that volatility of both are equal. The great attraction of this portfolio is that the hedge has paid interest and rolled down the yield curve. Both have generated extraordinary returns. It’s been magnificent.

If there are two rules in investing they are that magnificent portfolios attract inflows, and inflows ultimately destroy magnificent portfolios. As this magnificent portfolio came to dominate all others, the price of risk assets and bonds rose, inexorably, reflexively.

Everything is now expensive, so that today’s ratio of private sector wealth to GDP is 5.0x, an unprecedented high (this ratio is naturally mean-reverting and its long-term average is roughly 3.8x. It hit 4.4x at the 2000 peak then fell to 3.8x. It hit 4.7x in 2007 then 3.8x in 2009).

So now that risk assets and hedges are both so expensive the magnificent portfolio is incapable of delivering the extraordinary returns its holders have come to depend on. And they’re looking for the next magnificent portfolio. But no such construction exists for an investor who is not allowed to go short risk assets. And yet they still need to earn 7.5%. So they must take more risk, then pair it with a new hedge.

One way to take more risk is to sell volatility. So they do, in a myriad of implicit and explicit ways. While searching for a hedge.

Hedges almost always cost money. So investors avoid them, even when their cost declines, which it has, and now approaches 60yr lows. Systematic trend strategies (CTAs) generate returns over the long-term, and usually profit in big bear markets. So they look like hedges that don’t cost money. They’re not exactly equivalent to owning bonds, but when bonds are this expensive, and the Fed is raising interest rates, they’re an attractive alternative. Which is why you see trend strategies popping up in lots of the world’s biggest pension portfolios.

Trend strategies differ in material ways (I believe our approach is superior), but they all tend do well in slowly unfolding bear markets, like 2008. They also tend to do poorly in fast market reversals like 1987. But one strategy that does well when markets decline like in 2008, and does extraordinarily well when they decline fast like 1987 is long volatility. Which is why, when volatility is low, pairing our trend and long volatility strategies with a portfolio of risk assets is as close as you can get to replicating that magnificent portfolio that no longer exists.

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Authored by Andrea Germanos via CommonDreams.org,

The National Security Agency (NSA) collected over 530 million phone records of Americans in 2017 – that’s three times the amount the spy agency sucked up in 2016.

The figures were released Friday in an annual report from the Office of the Director of National Intelligence (ODNI).

It shows that the number of “call detail records” the agency collected from telecommunications providers during Trump’s first year in office was 534 million, compared to 151 million the year prior.

“The intelligence community’s transparency has yet to extend to explaining dramatic increases in their collection,” said Robyn Greene, policy counsel at the Open Technology Institute.

The content of the calls itself is not collected but so-called “metadata,” which, as Gizmodo notes, “is supposedly anonymous, but it can easily be used to identify an individual. The information can also be paired with other publicly available information from social media and other sources to paint a surprisingly detailed picture of a person’s life.”

The report also revealed that the agency, using its controversial Section 702 authority, increased the number of foreign targets of warrantless surveillance. It was 129,080 in 2017 compared to 106,469 in 2016.

As digital rights group EFF noted earlier this year,

Under Section 702, the NSA collects billions of communications, including those belonging to innocent Americans who are not actually targeted. These communications are then placed in databases that other intelligence and law enforcement agencies can access—for purposes unrelated to national security—without a warrant or any judicial review.

“Overall,” Jake Laperruque, senior counsel at the Project On Government Oversight, said to ZDNet, “the numbers show that the scale of warrantless surveillance is growing at a significant rate, but ODNI still won’t tell Americans how much it affects them.”

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After first erupting on Thursday, Hawaii’s Kilauea volcano has continued to send molten magma up through the eight fissures that have now opened up in the ground in a part of Hawaii that is home to several ritzy neighborhoods, including the tony Leilani Estates, where residents have been forced to flee as the eruptions, as well as several powerful earthquakes, have destroyed power lines and disrupted and left parts of the surrounding area without water.

One area resident summed up the neighborhood’s plight in a statement to the Los Angeles Times.

“This is as bad as it gets,” said John Bennett, 61, a resident of the Leilani Estates neighborhood forced to evacuate. “We can’t go back in yet. I feel lost. I don’t know what to think. I’ve never been in this situation before.”

The estimated 1,800 people who live in the affected area have sought temporary respite in government shelters. Others have moved in friends on other islands. 

At least nine house have been destroyed in Leilani Estates a the fissures have continued to spew lava through the lower Puna subdivision, according to the Honolulu Star Advertiser.

Some have said they don’t know whether the pets that they left behind will survive the natural disaster, according to the Washington Post.

Bennett, the man quoted above, said the eruption took him by surprise. He first learned what was happening when he came home Thursday and noticed that a fissure had opened up in his front yard.

Bennett’s wife Roberta, an assistant librarian at Kamehameha Schools on the island of Hawaii, was away on Oahu when the magma started flowing, but she quickly flew back with their son Keoni, 29. The family stayed in the house until Friday, when they were forced to leave because of the magma flows.

“Thursday night we saw the glow of lava about a half-mile away from our house,” Bennett said. “The next day we packed and left with our three dogs.The reason we left was the air quality was so bad, with a strong sulfuric smell coming out of the ground.”

Bennett, who works as a company that transports gas, diesel and jet fuel around the island, told the LA Times they have been staying with friends in Hilo on the Big Island.

“We’re strong. I’ve got my wife, my son is back in Honolulu. I think my house is still standing. I heard that four homes have been destroyed.”

Two new cracks in the ground began spewing lava from the volcano Saturday, emitting a toxic gas that further compounded the danger to residents, according to USGS.

Active eruption of lava and gas continues along Kīlauea Volcano’s lower East Rift Zone within the Leilani Estates subdivision. Additional fissure vents producing spatter and small lava flows developed early this morning, and additional outbreaks in the area are likely. Deflationary tilt at the summit of the volcano continues and the lava lake level continues to drop. There is no active lava in the Puʻu ʻŌʻō area. Aftershocks from yesterday’s M6.9 earthquake continue and more should be expected, with larger aftershocks potentially producing rockfalls and associated ash clouds above Puʻu ʻŌʻō and Halemaʻumaʻu Crater.

By late Saturday afternoon local time, magma was only flowing through fissure No. 7 – but that fissure alone was producing enough lava to continue threatening the surrounding area, said USGS volcano scientist Wendy Stovall.

Since the eruption Thursday, quakes have been shaking the island at regular intervals. The island has also endured two particularly large quakes: A 5.6-magnitude quake hit south of the volcano, which was followed by a 6.9 magnitude quake.

The latter quake was felt as far away as Oahu, and it also struck in nearly the exact same place as a deadly 7.4-magnitude earthquake in 1975.

What’s worse, the gas flowing up through the fissures is making the area even more hazardous to people living in the area.

“The sulfur dioxide gas is very intense” and a “dangerous hazard in the area,” Stovall said. “This is a continually evolving situation.”

Videos posted on social media showed plates crashing the ground as the floor.

#earthquake #hawaii video my boyfriend took in our house in Papaikou during the 6.9 earthquake 😳 pic.twitter.com/xAAjeN1zFO

— Allison (@Allieb1792) May 5, 2018

The quakes also forced the closure of Hawaii Volcanoes National Park after some of the trails were damaged. The first quake triggered a cliff to collapse into the ocean near the Jaggar Museum.

Park officials said they canceled all tours Friday afternoon and evacuated about 2,600 tourists from the area.

“Safety is our main priority at Hawai’i Volcanoes National Park, and it is currently not safe to be here,” park superintendent Cindy Orlando said in a statement. “We will monitor the situation closely, and reopen when it is safe to do so.”

Geologists from the USGS said the quakes around Puna most closely resemble the events that precipitated a 1955 eruption. That eruption lasted about three months and left almost 4,000 acres of land covered in lava.

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