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This is going to be part one of a two part article about EV’s. Love them, hate them, or ignore them, they’re here to stay. But, there’s so much to the story that most people aren’t thinking about, that maybe there’s some way to capitalize on this growth. As always, the issue is “storage” meaning batteries, and it’s the stuff in the batteries that is getting hard to find. So, let’s get through some of softball stuff fist.
Have you ever driven or ridden in an Electric vehicle? Especially one with the quality of say the Tesla? If not, you owe it to yourself to drive one. Now, it’s sort of tacky to go to the dealer and try and get a ride in one, with NO intention of ever buying. You’re simply wasting the dealers time and money. Don’t do it.
An easy way to get a ride in one of these things is via Turo. If you’re not familiar with Turo, it’s sort of like Air BNB. With Air BNB is you have a home that you don’t use all the time, you can list it with ABNB and rent it out. Many thousands of people use ABNB to pick up nice rental money on their second or vacation homes.
Turo works the same way. If you have a car that you don’t use a lot, you can list it on Turo, and people can rent it for a day, a weekend or a week or two. It’s pretty well done, and they cover you with a million dollar umbrella policy against damage and liability. Anyway…
Most decent sized towns have someone on Turo with a Tesla model S you can rent for a day. Most of them run from about 120 – 135 dollars per day. Folks, to get the REAL inside story on why Electric vehicles are so incredible, you owe it to yourself to spend a day in a Tesla. Pick a Saturday, take your wife on a local road trip, go to dinner and enjoy the vehicle. I think you’ll like it.
What you’ll notice is the Quiet. The first time I was in one, I was grinning from ear to ear. I was going down a nicely paved highway, and there’s simply no engine noise. None. The second thing you’ll notice, if you’re driving it, is the power. This dead silent beast launches effortlessly from a stop, and it’s nothing but pure fun. Yeah the bells and whistles are fun, yeah the displays are Star Trek intrigue, but I don’t much care about all that. I was more interested in the ride, and can tell you quite unashamed, they are incredible. Sporty, quick acceleration, dead quiet, and just a hoot to drive.
If you’ve been with me for any length of time you know I’m all about solar power. I’m totally into electric vehicles. Many don’t know it, but back in the 30’s a lot of the local milkmen in the Philly area, actually used electric trucks. They were so quiet that the milkmen didn’t wake their customers with loud diesel trucks like the competitors. They were reliable, didn’t care about the outside temps, didn’t need anti-freeze, and like all things energy, the “batteries” were the big hang up.
I don’t know how many articles I’ve written over the past 25 years about solar power. But it’s been a lot, because it simply makes so much sense. The Sun blankets the earth with enough solar energy in ONE day, to power everything we have on the planet for years untold. We just need to harness it and store it. That means “batteries” of some form and batteries are the weak link in the system. The only reason ( well one of the only reasons) we aren’t completely off fossil fuels is because no one has created the ultimate storage solution.
Well that’s obviously the problem with anything that’s not plugged in. Your flashlight might be the best of the best of the best. Yet no matter how good it is, if you use it for a few hours, your battery is going to fail. Same with your laptop. Even the best batteries on the market will only power your laptop for a few hours of video play and internet connection.
This problem is multiplied in Electric vehicles. To get a 2000 pound ( or more) vehicle to go 200 or 300 miles, At highway speeds, with the air conditioner on, and the stereo playing and the displays functioning, takes a LOT of power. To supply that much power you need a pretty hefty battery, and because of “cycle fatigue” at some point that battery is going to need to be replaced. Therein lies the big problem.
Now, in a “perfect” world (one we don’t have yet) you could put up say 12 solar panels on your roof or in your yard. You’d capture enough energy in a single bright day to charge up your storage batteries. Then after using your electric vehicle all day, you come home and plug into your battery bank and recharge.
That equates to almost “free” fuel. Yes you need to buy the panels, the storage batteries, the solar charger/inverter etc. I get all that. But if battery technology was to the point where you didn’t have to replace your storage batteries every 3 – 5 years, or your cars battery every 4 – 7 years, you could go for the next 20 years for “free”. Sure you might only have a range of say 200 miles, but how many times do you travel more than that on a daily basis? For most people the answer is “not many”.
I have an electric trolling motor for my little boat. It runs for about 5 hours on a standard (granted high capacity) battery. After putzing around the back bays chasing Redfish or speckled trout or what have you, I simply take that battery and attach it to the solar charger I have connected to just 2 panels. In one bright day, or two overcast day, that battery is back to 100%. Cost? Nothing now. I think I’ve re- paid for those panels and chargers many times over.
That’s what I envision for electric cars. Sure the layout will be bigger as you’ll need more panels and a bigger charger, etc, but you get the idea. How incredibly cool would it be to use the Sun that God gave us for all life, to supply our energy needs, including the “fuel” for our vehicle? I think it’s just shy of nirvana.
But we “ain’t” there. The problem is the same that they had back in the 1930’s. While battery technology has come a long long way in the last 100 years, they’re still not perfect. They don’t hold a charge long enough, often give back that energy unevenly, take too long to recharge and they die after “X” amount of cycles.
So the big push has been to incorporate ever more exotic materials into the manufacture of batteries. Chemicals like Lithium, Graphene, Cobalt, Graphite, etc, are being mined around the world to supply the demand for all the new electric vehicles being introduced.
Consider this: in 2015 there were 1.26 million electric vehicles sold world wide. In 2016 that jumped to 2 million. Sales for 2017 are up 86%. . Every major manufacturer from Porsche to BMW to you name it is introducing their own version of an Electric vehicle. Cities are passing laws where you won’t be able to use a gasoline car. I kid you not folks. Oxford (UK) will not allow gasoline cars by 2020. Paris says no gas cars after 2030. Oslo says no more gas or diesel by 2022.
This isn’t rocket science. If they’re going to turn out millions more electric cars, cities are to ban gas motors, thus driving even more demand, more and more electronic consumer goods needing batteries, Tesla home battery packs being cranked out for homes, means just ONE thing. The demand for the chemicals that they currently use is going through the roof.
But there’s a dark side to this that no one mentions. I’m not an electric vehicle fan because I’m some wild eyed Enviro nazi. Yes I care about the environment of course. But that’s not my drive for all things electric. Because unlike so many of the more shallow environmentalists, I completely understand the absolute RAPING of nature that digging for all these minerals is causing. Folks, they don’t show this stuff much, but the mining operations going on around the globe in the hunt for these exotic minerals is destroying a lot of property.
All that said, the push for EV’s is on. The push for ever bigger and better batteries is on. And the demand for the chemicals needed will rise by over 200% in the next two years. That means “someone” is going to make money digging this stuff up and distributing it.
In Sunday’s letter we’re going to talk about individual companies that might have a bright future, by delivering the materials that are going to go into these new version batteries. Should we be buying lithium companies? Or how about Graphite and graphene? Cobalt? Let’s dive into that quagmire on Sunday, but the answer is yes, I think there’s opportunity here.
On Tuesday we were witness to a real spectacle. After a soggy listless day on Monday, we came into Tuesday am with 3 big DOW stocks reporting earnings. One by one they “beat” the earnings and the futures went crazy. By 8:30 am, they were indicated to open us up by over 150 points.
There are things that drive us old school “investors” crazy. One of them is financial engineering and that’s exactly what we saw on Tuesday am. We were told that CAT beat the estimates on the top and bottom line ( Revenues and profits) That sent the stock 10 dollars higher to new all-time highs. But were the earnings really that good? Take a peek at this:
This is for CAT, the same company that hit an all time high Tuesday:
Q3 2012: $16.4B/$2.54
Q3 2017: $11.4B/$1.77
Stock price: 2012: $85 2017: $139
Are you seeing the frustration? CAT has made 5 billion LESS this quarter in revenues, and about 80 cents a share less in profit, but it’s heralded as the best thing that’s ever happened. This is NOT organic growth folks.
This is manipulation. The analysts know that CAT wasn’t “growing” for all those years, so they lower the estimates and lower the estimates until it’s sure they can beat them. Then when they do beat them, they cheer and blow kazoo’s like something good happened. It drives me nuts.
Today things weren’t so rosy. You can come up with any excuse you’d like, but the bottom line is that “someone” did some profit taking today. At one point during the day the DOW was almost off 200 points and the S&P was down 26.
Again, you can say it was lousy earnings out of Chipotle, or you can say it’s the flack over “Flack” or it’s this or that. It’s all just an excuse, not a reason. So, as the session wore on, they started nibbling as they always seem to do, and when the final bell rang, we were down just 112 DOW points and 12 on the S&P.
Yes that’s more than they’ve given up lately. Yes it’s true that one day, a drop like today is going to be the start of a real correction, a correction that’s almost 2 years overdue. But, was today the start of it? Naturally, we don’t really know. What we do know is that we’re entering the seasonally strongest period of the year. We know that fund managers that didn’t believe in the market are “chasing” to get in. We know that the Central banks are still printing. On the surface, it seems that no, today probably wasn’t the beginning of the end.
That said, I think you can sense the weariness. The heaviness. This market is tired and the earnings simply don’t support the levels. The SPY put in almost 100 million shares traded today, on a DOWN day. That’s more daily volume than we’ve seen in months and again…on a down day. That’s not constructive to the bull case.
My feeling is that they’re going to shake this off and try and move us higher again. It’s stupid, we don’t belong up here and one day things will indeed change. But they’ve got the momentum working, the seasonality working and it simply “seems” like today was a “one day wonder”.
We didn’t sell our open positions today, opting to hold on and see if this blossoms into something bigger or not. We’ll certainly know more tomorrow. Good luck out there and don’t throw caution to the wind.