Saturday, August 29, 2015

Joseph Nocera thinks his readers are idiots

This is an old school TigerHawk post, insofar as I bash The New York Times just because. I know, I know, it is small of me to do, but not all blogging grows from greatness.

In this morning's column, Joe Nocera denounces a particular analyst's humping of Tesla (TSLA) stock, and darkly suggests it is akin to Henry Blodget's bull call on Amazon in 1998. Fair use excerpt:

Do you remember when Henry Blodget first became famous?

No, it wasn’t when the then-New York attorney general, Eliot Spitzer, unearthed those notorious emails Blodget wrote as Merrill Lynch’s Internet analyst, the ones in which he privately disparaged companies he was publicly touting. That came later.

It was 1998, the height of the Internet bubble. Blodget was then an analyst with CIBC Oppenheimer, and the “it” stock of the moment was Amazon, which had as many detractors as it had boosters.

One day that December, with the stock at about $240 a share — and with no change in Amazon’s fundamentals — Blodget, an Amazon bull, raised his price target to $400. That day it popped more than $45; within three weeks it hit Blodget’s target. Some months later, I wrote an article about his coverage of Internet companies. It was titled “The Cheerleader.”

During the current six-year bull-market — a market that has also seen its share of excess — a new “it” stock has emerged: Tesla Motors. Led by the charismatic Elon Musk, Tesla is a company that makes beautiful, and thus far very expensive, all-electric cars, vehicles that are so fantastically well made that Consumer Reports just gave the Model S P85D sedan its highest rating ever.

Tesla is also, however, a company that eats through cash, loses money on every sedan it sells, routinely overpromises what it will deliver to Wall Street and is regularly in need of new funding.

That’s not to mention other factors impinging on Tesla: the falling price of oil, for instance, which diminishes demand for electric cars, or the fact that a number of traditional luxury auto brands are poised to get into the electric vehicle game. It’s not hard to make a case that, at around $250 a share, Tesla is as insanely overvalued as any Internet stock in the late 1990s.

And guess what? Just like the Internet stocks of yore, Tesla has its own Wall Street cheerleader: Adam Jonas, Morgan Stanley’s auto analyst.

But here's the thing. Amazon is up 10 times since Blodget made the call that Nocera ridicules, or 988% vs. around 200% for the Nasdaq and the Dow, notwithstanding the popping of the Internet bubble in early 2000. I know this in part because I shorted Amazon in 1998 for basically the same reasons that Nocera attacks Tesla now. It was a very useful learning experience for me.

The point, of course, is not to vindicate Henry Blodget or rescue Adam Jones, who is more than capable of defending himself. Indeed, Nocera seems to have justified Jones better than Jones ever could. The next Amazon, you say? Bring. It. On.

But how do you write that column, and how does your editor publish that column, without a whisper of a hint of an acknowledgement that, well, people who acted on their belief in Blodget in 1998 (and had the discipline to maintain their conviction for a few years) are far happier today -- or at least wealthier -- than people who believed Nocera? We don't even get a single "to be sure"?

You need to read the NYT so you know what is going on inside the lefty echo chamber, but it is very hard to believe anything on its editorial pages at face value. Otherwise, for example, you would think that Joe Nocera can distinguish a good securities analyst from a bad one.

Addendum (10:47 am ET, Aug 31): In a very down morning for the stock market, TSLA is up. There are no doubt many explanations, but some of it probably has to do with Nocera comparing it to AMZN in 1998. At least that's my theory for purposes of this post.


Jim S said...

Interesting article in the Wall Street Journal today, trashing Consumer Reports for being overly-fond of the Tesla Model S in their recent review.

I used to be an extremely loyal Consumer Reports subscriber, finally cancelling my subscription twenty years ago when I noticed they were on the opposite side from me on nearly every issue of public policy, none of which appeared to have the slightest relevance to their stated goal of impartial product reviews.

I remain an environmentalist, but not a watermelon (green on the outside, red on the inside.) Neither CU nor Tesla is ever likely to see a dollar from me, even though I loved the 2002 Prius we recently passed on to a friend when we decided one car is enough for us in retirement.

Gordon Scott said...

I, too gave up on Consumer Reports because of the politics. That, and their seeming insistence that there are no other products besides those sold in New England.

I wouldn't call myself an environmentalist, because that involves environmentalism, a religion with just as many sacraments and faith beliefs as Christianity. A conservationist? Yah, that I will wear.

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