Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

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<a href="https://www.smartkarma.com/entities/ford-motor-co" target="_blank" data-smartkarma-citation="entities:19225:1" rel="noopener">Ford Motor Co (F US)</a> <a href="https://www.youtube.com/watch?v=o0F9Uktpgtk#action=share" target="_blank" rel="noopener">revealed</a> on Sunday night its sexy new Mustang Mach-E, which is aimed squarely at Tesla's Model Y and set to hit the market about the same time next year.<a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> hardly needs even more demand pressure. Estimates out Friday from <a href="https://ev-sales.blogspot.com/2019/11/" target="_blank" rel="noopener">Ev-Sales.blogspot</a> showed Tesla's global deliveries fell 10% y/y in October to the lowest levels since tepid February results despite sales being fully ramped-up now in all major markets. Model 3 deliveries led the decline by falling 65% versus September, down 27% y/y, which threatens Tesla's ambitious, albeit dramatically reduced guidance for fourth-quarter deliveries.Investors may not notice or care since they’re still celebrating Tesla's surprise third-quarter profit by driving the stock up 41% to $359.50, the highest since December last year, and its bonds up four points to 96.2 (6.1% ytw), the highest since December 2017.Never mind that net income fell 54% versus last year on revenue down 8%, gross profit down 22%, and EBITDA down 7%. Free cash flow plunged 58%. Or that all of Tesla's "profit" in the third quarter was traced entirely to nonrecurring &amp; nonoperating items and evolving accounting maneuvers whichcontinue to mask ongoing weakness in operations, much like the similarly constructed contributions I identified in third-quarter results last year (see my report <a href="https://www.smartkarma.com/insights/great-magic-trick-tesla-now-do-it-again" target="_blank" rel="noopener">Great Magic Trick Tesla; Now Do It Again</a>, 11/29/18) and in every quarter since then. Such boosts comprised more than $1.1 billion (54%) of reported LTM EBITDA as of September 30th, with leverage "improved" as a result to a still high 6.3x versus the unvarnished 11.6x multiple on core operating EBITDA (see attached model).That's the problem with magic--it's not real, or sustainable. Read on for Bond Angle analysis, forecasts, and more.

Ford Motor Co (F US) revealed on Sunday night its sexy new Mustang Mach-E, which is aimed squarely at Tesla's Model Y and set to hit the market about the same time next year.Tesla Motors (TSLA US) hardly needs even more demand pressure. Estimates out Friday from Ev-Sales.blogspot showed Tesla's global deliveries fell 10% y/y in October to the lowest levels since tepid February results despite sales being fully ramped-up now in all major markets. Model 3 deliveries led the decline by falling 65% versus September, down 27% y/y, which threatens Tesla's ambitious, albeit dramatically reduced guidance for fourth-quarter deliveries.Investors may not notice or care since they’re still celebrating Tesla's surprise third-quarter profit by driving the stock up 41% to $359.50, the highest since December last year, and its bonds up four points to 96.2 (6.1% ytw), the highest since December 2017.Never mind that net income fell 54% versus last year on revenue down 8%, gross profit down 22%, and EBITDA down 7%. Free cash flow plunged 58%. Or that all of Tesla's "profit" in the third quarter was traced entirely to nonrecurring &amp; nonoperating items and evolving accounting maneuvers whichcontinue to mask ongoing weakness in operations, much like the similarly constructed contributions I identified in third-quarter results last year (see my report Great Magic Trick Tesla; Now Do It Again, 11/29/18) and in every quarter since then. Such boosts comprised more than $1.1 billion (54%) of reported LTM EBITDA as of September 30th, with leverage "improved" as a result to a still high 6.3x versus the unvarnished 11.6x multiple on core operating EBITDA (see attached model).That's the problem with magic--it's not real, or sustainable. Read on for Bond Angle analysis, forecasts, and more.

Alpha-Centric ESG Research

Kyle Rudden

Imagine a sell-side analyst calls. You ignore it, of course, and the voicemail goes like this:
<blockquote>
This is Hunter from Barr, King, Seals. We're downgrading Atomic &amp; Fossil Power to a Potential Future Buy, our lowest rating. Key points are that fish-kill rates from plant effluents are way up, charitable giving is down year-over-year, and the Board is still just a bunch of old white men.
</blockquote>
Sounds absurd, doesn't it?
There's a very good reason for that.
The truth is, ESG information doesn't drive stock prices.
I'm not saying ESG performance isn’t accretive to long-term value; often it is. Rather, I am saying that ESG informational events don't have nearly the same sway as their financial equivalents.
Financial information – about profits, losses, mergers, write-downs, upgrades, downgrades, and CFOs pursuing other interests – has a direct and immediate impact on securities prices.
ESG information, on the other hand, creeps into valuations circuitously.
By definition as non-financial data, ESG is always one or more degrees of separation from what really matters. ESG must impact financial metrics before manifesting, indirectly in prices.
Put another way, ESG isn't value in and of itself; it's a catalyst for value.
It's not all rain on the parade though. Some ESG events do move prices. Additionally, as the quality and timeliness of ESG data continues to improve, markets will absorb it with increasing efficiency.
This topic, how ESG information is assimilated into stock prices, is so pertinent to ESG Alpha – the core leitmotif of my research – that I will address it as a quasi-series, starting with this report.
Rather than kick this off with a buzz kill (hint: ESG scores/ratings are lousy predictors of price), I'm starting with a kind of ESG information event that affects stocks materially in the here-and-now.
Fat-tail hitting-the-fan Enron-esque ESG-related news.
Herein, I analyze a few recent ESG events that make the cut as statistically-significant in terms of inferred causality – and a few that surprisingly don't. Though not a complete list, here are a few:
<ul>
<li>Single-stock events (PG&amp;E, Toshiba, Chipotle, Steinhoff, Equifax, Bausch Health, Kobe Steel)</li>
<li>The Volkswagen "Dieselgate" or "Emissionsgate" scandal (VW, Porsche, MAN SE, and others)</li>
<li>Danske Bank A/S and Swedbank AB getting caught up in the "Baltic Money Laundering Scandal"</li>
<li>U.S. pharmaceutical companies being sued for damages associated with the U.S. opioid crisis</li>
</ul>

Imagine a sell-side analyst calls. You ignore it, of course, and the voicemail goes like this:

This is Hunter from Barr, King, Seals. We're downgrading Atomic &amp; Fossil Power to a Potential Future Buy, our lowest rating. Key points are that fish-kill rates from plant effluents are way up, charitable giving is down year-over-year, and the Board is still just a bunch of old white men.

Sounds absurd, doesn't it?
There's a very good reason for that.
The truth is, ESG information doesn't drive stock prices.
I'm not saying ESG performance isn’t accretive to long-term value; often it is. Rather, I am saying that ESG informational events don't have nearly the same sway as their financial equivalents.
Financial information – about profits, losses, mergers, write-downs, upgrades, downgrades, and CFOs pursuing other interests – has a direct and immediate impact on securities prices.
ESG information, on the other hand, creeps into valuations circuitously.
By definition as non-financial data, ESG is always one or more degrees of separation from what really matters. ESG must impact financial metrics before manifesting, indirectly in prices.
Put another way, ESG isn't value in and of itself; it's a catalyst for value.
It's not all rain on the parade though. Some ESG events do move prices. Additionally, as the quality and timeliness of ESG data continues to improve, markets will absorb it with increasing efficiency.
This topic, how ESG information is assimilated into stock prices, is so pertinent to ESG Alpha – the core leitmotif of my research – that I will address it as a quasi-series, starting with this report.
Rather than kick this off with a buzz kill (hint: ESG scores/ratings are lousy predictors of price), I'm starting with a kind of ESG information event that affects stocks materially in the here-and-now.
Fat-tail hitting-the-fan Enron-esque ESG-related news.
Herein, I analyze a few recent ESG events that make the cut as statistically-significant in terms of inferred causality – and a few that surprisingly don't. Though not a complete list, here are a few:

Single-stock events (PG&amp;E, Toshiba, Chipotle, Steinhoff, Equifax, Bausch Health, Kobe Steel)
The Volkswagen "Dieselgate" or "Emissionsgate" scandal (VW, Porsche, MAN SE, and others)
Danske Bank A/S and Swedbank AB getting caught up in the "Baltic Money Laundering Scandal"
U.S. pharmaceutical companies being sued for damages associated with the U.S. opioid crisis



nextmove, one of <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> largest fleet owners overall and its largest in Germany, just posted the most devasting Tesla review yet in a comprehensive YouTube video to explain why it canceled a $5.55 million order for additional Model 3s, which I can crystallize in a single quote:<blockquote>
"From our point of view Tesla has no process for a defect-free delivery."<a href="https://www.youtube.com/watch?v=boWp5JqqenY&amp;feature=player_embedded" target="_blank" rel="noopener"></a>
Stefan Moeller, nextmove <a href="https://www.youtube.com/watch?v=boWp5JqqenY" target="_blank" rel="noopener">video</a>, 8/16/19
</blockquote>I long have warned, most recently in <a href="https://www.smartkarma.com/insights/tesla-q2-deliveries-beat-demand-and-profit-trends-less-clear" target="_blank" data-smartkarma-citation="insights:30907" rel="noopener">Tesla Q2 Deliveries Beat; Demand and Profit Trends Less Clear</a> and <a href="https://www.smartkarma.com/insights/the-trouble-with-tesla-s-arrested-development" target="_blank" data-smartkarma-citation="insights:31131" rel="noopener">The Trouble With Tesla's Arrested Development</a>, that Tesla is actively impairing demand with its increasingly problematic manufacturing problems which have produced notably poor quality and reliability in now all its models as well as its poor customer service which have angered customers and spooked potential buyers who are increasingly driven to more trustworthy competitors. And, as I have observed, this can't be fixed with nearly a year of drastic price cuts.Such problems are far from over, so it won't be the last time we hear such stories or brace for the resulting impact. Tesla's loss of the vital nextmove order is a reminder that losing a customer can mean not just one lost sale, but scores and even hundreds of lost sales in one fell swoop--amplified by negative coverage which scares off buyers they never see.Read on for Bond Angle analysis.

nextmove, one of Tesla Motors (TSLA US) largest fleet owners overall and its largest in Germany, just posted the most devasting Tesla review yet in a comprehensive YouTube video to explain why it canceled a $5.55 million order for additional Model 3s, which I can crystallize in a single quote:
"From our point of view Tesla has no process for a defect-free delivery."
Stefan Moeller, nextmove video, 8/16/19
I long have warned, most recently in Tesla Q2 Deliveries Beat; Demand and Profit Trends Less Clear and The Trouble With Tesla's Arrested Development, that Tesla is actively impairing demand with its increasingly problematic manufacturing problems which have produced notably poor quality and reliability in now all its models as well as its poor customer service which have angered customers and spooked potential buyers who are increasingly driven to more trustworthy competitors. And, as I have observed, this can't be fixed with nearly a year of drastic price cuts.Such problems are far from over, so it won't be the last time we hear such stories or brace for the resulting impact. Tesla's loss of the vital nextmove order is a reminder that losing a customer can mean not just one lost sale, but scores and even hundreds of lost sales in one fell swoop--amplified by negative coverage which scares off buyers they never see.Read on for Bond Angle analysis.

Indonesia Political Risk Analyst

Kevin O’Rourke

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

Tax changes mark a fundamental overhaul of auto-sector regulation, designed to move from taxing based on model and engine size to rates based on emissions and fuel consumption.  Pollution in the capital is placing the governor under pressure, but the scrutiny will affect industries more broadly.  A Labor Ministry source downplayed prospects for a Labor Law revision prior to next year.  Widodo reiterated that numerous seats will go to parties -- even as two ministries headed by party representatives face KPK allegations of graft in import quotas, resulting in the arrest of a PDI-P parliamentarian.  Megawati received a fifth five-year term as PDI-P chair in a congress attended by Prabowo.  Haze is returning.  Plus, a close look at the factors causing the 6-30 blackout that covered Jakarta, Banten and West Java.

Tax changes mark a fundamental overhaul of auto-sector regulation, designed to move from taxing based on model and engine size to rates based on emissions and fuel consumption.  Pollution in the capital is placing the governor under pressure, but the scrutiny will affect industries more broadly.  A Labor Ministry source downplayed prospects for a Labor Law revision prior to next year.  Widodo reiterated that numerous seats will go to parties -- even as two ministries headed by party representatives face KPK allegations of graft in import quotas, resulting in the arrest of a PDI-P parliamentarian.  Megawati received a fifth five-year term as PDI-P chair in a congress attended by Prabowo.  Haze is returning.  Plus, a close look at the factors causing the 6-30 blackout that covered Jakarta, Banten and West Java. 

EV, Hybrid Incentives / Jkt's Air / Seats Promised for Parties / Islamists Slammed / Haze Redux

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/375/original/tesla%20GA4%20tent%20%20%20%20source%20%20%20Stephen%20Lam%20Reuters.jpg?1563394610" class="editor-image img-responsive" data-smartkarma-image-id="93375"></figure><div class="content-caption">Tesla GA4 tent. Stephen Lam/Reuters</div>CNBC filed a <a href="https://www.cnbc.com/2019/07/15/tesla-workers-in-ga4-tent-describe-pressure-to-make-model-3-goals.html" target="_blank" rel="noopener">scathing report</a> this week detailing serious problems at the <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> GA4 tent, a supposedly temporary solution set up in the parking lot last year to ease Model 3 production constraints at the company's primary manufacturing plant in Fremont, California.Even more troubling, as I long have warned, is that the problems CNBC uncovered really aren't new. Tesla's troubles also are no longer about being a quirky start-up still figuring things out as it goes. This is a $45 billion company now more than sixteen years old and more than a year into full-scale production capability for all of its models that it's expanding across the globe.Tesla denies CNBC's findings, <a href="https://www.businessinsider.com.au/tesla-workers-took-shortcuts-used-electrical-tape-model-3-goals-2019-7" target="_blank" rel="noopener">telling Business Insider</a> they are “misleading” and that it has “dedicated teams” that “track every car throughout every shop in the assembly line.”<blockquote>“In order to ensure the highest quality, we review every vehicle for even the smallest refinement before it leaves the factory. Dedicated inspection teams track every car throughout every shop in the assembly line, and every vehicle is then subjected to an additional quality control process towards the end of line. And all of this happens before a vehicle leaves the factory and is delivered to a customer. This applies to all areas of the factory, including our operations at GA4, and it’s why Tesla is able to build the safest and best-performing cars available today,'' the company said in a statement."</blockquote>Gee, who should we believe? If only there was mounting evidence from multiple sources showing Tesla has a long history of serious and escalating problems with its working conditions, plant safety, quality controls, and management oversight which already have cost the company millions of dollars in fines and settlements and yet no signs of being convincingly resolved.Hint: there is. Lots, as I've been warning since last year.Read on for Bond Angle analysis.

Tesla GA4 tent. Stephen Lam/ReutersCNBC filed a scathing report this week detailing serious problems at the Tesla Motors (TSLA US) GA4 tent, a supposedly temporary solution set up in the parking lot last year to ease Model 3 production constraints at the company's primary manufacturing plant in Fremont, California.Even more troubling, as I long have warned, is that the problems CNBC uncovered really aren't new. Tesla's troubles also are no longer about being a quirky start-up still figuring things out as it goes. This is a $45 billion company now more than sixteen years old and more than a year into full-scale production capability for all of its models that it's expanding across the globe.Tesla denies CNBC's findings, telling Business Insider they are “misleading” and that it has “dedicated teams” that “track every car throughout every shop in the assembly line.”“In order to ensure the highest quality, we review every vehicle for even the smallest refinement before it leaves the factory. Dedicated inspection teams track every car throughout every shop in the assembly line, and every vehicle is then subjected to an additional quality control process towards the end of line. And all of this happens before a vehicle leaves the factory and is delivered to a customer. This applies to all areas of the factory, including our operations at GA4, and it’s why Tesla is able to build the safest and best-performing cars available today,'' the company said in a statement."Gee, who should we believe? If only there was mounting evidence from multiple sources showing Tesla has a long history of serious and escalating problems with its working conditions, plant safety, quality controls, and management oversight which already have cost the company millions of dollars in fines and settlements and yet no signs of being convincingly resolved.Hint: there is. Lots, as I've been warning since last year.Read on for Bond Angle analysis.

The Trouble With Tesla's Arrested Development

Germany

Mercedes-Benz Group AG operates as an automobile company. The Company designs, manufactures, distributes, and sells a wide range of automotive products such as passenger cars, trucks, vans, and buses. Mercedes-Benz Group also provides financial and other services relating to its automotive businesses.

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Mercedes-Benz Group (MBG GR)

Tesla's Q3 "Magic" Fades Quickly In Q4

Ford Motor Co (F US) revealed on Sunday night its sexy new Mustang Mach-E, which is aimed squarely at Tesla's Model Y and set to hit the market...

Vicki Bryan

ESG and Stock Prices: Fat-Tail Events

Imagine a sell-side analyst calls. You ignore it, of course, and the voicemail goes like this: This is Hunter from Barr, King, Seals. We're...

Kyle Rudden

Tesla: Not At Your Service

nextmove, one of Tesla Motors (TSLA US) largest fleet owners overall and its largest in Germany, just posted the most devasting Tesla review yet in...

Vicki Bryan

EV, Hybrid Incentives / Jkt's Air / Seats Promised for Parties / Islamists Slammed / Haze Redux

Tax changes mark a fundamental overhaul of auto-sector regulation, designed to move from taxing based on model and engine size to rates based on...

Kevin O’Rourke

The Trouble With Tesla's Arrested Development

CNBC filed a scathing report this week detailing serious problems at the Tesla Motors (TSLA US) GA4 tent, a supposedly temporary solution set up in...

Vicki Bryan

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