…math problems [DOT 28/4/22]

cogito zero sum...

…I don’t understand how the markets work

The company’s reported total revenue for the quarter was $27.91bn, missing analysts’ estimates of $28.20bn, according to IBES data from Refinitiv. Wednesday’s earnings are Meta’s first since a dramatic report in February, when Meta lost a record $230bn in market value after revealing that Facebook had recorded its first-ever drop in daily user numbers.

The company’s first quarter earnings for 2022 represent a slight recovery, with daily active users (DAUs) on Facebook now slightly above analyst estimates. Still, the company’s 7% revenue growth year-over-year was the smallest it has reported in its 10-year history and was down 21% from a year earlier.
Meta’s investment in the metaverse will be slow to pay off, analysts have warned – and its costs reflect that: Reality Labs, its virtual reality research and product development sector, lost $2.96bn this period compared with $1.83bn in losses this time last year.
Net income from Meta’s family of apps business dropped 13% from this time last year to $11.48bn. Meta said in a guidance for quarter two, it anticipates revenue of $28bn to $30bn – slightly lower than the previous analyst estimates of $30.6bn, reflecting headwinds affecting the tech sector at large, including inflation and the war with Ukraine.


…if I did…then maybe I wouldn’t be surprised by the part in the opening paragraph of that which says that after an earnings report that mentioned that stuff…& followed what was acknowledged to be a bad enough one to push the price down…the result was…”shares up 13% in after-hours trading”

…well…not always…those markets are often skittish…& if I were good enough at math to understand how it can describe things like the shapes flocks of birds make…or schools of fish…or the logic that dictates how ants do shit…maybe I’d get it…but in general I guess I don’t exactly trust anyone who claims to be certain about what they’re going to do

A recession in Europe is almost inevitable if the war in Ukraine escalates, and Germany, which has been fiercely resisting calls to pull the plug on Russian oil and gas, finally relents. China is finding it increasingly difficult to sustain positive growth in the face of draconian Covid-19 lockdowns, which have already brought Shanghai to a screeching halt and now threaten Beijing. In fact, the Chinese economy may already be in recession. And with US consumer prices currently increasing at their fastest rate in 40 years, prospects for a soft landing for prices without a big hit to growth look increasingly remote.
The risk of a US recession has surely soared, with the main uncertainties now being its timing and severity. The sanguine view that inflation will decline significantly on its own, and that the Fed will therefore not have to raise interest rates too much, is looking more dubious by the day. With savings having soared during the pandemic, the more likely scenario is that consumer demand will remain strong, while supply chain problems become even worse.
As for Europe, blowback from economic slowdowns in China and the US would have threatened its growth even without the war in Ukraine. But the war has greatly amplified Europe’s risks and vulnerabilities. Growth is already weak. If the Russian president, Vladimir Putin, resorts to using chemical or tactical nuclear weapons, Europe will be forced to cut the cord decisively, with uncertain consequences for its economy and the risk of further escalation, which might mean imposing sanctions on China as well. Meanwhile, European governments are under considerable pressure to increase significantly their spending on national defence.

Clearly, emerging markets and poorer developing economies will suffer mightily in the event of a global recession. Even energy and food-exporting countries, which until now have benefited economically from the war because of high prices, would probably have problems.

With luck, the risk of a synchronised global downturn will recede by late 2022. But for the moment, the odds of recession in Europe, the US, and China are significant and increasing, and a collapse in one region will raise the odds of collapse in the others. Record-high inflation does not make things any easier. I am not sure politicians and policymakers are up to the task they may soon confront.


…&…speaking of confrontations that extend beyond the financial realm

Step by step, the west’s war aims are expanding. What began as an effort to supply “defensive weapons” to Ukraine has evolved into an attempt to provide heavier weaponry. This week Germany and the UK agreed to supply armoured anti-aircraft artillery vehicles to keep Russia’s air force at bay.

On Monday Lloyd Austin, the US defence secretary, said the west’s goal was to “weaken Russia” to the point where it could no longer invade or threaten its neighbours.

A day later the British junior defence minister James Heappey said it would be “completely legitimate” for Ukraine to use western weapons to strike inside Russia if need be.

[…] the language has toughened as the conflict has stalled. On the ground Russia’s well-telegraphed assault on the Donbas is still only gradually unfolding, with the gain of a handful of villages near Izyum, where the attempt to envelop Ukraine’s forces continues without any sign of a breakthrough, hindered by rainy weather, strong resistance and command and control problems.
Meanwhile, the Kremlin has seized on the slowly enhanced weapon supply to sound off. On Monday, Sergei Lavrov, Russia’s foreign minister, said that Nato was “in essence … engaged in a war with Russia through a proxy and is arming that proxy” in an interview where he also warned of the risks of a third world war and even nuclear conflict.
But given how much Russia is struggling militarily in Ukraine, the idea that Moscow could open a new front by, as Lavrov suggested, striking against weapons delivery in Nato countries, seems unlikely – not least because it would invite a western military response.
What is less certain is what the end state of the fighting will be. On Tuesday, Nikolai Patrushev, the powerful head of Russia’s security council, said “the result of the policy of the west and the Kyiv regime under its control can only be the disintegration of Ukraine into several states” in a Russian newspaper interview – arguably seeking to justify a de facto division of Ukraine along military frontlines.

On Wednesday, western officials said they would like to see Ukraine restored to the boundaries existing before 24 February – the start of the Russian invasion – “as a minimum”.

However, Ukraine is nowhere near being able to achieve such goals on the battlefield. A crucial period will come in the next month or so as the latest wave of western weapons, including US howitzers and German and British anti-aircraft systems, arrives.


…well…let’s be honest…the movements of the markets aren’t the only thing that doesn’t make sense to me

One piece of the story is obvious: Ukraine is normally a major agricultural exporter, but that’s hard to do when Russia is bombarding your railroads and blockading your ports. But there’s more to the story: Russia has halted much of its own grain exports, apparently in an attempt to hold down domestic prices. Kazakhstan, the region’s third-largest agricultural exporter, has followed suit.

Then there’s fertilizer. Modern fertilizer production is energy-intensive. Before the war, Russia was the world’s largest exporter, but Russia has now suspended those exports. Yet it isn’t just Russia. As a new analysis by Chad Bown and Yilin Wang of the Peterson Institute for International Economics points out, China — another major fertilizer producer — cut off much of its exports last year, again in an apparent attempt to keep domestic prices down. And as they point out, such export bans are, if anything, a bigger issue than the tit-for-tat tariff hikes of the U.S.-China trade war.
This is bad. It’s also an important lesson about the relationship between geopolitics and globalization.

Many people, I think, imagine that globalization is a fairly recent development. Economic historians know, however, that a surprisingly integrated world economy emerged between about 1870 and 1913, made possible by the advanced technology of the time: steamships, railroads and telegraphs. In the early 20th century, Britons were already dining on Canadian wheat, Argentine beef and New Zealand lamb.
What is true is that this first wave of globalization was relatively simple and largely an exchange of advanced-economy manufactured goods for primary products like, well, wheat. The complex value chains that characterize the modern world economy, in which, for example, cars made in wealthy nations include chips from Japan and wiring harnesses from Mexico and Ukraine, is indeed a largely post-1990 development, made possible to a large extent by containerization and modern information technology, and has pushed world trade to new heights.

But it turns out that both forms of globalization depend on a relatively stable geopolitical environment — which we seem to be losing. We’re not in “The Guns of August” territory, at least not yet, but there’s a definite whiff of 1914 in the air.

And one surprising aspect of recent economic problems, at least to me, is that they seem for now to be doing more damage to old-style globalization — should we call it globalization 1.0? — than to the complex economic relationships that developed after 1990. Despite the container shortage, the backups at the ports and all that, it’s still fairly easy to buy electronic gadgets that include components from a dozen countries. What’s really getting hit hard now is cruder stuff, like trade in wheat and fertilizer.

Food, Fertilizer and the Future [NYT]

…one thing’s for sure, though…nothing happens in a vacuum

A new push from Sen. Joe Manchin III (D-W.Va.) to launch bipartisan talks on an energy and climate bill could waste precious time that would be better spent striking a deal on President Biden’s stalled climate and social spending agenda, environmentalists and some Democrats warned on Tuesday.

Securing 10 Republican votes for ambitious climate policy could be a tall order, they said, and could slow negotiations over the bold climate provisions in Biden’s stalled spending bill at a crucial juncture ahead of the midterm elections.
“I don’t believe Republicans are serious about this,” he added. “I think this is all smoke and mirrors and that we need to get on to the work of the president and [Senate Majority Leader Charles E.] Schumer directly engaging with Manchin to see if we can strike a deal.”

Manchin shook up the climate debate on Capitol Hill yet again on Monday evening, when he and Sen. Lisa Murkowski (R-Alaska) organized a bipartisan meeting to explore the possibility of a bipartisan climate and energy security package.
Manchin insisted after the meeting with Schumer that his bipartisan energy discussions did not mean that climate provisions would be left out of any reconciliation bill that can advance.
“As I like to call him, Prime Minister Manchin, what he did is he called some people together from both parties,” Cramer said on Fox Business on Tuesday. “I just happened to be the only one from my party that showed up — not because they were disrespectful of Joe’s ideas, but just because they had other priorities.”

…speaking of priorities

Sen. Mike Braun (R-Ind.), co-chair of the Senate Climate Solutions Caucus, was not invited to the meeting, his spokesman confirmed to The Climate 202.
“It’s a little bit like a Russian promise of a humanitarian corridor,” Huffman said, referring to Ukraine’s accusations that Russia has been shelling a humanitarian corridor out of Mariupol, a southern Ukrainian port city that has been besieged for much of the war.
When asked by a reporter on Tuesday about concern that the bipartisan push is sucking the oxygen out of reconciliation talks, [Rep. Ro] Khanna responded, “There was no oxygen” — a reference to the fact that reconciliation discussions have fizzled out since Manchin came out against the measure in late December.

“One of the reasons I’m engaged in this is I think it’s the highest priority to get climate done for the midterms,” Khanna added. “And if we don’t do that, it’s a disaster.”
Inside the White House, many officials privately worry that they could fail to reach a deal with Manchin on the reconciliation bill altogether, The Post’s Jeff Stein reported. Some officials view July 4 as a crucial deadline for action.


…like I say…there’s a lot of stuff I don’t understand…but there are maybe a few that make sense to me…for example in principle I’m something of a fan of courtesy…to the point that I occasionally pine for a world in which it made a bit more sense to describe the stuff as common…but…for it to mean much doesn’t there maybe need to be a limit?

Mr. Manchin supplied a type of low-grade coal mixed with rock and clay known as “gob” that is typically cast aside as junk by mining companies but can be burned to produce electricity. In addition, he arranged to receive a slice of the revenue from electricity generated by the plant — electric bills paid by his constituents.

The deal inked decades ago has made Mr. Manchin, now 74, a rich man.

While the fact that Mr. Manchin owns a coal business is well-known, an examination by The New York Times offers a more detailed portrait of the degree to which Mr. Manchin’s business has been interwoven with his official actions. He created his business while a state lawmaker in anticipation of the Grant Town plant, which has been the sole customer for his gob for the past 20 years, according to federal data. At key moments over the years, Mr. Manchin used his political influence to benefit the plant. He urged a state official to approve its air pollution permit, pushed fellow lawmakers to support a tax credit that helped the plant, and worked behind the scenes to facilitate a rate increase that drove up revenue for the plant — and electricity costs for West Virginians.
As the pivotal vote in an evenly split Senate, Mr. Manchin has blocked legislation that would speed the country’s transition to wind, solar and other clean energy and away from coal, oil and gas, the burning of which is dangerously heating the planet. With the war in Ukraine and resulting calls to boycott Russian gas, Mr. Manchin has joined Republicans to press for more American gas and oil production to fill the gap on the world market.

But as the Grant Town plant continues to burn coal and pay dividends to Mr. Manchin, it has harmed West Virginians economically, costing them hundreds of millions of dollars in excess electricity fees. That’s because gob is a less efficient power source than regular coal.
This account is based on thousands of pages of documents from lawsuits, land records, state regulatory hearings, lobbying and financial disclosures, federal energy data and other records spanning more than three decades. The Times also spoke with three dozen former business associates, current and former government officials, and industry experts.

The documents and interviews show that at every level of Mr. Manchin’s political career, from state lawmaker to U.S. senator, his official actions have benefited his financial interest in the Grant Town plant, blurring the line between public business and private gain.
Gob, an acronym for “garbage of bituminous,” is waste coal — low-quality material dug from a mine that is mixed with rock and clay, making it harder and less efficient to burn. For decades, dark gray gob piled up on the ground outside coal mines in West Virginia, barren heaps often reaching several stories high.

But in 1978, worried about the country’s dependence on foreign oil, Congress passed a law to encourage alternative energy sources. That led to the opening of several gob-burning plants, including Grant Town.
But before AmBit could start construction, federal agencies raised environmental concerns. The company got help from Joe Manchin.
After helping to win the permit for the plant, Mr. Manchin began to profit from it.
But Mr. Manchin was not only a supplier of fuel to the Grant Town plant. He also got a share of its revenue.
Those terms, while not unheard-of, were generous to Mr. Manchin, said Stefanie Hines, a lawyer who teaches at West Virginia University and specializes in mineral rights. “These aren’t deals you give to everybody,” Ms. Hines said.

Once the Grant Town plant opened, Mr. Manchin urged his fellow state lawmakers to back a tax credit for power plants that burn gob, according to an account at the time in the Charleston Gazette. It passed the following year.

Just three plants in the entire state burned gob; Grant Town was one of them. At the time, Mr. Manchin dismissed suggestions of self-dealing, noting that he had broken no rules.
Shortly after the Grant Town plant began burning gob, AmBit said the operating costs were higher than expected, and the company was going to need more money for the electricity it was supplying to Mr. Manchin’s constituents.

Company executives sought approval from the West Virginia Public Service Commission, which balked, in part because the utility, Mon Power, opposed the request.

In 2006, with Mr. Manchin now occupying the governor’s office, AmBit again sought a rate increase. But this time, Mon Power supported its request.

The change in position followed Mr. Manchin’s involvement, according to people involved at the time.
The consequences of that rate increase turned out to be enormous. Since 2016, Grant Town has cost Mon Power $117 million more than it would have spent to buy that power from other sources, according to documents filed last year with the Public Service Commission. The utility had little choice but to buy the electricity; its contract with Grant Town doesn’t expire until 2036.
The extra costs were passed on to residents, burdening ratepayers in one of the poorest states in the nation.
In the middle of his second term as governor, Mr. Manchin handily won a special election in 2010 to fill the U.S. Senate seat vacated by the death of Robert Byrd. From a seat on the Senate Committee on Energy and Natural Resources, Mr. Manchin had an ability to shape federal policy governing oil, gas and coal.

He became one of the most vocal opponents to the E.P.A.’s proposed limits on emissions of mercury and other hazardous substances from power plants. The mercury regulations, which eventually took effect, were particularly threatening to plants like Grant Town, because gob generates more mercury per kilowatt of electricity when burned than traditional coal, according to Lisa Evans, senior counsel at the environmental advocacy group Earthjustice.

Mr. Manchin also sought to protect coal plants from more stringent regulation of coal ash, which gob-fired plants generate in higher volumes than conventional coal-burning facilities. He sponsored legislation in 2016 that gave regulatory authority over coal ash to states, rather than allowing federal regulators to dictate terms.

Mr. Manchin easily won a full Senate term in 2012 and re-election in 2018, and became a top recipient of campaign contributions from the mining, oil and gas industries.

Meanwhile, AmBit increasingly bought its fuel from Mr. Manchin’s company, to the point that it got 80 percent of its coal waste from the Manchin family business in 2020, compared to one-quarter when he first entered the Senate.
On the surface, Mr. Manchin has a business relationship with a single power plant in West Virginia.

But determining the players behind AmBit, the owner of the Grant Town power plant, is a bit like handling a set of Russian nesting dolls.

At various points, three major companies — Edison International, NRG Energy and Tokyo-based Sumitomo — owned a significant share of AmBit, through a series of holding companies that had the effect of obscuring their involvement, records show.

And while all three companies partly owned the Grant Town plant, which was paying Mr. Manchin, their representatives lobbied the Senate on dozens of bills handled by the committees on which Mr. Manchin sat, according to Senate lobbying disclosure forms. Lobbyists are not required to identify specific pieces of legislation or name lawmakers with whom they meet.
Last summer and fall, Mr. Manchin blocked the spending bill that contained Mr. Biden’s climate proposals, which had included penalties for power companies that did not reduce their coal use. But as those negotiations were underway in Washington, a different dispute was unfolding in West Virginia — one that may have affected Mr. Manchin’s incentives for ultimately opposing the federal climate bill.

For years, AmBit had warned that tighter greenhouse gas regulations could shutter the Grant Town plant. The company said it needed cash partly as a cushion against any new government limits on pollution. Last May, AmBit asked Mon Power to cancel the remainder of its contract, which expires in 2036, in exchange for a payment from Mon Power of as much as $200 million or more. That would allow Mon Power to find another source of electricity, maybe at a lower cost, and AmBit could try to find another customer for electricity from its Grant Town plant.

The stakes for Mr. Manchin were high. Grant Town was the only remaining power plant in his state that burned gob. If new federal climate rules put Grant Town out of business, his company would have no other potential customers for its waste coal.
On Dec. 29, the commission rejected AmBit’s request, and with it the chances of a financial buffer against tighter climate rules for Mr. Manchin’s most important customer.

Ten days before the Public Service Commission announced its decision, Mr. Manchin said in a statement that he could not support the president’s bill, effectively dooming it.


…& now a word from our sponsors

…sadly…that apparently seems to be a sentiment some manage to adopt with surprising impunity

Donald Trump is appealing the contempt of court order he received from a Manhattan judge that fines him $10,000 a day for failing to comply with a subpoena, according to documents filed Wednesday.

The contempt order was issued in the civil investigation by New York state attorney Letitia James into the former president’s business practices. On 7 April, James asked Judge Arthur Engoron to hold Trump in contempt of court for not turning over documents and information she had subpoenaed as part of the investigation.

Trump had promised to comply “in full” by 31 March, but did not, James said. Engoron granted James’s request, fining him $10,000 a day.
In a statement on the notice of appeal, James’s office said that Trump’s legal tactics would not thwart its inquiry. “The judge’s order was clear: Donald J Trump is in contempt of court and must pay $10,000 a day until he complies with our subpoenas. We’ve seen this playbook before, and it has never stopped our investigation of Mr Trump and his organization. This time is no different,” the office said.


…I dunno…calling it “the system” seems to imply a greater degree of things like design or control than come across to me…but calling it a game hardly seems to make sense when the stakes are considered…either way it can be hard to know what to believe when you can’t believe this shit

Who’s right? The answer is: Jonathan Haidt. Also, Hannah Arendt.

Haidt is a social psychologist at New York University and author of a cover story in the Atlantic about the destructive political impact of social media.

While sharing Obama’s assessment of social media’s harms, Haidt is more realistic about how hard it would be to design government-mandated content controls without sacrificing social media’s benefits — or devolving into censorship. It’s more important, Haidt convincingly argues, to fortify people’s independent ability to evaluate social media content than to control their access to it.
This gets at what’s genuinely new about social media — its sheer velocity and “virality” — as compared with past innovations in communications technology that also caused worries about democracy. Haidt also calls for ridding social media of bots and fake accounts by making “verification … a precondition for gaining the algorithmic amplification that social media offers” — or, in Musk’s more succinct formulation, “authenticating all humans.”

…I’ll put the link in when I get back to this one

…hmm…leaving aside this part

Billionaire tech entrepreneur Elon Musk has pledged to bring changes to Twitter on two major fronts if his deal to buy the social network closes: he wants to boost “free speech” and to “defeat the spam bots” in part by “authenticating all humans” on the platform.
Doing so could threaten users’ ability to speak anonymously or to use pseudonyms, which experts on free expression say can be crucial to protecting marginalized individuals.
Blocking users from using pseudonyms or anonymous accounts, [Jameel] Jaffer [executive director of the Knight First Amendment Institute at Columbia University] said, could expose critics of governments around the world to retribution.

One alternative, Jaffer said, is that a Musk-led Twitter could require users to verify their identity to the platform but not publicly disclose it. That way, Twitter could still potentially “authenticate all real humans” — as Musk has called for — without banning anonymity or pseudonymity. But that wouldn’t eliminate concerns about that data being shared with governments, he said.
It’s not just governments. Sensitive personal information used to authenticate users could also be seized by hackers, who already caused major breaches of Twitter data.
While the conventional wisdom is that anonymity can help fuel vitriol online, Kosseff said the research on its impact is more mixed, and some studies have even found users to be more aggressive when posting under their real names. 

He also pointed to other platforms that do require consumers to use their real names, like Facebook, as case studies in how banning anonymity doesn’t fix toxicity on social media.
Another possibility: the pledge, like others Musk has made, amounts to nothing at all.


…there’s *gestures* all of this

And that brings us to Arendt, the 20th century student of totalitarianism and author of a classic 1967 essay, “Truth and Politics.”

“No one has ever doubted that truth and politics are on rather bad terms with each other,” she wrote, “and no one … has ever counted truthfulness among the political virtues.”

From the demagogue’s bigotry, to the candidate’s unkeepable promise, to the diplomat’s white lie, some form of mis- and disinformation has forever been enmeshed in political discourse and activity and always will be. To this “commonplace” observation, Arendt added the admonition: “Nothing would be gained by simplification or moral denunciation.”

Gloomy words, but a useful corrective to Obama’s belief in “public oversight” of social media, which is so reminiscent of Walter Lippmann’s proposal — a century ago — for a “specialized class” of advisers to mediate between propaganda-prone voters and government officials.
A Jew who had witnessed the collapse of Weimar Germany and fled the Nazi regime, she knew democracies were vulnerable to extremists bent on using freedom of speech and assembly to destabilize and destroy the system. “The chances of factual truth surviving the onslaught of power are very slim indeed,” she wrote, “it is always in danger of being maneuvered out of the world not only for a time but, potentially, forever.”

Arendt placed her hope in intellectuals — artists, scientists, historians, judges and journalists — whose vocations centered on the pursuit of truth, however inevitably imperfect, and thus “require non-commitment and impartiality, freedom from self-interest in thought and judgment.”

The more apolitical these professionals are, Arendt argued, the more paradoxically useful and necessary they are to “the political realm,” as sources of trusted information, analysis and ideas.

Truth and politics don’t necessarily go together. Good luck fixing that. [WaPo]

…not that the truth is necessarily what we’re running with where some politics are concerned (apologies to @bryanlsplinter who knows this stuff already & isn’t fond of the twitter threads I’ve overdosed on today)

…&…at the end of the day…money talks…even if it sounds like it’s shitfaced…so…to go back to the elon/twitter chaos circus

…& sure…it’s abundantly obvious that elon is high on his own supply

…as well they might…even when he isn’t spouting shit on twitter…you know how they say “when people tell you who they are, believe them?”

…except…when they show themselves over & over to lie as often as not…maybe don’t?

Musk is the world’s richest person, with a net worth pegged by Forbes at $270 billion. Yet most of his wealth is tied up in Tesla shares, and the proposed deal structure would dry up most of his available liquidity.

He had already borrowed against $88 billion worth of Tesla stock, and the proposed acquisition financing for Twitter would push that figure to more than $150 billion, regulatory filings show. This would leave him little runway to get more cash out of his Tesla shares in the short term, since Tesla executives may borrow no more than 25% of the value of their pledged stock.

Musk’s loan against his Tesla stock to finance his Twitter bid is also expensive, potentially costing him about $1 billion annually in interest and amortization expenses, a regulatory filing shows. That gives him an incentive to refinance the proposed debt package at the earliest opportunity.

…there’s also the part where if he backs out he has to pay them $1billion…but in the context that might actually be the proverbial chump change

It is not clear how much of the $21 billion in cash that Musk has committed to the deal is immediately available to him, and whether he would have to cash out on some of his assets. They include stakes in rocket maker SpaceX and tunneling startup Boring Co.

Musk has also hinted at moving Twitter away from advertising, a prospect that has given pause to some private equity firms, given that Twitter relies on it for the majority of its revenue.


…that was a few days ago, though…& there’s shit everywhere that treats this sale as a done deal now…so I expect all that’s much clearer now…right?

Musk’s documents say that $13 billion in financing came from Morgan Stanley and the other banks, as much as $12.5 billion would be loans secured by his Tesla stock, and committed $21 billion in equity, “directly or indirectly” from him, although he didn’t say what the source of those funds would be. The filing says that the equity commitment could be reduced by contributions from others or additional debt taken on.
Tesla allows executive officers to use shares as collateral for loans, but limits the borrowing to 25 percent of the value of the pledged shares. Musk owns 172.6 million shares worth $176.47 billion. Just over 51 percent of his stake already is pledged as collateral, according to a Tesla proxy statement. That means Musk could use the remaining stake to borrow about $21.5 billion.


…& I know that’s from a few days ago, too…but “limits the borrowing to 25 percent of the value of the pledged shares” really tripped me up when it gets followed by “over 51 percent of his stake is already pledged as collateral”…if you don’t allow your stakeholders to leverage their shares for more than 25% of their worth so as not to let them expose you to too much risk…how the hell does it make sense that they can do that with getting on for all of their stake…it doesn’t make sense to me

…speaking of which…tesla apparently has a market cap somewhere in the region of $910 billion or so…& elon has some 17% or so of tesla’s stock…so by that 25% rule he’d be able to use that as collateral to borrow a total of something in the region of $39billion…except I’m clearly missing something that’s apparently obvious since I swear I read in a few places that the stock he’d already pledged as collateral was around $88billion…before the twitter thing was in the picture

He had already borrowed against $88 billion worth of Tesla stock, and the proposed acquisition financing for Twitter would push that figure to more than $150 billion, regulatory filings show. This would leave him little runway to get more cash out of his Tesla shares in the short term, since Tesla executives may borrow no more than 25% of the value of their pledged stock.

Musk’s loan against his Tesla stock to finance his Twitter bid is also expensive, potentially costing him about $1 billion annually in interest and amortization expenses, a regulatory filing shows. That gives him an incentive to refinance the proposed debt package at the earliest opportunity.

Analysis: Musk tears up buyout playbook with $46.5 billion Twitter financing [reuters]

…& apparently he isn’t pledging all of it…what he’s leaving in his back pocket is theoretically enough to sell off & (even after tax) cover the $21billion he’s promised as the equity slice of his end of the financing deal

The margin loan to fund a Twitter bid requires a pledge of nearly 59mn Tesla shares, or about 85 per cent of Musk’s total stake. His remaining unpledged stock is worth about $25bn at current prices so if sold, and allowing for an overhang discount, there would be just enough to cover the cash component of the offer. It’s a big ask.

But such calculations ignore a big event looming in the Muskonomy: the final payout from Tesla’s 2018 bonus scheme. Musk’s last awards will unlock shortly, assuming board approval, and will carry a five-year selling lockup.

Each of the three tranches due Musk give him the right to buy 8.4mn Tesla shares at $70, a more than 90 per cent discount to the prevailing market level. So, based on a $1,061 share price at pixel time, Musk could buy Tesla stock worth more than $25bn for not much more than $1.5bn. Factor in those shares and the margin loan financing looks a bit less onerous.

Tesla’s forecast-shredding Q1 numbers overnight, and resultant 8 per cent share price rise, are therefore usefully timed. But are they everything they appear?
There’s an answer of sorts: Warp, Tesla’s in-house enterprise resource planning software. Warp replaced SAP as Tesla’s ERP system in 2012, having reportedly been built in under four months. It has since grown from a tool for production planning into a central megabrain for managing everything from the group’s e-commerce sales and customer service to over-the-air software updates.

This kind of “amazing, first-of-its-kind, best-of-breed” software might be worth billions if spun out yet Warp has never even merited a mention in a Tesla filing, says Campling. Drawing a parallel with Star Trek’s fictional physics, he “can’t help but wonder if there are more than one kind of Warp Drive that are science fiction and the stuff of dreams.”

Some might call it incredible. But then, what is there about the Muskonomy that isn’t?

A Warp-drive journey through the macrocosmic Muskonomy. [FT]

…& you know what…even the FT shows signs of struggling with this stuff

Note: the maths in paragraph seven were fixed post publication.

…& who can blame them?

Musk’s filing with the U.S. Securities and Exchange Commission on Thursday details $25.5 billion in debt financing from Morgan Stanley and other financial institutions, including margin loans backed by his equity stake in Tesla Inc. It also includes $21 billion in equity financing to be provided by Musk himself.

Musk currently has about $3 billion in cash or other somewhat liquid assets after spending $2.6 billion buying a 9.1% stake in Twitter in recent months, according to Bloomberg estimates. His other holdings are tied up in Tesla stock — about $184 billion worth — and his ownership of closely held Space Exploration Technologies Corp.
Musk would need to pledge about 58.7 million Tesla shares to secure the $12.5 billion margin loan facility included in the debt financing. That would bring the total percentage of shares he’s pledged to about 85% of his holdings. The margin loan facility documents do allow Musk to sell his unpledged Tesla shares.

The unpledged shares are worth more than $25 billion, so if he sold almost all of them, it’d be enough to cover the $21 billion in equity financing, after taxes, coupled with the cash he has now.

Alternately, Musk could find partners to contribute to his equity financing. But one thing’s for sure: The mystery over how Musk will fund his bid was only partially solved today.

Elon Musk’s $21 Billion Equity Plan for Twitter Casts Cloud on Tesla [Yahoo Finance] […hey, the FT cited it as a source so who am I to turn my nose up at it?]

The value of Tesla shares traded on any given day often dwarfs the next most actively traded stock in the US, including Apple, chipmaker Nvidia and Amazon. That liquidity gave bankers comfort: in a potential crisis in which Musk defaulted, lenders believed they could sell enough Tesla stock in the open market — even while it was falling in value — to be made whole on the loan.

Most importantly, it was the $21bn of equity that Musk promised to commit personally that turned the tide and led banks to scramble for a piece of the action. “Everyone did the careful analysis around it, but at the end of the day it’s the equity cheque. There’s never been an equity cheque like this,” one person involved in the sale negotiations said.

From punchline to deal in under 2 weeks: how Elon Musk won his Twitter prize [FT]

…maybe they would…but

Elon Musk could owe Twitter as little as $1bn if his $44bn bid to take the social network private falls through, a significantly lower penalty than in the typical leveraged buyout.

The “reverse termination fee”, revealed in a regulatory filing by Twitter on Tuesday, means Musk could abandon the deal by paying less than 1 per cent of his net worth and a fraction of the $21bn of equity he has committed to complete the acquisition.

Twitter can try to sue Musk to make him to close the deal if the billionaire sews up the debt component of the bid, worth $25.5bn, but refuses to complete the transaction, said legal experts. However, Musk’s monetary damages would be capped at $1bn.

Favourable terms mean billionaire could back out by stumping up fraction of net worth [FT]

…then again…from a guy who’s got a documented history of having used twitter to manipulate a price or two…I might not be the only one who might be more likely to call him a troll?

…so…I don’t claim to know what it all adds up to…but I’m pretty sure the people getting the raw end of the deal aren’t the ones with so much money it makes my head hurt just trying to understand how their world works?

…& I promise I will hunt for tunes…but this is late even by my standards…so those will have to follow



  1. Re: stock market. The disconnect is always between actual and perceived value. Actual value is a rear-view mirror concept. You have no idea what something is worth until you collect the money that someone pays you for it. eBay sellers have a very firm grasp on this concept — I can guess my Talking GI Joe is worth $200, but I list it for $200 or best offer, and see what happens. That final price is GI Joe’s actual value, until the next time someone sells it. I may tell people (or my insurance company!) it’s worth $500, but that’s it’s perceived value, based on general information available in the GI Joe marketplace.

    Perceived value is what bounces up and down, all sound and fury, and signifying … well, not nothing, but not as much as people believe it does. Yes, I can sell when stocks shoot up and lock in those stocks’ actual value to me, but that really doesn’t reflect the value of the underlying company. That’s why you hear analysts talk about “fundamentals,” the essential pieces of a business that do determine its value. Number of customers, revenue, accounts receivable, debt, cash reserves, physical assets, inventory, even intellectual property. Those are “real” and can inform a stock’s perceived value. If the market lets it.

    Think of Gamestop’s big fluctuation. Same company today as it was yesterday, but a bunch of people drove up the perceived value by frenzied buying. Then other stuff happened, and the value crashed back down to “real.” That’s a fast overview because I’m not going into stock futures and what really happened there.

    Bottom line is short-term fluctuations mean almost nothing unless you’re a day trader, which is another word for gambler. And keep your hands off my Talking GI Joe.

    • …not gainsaying any of that…but by way of both explaining the depths of the rabbit hole I went down yesterday about this stuff…& hinting broadly at the swathes of relevant stuff I (contrary to appearances) managed to leave out of this when I finally persuaded the thing to post…the past may be a foreign country…but once the landmarks start including things like “ebitda” the present seems like an alien realm to me…let alone the future?

  2. This isn’t really germane I suppose but I wonder if there are two (or more) classes of Tesla stock, an A (which gives you more benefits, including enhanced voting rights) and B (which doesn’t). Sometimes companies offer A shares to top management (almost never to the drones) that have clauses in them that say they can be converted to multiples of B shares. All shares cost the same, it’s just that you and I can’t buy the A class, just the B class.

    So if, for example, Musk has 1 share of class A stock and there’s a clause that says it can be converted to 10 shares of class B stock, and the stock is selling at $100 per share, his one A share could be converted to 10 B shares, which he could then sell for $1,000 rather than $100. But that would dilute the value of all shares I guess, if he did enough conversion.

    I seem to remember that the Sulzberger family has an iron grip on the New York Times this way. The family doesn’t own a majority of Times stock, but their A shares have voting rights, and in this way they can keep over-promoting relatives into top jobs. Similarly, I think this gives them a way to select who will be on their board, and let’s just say they’re never going to ask me to join.

    • …that sounds about right…even when the shares aren’t publicly traded there seems to be a lot of juggling zeroes about for reasons that are largely opaque to me

      …so I think they “diluted” shares in spaceX by just saying for each share there was there would henceforth be 10…which presumably made each share a tenth of the value they’d previously had…while changing nothing else…& I’m sure there was a logic behind that, too…but I’ll be damned if I could explain it?

    • And speaking of the New York Times, they have decided that 2022 is the time to hire an investigative reporter for their skeletally staffed Albany bureau!

      Yes. They will supplement their dutiful recasting of State government press releases with someone who, nominally, might do a little asking around and fact checking. I doubt they’re doing this out of civic duty; they’re probably just pissed off that all the juicy stories that everyone wants to read are being broken by some outlet they’ve never heard of in some dreary backwater they’re never been to (the Albany Times Union) or, even worse, that pesky tabloid that keeps “degrading the conversation” (the New York Post.)

      I have no idea how this will play out. Two of our last three Governors, all Democrats, have resigned in disgrace, and the one in the middle declined to run for re-election due to “ethical questions” surrounding him (David Patterson, who ascended to the throne after Eliot “Client #9” Spitzer resigned.) They all had the Times’s full-throated support up until they didn’t, just like our former disgraced Lt. Governor, whose shady dealings and federal probes were known to anyone who followed these things (the Times certainly didn’t) at least a year before Gov. Hochul plucked him from well-deserved obscurity.

    • …yet another thing I don’t have a good answer for…but…although he was talking mostly about stuff relating to social media rather than the likes of rand paul directly…I feel like there’s a clue in the title of that atlantic piece by haidt

      Why the Past 10 Years of American Life Have Been Uniquely Stupid

      …&…some of it seems like it could map onto people like him without much tweaking?

      It’s not just the waste of time and scarce attention that matters; it’s the continual chipping-away of trust. An autocracy can deploy propaganda or use fear to motivate the behaviors it desires, but a democracy depends on widely internalized acceptance of the legitimacy of rules, norms, and institutions. Blind and irrevocable trust in any particular individual or organization is never warranted. But when citizens lose trust in elected leaders, health authorities, the courts, the police, universities, and the integrity of elections, then every decision becomes contested; every election becomes a life-and-death struggle to save the country from the other side. The most recent Edelman Trust Barometer (an international measure of citizens’ trust in government, business, media, and nongovernmental organizations) showed stable and competent autocracies (China and the United Arab Emirates) at the top of the list, while contentious democracies such as the United States, the United Kingdom, Spain, and South Korea scored near the bottom (albeit above Russia).

  3. i’d be okay with musk buying coca cola if he actually does put the cocaine back in….

    that might be enough to turn me away from coffee and back to the sugar juice

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