Here’s a question for you. What’s going to have a bigger impact on your returns from the stockmarket: the deal Britain gets from the EU… or the fact we’re entering the second, most lucrative stage of the “Grand Cycle”?

It’s a loaded question, of course. You hear about Brexit every day. You may never have heard of the Grand Cycle. But that doesn’t mean it isn’t important. In fact, quite the opposite. Sometimes understanding ideas that have been completely dismissed by the mainstream is the key to seeing what’s really going on.

Akhil Patel and Dan Denning just finished a presentation about one such idea. It contains a powerful, shocking prediction about the future of the stock, property and commodity markets. If he’s right, it’ll affect you in a big way.

A word of warning though – you might not agree with everything you read. You might think it’s completely wrong. If you do, I’d like to know why. But I’d like to know why after you’ve read the report and come up with a proper counter-argument. It’s easy to dismiss ideas like this after 30 seconds. That’s a mistake. It’s worth 15 minutes of your time. Have a look:

You can get the full story on this idea by following this link.

A new world order of car manufacturers

We’re in the process of seeing a shift in the entire automotive industry, as new and innovative ways of doing things replace the old. We’re seeing a disruption.

And we’re seeing it in the financial markets, right now. In fact, just this week Tesla overtook Ford as the biggest car manufacturer in the US. Titles like that come and go. It may not last. But what forces have enabled it to rise to such heights?

That’s what Eoin Treacy – Frontier Tech Investor’s investment director – wants to explain to you today. I’ll hand you over to him.

Until next time,

Nick O’Connor
Associate Publisher, Capital & Conflict

What does the evolution of Tesla mean for everyone else?

Eoin Treacy

Tesla broke out to new highs on Monday. It is now the largest auto manufacturer in the US, having overtaken Ford.

The share’s had a stratospheric advance but most of that happened three years ago. That was when it announced it was going to build a battery “gigafactory” which would cost billions of dollars it didn’t have. Investors were still upbeat about the ability of this startup company to deliver on its promises. Therefore Tesla has been able to raise the capital it’s needed to build the factory and also to design the Model X and 3.

That battery factory is on the cusp of opening, the mega-investment phase is over and Tesla is ramping up production of the Model 3. It delivered 25,000 vehicles in the first quarter, which was ahead of the company’s own estimates. That’s all great news for Tesla’s long-suffering investors, but what does it say about all the other car companies?

General Motors is Tesla’s closest rival right now with the Chevy Bolt priced at around $35,000. The fact Tesla still has a significant edge since the appeal of owning a stylish Model 3 versus a similarly priced but boxy Bolt isn’t hard to understand.

Nevertheless, these are not the only companies investing in electric vehicles, especially as companies have to comply with emissions standards, which will now be enforced. It is only a matter of time before other companies, not least European and Japanese car manufacturers, release their own interpretations of electric vehicles. They’re going to have to because the tide is turning against diesel and they are being compelled to sell more eco-friendly cars by increasingly stringent regulations.

There is a clear difference between electric and internal combustion vehicles. The former have far fewer parts. Let me give you two examples.

 

The check engine light went on in my Porsche Cayenne a week before its MOT was due. I took it to the dealership and they told me a sensor was not working so they replaced it. The light came back on so they told me the high pressure fuel pump needed to be replaced. Next it was another sensor that was playing up. Eventually they decided it was something about dirt in the fuel lines, but I decided enough was enough and went elsewhere to have it fixed.

At the next place while chatting to the mechanic, he talked about how difficult it is for them to make a living today because car companies design the vehicle parts to have a specific shelf life after which they need to be replaced. The era of fixing cars is well and truly behind us. It means that a good part of the profit from a car is made in repairing it. He told me how he had bought a part for his Audi online and thought that he had got a great deal. The trouble arose when he tried to code it into his car’s computer. It wouldn’t work. The part was authentic and unused, but it was too old and the computer would not accept it.

On the other hand, I was chatting with a friend today who had just taken his Tesla Model S to be serviced. They told him it needed a new electrical cable and installed it for free. That’s always a nice word, but when was the last time you took your car in for a service and heard the word free?

That’s really bad news for parts manufacturers and retailers. I’m sure it caught more than a few people’s attention Monday that while Tesla was the leading mover, OReilly Automotive (a parts dealer) was the leading decliner.

The share posted one of the most impressive advances from the 2008 lows as more people decided to hold their vehicles for longer because they couldn’t afford new ones or had no access to credit. It experienced a sharp pullback in early 2016 and has since lost momentum. Readers of Crowd Money (my book on trading) will recognise that as a good example of a previously consistent trend losing consistency at the penultimate high. The share now has Type-3 top formation characteristics and it is not alone in the auto parts retailers sector.

AutoZone has a similar pattern.

Advance Auto Parts also offers a textbook example of a Type-2 top with right-hand extension characteristics. This is a really important point.

The evolution of electric vehicles is truly transformative because it is not just about what kind of car you drive. It’s about who you buy it from. Tesla doesn’t have dealerships. It sells direct. It’s about how you service your car, where you source spare parts, how it is powered and how long the battery lasts.

There are going to be clear winners and losers, and it is to be expected that some companies will soar while others will disappear. That is the essence of a capitalist system, and it is going to cause major disruption to previously entrenched sectors.

Best,

Eoin Treacy