Dear Mr. Berko: I own 100 shares of JPMorgan Chase and 50 shares of Tesla, both at a profit. I think Elon Musk, the CEO of Tesla, is a genius. Should I buy more of these two issues, hold them or sell them?
- RP, Moline, Ill.
Dear RP: Never in a hundred, never in a thousand and never in a million years would I consider owning Tesla Motors (TSLA-$260) as an investment. Elon Musk convinced 18 Wall Street analysts that TSLA will earn between $2.44 and $4.36 a share next year. Now 18 of the Street's finest believe that TSLA shares could rise to $465 in 2016. If TSLA, with permission from the gods of wealth, were to reach that price and earn $4.36 a share, the shares would trade at 107 times earnings. TSLA's volatility and glamor make it a superb trading stock, but with a potential price-earnings ratio of 107-to-1, it cannot be considered an investment. Though Fidelity, T. Rowe Price and Vanguard funds own TSLA, it's more interesting to note that such fund families as American Funds, Franklin Templeton Investments, Dodge & Cox, Oppenheimer, Invesco, Goldman Sachs and Dreyfus don't own a single share.
Meanwhile, Elon is too loopy for my tastes. He wants to build a high-speed transportation system called Hyperloop and a supersonic jet with electric fan propulsion and has a plan to nuke Mars and then prepare it for colonization. I'm not comfortable with Elon. He has enjoyed enormous success in the digital world, but when it comes to building things with moving parts, his record isn't noteworthy. Even Elon's SolarCity (SCTY-$48), with $1.5 billion in debt, continues to lose hundreds of millions of dollars. That said, SpaceX, a private company with sweet contracts from NASA, may be profitable. So far, Elon's SolarCity, SpaceX and Tesla have enjoyed over $5 billion in government subsidies. Therefore, your concern should be: Can Elon's companies slash development costs before this taxpayer largesse ends? Tesla's shares may rise higher because it's a trading stock. But I recommend selling TSLA before Porsche's Mission E, an all-electric car that hits 60 mph in three seconds, reaches the market. It has a 300-plus-mile range, will cost less than Tesla's Model S and only takes 15 minutes to charge.
JPMorgan Chase (JPM-$61) has some iffy oil and gas loans outstanding based on oil between $80 and $110 a barrel, and last quarter, management provisioned $140 million to cover potential losses. Now some analysts believe that this amount could be much higher if oil and gas prices remain low. U.S. crude is now about $45 a barrel, and JPM's management is required to set aside money to cover potential losses if the loans show signs of deteriorating. Because I don't trust JPM's management to fully comply, I recommend selling your shares.
JPM is also one of the most crooked banks in the U.S., too bloody crooked for my taste. I can't abide by management's blatant larceny, which has gone unchecked for a decade and cost consumers multiple billions of dollars.
If you got caught robbing $3,000 from a Chase branch, I'd wager a dollar to a dozen of Dunkin's stale afternoon doughnuts that you'd be tossed in the slammer faster than your lawyer could say "shazam!" However, JPM has paid more than $26 billion in fines since late 2012 for stiffing and swindling the public, and not a single JPM employee has paid a penny or gone to prison.
JPM stole billions from public pension funds, caused billions in losses by deceiving investors about the quality of mortgages they had bought, egregiously overcharged its credit card customers, harmed consumers by making material errors in hundreds of thousands of debt collection lawsuits, gamed the energy rules by manipulating electrical power markets in California and the Midwest, which cost consumers hundreds of millions of dollars, unlawfully manipulated the interest rate and currency markets, etc. The list of infractions seems endless; the $26 billion in fines (so far) is mind-boggling; the ruthlessness of management is unimaginable; and the reaction of the Department of Justice under Eric Holder and Loretta Lynch tacitly suggests approval.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, Sep 29, 2015
