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Don't Drink the Jamba Juice

June 6, 2018

“If the company comes up short, fawning investors who continue to act like fans of their celebrity CEO, even when he needs some tough love from them, deserve whatever fate they may get.” - Therese Poletti


I wanted nothing to do with finance before I read Josh Brown’s book, Backstage Wall Street. I experienced K-12 at an all-boys private school in Greenwich Connecticut. The only thing I knew when I graduated was that I didn’t want to work in finance, a field I thought dominated by my classmate’s douchebag parents. However, my worldview changed after reading Backstage Wall Street alongside Yaron Brook’s book In Pursuit of Wealth: The Moral Case for Finance. I finally understood the freedom honest financial services can provide and to be a purveyor of that freedom is now my ultimate goal. My biggest obstacle in that regard is my big mouth and uninformed opinions. One of those opinions is the idea that ‘the best predictor of future behavior is past behavior.’


The business world is abuzz with talk of Tesla’s recent shareholder meeting. I view the market to be an estimation of general sentiment and with that being said, I think people thought the meeting went well. The next few days saw a marketable jump in Tesla stock and the indicators point to further bullishness ahead. I can’t help myself in thinking Elon Musk is fooling millions of investors. After reading Therese Poletti’s article, Tesla investors missed opportunity to hold Elon Musk & Co. accountable, I was immediately reminded of Josh’s experience with a similar shareholders meeting for Jamba Juice.


“We take our seats, and the girl with the microphone tells us to raise our hands if we want to ask a question. And that’s exactly the moment that I figured it all out. That’s the moment I had finally gotten it through my thick head that believing Wall Street research would never, ever work for my career or my clients. I realized that it was all a giant joke and that guys like me were unknowingly delivering the punch line with every pitch.


The first question is asked by the guy from Rochdale Securities with the highest price target on The Street, 18 bucks a share. I forget the exact wording of the question, but it was something along the lines of “Why is Jamba so awesome?” If I’m not mistaken, there may have even been some light applause as he asked it among the bullish faithful in attendance”


During this Jamba Juice meeting, the stock suffered the fate of a stone dropped in water. Immediately people were panic selling the stock as if the charade was obvious. The market didn’t care that people were lining out the door for Jamba Juice and the company was over. So after Poletti reports:


“For the most part, shareholders fawned over Musk…The live comments from shareholders were, in general, fawning, and many investors mentioned their status as customers, including one who owned SolarCity solar panels on his home, several who were owners of Tesla vehicles or were waiting for a Model 3, and one who just liked Musk’s leather motorcycle-style jacket, and used that compliment to ask if Tesla would make motorcycles.”


Why isn’t the stock dropping???


People were obsessed with Jamba Juice and bought it with a religious fervor. People are obsessed with Tesla and buy the vehicles with religious fervor. Jamba Juice was selling the healthy living lifestyle. Tesla is selling the living green lifestyle. I get that a juice company and an auto manufacturing company have an abundance of differences but the narratives that drives each appear to coincide.


Musk reassures investors that this time is different. This time Tesla will reach their production goals. If the Ritholtz team taught me one thing, it’s that this time is never different. What has fundamentally changed about the company that will allow it to reach its quotas? Apparently, nothing.


What incentive does Musk have to be honest about the company's situation? Investors are buying his stock like hotcakes and nothing seems to dissuade them. At the end of the day if the stock goes kaput Musk will be economically secure, but millions of investors will suffer. Maybe it’s time to stop drinking the kool aid and start holding some feet to the fire.


Backstage Wall Street:


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