I like to lead these columns with a rock reference, and I woke up this morning to the most beautiful New York City sunrise. I would have loved to have written "...and got myself a beer," but I am no Jim Morrison.
My two-month-long business development odyssey did take me to Paris last week, where Jim met his sad demise, and it was beautiful, as always. Also, as always, it was cold in early November, actually a couple degrees below average.
Prior to Paris I was in Zurich, which was very chilly, especially at night, and before that Los Angeles, which is never cold, and before that, Sao Paulo, which was seasonally warm and subject to frequent late afternoon rain showers despite media reports of record droughts in Brazil.
So, everything is as it's supposed to be. But that is in direct contrast to all the hot air coming from Glasgow during the COP26 conference. High today in Glasgow is forecast at 51, low at 49, and it will rain all day. Anyone who has been to Scotland outside its glorious summers knows all about those gloomy days.
So, I just cannot jibe these far-fetched climate horror stories with actual life on planet Earth, of which I have covered about 10,000 miles of its surface area in the past two months.
Investment implications? Well, Exxon Mobil (XOM) just raised its quarterly dividend by a penny to 88 cents a share. Did you know that?
Things are looking pretty darn good for XOM, with both main global oil benchmarks still holding $80 a barrel (although under pressure after Wednesday's terrifying Consumer Price Index print) and CEO Darren Woods announcing an acceleration of the company's share repurchase plan for 2022. Predicting that Exxon Mobil would maintain its dividend in late 2020, when so many were predicting a drastic cut, was one of my best calls in my post-Wall Street days, and I will enjoy the higher payouts.
Exxon Mobil still yields 5.48% and the 10-Year U.S. Treasury note yields 1.55%. I will take XOM's fortress balance sheet over the Biden administration's spend-o-rama liability-laden balance sheet any day of the week. Today is one of those days. The thing that is important for Exxon Mobil is the prevailing level of hydrocarbon pricing in the markets, not the day-to-day moves of crazed oil traders (natural gas is much crazier and those futures are well-deserving of their NYMEX nickname of "the widowmaker.") Exxon Mobil is printing cash at these hydrocarbon price levels. Don't overthink XOM.
The other side of the coin? Well, Tesla (TSLA) , of course. Tesla shares have been on a wild ride this week. Elon Musk is selling.
I will rely on ZeroHedge's excellent SEC Form 4 analysis here, but the bottom line is that Elon sold about 4.5 million TSLA shares combined via transactions that occurred Monday and Wednesday. Musk exercised options to purchase about 2.15 million shares Monday (with a strike price of a staggeringly low $6.24 per share) and has been selling TSLA, presumably to cover the tax liability on the massive capital gains he will incur from exercising those options. Interestingly, the Form 4s included the language that Elon's share sales were conducted pursuant to a 10B5-1 trading plan adopted on Sept. 15, 2021.
Wait, does that mean Elon had already planned to sell his shares before his Twitter poll of this past weekend? Of course it does. The taxman is a nasty opponent.
We are coming to the end of the year and should see tax-planning moves to the fore, but Musk's timing should be questioned by analysts. Volkswagen (VLKAF) sold more NEVs in China in October than Tesla did. No hybrids, no obfuscation; VW won the month. That is, in the pure-electric space, VW's first monthly defeat of Tesla in China, as far as I know. Is this normal quarter-wide seasonality (Tesla tends to build for export at Lingang at the beginning of the quarter and serve the local market in the last month of any quarter) or is it that the Great Chip Drought of 2021 is finally easing and VW has a plethora of cool China-made models that it is trying to build to compete with Tesla's fairly similar-looking 3 and Y?
When I started in equity research at Lehman in 1992, I learned from one of the legendary industrials analysts, Bob Cornell, that analysts are "professional cynics."
Fast forward 30 years... and it is nauseating. What a collection of pom-pom waving blowhards who form sell-side analysts now, and those that follow Tesla are laughably bad.
We must question Elon's share sale timing just as we must question the safety of Exxon Mobil's dividend. It's our job, doggone it.
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