‘Despondent’ Musk’s Tesla resembles Lehman, Greenlight’s Einhorn says

NEW YORK (Reuters) – Hedge fund manager David Einhorn lambasted Tesla Inc (TSLA.O) and its “despondent” Chief Executive Elon Musk on Friday, comparing the electric car company to Lehman Brothers Holdings Inc, where he had flagged accounting problems several months before its 2008 collapse.

FILE PHOTO: David Einhorn, President of Greenlight Capital, Inc., presents during the 2018 Sohn Investment Conference in New York City, U.S., April 23, 2018. REUTERS/Brendan McDermid

“Like Lehman, we think the deception is about to catch up to TSLA,” Einhorn’s firm Greenlight Capital, which has sold Tesla shares short, said in a quarterly investor letter obtained by Reuters. “Elon Musk’s erratic behavior suggests that he sees it the same way.”

Greenlight’s letter came one day after Musk, a longtime critic of short-sellers, appeared to taunt the U.S. Securities and Exchange Commission by calling it the “Shortseller Enrichment Commission” on Twitter.

That came just five days after Musk settled SEC fraud charges, in an accord that lets him remain Tesla’s chief executive but requires he step aside as chairman. A judge has yet to approve the settlement.

Tesla did not immediately respond to requests for comment. Its shares were down 7 percent at $262.05 in late afternoon trading.

Greenlight is having a difficult year, with its main fund down 25.7 percent through September, but said its Tesla short position was its second biggest winner in the third quarter.

In an investor presentation in May 2008, four months before Lehman went bankrupt, Einhorn had questioned the investment bank’s accounting, including for real estate, and said it needed to raise large amounts of capital.

Einhorn said Tesla has “many parallels” to Lehman, which he said “threatened short sellers, refused to raise capital (it even bought back stock), and management publicly suggested it would go private.”

“Months later, shareholders, creditors, employees and the global economy paid a big price when management’s reckless behavior led to bankruptcy,” Einhorn said.

He said a big problem for Musk is that Tesla would lose too much money targeting a mass audience by selling its Model 3 at a $35,000 starting price, and yet “can’t bring himself” to cancel the program and refund customer deposits.

“His conduct suggests that he is doing his best to be relieved of his position as CEO to avoid accountability,” Einhorn said.

Musk, for his part, has used Twitter to mock Einhorn, saying on Aug. 1 he would “send Einhorn a box of short shorts to comfort him through this difficult time.”

Greenlight said it also sold its last Apple Inc (AAPL.O) shares in August at $228 per share, eight years after buying the iPhone maker at less than one-sixth that price, on growing fear of “Chinese retaliation against America’s trade policies.

Apple did not immediately respond to a request for comment. Its shares were down 1.4 percent at $224.71 late Friday.

Reporting by Jennifer Ablan and Jonathan Stempel; Editing by Tom Brown and Marguerita Choy

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Bubble trouble? Seltzer maker LaCroix sued over ‘all-natural’ label

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A lawsuit popped open this week in Chicago accuses the popular sparkling water brand LaCroix of lying about its “all-natural” ingredients.

The filing in Cook County, Illinois, circuit court, on Monday against the National Beverage Corporation, LaCroix’s parent company, by the law firm Beaumont Costales LLC on behalf of plaintiff Lenora Rice.

“Much of LaCroix’s popularity stems from the American consumer’s perception that LaCroix water is ‘all natural,’ or otherwise comprised entirely of natural substances,” reads a copy of the complaint obtained by NBC News. “Unfortunately for all parties involved, Defendant’s representations regarding the naturalness of LaCroix water are false.”

Image: LaCroix Sparking Water
LaCroix Sparking Water on display during Hilarity for Charity’s 5th Annual Los Angeles Variety Show: Seth Rogen’s Halloween at Hollywood Palladium on Oct. 15, 2016 in Los Angeles, California.Randy Shropshire / Getty Images

The lawsuit claims LaCroix uses a number of synthetic ingredients, including ethyl butanoate, limonene, and linalool propionate.

The lawsuit then goes on to claim that the company has not only mislabeled its products, but contains ingredients that are used for other purposes like linalool, which the suit claims is used in insecticides.

All three ingredients are in fact naturally occurring in fruit. Ethyl butanoate is found in natural fruits, including apples and tangerines, according to the chemistry database PubChem maintained by the National Institutes of Health. Linalool and limonene also occur naturally in fruit. They help give citrus peels their distinctive aroma.

In a statement published online, the law firm says it wants LaCroix to relabel its packaging and award damages to customers who bought the beverages thinking it was “all-natural.”

The National Beverage Corporation strongly refuted these allegations in a statement saying they were made “without basis in fact or law.”

“Natural flavors in LaCroix are derived from the natural essence oils from the named fruit used in each of the flavors,” the company wrote, citing the United States Food and Drug Administration’s definition of “natural.”

“There are no sugars or artificial ingredients contained in, nor added to, those extracted flavors,” seltzer the company said.

The company said it will be seeking damages resulting from the publication of the lawsuit’s allegations.

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Tesla adds Atari games and dash camera feature in new software update

Tesla has officially released the ninth version of its in-car software, which includes a new dash cam feature, Atari games (playable when parked), improved navigation, and more in what the company calls its “most substantial update yet.” Software version 9.0, as it’s called, is available to download on all Tesla cars now. Owners just have to connect their cars to a Wi-Fi hotspot to begin the update.

There are no advances for Tesla’s driver assistance system, Autopilot, though. CEO Elon Musk promised earlier this year that Tesla would start unlocking more of the features that he says will eventually make the company’s cars completely able to drive themselves. But the first of those features, called Navigate, is now listed as “coming soon” on the company’s website. (Musk said on Twitter that the feature needs “a few more weeks of validation.”)

Version 9.0 allows Tesla cars built after August 2017 to operate a “dash cam” mode. With this feature on, the car will record and store video from its front-facing camera in 10-minute clips. The new software update also adds new navigation features, with more detailed turn-by-turn directions, and better information on upcoming turns and exits on the highway.

Another new feature from the 9.0 update will also reduce the available acceleration at low speeds when the car sees an obstacle in its path, which Tesla says reduces the chance of a driver accidentally accelerating out of panic. The display behind the steering wheel now shows different types of vehicles, too, like bikes and trucks. This is instead of using a car to represent all objects detected by the car’s sensors and cameras, like before. Tesla says all eight of its cars’ external cameras are now active, which provides a “full 360-degree” view that creates “better situational awareness on the road.”

As usual, the new software includes some Easter eggs, this time in the form of Atari video games. The company doesn’t say which ones are included, or where people can find them in the software. The games can be played when the car is in park, using a mixture of the touchscreen and steering wheel controls. Musk said he was hoping to include Pole Position, Missile Command, and Tempest when he initially tweeted the idea in August.

Lastly, the Model 3 is getting a web browser and calendar in version 9.0, and apps on all of Tesla’s cars should be easier to access. Climate controls have been consolidated, too.

Tesla says it will have cars that update to version 9.0 run Navigate in “shadow mode,” essentially letting part of the car’s brain pretend that the feature is working, in order to help validate the software ahead of its release. Navigate will then be released to US customers in beta. Other, even more advanced features of Autopilot will be released in the following months, according to the company.

Tesla says Navigate is the “most advanced Autopilot feature ever.” It allows the car to guide itself — with driver supervision, Tesla says as a reminder — from on-ramp to off-ramp, can suggest lane changes, handle highway interchanges, and even take exits. Navigate is “designed to make finding and following the most efficient path to your destination even easier on the highway,” Tesla says.

Navigate will also have a new safety feature that forces the driver to confirm lane changes. Right now, drivers using Autopilot just flip the turn signal to have their car automatically change lanes. Navigate makes the driver do this twice. Tesla is also beefing up its blind spot monitoring by using the side and rear-facing cameras to help the rear-facing ultrasonic sensors detect when another car is creeping up beside you.

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Toyota car fault prompts massive recall

Toyota PriusImage copyright
AFP

Japanese car giant Toyota has announced a recall of more than 2.4 million hybrid vehicles worldwide because of a fault in their systems that could cause them to lose power.

The recall of Prius and Auris cars includes 1.25 million vehicles sold in Japan, 830,000 in North America and 290,000 sold in Europe.

All those affected were produced between October 2008 and November 2014.

Toyota said it was not aware of any actual accidents caused by the fault.

However, the carmaker said that in “rare situations”, the fault could cause vehicles to stall when entering “failsafe” driving mode.

“While power steering and braking would remain operational, a vehicle stall while driving at higher speeds could increase the risk of a crash,” the company said.

Toyota said the cars affected had already been recalled previously for other reasons in 2014 and 2015.

“The remedy conducted then did not anticipate the new condition identified in this recall,” it added.

In recent years, Toyota has had to recall large numbers of cars for various reasons, including faulty airbags supplied by vehicle parts firm Takata.

In 2015, it had to recall 6.5 million vehicles globally over a faulty window switch that was liable to short-circuit.

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Elon Musk accuses BlackRock of helping short sellers

Tesla CEO Elon Musk has accused large fund managers such as BlackRock for fueling short sellers, a group of investors he has been criticizing on his Twitter account.

Short sellers are investors who bet on the decline of a security, such as a stock. They make money by selling the shares they borrow, and hope the price falls so they can buy them back at a lower price and make profits from it.

Musk also said those funds were “pretending to charge low rates” for their passive “index tracking” products.

CNBC reached out to BlackRock for comment about Musk’s allegations, but didn’t immediately hear back from the company.

Fund managers have lowered management fees on certain products due to increased competition in the space. Fidelity Investments said last month it was launching two no-fee index funds, while Vanguard announced in July that investors using its online brokerage platform could trade exchange-traded funds without commission.

At the same time, fund managers have been growing their business in securities lending — which is the process of temporarily transferring ownership of shares or bonds to another party, such as short sellers. The companies earn a fee in return for loaning out their holdings.

Securities lending is a lucrative business, according to an opinion piece by Financial Times in April. The newspaper, which cited a regulatory filing, said BlackRock made $597 million in revenue last year from lending securities.

Musk hit out at that practice, saying “there is no rational basis” for long-term shareholders to engage in that business. He claimed that doing so “dilutes the shareholder base” while giving short sellers “a strong incentive to attack the company by whatever means possible.”

The billionaire CEO also said many small investors in passive index funds don’t know that their holdings are being lent to short sellers.

Some have called out Musk for not understanding how markets work. Several people who replied to his posts pointed out that investors who believe Tesla would do well have the incentive to lend their shares to short sellers.

“Longs can earn yield while some idiot bets against the stock they believe will go up. There’s every incentive for longs to lend out stock,” wrote Dave Lauer, who studies market structure and volatility. “Longs” refer to investors who buy an asset on the expectation that the price will rise.

Musk has been an outspoken critic of short sellers, once calling them “jerks who want us to die” and accusing them for spreading “negative propaganda” against Telsa. On Thursday, he also mocked the Securities and Exchange Commission by calling it the “Shortseller Enrichment Commission” and said what short sellers do “should be illegal.”

Tesla has been a favored target for short sellers due to its rapid cash burn and struggles in turning a profit. Those who have shorted the company’s shares include Jim Chanos of Kynikos Associates and David Einhorn of Greenlight Capital Fund.

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Reputed mobster gunned down at McDonald’s drive-thru

A reputed mobster — whose son was injured during an attempted hit job three months ago — was shot to death at a McDonald’s drive-thru in the Bronx while waiting for a cup of coffee on Thursday, sources said.

Sylvester Zottola, 71, a Bonanno crime family associate, was shot in the head and chest and shoulder while sitting in his car outside the fast food restaurant at Webster Avenue and Belmont Street at around 4:45 p.m., according to law enforcement sources.

Zottola had ordered a medium coffee at the drive-thru and his car was boxed in when the gunman opened fire, the sources said.

Sylvester had been roughed up three times in the past year. His son, 41-year-old Salvatore Zottola, was injured when a gunman opened fire on him outside his Bronx home on July 11.

The July shooting was captured on surveillance video, but the younger Zottola did not cooperate with authorities and no arrests were made, sources said.

Investigators believe the attack on Salvatore was intended to be a message to his father, who received his own share of attempted assaults.

No arrests had been made Thursday evening in Zottola’s slaying.

Click here for more from The New York Post.

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After market rout, signs point to even higher bond yields

(Reuters) – A bond market rout that drove yields through key levels has some investors prepared for another leg that may finally declare an end to a three-decade-long bull run.

FILE PHOTO: An illustration picture shows euro and US dollar banknotes and coins, April 8, 2017. REUTERS/Kai Pfaffenbach

The $15 trillion (£11.5 trillion) Treasuries market tanked on Wednesday with the 10-year and 30-year yields racing to seven-year and four-year highs, respectively. Traders again dumped U.S. government debt on Thursday following upbeat economic data and hawkish remarks from Federal Reserve officials, and yields – which move inversely to prices – hit new multi-year highs.

“The last man standing was the 30-year, and it has definitively broken above a multi-year base that should over time carry us to significantly higher yields,” said Jeffrey Gundlach, chief executive officer of DoubleLine Capital, who manages $123 billion (£94.46 billion).

Some key levels that investors are now laser focused on are around 3.50 percent for the 30-year and 3.25 percent for the benchmark 10-year. The 10-year and 30-year yields hit 3.232 percent and 3.3920 percent, respectively, on Thursday.

Technical signals suggest bond yields may rise further, especially on the longer-dated debt, and at least stall the likelihood the yield curve would invert as the Fed will likely push short-term rates higher.

Some of the bearish indicators included a surge in open positions in Treasury and interest rates future and in bond market volatility, which spiked to its highest level since June on Thursday.

“Wednesday’s breakouts now have analysts rushing to historical charts to indicate likely upside yield objectives,” said Karl Haeling, vice president at Landesbank Baden-Wurttemberg.

Treasury yields blew past key technical levels in the initial phase of the selloff, begetting more selling that drove the 10-year yield to a seven-year high.

The market rout continued into early Thursday before selling ebbed on a pullback in Wall Street stock prices and in advance of the government’s monthly jobs report due at 8:30 a.m. (1230 GMT) on Friday.

Investors are hesitant in calling the end of the bull market for bonds, as whenever yields hit technical levels opportunistic buyers flood in. Some analysts reckoned the two-day selloff is overdone and can reverse quickly if Friday’s jobs figures, particularly on wages, fall short of forecasts.

Graphics: U.S. Treasury yields at multi-year highs (reut.rs/2OA5ClY)

NEXT YIELD LEVELS

Gundlach has had his eye on the 30-year yield, predicting that two closes above 3.25 percent in a row would be a bearish sign for the bond market. The market on Thursday closed above that level for a second day in a row.

The next technical level traders are looking for the 30-year to hit would be 3.39-3.40 percent area, and then 3.50 percent.

Traders are also focused on the benchmark 10-year, with psychological support being 3.25 percent, the top-end level of most analyst forecasts for 2018.

They will also monitor whether the 10-year and 30-year yields would test 3.125 percent and 3.25 percent before the end of the week.

The U.S. bond market will be closed on Monday for the U.S. Columbus day holiday.

Graphic: U.S. Treasury yields break support (reut.rs/2OvIZiH)

STEEPER YIELD CURVE

With worries receding about an imminent yield curve inversion, traders are eyeing the 2-to-10-year part of the curve with a resistance level above 33 basis points as key. They point out that after that there is no strong technical support before around 50 basis points.

Back in August, the yield curve touched its flattest level in more than a decade, stoking concerns it will invert.

Such a move has been a reliable indicator that the economy is heading into a recession since the last century. The past three U.S. downturns were preceded by periods when the yield curve inverted 12 to 18 months earlier.

Graphic: U.S. Yield Curve (tmsnrt.rs/2zUqXiW)

BEARISH ALREADY

Analysts will be watching data from the Commodity Futures Trading Commission, which is released every Friday, on investors’ positioning on bond and rates futures before Wednesday’s selloff.

In the 10-year T-bond area, speculators including hedge funds already accumulated a record net level of short bets on Sept. 25. On the other hand, fund managers built a record amount of positions that 10-year Treasury values will appreciate.

Graphic: Commitments of traders (tmsnrt.rs/2FaJhTk)

Reporting by Richard Leong; Additional reporting by Jennifer Ablan; Editing by Leslie Adler

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Lenovo shares tumble following report about alleged Chinese spy chips

Shares of computer maker Lenovo fell about 20 percent on Friday morning as shares in many Chinese tech firms struggled for gains during Asian trading hours.

followed a report from Bloomberg BusinessWeek that said data center equipment run by Amazon Web Services and Apple may have been subject to surveillance from the Chinese government through a tiny microchip inserted during the equipment manufacturing process.

Bloomberg said the chips, which have been the subject of a top secret U.S. government investigation starting in 2015, were used for gathering intellectual property and trade secrets from American companies and may have been introduced by a Chinese server company called Super Micro that assembled machines used in the centers.

Apple, AWS and Super Micro dispute the report. Shares of the iPhone-maker fell 1.75 percent and Amazon declined about 2.21 percent in Thursday trading.

In a statement to CNBC, Lenovo said that Super Micro “is not a supplier to Lenovo in any capacity. Furthermore, as a global company we take extensive steps to protect the ongoing integrity of our supply chain.”

Nevertheless, its Chinese roots may be the cause of Lenovo’s Friday stock decline.

“I’m pretty sure that Lenovo is down because it’s a Chinese company which provides (personal computers) to many enterprise customers in the US,” Leo Sun, tech and consumer goods specialist at The Motley Fool, told CNBC by email. “Therefore, companies will likely choose an American PC maker, like (Hewlett Packard), as a safeguard.”

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Samsung Electronics Expects Third-Quarter Operating Profit to Be Its Highest Ever

SEOUL–Samsung Electronics Co. expects third-quarter operating profit will be its highest ever, topping analyst estimates as demand for its electronic components remains high.

The world’s largest smartphone and semiconductor maker Friday said it expected an operating profit of 17.5 trillion South Korean won ($15.4 billion) for the quarter, up 20% from 14.53 trillion won a year earlier. Samsung expects revenue will increase to 65 trillion won from 62 trillion won.

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NJ Transit halts New York Penn Station service after derailment

A “minor” train derailment near New York Penn Station halted NJ Transit service Thursday night, according to the transit agency.

NJ Transit said the mishap happened at a “slow speed,” around 6:20 p.m.

There were no injuries, according to a New York City fire department spokesman.

The Montclair-Boonton Line train was headed from Penn Station to Montclair State University when the derailment occurred shortly after leaving the station and before the Hudson River tunnel, NJ Transit spokesman Jim Smith said.

One set of wheels on one car, which was closed to passengers at the time, derailed, the spokesman said. There were no injuries to the approximately 900 to 1,000 passengers on the train.

Amtrak said service was restored, but travelers should expect delays Thursday night. 

“Rail traffic to and from New York Penn Station has resumed, after being temporarily suspended due to a slow-speed commuter train derailment,” Amtrak said in a statement.

“Passengers should expect delays throughout the evening as crews work to inspect the infrastructure, make any necessary repairs, and restore all tracks for service,” the statement said. 

Photos on social media showed large crowds at the station.

New York City Emergency Management said to expect delays on NJ Transit service in and out of Penn Station

“Consider alternate routes and allow for additional travel time,” the agency said in an alert.

Noah Cohen may be reached at ncohen@njadvancemedia.com. Follow him on Twitter @noahycFind NJ.com on Facebook

 

 

 

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