More troubles for Tesla

From Justin Brill, Editor, Stansberry Digest:

Is this the beginning of the end for Tesla?

Regular Digest readers know we’re no fans of the electric-car maker and its “visionary” CEO Elon Musk. We’ve long believed it’s only a matter of time before the company’s terrible business model – and Musk’s questionable ethics – catch up with it.

We’ll admit it… Tesla has kept the charade going far longer than we ever imagined it could.

Despite missing practically every manufacturing deadline and sales target it has ever set… losing money on every car it sells… and sending nearly $10 billion to “money heaven” over the past five years… Tesla remains a market darling. And Musk remains beloved by investors, the media, and the government alike.

But reality may finally be intruding…

Earlier this month, we noted that the company is having serious trouble building its new, lower-priced Model 3 sedan, even by its own dismal standards.

Last week, Tesla announced yet another safety recall, this time of 11,000 units of its high-end Model X SUV.

And on Friday, reports surfaced that the company had suddenly fired hundreds of employees. As news service Reuters reported…

Luxury electric vehicle maker Tesla fired about 400 employees this week, including associates, team leaders and supervisors, a former employee told Reuters on Friday.

The dismissals were a result of a company-wide annual review, Tesla said in an emailed statement, without confirming the number of employees leaving the company…

The Palo Alto, California-based company said earlier in the month that “production bottlenecks” had left Tesla behind its planned ramp-up for the new Model 3 mass-market sedan.

Tesla suggested the cuts were related to performance…

But new reports suggest there may be a different reason behind the move. As financial-news network CNBC noted this morning (emphasis added)…

Tesla is trying to disguise layoffs by calling the widespread terminations performance related, allege several current and former employees…

Most of the people let go from Tesla so far have been from its motors business, said people familiar with the matter. They were not from other initiatives like Tesla Powerwall, which is helping restore electricity to the residents of Puerto Rico now…

“Seems like performance has nothing to do with it,” one Tesla employee told CNBC under the condition of anonymity. “Those terminated were generally the highest paid in their position,” this person said…

That assessment was echoed by several others, including three employees fired from Tesla during this latest wave. Tesla rates employees on a scale from 1 to 5. Two laid-off employees had achieved scores at or above 4 in past performance reviews with their managers, they said.

Tesla appears to be desperately slashing costs…

… Despite raising another $2 billion just two months ago. Tesla investors should be asking themselves why this is happening. Perhaps the company’s financial health is even weaker than believed?

In the meantime, we wouldn’t count on Musk hitting his production targets this quarter, either.

Defense stocks are skyrocketing amid rising tensions with North Korea…

Kim Jong Un claims President Donald Trump has “lit the wick of war” with his rhetoric. Trump has referred to the North Korean leader as “little rocket man” after he conducted 15 missile tests so far this year. And just this week, North Korea’s deputy U.N. ambassador warned that the situation has “reached the touch-and-go point and a nuclear war may break out any moment.”

As of Monday’s close, defense stocks are up nearly twice as much as the broad market year to date. And they show no signs of slowing. The iShares U.S. Aerospace & Defense Fund (ITA) – which holds a basket of defense stocks – recently hit a new all-time high. Shares are up more than 30% since the start of the year.

The rally in defense stocks first strengthened last November when Trump was elected president. That’s partly because the Republican Party is seen as more military-friendly. But Trump compounded that optimism a few months later when he said he wanted to increase military spending by $54 billion.

Both sides of Congress, while still working out a budget, are indeed showing support for even more military spending. And numerous defense contractors are likely to benefit.

These companies should also benefit as other countries follow this trend, too. The U.S. leads the world in military spending by a massive margin. But now, more countries are ramping up spending as threats of war swell on the Korean Peninsula, the Middle East, and other regions.

U.S. allies South Korea and Japan are among those beefing up their militaries, especially after Trump recently said he would allow them to buy more “highly sophisticated” military equipment than expected.

Our colleague Dr. David ‘Doc’ Eifrig is incredibly bullish on this trend…

He has added three defense stocks to his Retirement Millionaire portfolio over the last two years. But war rhetoric aside, Doc and his team believe these companies are fantastic long-term investments today. Doc’s senior analyst Matthew Weinschenk shared his latest thoughts on the sector in a private e-mail this week…

Yes, folks who fear escalating tensions between North Korea and Trump have started buying up defense stocks. That has turned sentiment in their favor, but we believe the fundamentals support a much longer and broader trend.

The Senate recently passed the National Defense Authorization Act worth $700 billion. That’s up from $549 billion in previous spending and from the $603 billion that Trump requested.

This isn’t partisan politics. The Senate’s vote came in at 89-8 in favor. And our military desperately needs it. Obama reduced military spending, which was further hampered by budget sequestration. Our military readiness has been reduced to the lowest level in decades thanks to the penny-pinchers.

Doc first recommended aircraft manufacturer Boeing (BA) to his Retirement Millionaire subscribers back in August 2015. It’s up 90% since then. He recommended a second defense stock – shipbuilder Huntington Ingalls Industries (HII) – back in January. Shares are already up 24%. And his latest defense-related recommendation, added to the portfolio in July, is already up 13%.

All three stocks are in a clear uptrend, recently hitting new record highs. But with the U.S. increasingly vulnerable to threats of war, Doc and his team believe the sector still has plenty of room to run. More from Matt…

This summer, an opinion piece by former vice president Dick Cheney in the Wall Street Journal pointed out, “Only three of 58 brigade combat teams [are] ready to ‘fight tonight,'” and “fewer than half the Navy’s aircraft can fly because so many are grounded for maintenance or because they lack spare parts.”

This comes at a time when we face threats from real superpowers that we didn’t need to face before. Russia and China are increasingly aggressive. Plus, we need to ramp up missile shield defenses, cybersecurity, and other threats we didn’t face 10 years ago.

These stocks may be a little overheated right now, thanks to Kim Jong Un’s attention. But over the next few years, we’re sure to see more spending going to defense contractors – a highly concentrated industry with regular, government-guaranteed profit margins.

Do you have a ‘war ready’ portfolio?

Had you invested in some of the biggest defense contractors during the first year of President Ronald Reagan’s tenure, you would have made a fortune over the next several years. These stocks soared hundreds of percent as military spending ramped up under rising Cold War tensions.

Doc believes a similar trend could now be underway… And many of these firms could absolutely soar once again.

You can get instant access to Doc’s detailed research on this trend with a 100% risk-free subscription to Retirement MillionaireClick here to learn more.

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