freeman3 wrote:I am not sure it is accurate to say that Tesla paid back the loan with money from the federal government.

It sold emission credits to other car companies so they would not be fined for not having enough zero emission vehicles.

So the federal government did get its money back. The point that can be made is that it would not yet be a profitable company based solely on car sales.

freeman3 wrote:Yes, but the $7,500 credit is not related to the loan and the emission regulations are state not federal and not designed to obtain revenue but to make sure there are a minimum number of zero emission vehicles on the road--that is why you are allowed to trade credits. But if you limit your point to say that a car has not proven its viability on the market when it needs tax credits and to sell zero emission credits to make money, I would agree with you

Your certainty that it won't help American competitiveness seems to be more ideologically than evidentially driven (since it is too early to judge the results)

freeman3 wrote:I think what Landes was saying with that analogy is that you don't get high returns for low-risk (a lesson that was lost on Wall Street in the years leading up to the Financial Crisis). Mr. Landes is pro-capitalism so if you are reading something anti-capitalistic in that analogy I suspect you are mistaken. It would if course be even more problematic to infer my views from that analogy.

"To be sure, the rich, industrial countries can defend themselves (ease but not eliminate the pain) by remaining on the cutting edge of research, by moving into new and growing branches (creating new jobs), by learning from others, by funding the right niches, by cultivating and using ability and knowledge. They can go a long way on cruise control and safety nets, helping the losers to learn skills, get new jobs, or just retire."

As it relates to solar panels, the evidence is that the federal government has destroyed jobs by adding tarrifs to Chinese imports. At this stage of industrial development, there are more jobs in installing panels than producing them (which is only efficient in a large highly automated (not that many people) facility.

Tesla’s runaway success, by contrast, is demonstrating how making venture capital–style investments in risky companies—without demanding venture capital–style compensation in return—can end up costing taxpayers even more. In Silicon Valley, one Google pays for a dozen Pets.com. The government made the key mistake of loaning money to Tesla without insisting on receiving stock options, options that could have allowed the Department of Energy to pay for the Solyndra losses several times over.

When the government’s negotiators started hammering out the details of the Tesla investment in mid-2009, it was obvious to both sides that the feds were in a position to name their terms. Tesla’s management knew that if they couldn’t get the government’s money at 3 or 4 percent interest, their next cheapest source of capital would cost 10 times more, a whopping 30 to 40 percent annually. (That’s according to estimates Tesla made in a regulatory filing, which based its numbers on “venture capital rates of return for companies at a similar stage of development as us.”)

Today, the Energy Department defends the massive discount it offered as perfectly appropriate. “The loan program wasn’t intended to generate profit; the goal of the program is to provide affordable financing so that America’s entrepreneurs and innovators can build a strong, thriving and growing clean energy industry in the United States,” says a department spokeswoman.

Yet isn't affordability the exact reason stock options are standard in normal venture capital deals? When a company is struggling, the options can’t be exercised and thus are perfectly affordable, not draining a dollar of cash from a startup company. Unlike a loan, stock options only cost the company money if it goes on to success—at which point it can afford to share that success with its early investors.

Personal loans made in 2008 by Elon Musk, Tesla’s co-founder and CEO, provide a telling contrast. Musk received a much higher interest rate (10 percent) from Tesla and, more importantly, the option to convert his $38 million of debt into shares of Tesla stock. That’s exactly what he ended up doing, and the resulting shares are now worth a whopping $1.4 billion—a 3,500 percent return on his investment. By contrast, the Department of Energy earned only $12 million in interest on its $465 million loan—a 2.6 percent return.

The government had huge leeway to demand similar terms as part of its loan, given the yawning gap between its interest rate and the cost of Tesla’s next-best source of capital. The government was ponying up more capital than all of Tesla’s previous investors combined. At a bare minimum, the Department of Energy could have demanded a share of the company equal to the 11 percent Musk received for his $38 million loan the year before. Such an 11 percent share would be worth $1.4 billion to taxpayers today.

And if the government had wanted to bargain like a real venture capitalist, Tesla’s desperate need for cash gave the feds the power to demand options on half the company’s stock, or more. Over at the Treasury Department, negotiators were demanding big ownership stakes in exchange for life-saving bailouts. The Treasury wound up owning 85 percent of AIG’s stock and 32 percent of GM’s.

freeman3 wrote:The stock market is doing great because large Anerican companies are doing great due to lower labor costs.

I don't know how all of these 30 loans are doing (we know about Solynfra and Tesla but what about the other 28)

I think if Tela is producing a car that people are buying then that helps our competitiveness.

As for the loans being at least in part politically connected, I suspect that that is an endemic problem in Washington right now. That is just the reality with so much money floating around in politics.

freeman3 wrote:Well this source gives low labor costs leading to higher profits as the number one reason as to why the stock market will remain high in 2013. http://business.time.com/2013/01/22/6-r ... l-in-2013/
Perhaps you have an alternative source propounding a different theory, DF?

“It seems we’re somewhat ahead of schedule but I think we’re still on track for Dow 20,000 by the end of the decade,” Mr. Masters said last week. “The odds have just gotten better.” And despite the stock market’s recent meteoric rise, he said, stocks still look relatively cheap, certainly compared with bonds.

“It’s not that the expected return on stock right now is really that high,” he said. “It’s that the return on government bonds is indubitably very low.”

That unfavorable verdict on bonds is no accident. In a sense, it’s the policy of the Federal Reserve. Ben S. Bernanke, the Fed chairman, says he is trying to make traditionally riskier assets like stocks relatively attractive, increasing investors’ wealth and in that way stimulating the economy.

freeman3 wrote:Interesting. Of course, Mr Master's predictions are predicated on companies continuing to have good earnings (which has been based on low labor costs and not increased sales) and the Fed says it will only keep short-term interest rates near zero if there is high unemployment and low inflation ( and inflation is helped to be kept low by low labor costs and high unemployment helps to lower labor costs as well). Gee, whaddya know, everything seems to lead back to low labor costs...