Elon Musk Warns Stocks May Plunge, Swears Not To Sell Tesla Stock Next Year, And Blasts The Fed Here Are The Top 14 Quotes:
- Elon Musk talked about Tesla’s uncertain future, the US stock market, and the US economy.
- A catastrophic recession might cause equities to plummet, the tech billionaire warned.
- Musk disclaimed plans to sell additional Tesla stock in 2023 and stated operating Twitter is only a minor distraction.
In light of the probable negative effects on the economy, Bill Gross, David Rosenberg, Robert Herjavec, and Ed Yardeni have also encouraged the US central bank not to raise interest rates excessively.
In a Twitter Spaces conversation with Whole Mars Catalog on Thursday, Elon Musk lambasted the Federal Reserve’s aggressive interest-rate hikes this year and warned that markets might crash if a recession sets in.
The Tesla CEO also dismissed criticisms that operating Twitter is a distraction for him, vowed to stop selling any more of his company stock in 2023, and mentioned that a stock buyback would depend on how severe the impending recession is.
The following 14 quotes from Musk have been gently edited for length and clarity:
The Stock Market
1. “Things can get out of hand when there is a severe market panic. Avoid taking up margin debt and avoiding margin purchases since you never know when the stock market could experience a panic.”
2 “Next year, I predict Warren Buffett will purchase a sizable amount of stock. It makes sense to acquire stock when a company’s fundamentals are really good but the market is experiencing a brief period of fear.”
3 “The stock values of everything will be lower if a repeat of 2009 occurs. Things that are purchased with debt — primarily houses and automobiles will be the two biggest — will be severely affected.”
4 “Long-term, there is a natural economic cycle that takes place, and, to be honest, a recession is long needed. It’s remarkable that since 2009, there hasn’t been a significant recession in any meaningful sense.”
5. “Even if you have a really good ship, if you’re a ship in the storm, you’re still going to get pounded by the storm.”
6 “It’s like giant catnip, Twitter. Twitter is catnip crack, or what you get when you mix catnip and cocaine. On Twitter, even the smallest news item makes the first page. It will draw a lot of attention.”
7 “Twitter would have gone bankrupt if I hadn’t managed to limit the outrageous costs for at least a month. That project is virtually finished.”
8 “Twitter represents a small portion of the actual cognitive effort. By a wide margin, it is a far simpler problem than Tesla or SpaceX.”
Stock repurchases and sales
9. “Just to make sure there was enough dry powder to cover the worst-case situation, I had to sell some stock. Having experienced two quite severe recessions, I tend to be somewhat paranoid.”
10 “I probably won’t sell any shares for another two years. Under no circumstances, not the following year, and most likely not.”
11 “Doing a repurchase just to learn that the recession is worse than in 2009 is not a wise move. We simply need to determine the recession’s nature. My vote on the board would at the very least be in favor of a repurchase if it appeared that we were managing our cash flow reasonably well and the stock price was outrageously low.”
Increase In Fed Rates
12. “My mind is blown by how much the Fed increased interest rates. The Fed is currently operating the economy like a car on a cliffside road while viewing a three-month-old video taken in the rearview mirror. Driving a car on a winding cliff road in this manner is not recommended. I predict a difficult landing.”
13 “The double-whammy effect of interest rate increases is something to appreciate. Any business that sells a product that depends on the cost of financing will see a decline in profitability when interest rates rise. People look at their monthly payments because they lease or borrow money to buy cars, so you basically have a demand problem with higher interest rates, which ultimately lowers profitability. The value of all stocks then generally decreases when the actual interest rate rises.”
14 “A high real interest rate is the equivalent to an increase in the car’s price because the great majority of cars are purchased on credit. Therefore, you would have to lower the price of the car to maintain demand, and you would have to further lower the price of the car to raise demand.”