Elon Musk touts beaten-down Tesla stock as a potential bargain - and blasts the Fed for going overboard with interest-rate hikes

Elon Musk touts beaten-down Tesla stock as a potential bargain - and blasts the Fed for going overboard with interest-rate hikes
Elon Musk.AP Photo/Ringo H.W. Chiu
  • Elon Musk said the plunge in Tesla stock might present a "buying opportunity."
  • The automaker's CEO blasted the Fed for hiking interest rates when prices may already be declining.

Elon Musk has touted beaten-down Tesla stock as a potential bargain, and warned the Federal Reserve has hiked interest rates way too high, given prices appear to be declining.

A Twitter user suggested Wednesday that Musk might be partly responsible for the 64% plunge in Tesla's stock price since April, which has wiped over $600 billion from the electric-vehicle company's market capitalization.

"Maybe so, in which case … buying opportunity!" Musk responded, before taking aim at the US central bank.

"I keep saying that Fed rate is insane, because data I'm seeing says we're already in deflation," he tweeted. "If true, then real rate of return of T-bills is roughly that of S&P500. Very smart investor I spoke to today said he's shorting S&P…"

Inflation surged to a 40-year high of 9.1% in June, and remained north of 7% in November, well above the Fed's annual target of 2%. The central bank has responded by hiking interest rates from virtually zero in March to over 4% today, in an effort to cool demand and curb the pace of price increases.


Higher rates flow through into larger returns from savings accounts and government bonds, increasing their appeal for investors relative to stocks and other riskier assets.

Musk's view appears to be that prices have stopped rising and started dropping, eliminating the need for the Fed to keep rates elevated. He also pointed out that assets paying a fixed interest rate become more attractive when prices are falling, as their real returns can rival that from stocks, but with much less risk attached.

The Tesla, SpaceX, and Twitter CEO on Wednesday also replied to another Twitter user, who suggested that recent declines in the bond and housing markets will force the Fed to end its hikes soon and likely to slash rates next year. "I sure hope so!" Musk tweeted.

Musk has repeatedly criticized the Fed in recent weeks, warning its policies are courting a severe recession. He's said the US central bank is focusing too much on backward-looking economic data instead of current conditions.

The tech billionaire also underlined the dangers of debt in a rising-rate environment. He appeared to be speaking from experience, given he's personally borrowed against his Tesla stock, and relied on leverage to finance his Twitter purchase this year.


Musk may blame Tesla's stock plunge on the Fed slashing the appeal of stocks this year. Yet his shareholders are worried that Twitter is becoming a costly distraction, and a recession could sap demand for electric vehicles next year.

Read more: Famed bearish strategist Albert Edwards says the Fed will extract a high price to bring down inflation — and outlines why its success will only be temporary