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- Elon Musk, Tesla CEO, warned that there would be a recession during the fourth quarter earnings update.
- Gary Black, co-founder of The Future Fund, said that investors should not be concerned about his outlook.
- Black stated Thursday that any economic downturn will not be severe because the Federal Reserve can reduce interest rates whenever it wishes.
Elon Musk's strength lies in the development of electric cars. However, long-time Tesla investor Gary Black warns that investors won't pay much attention to his warning that the US could fall into deep recession this year.
The Future Fund managing partner said Thursday that he doesn't believe investors listen to Elon’s economic forecasts. He's seen as a great engineer and product guy, but he's not an economist.
Musk spoke out about the possibility of severe recession during Tesla's fourth quarter earnings call. This was after Wednesday's bell.
He stated that a downturn could help Tesla's stock prices because it would be deflationary, which would reduce the company's input cost.
Black does not believe that investors will pay much attention to Musk's economic forecasts. Black stated that even though there is a recession, it will likely be short-lived because the Federal Reserve can reduce interest rates.
Investors believe that the central bank increased the cost of borrowing by nearly zero to 4.5% last year. Many investors also think it will begin slashing its lending rates in 2023 to help support economic growth.
Black stated that "most people believe that if there is a recession it will be very shallow" because the Fed can reduce rates at any time and likely will. "So, I don't believe people are buying into this idea that there will be a recession.
Tesla stock rose just below 11% on Thursday, after the company exceeded Wall Street's fourth quarter earnings targets.
Musk said that Tesla's recent earnings-per-share performance was due to US price cuts between 7% to 20% for its flagship vehicles. This has helped to revive once-stifling demand.
According to Black, Thursday's rally shows that the price cuts worked.
He said that the conference call was a success. Elon was a great host and displayed a lot confidence. He said that January's orders were twice as high as production.
Black said that the reason the stock is up 10% today is the outlook on volume, which was the result of reducing the price three weeks ago."
Continue reading: Elon Musk seems to be gung-ho about Tesla sales reaching 2 million, but a Wedbush analyst claims it has to'sacrifice margins in order for volumes'
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By: gglover@insider.com (George Glover)
Title: Investors don’t listen to Elon Musk on the economy, Tesla bull Gary Black says as he rebukes recession claims
Sourced From: markets.businessinsider.com/news/stocks/elon-musk-tesla-earnings-recession-outlook-gary-black-future-fund-2023-1
Published Date: Fri, 27 Jan 2023 12:13:17 +0000
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