In a world inflated by stock buybacks, Tesla CEO Elon Musk had the guts to do what the Federal Reserve won’t: call the stock market a colossal asset bubble.
In a startling move, billionaire Elon Musk confessed that he believes Tesla stock is overvalued. The stunning admission sparked a massive sell-off in the price of TSLA shares.
While shareholders will inevitably be angry, it’s refreshing to see a CEO tell the truth. The Federal Reserve could learn a lot from Mr. Musk.
To understand the magnitude of what Elon Musk just did, consider that the mercurial billionaire and self-proclaimed meme-lord is Tesla’s largest shareholder.
Musk has stated in the past that should Tesla and SpaceX ever go bankrupt, then he would as well. What he did on Friday was the financial equivalent of taking a chainsaw to one of his own limbs.
TSLA had been defying the odds while plummeting auto sales crushed other car companies. Even after today’s 10% sell-off, Elon’s EV giant is still worth well over $125 billion.
But Musk clearly has had enough of the reckless investing that the Federal Reserve has allowed to fester among TSLA speculators.
With horrendous economic data piling up in the U.S. and more than 30 million Americans losing their jobs, the Federal Reserve has been providing massive support to financial markets in recent months.
After a decade of loose monetary policy, investors left with few options have been herded into the stock market as low interest rates fuel dangerous risk-taking.
Of course, nobody at the Federal Reserve would ever admit that their obsession with maintaining the financial status-quo has created a colossal asset bubble that has driven wealth inequality in the U.S. to its highest level in decades.
CEOs, including Elon Musk, have become wildly rich from their stock options, while worker pay has stagnated. And we haven’t even touched on the buyback scandal.
This is what makes the Tesla boss’ comment so admirable. It could cost him billions of dollars, and he did it anyway.
Musk has apparently had enough of another Fed-fueled bubble too. He claims he’s also divesting of his real estate assets, with just one stipulation on the sale of his home:
There is another explanation for Elon Musk’s comments, and they center around accusations that his push to reopen the U.S. from the coronavirus lockdown is self-serving.
Fellow billionaire Mark Cuban embodied this view recently, claiming:
I don’t think he has other people’s interests at heart.
But by intentionally attacking his own wealth and dumping most of his physical assets, Elon Musk is demonstrating to the world that he is fighting this fight for the working people of America.
With a massive, multibillion-dollar payday on the line (and a baby on the way), Musk saw a bubble – and he didn’t hesitate to call it one.
Federal Reserve, take note.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.