https://www.youtube.com/watch?v=z7ntsM5hVho&t=237s
[Music]
hey it's Dave so the question is is
Jerome Powell trying to crash Tesla
stock and the follow-up question is can
Jerome Powell be successful at crashing
Tesla stock all right so yesterday the
FED announced that they're raising the
FED funds rate by 0.75 percent or 75
basis points in Jerome Powell's press
conference speech he emphasized three
important points the first point being
the FED is going to bring down inflation
no matter what we know that the Dual
Mandate of the FED is maximum employment
and stable prices employment is doing
fine so the FED is going to focus all
their intention on getting prices stable
all right the second point is that the
FED is afraid of acting too slow or
pausing because they're afraid that
inflation expectations will become
entrenched so in other words they're
scared of people expecting prices to
continue to go up and that causing a
chain reaction in which prices do go up
Elon Musk shared on Twitter that he's
actually against the FED raising
interest rates he thinks is already
coming down he suggested the FED
actually lowered their fed funds rate by
0.25 but Jerome Powell made it clear
yesterday he's not going to listen to
Elon Musk because he's afraid inflation
is going to get out of control the third
Point dronepal emphasized in his press
conference is that the economy needs to
slow down and the FED is going to
actually play an important role in this
by raising interest rates this will slow
expansion in other words the higher cost
of capital or make it more difficult for
companies right to borrow and to
actually go forward with aggressive
growth plans with a higher interest rate
environment and with more restrictive
Capital you're going to see Expedition
shift from consumers and companies into
a slower economy and Jerome Powell made
it clear he's not trying to help out
investors he's not trying to prop up the
stock market in fact he actually thinks
housing prices are quite high and he's
looking forward to actually housing
prices going lower for Jerome Powell his
main goal right now is to bring down
inflation and that's by raising interest
rates and making the cost of capital
more restrictive what's also interesting
is because unemployment is very low
right now it actually gives Jerome
Powell more more confidence or more
incentive actually to focus just on
inflation because of their dual mandate
the only part that they really are
concerned right now is the inflation
part so back to the question is Jerome
Powell trying to crash Tesla stock well
not specifically of course Jerome Powell
doesn't care about Tesla stock or Google
stock or Amazon stock or any particular
stock per se but what Jerome Powell and
the FED are trying to do is they're
trying to slow the economy and they're
using higher interest rates and more
restrictive monetary policy to slow
expansion and slow growth plans of
companies now this will hurt the man in
the economy it will raise the
unemployment rate and there might be
unintended consequences as well but the
FED thinks those risks are worth it
because they view inflation as this
raging monster out of control and they
have this limited opportunity to be
aggressive and put inflation back in its
cage the problem or the weaknesses of
the fed's approach are a few things
first off the FED is dealing with
lagging indicators their core CPI index
is flawed at best and they don't have
the Insight that a lot of company CEOs
like Elon Musk have he's able to look
into the supply chained through hundreds
of suppliers to forecast future
commodity prices to forecast what's
going on in the supply chain with
Logistics and to have a better pulse of
what's going on in the economy right now
so the big danger right now is the Fed
overdoing it in other words they raise
interest rates too much they make access
to Capital too restrictive and a slow
expansion of the economy too much so
this brings me to my next question which
is can Jerome Powell actually be
successful at crashing Tesla stock so
let's say in this scenario that interest
rates continue to go up let's say the
FED makes the mistake of actually
restricting Capital too much what
happens to Tesla stock and actually the
stock market in general in that case
first off the stock market is driven by
expectations so the more expectations
investors have that the FED is going to
overdo it that the FED is going to slow
the economy too much the stock market is
going to react by pricing that in
however the moment that it's clear that
inflation actually is in reversal and
the FED is going to have to Pivot that
expectations from investors on the stock
market are going to change then people
are going to price in lower interest
rates in a more looser monetary policy
and that's going to be reflected in
stock market prices for for Tesla stock
specifically it's going to come down to
whether the financials the revenue and
the profit and the margins that Tesla
crew are going to be higher than
expectations that investors have for
Tesla stock over the next several
quarters in my opinion Tesla has a lot
of Tailwinds going for it for example
first they have high demand for their
product second they have extremely high
margins right now and these margins are
improving third they're ramping new
factors in Austin and Berlin which
should actually increase the revenue but
also increase their margins because of
the cost efficiency improvements in
manufacturing in these two factories
Tesla also has new technology for
example FSD beta as it improves the
option take rate is likely going to
increase which improves Tesla's revenue
and margins and then Tesla has the U.S
to federal tax credits which are going
to kick in starting 2023. this is only
going to help demand and help margins as
well but in the short term Tesla stock
is very vulnerable to the macro
environment and to invest your sentiment
and with a Fed being very aggressive
toward raising interest rates and
restricting the economy this is going to
be a very volatile stock market in
coming months for me personally I
generally tend to take a step back look
at the bigger picture I'm more Investing
For The generational opportunity I'm
looking for long-term generational
companies that have generational
changing products with increasing
Revenue growing margins and are still in
the early Innings of their ghost story
so my time frame allows me to be bullish
it allows me to look at and appreciate
Tesla's new products coming forward
let's say the Cyber truck or even AI Day
2 with the Prototype of their new Tesla
robot anyways hope this has been helpful
if has good like And subscribe all my
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player I'm currently in Dallas Texas
we're coming back from a super long
summer RV trip we spent about a hundred
nights sleeping in our RV going through
all these state parks and national parks
it's been a fantastic time but I'm ready
to go back home to Austin where I'll be
able to do more interviews and put out
some more videos so looking forward to
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