Elon Musk Has an Alarming Diagnosis on the Economy and Biden
Elon Musk makes the news.
He is everywhere.
The chief executive officer of premium electric vehicle maker Tesla (TSLA) – Get Tesla Inc Report is somewhat reminiscent of former Republican President Donald Trump when the latter was in office.
Like Trump, Twitter is Musk’s main communication channel. Like the real estate developer, the tech tycoon seems to love being in the spotlight. When another piece of economic news manages to steal the show, Musk always finds a way to bring all eyes back on him.
Since April, he has found a strategy to monopolize media attention. His $44 billion bid to acquire Twitter has become a telenovela with unexpected twists. Every day seems to have its share of surprises. More than a month after the announcement of the offer, very few are those who can say that Musk will finalize the transaction which will in the process put him in debt.
When it’s not Twitter, Musk has found another way to be the center of attention: he gives his opinion and comments on political as well as economic subjects and hot topics.
The world’s richest man, who sees himself as a global CEO, has just given his diagnosis of the state of the economy as consumers grapple with soaring grocery store receipts and investors wonder if we are in a recession.
‘We Are in a Recession’
“I think we probably are in a recession and that recession will get worse,” the billionaire said on May 16 during a virtual appearance at the recent All-In Conference held in Miami. “But you know, these things pass and then there will be boom times again.”
Tesla CEO added that the recession will “probably” last 12 to 18 months.
“It is usually the amount of time that it takes for a correction to happen.”
Economists are currently divided on the state of the economy even if the recent rout of the financial markets show that fears of recession are very high among investors.
Gross domestic product (GDP) contracted an annualized 1.4% in the first quarter. But the drop came mainly from a slowdown in inventory growth and a widening trade deficit. Consumer spending and business investment — the economy’s mainstays — registered solid gains. The unemployment rate totaled 3.6% in March.
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“The economy is still showing some resilience, but the first-quarter GDP report signals the start of more moderate growth this year and next, largely in response to higher interest rates,” Sal Guatieri, a senior economist at BMO Capital Markets, said.
Musk recommends that companies watch their costs as well as cash flows.
“Recessions are not necessarily a bad thing. I’ve now been through a few of them. And what tends to happen is if you have a boom that goes on for too long, you get misallocation of capital. It starts raining money on fools. Basically, it’s like any damn thing gets money and I’m sure you’ve seen a few of those,” Musk said.
“So somebody gets just out of control. And you just have a misallocation of human capital where people are doing things that are silly and not useful to their fellow human beings,” he continued. “Watch your cash flow and get positive cash flow as soon as you can.”
‘The Real President Is Whoever Controls the Teleprompter’
The mogul added that one of the things about recessions is that they sort out good companies from bad ones.
“The bullshit companies go bankrupt and the ones that are doing useful products are prosperous.”
Also during the same interview, Musk vehemently criticized Democratic president Joe Biden when asked if he observed a difference in immigration between the current administration and that of his predecessor Donald Trump. The serial entrepreneur begins by laughing before responding that Biden can only do one thing: read the teleprompter.
“It’s hard to tell what Biden is doing to be totally frank,” Musk said. “The real president is whoever controls the teleprompter. The path to power is the path to the teleprompter. I do feel like if somebody were to accidentally lean on the teleprompter, it’s going to be like ‘Anchorman. ”
Tesla chief executive officer is referring to the 2004 film about a news anchor who will read anything written on the teleprompter even if it ruins his career.
Relations between Musk and the White House have been strained from the start. The world’s richest man did not digest that Biden organized events on electric vehicles without inviting him or mentioning the name of Tesla when it is his company that forced the automotive industry towards electrification.
“This administration, just, it doesn’t seem to get a lot done,” Musk continued. “The Trump administration, leaving Trump aside, there were a lot of people in the administration who were effective at getting things done.”
“This administration seems just to not have the drive to just get s— done. That’s my impression. That’s my impression. We definitely need to fix immigration policy, like we had COVID which was an issue.”