More NOT-ADVICE
An idea I've encountered to some degree, but not nearly as much as I think worthwhile, about interest rates, is that somewhere around 2.5% for the Fed target interest rate is neutral to the economy. Around 2.5% is neither stimulative, nor is it a wet blanket (I can't think of a better and cool term like stimulative
).
That means that with this most recent interest rate boost, the Fed has moved from a stance of aggressive stimulation of the economy to ... aggressive stimulation of the economy. The difference between now and the start of the pandemic is inflation was 8% at most recent report, and I expect it to be higher in the April report.
If the Fed carries through with quarter point hikes for the balance of the year and arrives at 1.75 - 2.00% at end of year, then the Fed will have moved from aggressive stimulation of the economy to .... stimulating the economy at a steadily and lower stance of economic stimulation. I don't know what inflation will be at the end of the year but any stimulation with 8%+ inflation and such a good employment environment cries out for more aggressive interest rate increases. I am increasingly of the belief that the Fed needs to do something shocking to let investors know clearly that the high inflation needs to be addressed - something to let investors know that the Fed isn't asleep at the wheel through this. I tend to think that quarter point rate changes are priced in and have become the baseline for business-as-usual to investors.
I see these as a net good for Tesla, even if the transfer mechanism is somewhat convoluted and delayed. At some point - maybe with this P/D report, and maybe in a few more quarterly P/D reports, I think that investors will flip a switch in their thinking about Tesla. At some point I expect investors to realize that Tesla is effectively immune to interest rate changes and inflation - that Tesla has the necessary pricing power to pass along inflation in raw materials to buyers with no effective change in the business.
And interest rates don't really matter to the company any longer - there is no need for longer term borrowing to support expansion of the business. The company might even be facing the need to start paying a dividend to avoid accumulating too much cash (how weird is that).
The combination, I think, will turn the view of Tesla from a "Growth Company" (with corresponding interest rate sensitivities) and into a safe haven. A good place to be invested in the face of high and rising inflation and/or interest rates.
As long as the longer term Tesla Story remains intact. The big risk to this safe haven view, as I see it, is a quarter (or 2) of matching or missing expectations. It can and will happen - the question is when. As long as Wall Street is told ">50% long term growth, significantly higher in 2022" and hears "30% growth" and puts 30% into their models, then the Wall Street expectations will lag reality by a lot.
