Elon Musk says he sold Tesla stock to free up cash in case a 'worst-case scenario' strikes. Here's what he's so worried about.
that if higher interest rates are compounded by a serious recession, he and his companies could suffer.
The higher cost of borrowing effectively increases the price of cars, meaning manufacturers have to cut prices to keep customers or bring more in, Musk said. As a result, rate increases tend to temper demand and eat into automakers' profits, which can weigh on their stock prices. As well as pointing to rates, Musk warned a severe recession would hammer sellers of big-ticket items bought on credit. In tough times, consumers will stop buying those products before giving up staples, he said.
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