TSLA Takes A Page Out Of The Fed’s Inflation Playbook

Elon Musk has a talent for creating news to inflate the value of Tesla (TSLA). This week he did it again by following Apple (AAPL) and the Fed’s tactics for inflating asset prices.

In addition, he cleverly used this tactic to abruptly halt the slide in his stock as it was breaking an important support level and looked destined to head lower.

It’s surprising that more companies haven’t followed the Fed’s lead in this way because it’s really this easy…

When the Fed needs to support or inflate something, it does two things.

  1. Finds buyers (it has plenty of investors willing to follow its lead)
  2. Prints money

And the best part…

It starts working even before they print the money.

For example, the Fed engineered the March 2020 low in the S&P 500 with an announcement that they would begin to buy corporate bonds. As a result, the market exploded higher immediately, and the Fed didn’t actually start buying the bonds until months later.

Any well respected company with a stock price over $200 can do the same thing.

Mr. Musk clearly understands that equity (stock) serves as a form of currency for a corporation, so last week he came to the obvious conclusion…

Why not just “print more stock” to boost TSLA’s value?

It’s free, and with his announcement of a stock split, Mr. Musk will turn every share into five.

My only question is why he chose 5 for 1 when 10 for 1 would have one-upped AAPL’s 7 for 1 announcement, and been even more generous to the investors he’s reaching out to.

After all, this is simply an effort to enable more people the opportunity to attain the status of becoming a shareholder.

As for finding buyers for all his “new” shares, he was as effective as the Fed.

The news drove the stock up over $200 before closing $120 higher the next day. By the end of the week, the shares sat at an all-time closing high, $276 higher than the day before the announcement.

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