A black swan market crash on the horizon?

Stock markets (^DJI, ^IXIC, ^GSPC) are navigating choppy waters as concerns over Federal Reserve policy, apprehensions that artificial intelligence stocks may be severely overvalued, and uncertainty around the outcome of the November election play on investor minds. In this complex environment, investors face challenges in formulating effective market strategies. How might one navigate these turbulent conditions?

Today's episode of Opening Bid with Yahoo Finance Executive Editor Brian Sozzi features Wind Shift Capital Founder Bill Blain to discuss Tesla's (TSLA) stock valuation and the current state of large-cap technology stocks, Boeing's (BA) turnaround potential under its new leadership, and why he believes markets will experience a crash despite volatility.

Video Transcript

Welcome to opening bid.

I'm Yahoo, finance executive editor Brian Sazi.

Now, let's make some money and get a lot smarter.

And I think we're going to do that in this episode per the usual, but definitely this one here with me now is Wind shift capital founder, Bill Blaine.

Bill.

Always, uh well, always you've really never been all of us so good to see you for the first time.

Uh Long time follower of what you write over.

Uh what at the morning Porridge uh newsletter or, or blog.

Uh definitely an avid follower of that.

And what recently caught my attention.

Uh a couple weeks ago, I saw one of your writings.

Uh I wouldn't say you were calling the top, but you voiced a lot of concern on where the market was and a couple of weeks later, now many stocks are in the tank.

So my first question to you is what did you see a couple of weeks ago?

That got your word.

Well, I've been, I've been concerned for a long time that the the market was still massively um overbought on a mood that interest rates were going to fall massively and that, that is something that changed so long ago.

Yet, the market still believes that if we get interest rate cuts that are going to be minimal, it was also clear that we had issues in the adoption of A I in ways that would actually change the world as we had been promised, it would be and it became clear that A I is going to change the world, but just much slower and much more extensively than we thought.

And then on top of that, you've got all the rising political uncertainty and I mean, by that domestic political uncertainty were unlikely as it sounds.

The UK is the most stable democracy suddenly in the West after years of Tory infighting and we have all the problems still to come in the US.

And then of course, you've got on top of that conflict in Ukraine, Israel Hezbollah and the whole new relationship with China and how that changes uh global supply chains.

So put all these together and it's been looking for a while that we were going to reach a crescendo, crescendo at some stage.

And yeah, I was lucky.

I sort of called it a few weeks ago that we are getting to the top.

And so it proved, but I don't think we're set for a massive crash.

Just a whole series of nervous considerations.

Uh Well, it's good to toot your own horn bill.

I, I'll do it for you because not many people have the courage to go out there and make a contrarian call, which brings me to this.

Is it hard to hit, publish on something that you write that, you know, is going to be contrarian.

Does it scare the hell out of you even though you've been doing this for a long time just knowing that you might be wrong?

Uh, does that give you pause sometimes?

Oh, no, I, I actually think that having the, you know, going out and saying something you fundamentally believe in and people calling you up as you're, you know, telling you that you're wrong.

That's actually a great thing.

So it's a chance to speak to them.

There's nothing better than calling one of my clients and getting to blame.

You're an idiot because that is the beginning of the dialogue.

And not only will I understand what their perspective is that they might get a better idea of mine and that will inform what I do in the future.

So I'm not in the least bit afraid.

I remember getting into terrible trouble years ago on another well known um us Financial news channel when I said, uh, so Bill, when do you think the crash is going to happen?

And I said, I think I said something 11 and 15 on um October the eighth and they went, wow, that's kind of exact says, I don't know, but I've said something, it just so happened that day there was a correction and suddenly you're the hero.

Now you keep coming on, they keep asking you on because you drive those big clicks bill.

I mean, that's why you're here on Yahoo Finance.

No, I mean, what you've got to do is there's no point in just saying what everyone else is saying, but not really thinking.

And I think one of the problems in financial markets today is 90% of the research and analytics that is sent around the market is written by compliance officers to be read by compliance officers.

The guys that I read are the guys who have an opinion and they have insights to back it up with.

Everyone's got an opinion.

They're, they're like mouths, everyone's got one, but it's the guys who can actually put an argument around that.

They're the people I go out and read.

You know, what's interesting during this latest sell off bill?

I, so my week started the first story I read of course on Yahoo Finance.

You know, we aggregate a lot of content from around, around the universe.

A story about calling this latest sell off a panic.

And I just, I just clicked out of the article.

I'm like, what are these guys talking about?

This is not a panic in the markets.

We don't have people lining up outside of the banks.

Do you think?

Do you think we're in some form of short term panic here?

No, not at all.

Um I think people were surprised at just how quickly, uh, the Japan's situation escalated, you know, when you get a move like that.

And, yeah, and that's a massive, massive eight times standard deviation type move.

It's kind of thing that, that gets people surprised.

Um, but I think there's a clear difference between what's happening this time and what we see in a crash typically when you have a correction as we've just seen, that's because a whole series of known unknowns have come together uh in my experience and gosh, you can tell by the color of my hair, I've had quite a bit of it.

Um, crashes occur when it's one of the no seals, a black swan, an unknown unknown that suddenly emerges that you suddenly work out.

Wow, all the banks are bust.

That's what caused the crisis in 2008.

Whereas this was a whole bunch of things that, ok, they've all come together and that's why the market's gone down.

I, I tend to, to agree with you.

Uh Bill.

I think these folks and we start, they, they, they come out of the woodworks uh in days and weeks like we've been seeing in the markets calling for crashes.

I just, I just think they're dopes.

So you don't see a crash?

That's, that's good.

But do you see the conditions for a bear market?

I'll tell you what I do see.

Um, and I think there's going to be a reassessment, there's going to be bear and bull markets because you're going to have split fundamentals.

What I think is really occurring now and the catalyst for this has been an outbreak of common sense in the, the A I expectations is people are going to start looking very long and hard at their investments and they're going to say, you know, what does this really make sense?

And you know, there is one example that I would cite is a clear one where there's going to be a reassessment and that's Tesla for years.

People have gone along with the sort of um the Cathy wood outlook that this is worth trillions because it's the best battery company.

It's got self-driving Robotaxis and they'll go along with all the social manship and outright fairground barker is of Elon Musk.

Uh But I think now people are going to have a more sober reassessment and that's bad news for firms that aren't delivering or firms that are over promising and under delivering.

So I think there's going to be a lash back there.

At the same time.

I think the investors are going to look and say, well, look what are the real fundamental strengths of this economy, which is not nearly as bad as the doomsters think.

And these are the kind of stocks where they're producing great protected non-compete type pinks or turnaround stories.

And one of the stories that I'm following at the moment in turnaround and it's only a possibility because it's not certain yet are names like Boeing where Boeing has had, you know, the worst decade possible, but it's finally beginning to look like it's going to elevate itself off worst company in the world status.

And if that happens, I can see definite upside there because you know what, everyone is still going to want to play.

You know, I was waiting, I was going to wait bill to talk about uh individual stocks towards the other side of this, but you brought up two good ones.

So I'm going to slice them in half here.

Let's start with Tesla because you just mentioned Tesla, I had a guest on opening bid uh a couple of days ago, Tesla retail investor, very passionate person does a lot of research.

Appreciate her for, for coming on.

She made a, I think a pretty compelling case for Tesla stock to reach up to $10,000 a share over the long term.

Now, Tesla's shares down 20% over the past month stocks at about $200.

What do you think when you see calls like that?

Oh, ok. My, my first thought is, can I have a quarter ounce of whatever she's smoking?

I mean, you don't, so you don't see it?

So you see, you don't see it.

I mean, that's not even a possibility.

I mean, look, yeah, it's, it's, it's the world would have to fundamentally change in ways that we cannot possibly understand for that to be realistically possible.

Look, here's the thing I live in the UK and I have to get a train into London every morning.

The train works in a single line from my station to Waterloo.

It's a single line where trains go up and down it.

Now, they cannot make that work.

They have not been able to make it work for nearly 200 years.

The signaling problems, they have some of the finest mines in the world trying to make that one line piece of railway actually work, but it doesn't.

So how are you going to get self driving?

Really work?

All you need to do is look at the, the way which the camera system that Tesla is using is under pressure.

You have to look at the other companies that are still struggling with other approaches.

And you've got to conclude that until we get real um general intelligence from machines, not artificial intelligence, which is just crunching numbers, it ain't gonna happen.

That means that robotaxis and full self driving are not going to be delivered.

Now, I may be wrong.

Maybe there will be a technological miracle that makes that happen.

And if the facts change, I will change my mind.

So therefore, I have to look at what the reality with Tesla is today, which is, it's a car company.

It sells electric vehicles in a very competitive market where margins are falling and guess what demand is falling today?

Parked in the yacht club car park.

This weekend, I saw one of these new um Chinese Tesla copies.

I think it's called a Bdy.

I don't think they're selling them in the States, but you know what?

It's a prettier car than a Tesla and it costs one third the cost.

So that's why I'm negative Tesla.

I appreciate that level headed analysis.

Hang with us, Bill.

We're going to go off for a quick break.

Don't go anywhere lots more to talk about.

All right, welcome back to opening bid.

Having a really cool conversation here with wind shift capital founder, uh Bill Blane.

Of course, also the author, longtime author of Morning Barge.

Uh, is, is it a blog or news letter?

I just wanna make sure I have it right, Bill.

I don't really know.

It's a, it's a kind of a bloy sort of newsletter.

It goes out every morning.

It's designed to be in people's desks by 830.

I've been writing it for 15 years since the global financial crisis when I was trying to explain to my clients why these suits should sell me all their bank stocks, uh which they did.

Um And it, it just sort of taken off.

So it's not a very well, not terribly particularly glossy little um website and for 10 pounds a month, which I think is, it's not that many dollars.

You get an article every morning.

Uh which is, yeah, full of my useless opinions, but occasionally a couple of diamonds of insights.

Well, let's, let's stay on those diamonds bill.

Let's close the loop on that Tesla conversation we were just having.

So what if you're rightly skeptical of, of really big price targets on Tesla?

I get it.

What if the, what if former president Trump wins the White House pulls the $7500 tax credit for, uh, EVs here in the United States.

Uh How big a risk is that to a business like Tesla?

Um Yeah, that, that's an interesting one.

You know, my, my own view is that if Trump gets in, he's going to be far better advised, he's going to have a much better team of people round about him and the kind of big shifts that we're expecting are simply not going to happen because whatever we think about Trump, he's smart enough as long as it sounds like his idea to accept other people's ideas.

So I don't think we need to worry about things changing too much, but it is, it does kind of, you know, sum up the contradiction at the center of us, politics from our perspective here in Europe that you've got a president that has announced that he's into oil and gas and supports autos, but then his greatest supporter is Trump and you read stories about Trump now feels that he has to go with that.

Um I'm gonna hold any judgment out on that until we see what happens in the market, which I know sounds like a bit of a cop out because the election now looks much closer.

But I suspect that when the election happens, the last thing we're going to be worrying about is Trump and Tesla.

Do you view one candidate, uh, Harris or Trump as better for stocks?

Um, I don't think it would be right for me as a rabid Scotsman.

Um to be commentating on um the choices that America faces in terms of who's the better politician that people should be voting for.

But I certainly think there are issues that the electorate should be thinking about in terms of what the likely economic outcomes are.

Now, Trump is going to be positive for the economy in some ways that he's going to keep his tax rates very low, but that means he's going to borrow and keeping the 2017 tax cuts means that the treasury deficit which passed through 35 trillion this morning is going to continue expanding at a faster rate.

Now, that is potentially very dangerous for the dollar and it's very dangerous for the bond market.

We have this expression that we call the virtuous sovereign trinity and the basis of that very simply put is that an economy that has a stable currency, a sustainable bond market and political competency will tend to do very well.

Now, at the moment the US very much has that.

But if any of them fall by the wayside, if the dollar becomes increasingly unstable and we see dull de dollarization as a result of the election or we have a massive crisis in the bond market because of the increasing scale of the US uh deficit.

That's when you run into problems.

And of course, in the UK, we're very familiar with political incompetency following Premier Liz Truss who lasted slightly less time than have let us on a shop shelf.

I like how you just slid in a little Liz Trust their analysis.

Well, I mean, you mentioned, uh you can't resist talking about Liz trust.

She is just a gift that keeps on giving to analysts looking for examples of political incompetency.

Ask me any question about political incompetency.

The answer is always let's trust fair enough.

You know, you mentioned, uh you don't necessarily really want to weigh in on us politics.

So from, let me let a U person in the US perhaps pick your brain.

What is the state of the, the U UK economy?

Uh What are you seeing?

What are you hearing?

And how might the UK economy impact the US economy and US markets over the next 12 months?

That is a very interesting question indeed.

I mean, the UK, strangely enough, I made the joke earlier that suddenly the UK and probably finds itself uh with a very stable political democracy.

Uh But the UK has a whole series of um issues that we need to confront.

And there are a couple of really major ones that we need to solve in order for the economy to get working on.

And one of the major ones is housing in London, rents and the cost of housing are completely beyond the affordability of most workers.

The average house in London, the average two bed flat in London is something like 650,000 pounds.

Whereas average salaries are somewhere in the region of 60,000 pounds for two people together.

So they just cannot get in the housing ladder.

Rentals are now well, over 60% of disposable income, which means no one's got anything left to consume.

And if the economy isn't consuming, then it can hardly grow.

And this is a problem that's going to take a long time to address.

You've also got all the infrastructure problems that haven't been addressed over the last 14 years.

So there's an awful lot of rebuilding to be done.

And the government response to that is we have got to be really careful on spending.

We're going to have austerity cuts so that we cut back on spending to get the economy functioning again.

Well, there is an argument to be said that if we started spending money and involved the private sector to finance it, we could actually create a virtuous growth cycle by spending money on house building and rebuilding infrastructure but at the moment because of Liz, trust.

Yeah, I got it back again.

Um, because of Liz trust.

We're terrified of any unfunded spending commitments.

Sounds like, sounds like it sounds a little bit like what we're dealing with in New York City where $6000 get you a closet and 10 roommates.

Yeah.

You know, it's, I think it's even worse in London now.

Um, you know, you look at some of the houses that are up for sale and you just think, oh, forget it.

I mean, I'm very fortunate.

I left London a few years ago because my passion is sailing and moved to the south coast.

But then I have to face that railway line.

I was talking about.

It used to be an hour.

It's now days.

But, I mean, if you compare and contrast the UK to the US at the moment, you'd have to be mad not to be invested in the US.

The US has had one of the strongest performing economies for the last four years.

We've had Corporates doing very well.

Indeed.

And it's only now that we're really beginning to get the first signs of, I wouldn't call it even a recession.

I would just call it a slowdown.

Um, because it's not yet terribly serious when it becomes serious.

It's when consumers have no money left to consume.

And the other thing to consider is that the strength of the US economy is, it's not so dependent on external supply highlights it is by and large internalized economy.

Whereas in Europe, we are extremely vulnerable to supply chains and everything in economics really boils down to it's not demand, forget classical economics.

It's all about what there is available to buy supply being a critical thing and that's where Europe is vulnerable.

Uh Bill, let's go back to some uh some stock at old fashioned stock talk here.

You mentioned uh I wanna end this ultimately on, on tech because a lot of interest in all things tech stocks here, y'all finds.

But you mentioned Boeing is a turnaround story.

New CEO that just got in, got in there.

Should investors trust a company like Boeing?

Given all the challenges it has been up against.

The financials have really taken a dive here.

What is the, what do they need to do, I guess to, to repair investor trust?

Ok.

So I have been profoundly negative on Boeing for a long time even before the max disasters.

And the reason for that is I watched what had been the finest manufacturing company in the world.

Uh If it ain't Boeing, I ain't going, they built the best airliners and I watched that company getting taken over um by mcdonald Douglas using Boeing's money as the joke go and a whole bunch of cost accountants replacing engineers.

And so it became a company run on the basis of financialization that was to maximize the stock price which incidentally maximized the returns to the management suite as well, who paid themselves enormous bonuses through stock options and stuff and became clear that this was no longer a company of engineering brilliance.

But a company run by accountants then we had the crisis with the Mac which they tried to wriggle out with.

It's now clear, they've squandered all their money on stock buybacks.

They don't have the cash to develop a new plane, but they are finally under understanding the importance of their genetic history that it's safety and quality that counts.

So I would look at Boeing and say, ok, do I trust them?

Not quite.

Is it willing?

Is it a good time to have a small look at them and maybe a small bet on them, perhaps it's a stock that's worth watching.

I wanted to see what the new CEO does.

I want to see how he prioritizes the shop floor and how he puts the priority back on safety and quality.

And I want to hear plans for the expansion of the, the business.

What are they going to build and how are they going to get it done bill in the minute that I have left out of all the magnificent seven stocks that have sold off.

All these names are generally off their 52 week highs, which would you back up on the back up the truck on and why?

Oh, gosh.

Um, if you'd asked me that last week I probably would have said apple because I'm an Apple hic.

But when Warren Buffett turned around and dumped the stock, I said, you must know something I did out of the whole lot of them, which is the one I'd go for.

Gosh, at the moment, I've got to say it probably be Facebook because the business of advertising is massive and about 75% of advertising goes through, uh, the internet and the firm that controls that best at the moment is Facebook.

Do I think Facebook will survive the evolution in advertising that is constantly going on?

No, they will be replaced.

But in the short term, Facebook will be my call.

Hell of a chat here, mate.

Really?

Uh, enjoyed this one.

wind shift capital founder, Bill Blaine, give his blogging newsletter, a read morning PGE.

Uh, really, uh, something I've been reading for, for quite some time.

Very much.

Enjoy it.

Bill Blaine.

Good to see you.

We'll talk to you soon.

A real pleasure.

Thank you.

And that's it for the latest episode of opening bid.