U.S. Markets closed

'Big Short' trader weighs in on recession risks, Elon Musk, Tesla, FTX, weed in Florida

Sunburn Cannabis Chairman of the Board and 'Big Short' trader Danny Moses joins Yahoo Finance Live to explain why he's short on Tesla, the state of crypto amid the FTX collapse, the odds of a U.S. recession, and weed legalization.

Video Transcript

DAVE BRIGGS: All right, Bank of America CEO Brian Moynihan saying this morning, he expects a mild recession next year, nothing of the economic hurricane we've heard from Jamie Dimon recently forecast. Investor Danny Moses, he saw the 2008 recession coming and was profiled in "The Big Short." He's now going long on cannabis, says the chairman of Florida-based Sunburn. Danny, good to have you here. We'll get to that in just a moment. First, I want to ask you what you see coming this time around. Do you think we can avoid a recession?

DANNY MOSES: I don't think so. I think we're starting to see it build its way in into the rates market. You look at the 210 curve. You're about 75 basis points inverted there. I think earnings is going to continue to come down for 2023 on the S&P 500. I think we're gonna end the year in the $220 to $225 level in the S&P. So I think we'll have flat to negative earnings next year. And I just think that consumer spending is going to start to really slow here. And we're starting to see some evidence of that.

JARED BLIKRE: And you've been talking about publicly on Twitter a number of stocks that have seen some precipitous declines from the record highs, Carvana among them. And you've also got a megacap in your sights as well, maybe for the same reasons or are some of the same reasons. Could you explain that?

DANNY MOSES: Yeah, sure. So I mean, some of these names, they just were dependent upon the debt securitization market, if you want to call it, that whether it was a buy now, pay later, or in the case of Carvana, the auto loan segment. Those spreads have obviously widened, and the ability to keep originating loans and sell them is being hurt by rising rates, obviously.

The granddaddy of them all, as I call it, Tesla, obviously, if that's what you're referring to there, that I've talked publicly about many times. And I believe that Tesla is the one company that represents to me everything that's been wrong in terms of valuation, capital markets, and it's the king of the meme stocks. I'm happy to go into that more.

DAVE BRIGGS: Please do, and the stock down 54% year to date. If you could explain more on being the king of the meme stocks, and how do you think this Twitter distraction is impacting Tesla.

DANNY MOSES: I think you're getting to see front and center how Elon Musk handles himself, right, in real-time. And I think he helped build the culture, obviously, at Tesla and SpaceX over time. This one, he didn't. And he's come in obviously with a wrecking ball into Twitter, obviously, in this case. And obviously, I think he's a hypocrite in the sense of he's saying he's all about free speech. Yet he dares go after censorship in China, where half his production is and 25% of his sales are. So I find that funny.

Everything about the SolarCity acquisition back in 2016, remember, SolarCity was started with basically state funded credits out of New York State and federal subsidies that helped get these solar panels in people's homes. The same is true for Tesla in the sense of the amount of EV regulatory credits that have been used all along the way that helped fossil fuel cars, obviously, get sold around the world.

So I just think that on an earnings basis, on an adjusted earnings basis, even-- give him credit for that-- I think the stock is rich. And I think just being up with this market capitalization of $575 billion plus or minus 5 billion is just too high here. And so I think over time, we'll start to see earnings degrade.

And I just can't understand how people don't question more about his operating expenses. You're building gigafactories in Berlin and Austin, yet-- and you want to produce more cars. Yet, as a percentage of sales, they don't seem to track accordingly. So something's up there. Listen, I've been short the stock on and off for a long time. I'm sure over the course of the position, I'm down. But I feel very confident at this moment in this position that I'm in.

JARED BLIKRE: Nd you've also been pretty vocal on crypto-- on the crypto space overall and also the FTX bankruptcy, noting that you know a lot of smart people in crypto. Could you expand on what you're seeing right now based as your position that you've held historically with crypto?

DANNY MOSES: Sure, I've never really held a position. I traded it once or twice in 2018 and got scared out of it. So I'm not going to dance on anyone's grave here, so to speak, because I hated Bitcoin at $500. So, obviously, I've missed the run-up. That being said, obviously, a lot of people were lured into this DeFi and the tokens and so forth and crypto in general. And it's sad to see people lose money.

I will give Gary Gensler credit for something that he did at the SEC. And if you look back today, we had the BlockFi bankruptcy, obviously. If you look back earlier this year, remember, he stopped them from selling some of these products as he categorized them as securities, or else, this could have been a much bigger debacle. And you're obviously seeing all the interwoven connectedness between FTX and BlockFi and others. They owe each other money, one on a loan, one on an investment, and so forth.

So I think we're going to continue to see this unwind. Hopefully, it's just contained into this sector. But I still think there's more fallout to come here. And listen, I think crypto, in a form, will be around. Blockchain is here to stay. So applications are being built using Ethereum and using the blockchain. I think that's here to stay. But like the dot com bubble that kind of burst, obviously, a lot of companies will go by the wayside. But the technology itself is probably here to stay, and we'll have some type of application in the future.

DAVE BRIGGS: Touching them all here with Danny Moses. Got to close on cannabis. You are now the chairman of the board at Sunburn, Florida-based. You're also building a case study with Harvard Business School on building a cannabis company. Why are you a believer in this industry, when you're talking about the biggest MSOs down between 25% and 50% year to date? And if you are building this case study, what are those big MSOs doing wrong that you think you can do right?

DANNY MOSES: Well, I don't think there's necessarily a case study being done, just to correct. We did go up and speak at the Harvard Business School. But just to clarify, we did have a great time in the class there, speaking to the entrepreneurial class. But I think there's a huge opportunity. One, there's a definite need for brands in the sector. And Sunburn is an authentic brand founded by Brady Cobb, and his story, his father's story, so forth.

And having the state of Florida be where this is, is the best demographic that you can be in. Sales will be north of a billion and a half dollars in Florida this year. It's one of the top states, and it's medical only. Demographics, if this were to go, adult use. Recreational would obviously be much bigger than that. Obviously, with the amount of tourism in Florida, it would be very large. But the team is incredible.

And so Brady and his team really care about quality of the flower, quality of the products themselves, and then building out the best locations within the state of Florida in terms of the acquisition that we made of this MedMen asset, just in the state of Florida. So I couldn't be more excited to be a part of this team. I sit back and watch these guys do what they are doing. But I think it's a tremendous opportunity. And I think we're really just in the first inning, certainly, for what it means for Florida.

JARED BLIKRE: Yeah, we got to leave it there, but always appreciate your insights. And as a recovering Florida man, I got to tell you, Sunburn is a great name. Best of luck on your ventures. Danny Moses, thank you.