A (4:12)

Melissa, let's be clear though, I mean this is not a done deal. I mean it seems strange to think about a deal and we're talking about the terms of deal, who will own this new company and yet the quote unquote seller is nowhere here in the picture.

B (4:25)

Yeah, the seller's not in the room neither by the way, were the buyers in the room. We had a lot of political figures in the room here. So this was not the deal signing. This was just the signing of an EO that certifies that the deal is kosher under the law. What we're waiting for is an actual transaction of the underlying asset. Not clear when we're going to get that. We still don't know all the investors here. Despite David's great reporting from earlier in the day, you know, we now know a little bit more. We know about this Abu Dhabi entity, but we don't know all of the investors who are getting in on this deal. So, you know, I think that's a key piece of this. The other key piece of this is how did they come to this $14 billion valuation for TikTok US? We'll have to see the rationale for that. But there are going to be skeptics here who will look at this and say, wait a second, are these political allies of President Trump being given a sweetheart deal with a very low valuation at 14 billion for a media organization, an Internet organization that is so influential in American life and is going to have exclusive, really, access to the American market? A lot of questions around all that still to be answered.

A (5:30)

All right, Eamon, thank you. Eamon Javers from the White House, by the way, ByteDance, which is the parent company of TikTok, its most recent valuation exceeds $300 billion. This is a $14 billion deal for the US division of tick Tock. What do you think?

B (5:46)

It's pretty shocking. I mean, if you just want to kind of take a look, five years ago, the President signed an executive order to ban TikTok. And so here we are five years later, and you would think that this is a company that would be worth a whole heck of a lot more. They probably have four or five times the revenue that Snap does. That's here in the United States. So snap has a $15 billion enterprise value. I mean, just think of that. So there's no shortage of folks that would outbid 14. There's probably a $40 billion bid out there for this thing. So I'd be really shocked if it gets done like this, because if you just think about The Chinese and ByteDance, I mean, they have no obligation to sell this thing. They get banned. But, I mean, there is a bid much higher than $14 billion for this thing. That's fair. And I would just argue we don't really know who still then owns the algorithm. And we know that there's rules around how the algorithm is handled, how essentially Oracle is going to manage a firewall and all that stuff. But one could make an argument that the real value of this company is in the algorithm. And so if you don't own the algorithm, but take it back to the players involved, there's no question that Oracle is. Is, to me, in the catbird seat. And there's a reason why this deal makes sense for Oracle, not just because they seem to be part of the inner circle. But if you remember this, this Tick Tock was really their first major customer in terms of their CL services. I mean they were the dominant nascent early customer. Very lucrative, a lot of services attached to it. And this is a big, big deal for Oracle, even independent of. Of, you know, call it the relationship that Larry Ellison has with the White House. So I think right now this is very Oracle friendly. But as we all have said, this satisfies us deals and dynamics. It does not necessarily indicate that the Chinese or that Bite dances here. Right.

A (7:31)

Or the Chinese has blessed this deal. A lot of things are sort of unknown. And I think the point on the algorithm is a very good one because supposedly ByteDance will lease us TikTok the algorithm. It will then recreate it, it'll copy it, retrain it, but who knows what that is going to be? I don't know if it's going to be as effective as the old algorithm. And so therefore maybe there should be a degraded valuation for this asset.

B (7:56)

Yeah. And then when you look at it, what do you do with Snap and what do you do with Meta? I think you buy Snap off of this. You buy the Tim's point Oracle off of this. I'm not sure if the negativity that if you look at Snap is down 23% for year to date. They're used like kids use these for two different things. Tik Tok is scrolling, Snap is snapping. So there's. You're literally sending messages to. You're literally sending messages to someone snapping. Yeah, so you're snapping to somebody. But I think there's two different use cases and it's been slammed by. By, you know, eyeballs viewing. But I think there's enough eyeballs for Snap to where the stock is, even though it's off the lows recently to actually rally further from here. I mean, in terms of. Is there anything written today? It's just not what I do about what this prospectively is worth. If 14 billion is light, I mean, just to put in context, I mean RALPH Lauren is 18 billion. They sell socks and Williams Sonoma is 24 billion. And they sell blenders and egg beaters and mixing bowls. Surely the 14 number. I don't think we've ever talked about eggs ever on someone's got to do that. But what you guys study this stuff, right? And you. There must be sell siders who are put out. What is TikTok worth? If it's not worth 14, it's got to be worth a lot more.

A (9:09)

No, I would I mean, one would think, One would think, one would think. So in terms of the reach that it has, the influence in public, the public sphere, all the millionaires that TikTok has spawned in terms of influencers.

B (9:21)

So then where is the four? Was there anything about where the 14 came from? Or is that just an Arbitrary Twitter from JD Vance Elon raised money in Twitter at like 80 billion or something like that. If you think of the revenue base, you know, they have again, a much lower revenue base based on advertising. You know, TikTok is obviously the thing there's no shortage of. There's advertising revenue, there's e commerce revenue. You know, they have. This is the platform where creators want to go. And I'll just say one thing is a parent of kids who probably spend way too much time on TikTok. I would love for that algo to be degraded for the kids not to enjoy this thing anymore. Because if you think of the attention that is commanded by this platform right now, and it is not Snap. Your point about snapping? You know what the kids do today, they do take a snap and they send it. There's no way to monetize that. I mean literally. And Snap as a company on a gap basis, they've never made any money. And if you think about social platforms, how few have been able to get over 100 or 200 million monthly actives? It's a handful of them. So TikTok to me is an amazing asset for anyone to get it under $100 billion. I mean, assuming that the algo is in place and they are literally set to grow in a manner that is not subject to any government oversight, I mean, there will be government. That was the valuation over 100. It was the value. The US entity is 14 billion. Valuation is 106 billion or somewhat for TikTok for their brand. So. So I think they just found out, they just divided it and came up with something, an arbitrary number of a slice of 106 and just, you know, the conversation around other places. But the conversation around SNAP is that right now the street doesn't believe Snap can meaningfully accelerate revenue. As Dan saying, I mean, it doesn't matter where they sit here, where they sit in the funnel is an inability really to monetize from an ad basis.

A (11:06)

For more on the Tick Tock deal and the broader impact on big tech, let's bring in Jefferies Managing director and senior technology analyst Brent Thill. Brent, great to have you with us. We just got a number in terms of valuation, $14 billion for us TikTok, what's your take?

B (11:20)

That's massively undervalued. I think Carter said it well, like, how do you buy a blender for a higher market cap? This is crazy. The numbers got to be wrong. It doesn't make any sense. The market cap of Snap is 14. The market cap of matter, you know, is close to $2 trillion. I mean, this doesn't make any sense. So the only way you could read into that is are they getting themselves a good deal and they're going to mark it up and it's going to be a huge windfall, but that it makes zero sense from what I can see, and I don't have access to all the numbers, but it doesn't make any sense.

A (11:52)

Just to play devil's advocate, Brett, I mean, there is, you know, the possibility that it's not worth as much because they do have to recreate the algorithm, they have to retrain the algorithm. There might be a period where users have to actually download the app again and they could lose users. I mean, even Grant factoring all of that in 14 makes no sense.

B (12:11)

No sense. Zero. I mean, no sense. So this is a great deal. It's a great deal for Oracle. They're on a hot streak now. We think ultimately the drama's over. This is good. They should be able to attract more advertisers to the platform because the drama's over. As we've seen in social, there's only one play. I have teenagers. They look at Snap, they've never been influenced by anything that Snap has sent, so they can't monetize. And I see that through my own teenagers behavior. It's all valued and monetized on Instagram. And Zuck just said that they crossed 3 billion monthly active users. Everyone's sticking on Instagram. There is room for TikTok. But again, I think that the question is, is there going to be market share taken from advertisers, whether it's TV or whether it's from other social platforms, back to TikTok. And I think the answer was is yes. I just can't tell you where it's going to come from yet. But there's no question these are, you know, there's three platforms really that the, that, that, that most are using Meta, TikTok and Snap. And I think ultimately we've seen this. I think there is room for TikTok and monetization. Snap just hasn't been able to do it and it's been, it's been a broken record for a while. So Brent, Tim, agree with you on the teenagers. Same with Dan. So shining a bright light on Instagram and trying to kind of talk about valuation and some of the pieces. But again, Instagram, relative to other p of Metta overall, can you help us understand just how you put a premium on that Instagram? And we're at a place here, we're on valuation. This has certainly been a story where people have been able to say, well, that has certainly come a long way in the valuation in the last 18 months. But as you point out, it's Instagram and almost everybody else. So help us understand just how you attach that value. Yeah, I mean we don't get, we don't disaggregate just at a high level. You know, this company is going to do $30 of earnings power. You put a $30, 30 multiple on it' hundred dollars. So we still believe, you know, there's a lot of upside in matter just overall in terms of Instagram. Clearly it's, it's the, it's the driving force that's the huge engagement. We don't necessarily break it apart, but I don't think that there's any chance of a spin or a divestiture. We think that this is going to be part, part of the franchise. And then you look at all the other assets that they're, they're generating beyond just this platform. You know, we think again, advertisers keep telling us that they're staying with Metta and we've actually heard market share gains against Google because the engagement is so high, the users are engaged, the advertisers stay there. And we've heard this from, for now, multiple quarters in a row, that the advertisers keep spending more on matter less than other platforms. You can see it in how the other stocks are acting. Again, it's not all taken away from Google, but at the margin. Google has necessarily from the advertisers we talked to has been as excited about what they're seeing. So as long as the advertisers are saying we love the meta roi, we're staying positive on it because again, usage is there. Zuck talked about this. If you got 3 billion monthly active users, you're going to get the advertisers to come to the platform. Hey Brent, help us think about Oracle for a second here. You know, obviously TikTok is one of their early customers. We know that, you know, they have, you know, low single digits, maybe mid single digits market share as it relates to cloud. So they have this huge open AI contract. They have a meta contract. I'm sure there's others that are coming this way. They just raised $15 billion to help this build out, but man, they need $100 billion. Right. And so you have free cash flow that's negative here. How do they do this? How do they satisfy this infrastructure build that's going to be basically commensurate with all these contracts. It just seems like a very curious situation that the market is willing to reward them for that revenue that they've guided to when it's going to take. Their competitors have spent hundreds of billions of dollars on the, on the build out. Yeah, I mean Oracle, we've never seen 317 billion sequential improvement in backlog. That's 6, 7 times their annual revenue. The Oracle story is really about the backlog. It's not even about the revenue. Remember the company you know is guiding from single digit growth to double digit growth. This has not showed up in revenue. The real question investors have on Oracle is all this backlog phantom. Can Clay, who was walking with Sam Altman in Texas the other day, get this infrastructure in the ground and get it up? Can he do it profitably? Because we know infrastructure is way lower margin than software. Those are the questions we keep getting. We just came off the heels of 45 companies at Jefferies AI Week and everyone believes the ROI is coming. The economic value that's going to have for all of us, whether you're a doctor or lawyer, you're in Wall street is going to be there. But these are huge investment. It's hard for investors to digest the magnitude that's going in. I think the other concern right now really is just around just the scope of the, the transactions and how few there are. Right. There are very few companies that are going to hand over $300 billion checks. OpenAI. There's only a few that you could count on. Again, there's like two or three on the planet that could deliver a contract that big. So I think there's concern about concentration risk, there's concern about can Oracle deliver. Here's the reality for the stock. It's not going to matter for the next two years because it's not going to come off their backlog and their backlog is going to stay high. And if they keep signing up matter and Middle east data centers and other contracts, they've now got TikTok, they sign up more infrastructure, that backlog number is going to keep going higher and again it's going to matter at some point, but it's not going to matter in the interim because they can't take it to revenue. So the backlog number is just going to stay high. And 100% of Oracle stock move is on backlog. It's not revenue, it's not a margin. It will flip at some point. So I'm just saying in the near term, it's not going to matter as long as they keep signing these deals. We had core we've on today and they see an incredible demand for AI. They can't keep up. Every data center operator we're talking to can't keep up. There's not enough power. It's hard to believe and I'm not trying to hype this. It's just incredible the demand that we're seeing right now.

A (18:37)

So Oracle trades only on backlog. What is your rating on Oracle then?

B (18:42)

We have a buy on Oracle. We continue to believe that that backlog is going to remain high. And again, the risk is can they convert? They're basically saying we can build you 100 condos in Miami, but we haven't built them yet. Trust us, we'll get them up in two to three years. The analogy is simple. But that's what they're doing for data center infrastructure. They're accepting these contracts way ahead of infrastructure being built. The question is, can they pull it off? And again, it's interesting that Safra steps down and Clay steps up and Clay is architected oci and he's done a great job. But then the question now is can they execute on these incredible contracts? Because not the stuff's on the ground. None of it's up. It's, it's again, it's lower margin infrastructure. And then their hope is they, they layer more software on top to bring it up again. The backlog number is going to stay high in our opinion for a while because it's going to take years for them to do this. And the focus really has been on that number. Again, only one number to watch at Oracle. It makes my job easy. Focus on backlog.

A (19:48)

That's it? I guess so. I don't know if you sleep well at night though. It sounds like a risky business. Brent, thank you. Always good to get your take on things. Brent Thale of Jefferies. Speaking of Oracle, the stock, as we showed you, down another five and a half percent today. It's now lost nearly 16% from a record high hit just two weeks ago. Analysts at Rothschild Redburn initiating the stock with a sell rating, a $175 price target. That would be a 40% drop from today's close. A firm warning. The market is overestimating Oracle's contracted cloud revenues. Even with this week's losses, Oracle is still up 27% this month. What do you make of this run in the pullback?

B (20:25)

Well, so is the pull. If what's the primary data point, what's the secondary? Like footnotes in a research paper. The primary data point is the news related fundamentals based gap up, right? Oh, I heard that. The secondary data point is the reaction to that day. So perfectly normal to pull back, right? To dip, to give back a huge move like that. The question is, is the giveback over or are we going to go all the way back and fill the camera gap? I don't think the gap gets filled anytime soon. I think the stock's been rerated and it's likely to back and fill here I would bet against volatility.

A (20:57)

It's interesting to think about a stock trading purely on backlog and not the realization of actual revenue or even the close to realizing the revenue that they're announcing or saying that they will have.

B (21:08)

Well, by the way, you know, I think Brent's always very balanced, very measured and we love him here. But I didn't hear a buy. I mean I heard it. I heard someone pointing out that he was saying that it's all about the backlog that we can't monetize right now. It's interesting that the note from Rothschild points to the backlog as well, but they are questioning the size of the backlog as well. So not just can they deliver on it, not just growing demand and a number that kind of goes out here. So look, we've sat on this desk for a long time that there's a, there's a revenue growth story that may be something. But if you've owned Oracle for the last three or four years or five years, you've owned it because it's almost behaved like a bond. This is something that I hear from a lot of investors that continue to add this to clients. And this is something that's now a very different story. And obviously you start coming to the capital markets, start worrying about a debt profile, it changes the profile of a company. Even though, let's be clear, this has been, you wish you owned Oracle this year and it's been one of the most exciting stories in tech. Oracle move to Carter's point from 220 to 330. That 50% retracement is $275. If it breaks that price, that's your exit if not, just shoot against that and be long. Yeah, I just find it interesting that investors forget that this Stock sold off 40% from its highs early in this year to its lows in April. And just think about this. If you were going to fill in that gap, which I actually think it will fill in the gap for the very reason, for the fundamental reason that if this thing is only trading on one number that we don't really have a lot of visibility on, I think at some point you see this thing come in, fill that gap and then have a ball at 250.

A (22:41)

Coming up, cutting the caffeine. Starbucks slashing jobs and closing stores. How the coffee chains turnaround plans are unfolding and what it means for the stock's next move. But first, Costco results are out. The details and numbers from the latest quarter next don't go anywhere. Fast money's back in two. Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs as the owner of her own dog rescue. That is second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more at aarp.org skills.

B (23:33)

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A (24:03)

Whenever I need to send roses that are guaranteed to make someone's day, the only place I trust is 1-800-flowers.com with 1-800-flowers, my friends and family always receive stunning, high quality bouquets that they absolutely love. Right now, when you buy a dozen multicolored roses, 1-800-flowers will double your bouquet to two dozen roses. To claim this special double roses offer, go to 1-800-flowers.com Pandora that's 1-800-flowers. Com Pandora. Welcome back to Fast Money, an earnings alert on Costco. The warehouse club reporting sales and profits topped estimates. Costco's conference call is underway. CNBC's Melissa Repko has got the latest. Melissa, hey.

B (24:49)

So I just got off the call and they are still talking but some of the highlights for growth in the.

A (24:53)

Quarter was that membership income grew by about 14% year over year. And that's a closely watched area since.

B (24:59)

So much of their their business comes down to members.

A (25:02)

The other thing that they spoke about is CFO Gary Millichip mentioned that they're trying to offset tariffs by sourcing differently.

B (25:08)

Than they were before.

A (25:09)

They're introducing things from the Kirkland brand.

B (25:12)

That are alternatives to tariff affected items.

A (25:16)

And he also mentioned that they are choosing their assortment differently in some cases dropping items or ordering bigger from manufacturers that are less heavily affected. All right, Melissa, thank you. Melissa Repko. We should note because they did increase their membership fees. So you might wonder is the increase in fees because of that increase in membership? And they were saying that just under half of that increase in overall membership fees are because of that increase to what you pay. Stocks aren't moving much here.

B (25:45)

No. And I think that the price increases is in the price. And we don't need to repeat what's obvious about Costco, which I'll quickly repeat that it's 47 times trailing, 40 times forward. But I'll say there's a reason why they are getting this multiple different than even Wal Mart, who I think deserves a much better multiple. And they have it of course than they've had historically because of the smaller amount of SKUs and the buying power they have. The merchandise margins for Costco are better than anybody's. So they're focusing on fewer items. They have the ability to push price even that much more. It's obviously great for the consumers there, but it's great for the company in terms of the margin profile. But at this point, I mean this, you know, this is more expensive than Oracle. I don't know, I'd rather on Wal Mart. You didn't ask me that but there I did it.

A (26:28)

All right.

B (26:28)

Would you rather self would. I didn't do that. No, I didn't. Kind of did it. Revenue is still growing at 8%, the EPS growing at 9%. The renewal rate is above 90%. So that just is a cash cow right there. I don't like the multiple as well.

A (26:45)

I think would have never liked it at any one point in time probably.

B (26:49)

No, I used to love the renewal rate. I think that was the reason why people buy the stock. But I think it's just getting a lot more bloated than it's ever been to itself.

A (26:57)

Right. To be fair, the multiple is at the high end of its own historical valuation. So you can just compare to itself is it is expensive and it doesn't.

B (27:06)

Really have any competitors if you think about it, right, there are other wholesale sellers like this, but there's Costco and all the others, BJ and so forth. The question is, is this a topping out formation right in otherwise epic run. This is a stock. It has all the elements that it is the same price it was, you know, eight, 10 months ago. I would, I would sell it if I had it. I think it's fascinating that it never confirmed the new highs in the S&P 500. We've had a lot of new highs over the last couple of years, months or so. And then the other thing I'll just say is I don't know retail stocks, but 2% of their revenue are these membership fees. That could be 60, 70% of their gross, gross profit. Like is that a good business? I don't know. Like, like it just like selling, is it 70% of the gross profit? So I just read this here on the, I mean I'm clicking through and this is from the.

A (27:55)

Examine it. Look, look into somebody.

B (27:57)

We will ask at 10.

A (27:58)

Yes, there's a lot more fast money to come. Here's what's coming up next.

B (28:05)

Starbucks gets decaffeinated. The coffee chain shutting stores and slashing jobs. The impact of the billion dollar restructuring plan next. Plus inflation, the Fed and a volatile market. How our next guest is navigating the stock swings and where he's seeing opportunity now. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this. The world runs on energy and as demand increases, Sempra is rising to help meet the challenge through our Texas and California utilities, we're investing billions to help power these booming economies. We're building tomorrow's energy infrastructure today. Modernizing one of North America's largest energy networks with next generation technology to power the everyday lives of nearly 40 million people. That's positive energy. Learn about Sempra's financial results@sempra.com investors. I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now, thankfully, bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes, my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost with their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.

A (29:39)

Welcome back to Fast Money. Starbucks shares going cold today. The coffee chain announcing a $1 billion restructuring plan that includes Cross closing about 500 stores, laying off 900 nonstore employees starting as early as tomorrow. The company estimates most of the cuts will be in its North America business. This marks CEO Brian Nichols latest pivot to return the coffeehouse and to return to the coffeehouse and customer. The stock has fallen about 8% since he took over a little bit more than a year ago. And I was curious about CMG's performance in the same time frame. CMG is also down. So neither stock is doing well since Brian Nichols has left. Whether or not it has something to do with Brian Nichols or not. But you are a Starbucks customer and a shareholder. So what do you think?

B (30:21)

Yeah, I'm. I'm a bigger customer than. I'm a shareholder right now and I'm happy about that. But I do own the stock. I haven't added to it for a long time and I don't. It's not time. I, it's interesting. This is kind of like a sneaky restructuring because this is not something that is an all out hey, we're changing what we're doing. In fact it's really been about hey, we're going to run these stores better and we're going to do it in a way that's going to change margins and. But CMG and Starbucks have something in common which is that coming out of COVID things couldn't have been better for both places. I think you have a lot of pressure on price. I think you have margin pressure. I just don't think there's anything that can happen in the short run. What today reaffirmed is that there is no quick fix. It's been a year and I don't think you have to rush into the stock. Even if I rushed into the store this afternoon to get a cough. And to your point, Chipotle, it's not idiosyncratic to Starbucks. They're all under a lot of pressure. So what happened to Darden? So if you look at The S&P 500 Restaurant Industry Group which has McDonald's and Yam and Starbucks and Darden and so forth, Domino's, it's at a 15 year low to the S&P 500 relative basis. It's just not been a good space to be in. He's also cutting non performing stores but he's going back to store expansion in 2026. That's only a couple of months here. I don't know how you thread that needle. I'm a fan of his. I think he's a great operator. So I'm prone to give him the benefit of the doubt. When I look at it on a chart. It's been in a declining trend line since the middle of July. But when I also look at where it should stabilize is really close to where we are right now. $80. I'd buy it against an 80 stop. Yeah. If we're playing nickels, would you rather what?

A (31:58)

I don't even know what.

B (31:58)

Old nickel versus new nickel. Yeah, that's what I'm talking about. Double nickels here. I'm doing CMG here because you know, when you think about Starbucks like this is not a good experience. It's not a good price point. You know, I think there's a lot of competition. I think Chipotle will get their act together. Double digit expected earnings and sales growth next year. I think Chipotle is okay.

A (32:17)

Coming up, the next move for markets as stocks pull back from records. Where next guest sees the biggest risk and opportunity in fast money. Return back into. Welcome back to fast money. Stocks pulling back for a third straight day. The Dow falling nearly 174 points. The S and P and NASDAQ both dropping half a percent. Shares of Eli Lilly nearly 4% lower today. The company halting a study of an experimental drug designed to prevent muscle loss in obesity patients which was being tested alone and in combination with Lilly's Tirzepatide offshore driller. Transocean dropping more than 13% after announcing the sale of shares at a discount. The Swiss company expecting to make $381 million from the sale which it will use to pay off debt. And some stocks hitting key levels. Alta trading a fresh 52 week high. Baker Hughes hitting its highest level in about eight years. Well, even with the recent pullback, our next guest says markets have plenty of Runway ahead. Let's bring in Andrew Davis, director of macro research at Bryn Mawr Trust Advisors. Andrew, great to have you with us.

B (33:23)

Thanks for having me.

A (33:24)

So you have no question in your mind when it comes to the AI store? The AI story, I mean that seems to be where a lot of the doubts are stemming from right now.

B (33:31)

Yeah, look in this environment I think that the one big beautiful bill, it really incentivizes that Capex and companies have already committed that Capex cycle. We see it as continuing for a while here into 2026. So not to say there's not risk to the market but tactically we are overweight equity and we feel like there's room to run.

A (33:51)

When you think about though that capex cycle because we were talking at the top about Oracle, we were talking to an analyst who said saying that Oracle is trading on backlog and so inherently does that mean that the market is sort of trading on this notion that there will be capex spent? We don't actually know if there will be capex spent.

B (34:09)

Well some speculation on that part but I do think that what's more concrete from the macro tailwinds that we have going on here is look Powell said last week that their cut is risk management and we view that as they're buying optionality here I think I look at that dot plot dispersion and I view that as healthy. I make no mistake. I don't think that's confusion on their part. I think that's discipline. They're stress testing different environments. That's exactly what I want to see from a macro lens as an investor this is where I like to say the old rule was don't fight the Fed in 2025 it's don't fight the data. Paul's been crystal clear on that point. They're data dependent, their dot plot isn't a promise, it's model output. So what matters more to us is besides this capex are the inputs to that model that's going to be productivity, consumer behavior and inflation pass through. Right now that data is telling us slowing, not breaking economy. Andrew, when you look at the consumer you've noted some, you're focused on the high end consumer and signs of weakness there with noisy data. What exactly are you looking for and what's going to be the canary in the coal mine for you to say the consumer is cracking. Yeah, we're definitely laser focused on the consumer and I think the bifurcation is worth explaining. I like to call it an employment light expansion that we're in right now and what I mean by that is that robust pace of hiring month over month we're not seeing any more but that's okay. Demographics have changed. We think you don't need to see as much to absorb new entrants in the labor force. What's more important? Initial jobless claims coming out this, this morning, right? Pins near all time lows that tells us low fire, slow, higher. Don't get me wrong, the low end consumer, the young professional definitely feeling the pinch but the high end consumer is the economic engine of the US and we're seeing it in earnings calls. What did Wal Mart tell us? High income consumers spending more there at the same time McDonald's double digit declines from the low end consumer. So that bifurcation is real, that K shaped economy which by the way I think is why a lot of economists models were maybe broken over the last couple of years. But again that's back to slowdown not breakdown.

A (36:12)

So clearly the consumer is the, is one of the things that you're most focused on. What, what is the other? I mean what will get in the way of your bullish outlook?

B (36:20)

Yeah, I think the big risk is just back to that the high end consumer, the labor market, you know it is irrefutably, it's cooled down. So we want to make sure that we don't see layoffs bubble up on the, on the jobs number. As far as month over month I think that's where you know you've seen some revision volatility. Lo and behold the BLS number revealed what the ADP number told us from the first get go. So I think in this environment you want to be looking at alternative data sources to get comfortable around what the high income consumer is doing where share of wallets going.

A (36:52)

All right Andrew, great to see you. Thank you. Andrew Davis, Bryn Mawr Trust yeah, he's right.

B (36:57)

I mean today was a confusing day especially in a world of really backward looking data. You get a second quarter GDP revision up at 3.8 and I realize that's the second quarter we were just getting ready to go to the beach and we're in a different place here but it tells you where the economy was and then you have the jobless claims which is a noisy data piece but yes is somewhat concurrent to, to where we are. I, I think and we've talked about it even in some of the discretionary spend in the restaurant space Carter's talking about those charts. It's hard for me to get really excited about the consumer. I think discretionary and I felt this a year ago and I think that was, it was clearly wrong in a handful of places. But in some of the peril in some of these places it was right. But I don't think you're chasing the consumer here and I do think that the strength of this market in the fourth quarter remains mega cap tech.

A (37:44)

What do you see in terms of the charts for the S and P for Mag 7?

B (37:48)

Well that's the whole story continues to be, it seems to be ever thus and yet again to think that the S and P, since that's we're talking about, lost 21% of the value it ever created since its beginning because of a tariff quarrel. Right. Meaning Nvidia lost 40, 50%. They're still risky assets and not much risk is priced in. Take measures.

A (38:09)

Coming up, CarMax crashing out, shares taking a nosedive after the company's latest earnings, the numbers that had investors driving off the lot. When FAST MONEY returns back to.

B (38:20)

December 11, join Melissa Lee on the team of traders in New York City for an all access celebration live and on air. FAST MONEY live trading the holidays. Get your tickets now@cnbc events.com Fast Money.

A (38:38)

Welcome back to Fast Money. Shares of CarMax getting wrecked after reporting earnings and revenue that missed analysts estimates the used vehicle retailer stock down almost 20%, hitting levels not seen since March 2020. For more, let's bring in CNBC's Phil LaBow. Phil, what happened, what they say about this.

B (38:56)

Melissa, there was nothing good in this report, really. When you look at the quarter, almost every key metric was poor. And even on the conference call, the CEO said month by month the quarter got worse. Now, they believe they're better positioned now. But here's the bottom line they missed on the top and the bottom line, vehicle sales, in terms of the number of vehicles purchased either or sold either in retail or wholesale, that went down and the loan loss provisions, they went up and they didn't go up just a little bit. They went up by 26% compared to the same quarter last year. Do the math here. They see that the loan quality in terms of delinquencies and defaults, it's deteriorating, especially for those written in 2022 and 2023. And as you take a look at shares of CarMax, keep in mind that that auto delinquency rate right now for the industry, it's at 2.54%. Now, it's not as high as it was back in 08 and 09, but it has gone up substantially over the last couple of years, which raises questions about the strength of the consumer and whether or not we're headed towards those types of delinquency rates that we saw back in 08 and 09. Against that backdrop, you might be saying to yourself, terrible time to be invested in the auto industry. Well, if you've been invested in the suppliers, you've done quite nicely, especially if you go back to early April, remember when the tariffs were announced, that's when auto supplier stocks just got hammered and people said stay away from them. They have outperformed the Dow Jones Industrial average S&P 500. They've been a steady performer since then, in part because they've been able to pass along tariff costs to the automakers who have had to have lower margins. They haven't been able to say, no, you eat the cost. Instead, it's the supplier saying to the automakers, you want these parts, you want these components, pay the bill. And that's what's happened here. That's why you take a look at Visteon, Magna, borgwarner, Lear, all of these stocks have generally had a very nice performance since April, far better than a lot of other stocks. Melissa. But it just goes to show you, even though a lot of people are looking at the CarMax results and they're saying, oh man, this is. You want to stay clear of the automakers here for a while or the auto dealers, the suppliers have put in a really nice performance over the last six months.

A (41:16)

So Carvana versus CarMax. Phil, does CarMax just have a bigger financing division? Do they not extend loans as well? Why is there such a discrepancy between those two?

B (41:26)

A lot of issues here in terms of Carvana versus CarMax. And look, the chart there says it all. Gross profit per vehicle is really where most people focus on the difference between the two companies. Carvana is doing better than CarMax in terms of that gross profit per vehicle. That's the key metric that a lot of people focus on. Clearly there's a lot more cost on the CarMax side in terms of the physical locations versus Carvana, which is really a digital entity in terms of the vehicle sales for used vehicles.

A (41:59)

All right, Phil, thank you. Phil LeBeau. There's also a consumer tell within the CarMax report too, and that is that the consumers with higher FICO scores are sitting on the sidelines. Those with lower FICO scores so lower credit quality, they are buying cars. So what does that tell you about their exposure? I mean, obviously they increased loan losses. So there is that worry that, that they will be delinquent at some point.

B (42:23)

Yeah, I would say, you know, Gen Z, 49% of Gen Z's parents helped them pay folks car payments. So I don't know if it's as big of a worrisome thing. I think, I think you're accurate to say it's worrisome, but I think they're going to get bailed out by their parents. So I don't think it's, it's going to be horrendous. It's not going to be an 08 or 09. There's also the pull forward tariffs with a major, major consideration. So there could have been a pull forward with all of these to get ahead of tariffs. And then there's the, there's the elephant in the room with interest rates. Interest rates are too high right now. They make buying cars way too expensive. And it just doesn't factor out. But it seems like this is more of a car carmax problem than other people's problem.

A (43:02)

The 49% of Gen Z though. Yeah, that's assuming that all of these loans, all these people buying cars are Gen Z. I mean there's other people outside of Gen Z. Oh no, you prefaced it.

B (43:11)

I thought you said you thought. You preface it with saying the high, high end consumer is not buying cars.

A (43:15)

Right.

B (43:16)

So I'm assuming that the lower end.

A (43:17)

Consumer, but that's not necessarily Gen Z.

B (43:22)

The parents are paying the bills, they're probably on the loans and they're probably the higher end people. The carback story was about share loss to me as much as anything. I mean they're losing out to the competitors. And back to what Phil said about the general overall climate and what I think is going on the. Look at that chart on gm. I don't know if we have time for Carter now. Okay so but that's a chart that to me is near breaking through a three year, breaking near a five year and I'm long.

A (43:45)

All right, coming up, small caps, big technicals where the chartmaster sees that group heading as Russell a 2000 pulls back from records. Plus his take on one metal producer. That's next. More fast money to final trade time.

B (44:06)

Tim gm. Excuse me. Carter told me at the break that he, he doesn't want to comment on this, but I think he likes it. I like it.

A (44:12)

24 seconds.

B (44:13)

Carter Oil Services stocks going higher. Dan Fading iwn with Carter Steve TJ.

A (44:19)

Maxx thanks for watching. Fast Mad Money with Jim Cramer starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such to view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer.

B (45:07)

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