← CNBC's "Fast Money"
CNBC's "Fast Money"
Rate Rip Higher… And A Middle Market Pulse Check 1/8/25
00:43:46
Rates on the rise, as investors brace for what President-elect Donald Trump’s tariff plan could do to inflation. The trouble brewing under the surface.. And the sections of the market feeling the pressure. And A check on the middle market. What a new report out of a private credit powerhouse is saying about the landscape. Fast Money Disclaimer
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- [00:01]
Melissa Lee
What does it mean to be rich? Is it having more stories to share or time to give? Is it being able to keep your loved ones close or travel somewhere far away? At Edward Jones we believe the key to being rich is knowing what counts. Your dedicated financial advisor will take a comprehensive approach to your financial strategy to help support what truly matters to you. Edwardjones.com findyourrich Edward Jones Member SIPC Weekdays.
- [00:32]
Frank Holland
At 5am Be first on world markets, first to the global business conversation.
- [00:37]
Melissa Lee
Get a jump on the investing day.
- [00:39]
Frank Holland
Every day with Frank Holland. Success starts early. Worldwide exchange, 5:00am Eastern. CNBC.
- [00:48]
Melissa Lee
Live from the NASDAQ markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Heading higher 10 year yields at levels not seen since April. And the rapid move in the last month having an outsized effect on some sectors. We go under the hood to find out what it says about the market. Plus a quantum conundrum. The stocks tied to the next level of computing technology plunging after a massive recent run. What spooked investors and where the trade goes from here. And later, fast money turns 18. Today. We'll take a look back at the humble beginnings of the show and look ahead at just how much has changed in the business world and markets since day one. I'm Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Fireman, Dan Nathan and Guy Adami. That's not them. Look like Here they are.
- [01:37]
Tim Seymour
They are, Guy.
- [01:39]
Melissa Lee
You get better with age but surely WISER this past 21st day show. All right. But before we get to the celebration, we start off with rates ripping higher. The 10 year yield up 60 basis points in just the last month. The move putting pressure on major averages. The Dow losing 4 1/2% in that period. The S&P 500 down nearly 3% and the Nasdaq dropping almost 2%. But a closer look may suggest suggests that even bigger problems are looming. Rate sensitive sectors like homebuilders, regional banks, small caps plunging over the past month. So do these moves signal that cracks in the market could spread even further?
- [02:14]
Guy Adami
GUY well, happy anniversary award jacket for the occasion, which I never ever do. But I'll say this, I mean that is the story. And again, it's not wasn't the inversion in the yield curve that's the warning sign. It's a re steepening. And now in the two tens are as steep as we've seen in quite some time. But I don't think a lot of people anticipated 10 year yields a month and a half, two months after the Fed started cutting rates to be 4.7% and I still think they're going higher. For whatever reason the market is starting to care. I think it's going to care more the higher it goes.
- [02:44]
Melissa Lee
And this is a global problem. It's not just in the US that rates are rising. Japan is over a percent for instance.
- [02:49]
Tim Seymour
Japan to me is a lot more dramatic. I mean let's talk about a 13 year chart in Japan on JGBs. The 10 year which, which got up and really have been crescendoing higher. In other words, I'm not even sure this is level that we're going to rest at. And there is an argument that we've made that global rates are going to also partially pull up US rates. There's been an argument about where Japan is. They have inflation. The question is what are they going to admit to and what are they actually going to do. But you know, Japanese investors have been relative value buyers of Treasuries. There's still a major discrepancy on that spread. Meanwhile, Chinese yields continue to go through the post Covid lows. In other words there's a real sense that the Chinese deflationary spiral is spreading but everywhere else there is pressure upward on rates.
- [03:32]
Melissa Lee
Yeah, the Fed minutes were really interesting today. I thought Steve Liesman when they first came out had this assessment that two thirds of what was in the minutes indicate would have been the case for holding or raising rates and I thought it was very bearish as well markets.
- [03:47]
Karen Firestone
Well that was interesting and I think that that presser which was ultra hawkish sort of reflected that. He said if you'd read these minutes and know what the outcome was, you wouldn't have thought those two things would go together. So, so that was sort of interesting this idea that the Fed thinks about what if these policies happen and what do we need to do in front of that where normally they just wait, see what are the policies and then how do we respond. So all that having been said though I did cover a little TLT today just because I feel like it has moved so much and, and then that auction was actually that, that actually wasn't anything to be afraid of this one. But I do think if, if things are going up for the right reason there are some industries that can do well in this. Banks for example. Right. Rising rates could be a good thing for banks. Not so great if you don't earn a lot of money and it's all huge earnings, you know, expectations in the future discounted back at a lower back. Right.
- [04:44]
Frank Holland
And we're going to get a sense of that right in Q4 earnings running. That's how much we're going to hear. Constant currency. Right. We're going to like let's, let's see what these companies that have a lot of exposure overseas have to say about that and what that means for growth. And we know that you just mentioned the small caps melt. I mean this is a sector where the of capital is high, that servicing the debt is high and you know again they're going to be subject to issues as it relates to tariffs if we do have a trade war. But this brings me back to late 2021 when the Fed started to signal there to raise interest rates to battle inflation. And what sold off right away is things like quantum computing. I mean like not the same things but if you thought about SPACs, if you thought about unprofitable tech, if you thought about crypto, that sort of thing, you know look at today, I mean there was a lot of that in the markets today. You also saw some of these Mega Cap, the fateful eight, those things reversed after the opening. They were all green after. Meaning what does that mag7 +broadcom, you know that we've done away with the mag7 and now we're the market is in the state of those eight stocks. And I don't mean to sound so pessimistic but when you put a lot of that price action together, that sentiment together and you say to yourself Q4 earnings better be great and people better have confidence in that 13, 14% expected EPS growth year over year for the S&P 500. Because if there is not a lot of confidence as we get into February then we are going to have a sell off. Are we going to have a sell off greater than 10%? Probably not if you just look at the sell offs that we've had over the last couple of years. But the one thing is and guy feels this way, if we have the 10 year back above 5% and it's not like a kiss like it was in 23, if it looks like it's establishing a new range that has to weigh on equity valuation.
- [06:13]
Guy Adami
Yeah, I agree. I'm glad Tim brought up China because right before our eyes, you know that currency has been sort of going the same type of levels that we saw seven or eight years ago where the market got concerned, number one. Number two, it's fascinating that the yen continues to weaken with their Interest rates going higher and something's about to give there. There's going to be some sort of intervention over the next weekend. Currency without question, and we'll see how that plays out. The last time it happened in a meaningful way was in July on a CPI day, if I'm not mistaken. On a Thursday, dollar yen was 161. Ten minutes later is 157. And by September we got down about 139 or so. And that was around that August 5th date. So there's a lot out there outside us to be concerned about.
- [06:57]
Tim Seymour
I think about the world of again, interest rates and what it could mean and where equities have also come from during a period. If we go back to April 25th, which is where we hit that intraday 470 today, S&P was at 5,000. So you can say, well, it rallied a lot on higher interest rates, but rates really pulled back. So, you know, we're in an environment where I think it sets up Friday's payroll number to be a huge number because get a sense that you have a much stronger labor market than the Fed really signaled. When they cut by 50, that was really what they were doing. And they pointed out we're now here to defend the labor market. If the labor market doesn't need any defense at all. And in fact we had a jobless claims number today, which is a noisy data series, but that four week average is back to April of 2024 numbers. There's zero sign that the labor market's falling out of bed. If you actually see signs that there's actually more tightness there or strength or wage pressure, which is certainly what we kind of inferred from the ESM number that came out two days ago or yesterday. That's the stuff that I think actually it's crazy. You go from we had the growth scare back in August and now we actually might have the other growth scare which is actually we're growing too fast.
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Melissa Lee
Right, right, right, right.
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Karen Firestone
No, I agree with that. Although I come back to the same thing. If we're growing, we're good. We're good in some, for some, for some industries, I think that parts of the market is good and I think when you talk about that earnings expectation, the S and P, I think it's sort of a barbell where you have some that are growing much faster than that. We need those to perform for sure. Right. We need the fateful eight.
- [08:22]
Frank Holland
I like what you did there. You know, one thing I'll just mention, I know there's A guy name but Dollar General made like 8, 10 year lows today. And we talk about this kind of case shaped recovery. We the trade down that we've seen into Wal Mart, but the very low end, it really does not act well at all. And that has to say something about what is the spiral effect we're going to see if we do start to see unemployment get a little worse. I mean, right now, what are we for two or something like that? And a lot of folks, what do we get down to 3.6 at the lows? I mean there's going to be a breaking point at some point where people are going to be like, ok, you know, maybe there's some artificial stuff going on in this jobs data and we know that the new administration is going to do everything they can to keep that going. But if mass deportation happens, who knows what the heck happens? That is to me a potentially really big monkey wrench.
- [09:05]
Melissa Lee
In all of these things are inflationary tariffs, immigration policy, all these things are looming. And this all lines up with what a lot of strategists were predicting last year. And that is a correction in volatility in the first quarter. Right. A pullback in the first quarter. Here we are. Although it's rates that are causing it.
- [09:22]
Guy Adami
At this point and currencies and volumes. Listen, I mean I'll say this as well. Katie Stockton over the summer talked about this and I'll say she was right, that once volatility starts to embed itself, it doesn't go away over time. It usually lasts, you know, nine to 12 months. And I think we're probably six months into this thing. And I think early this year volume is going to be a story. And on rather benign days, you've seen spikes in the volatility index. You saw it on December 18th, again on the 27th. I think you see a lot more of it into the year.
- [09:49]
Melissa Lee
For more on rates in the market, let's bring in Mike Schumacher, head of macro strategy at Wells Fargo Securities. Mike, great to have you with us here on set. What do you make of this move in rates we've seen over the past month or so? And where are we headed?
- [10:01]
Mike Schumacher
Pretty messy, frankly, from our point of view. Really what really changed things was Powell's comments on December 18th. We were, I'd say, modestly bullish until that point. Once he spoke, we said, no, done. Fed might cut a couple more times, but there are no rush to do it. So why do you want to be long bonds at that particular stance? You probably don't. So from our standpoint being long, something like a four or five year treasury fine, 10 year, 30 year, no particular reason to get along that at this point in time.
- [10:29]
Melissa Lee
Right. I read in the notes that you seem to think that yields are not reflecting all the risks that are currently out there. So what are the risks that are not in the move higher yet and how much higher can we move on those risks?
- [10:41]
Mike Schumacher
Yeah, it's really interesting, Melissa, when you think about markets, I'd say right now you've got so many different possibilities with this combination of central banks shifting gears, inflation. Maybe it's sticky, maybe it's not politicians getting into the fray. Not just in the US how many governments have fallen over the last couple of months? Probably five, six. A lot of things to try to calculate. So from our standpoint, you can imagine a case where let's say Republicans actually get their act together despite the speaker thing and manage to pass legislation, not just extend the low taxes we have today, but cut them further. Budget deficit takes a hit, gets much bigger. People say, wow, this is bad news. Long term rates can go up a lot at the same time if tariffs come in and they're big and broad based, not just an extra 5 or 10 percentage points against China or something nutty against Mexico, but broad based other countries retaliate. That is almost universally bad for growth. You could see maybe not a global recession, but a slowdown. So in that case, I think people are underpricing the risk that yields go down a fair bit. So you've got one case where rates go up a lot on the long end. Another which is maybe a 10 or 20% probability has them coming down quite a bit. So it's very difficult to try and sort out for investors and for your viewers all these odd scenarios.
- [11:52]
Guy Adami
Now Tim brings us up a lot. What about the strength in the dollar which doesn't seem to want to go down at this point and at a certain level I think that's going to be a tremendous headwind for equities.
- [12:02]
Mike Schumacher
Yeah, I'd agree with that guy. It's interesting. It makes me want to lean against it because pretty much every client I talk to says, oh yeah, strong dollar, strong dollar. But you go through the arguments and you all made a few a couple of minutes ago. China, for instance, right. Big economic weakness, a lot of stimulus, lower yields. Contrast that with the US Pretty strong economy, higher rates, that big gap ought to drive the dollar a lot higher. I think it will. And yet client after client says the same thing. Dollar, euro, vacation pricing looks pretty good if you're sitting here in New York. Yeah, let's go to London, Paris, whatever. Why not 103? Does it go to parity? We think it does. Probably the next couple of months. So I can make a lot of really good arguments for the dollar strengthening. I think it's difficult to get in the way of that right now, but I'd agree with you. Eventually it becomes a pretty tangible headwind.
- [12:46]
Tim Seymour
Mike, you might have just alluded to this. With the strength, the sense that the dollar's going higher. That seems to be where your macro strategy guy. Where are the global macro funds? What's their trade for this year? We can look back on last year and we can see where there were some obvious places this group played. These are some of the biggest funds in the world. What, what's, what's the strategy?
- [13:02]
Mike Schumacher
I think they're trying to figure that out, Tim, because they hit the Trump trade pretty well.
- [13:06]
Lawrence Gollum
Yeah.
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Mike Schumacher
So you had to say, well, all right, rates go up, equities rally, dollar strengthens, boom, I'm in. So if you got even a couple of those right, it was a great year. But I'd say for this year it's much more of a tough calculation because Trump's already in that trades run a fair bit. Do you really want to load up right now? Probably not. So I think they're trying to sort that out. They'll probably take their cues over the next month or two. I would think in the US once the new administration comes in, we actually see what it can do with Congress. Don't know yet. And once some of these tea leaves start to settle overseas, too.
- [13:36]
Melissa Lee
Michael, great to see you. Thank you very much.
- [13:38]
Mike Schumacher
Thanks to be here on the 18th too. All right.
- [13:41]
Melissa Lee
It's well known across Wall street, you turn 18 today.
- [13:45]
Karen Firestone
Legal now.
- [13:46]
Melissa Lee
Yeah, exactly.
- [13:47]
Tim Seymour
We can't drink. We can't drink, but we can vote.
- [13:50]
Karen Firestone
We can vote.
- [13:50]
Tim Seymour
And we wouldn't drink anyway.
- [13:52]
Melissa Lee
No, it's a family show. Milk. Okay. What's your trade for the year?
- [13:57]
Karen Firestone
What is my trade for the year? I'm always long. I know. So I'm staying always long. Of course, I'm afraid of. I have a lot of mag7ish, fateful8 kind of exposure. But I still think there's legs to that story.
- [14:11]
Melissa Lee
Yeah, yeah.
- [14:12]
Frank Holland
I mean, listen, I think the concentration in the faithful aid is kind of disturbing. I said that last year. I said it probably two years ago. @ some point it's going to matter. I go back to the view about 2021. It was mega cap tech after A lot of the really risky sort of stuff sold off, that's what led the bear market down. And I think people forget that. Netflix, Tesla, you know, a handful of other names sold off 75% from their highs in video sold off 75%. People don't think that can happen. I'm not saying that's going to happen. But if this Gen AI thing doesn't materialize this year the way people expect to from a use case scenario, these stocks are going to go down because the pull forward enthusiasm, the pull forward in multiple, the spend that's happened is going to weigh on their growth and especially if we hit a tough spot in, you know, in the economy. So I mean to me that's kind of dangerous right here and you know, again I said that six months ago but it becomes increasingly dangerous as rates go up and then we have this kind of weakness abroad. I just want to say one last thing there. Microsoft, when they put out that $80 billion number for capex and spend on infrastructure as it relates to Gen, they said half of it's going to be here, half of it's going to be global. If the globe slows down, they're not going to be spending $80 billion.
- [15:22]
Tim Seymour
Well, so let's try to thread this into where I think, you know, the last bit of the market is really what's going on with mega cap tech, what's going on with semiconductors. And if we look at where we were In March of 2024, semi's got out of the gates up 30%. Semis are effectively at least as a group and some did a whole lot more like in video. But if you look at that group, that group's up 4% almost in 10 calendar months. And so the question is where is the leadership going to come from? I think we are going to stay more concentrated in that group than, than a lot of people want. But right now that's the question.
- [15:53]
Melissa Lee
All right. Meantime we are watching shares of Nvidia after hours falling on a report that President Biden is looking to put further restrictions on X exports of Nvidia and AMD Air chips. Nvidia just responding to the news saying every data center is being accelerated and every business and application is incorporating mainstream AI. A last minute rule restricting exports to most of the world would be a major shift in policy that would not reduce the risk of misuse but would threaten economic growth. And US leadership shares are now down nearly 10% since hitting a record high earlier in the session yesterday. We talked about this yesterday with Katie Stockton. It was a major, it was a reversal hit the high closed on the low. It was like 200, 300% of the average daily volume guy. So heavy volume on that day. And what does that mean to you?
- [16:37]
Guy Adami
100%. I mean I trade I think 375 million shares yesterday, so almost twice normal volume. You're right to point that out. Made an all time high, closed on the lows. The same formation we saw in March, the same formation we saw in June. In March the stock went down about 35% from March into middle of April. In June it took a lot less time. It was down into August, probably 40, 45% on that August 5th low. I think you're setting up exactly the same way. I'm not a hater, but history is repeating itself and the amount of volume yesterday should really give people concern.
- [17:10]
Tim Seymour
I'm not sure people were putting in their Nvidia risk book that you're going to see export controls. It's just not, I mean we know where they've been with not, I mean we've already had out there the China dynamic with, with regards to chips. But you know, if you look at a broader policy moment here for this stock, it's not what I think is in the price. I think what's been questioned about the price is, is the growth and the delta on the growth which has been slowing but still really impressive. And that the multiple still makes it a lot more attractive than other big mega cap semis. And in that context, I like it. I think you had to sort through this.
- [17:45]
Frank Holland
Yeah, I just think one of the most important things for this name happened earlier this week. Jensen Wang at ces. He goes, he takes the stage Monday night. He's the keynote. Everybody wants a piece of what he's got to say. And it wasn't enough. You know, the stock was down six and a quarter percent yesterday. The reversal today while it closed flat and this news tonight, I mean, I don't think it's particularly interesting. What I think is most interesting is not just the China ordering that we've seen and what these curbs might be. It also goes back to the concentration, you know, for those companies, Microsoft, Google, Amazon and Metta, you know, they make up 40% of their order book of their revenues. And so if we are going to see a slowdown in just demand, that's why the Capex numbers, when we get them on earnings over the next few weeks is going to be really important. I just think there's probably other better places to play this theme. Than Nvidia right now.
- [18:27]
Melissa Lee
Coming up, a quantum leap. Lower quantum computing stocks plummeting after Nvidia CEO pours some cold water on the sector's timeline when he believes this tech will be up and running and if these stocks are still investable. And Fast Money's 18th anniversary continues with a very special guests joining us later this hour. And keep this in mind, Apple announced its first iPhone the day after our debut. Netflix was just about to announce its plans for streaming service. It was still delivering DVDs. And folks are singing to to the left, to the left as Beyonce is irreplaceable. Top the charts now she's a country star. And oh, how much has changed. Much more Fast Money into this is.
- [19:09]
Frank Holland
Fast MONEY with Melissa Lee right here on CNBC. Weekdays at 5am Be first on world markets, first to the global business conversation.
- [19:24]
Melissa Lee
Get a jump on the investing day.
- [19:26]
Frank Holland
Every day with Frank Holland. Success starts early. Worldwide exchange, 5am Eastern, CNBC.
- [19:36]
Melissa Lee
Welcome back to Fast Money. Wildfires raging across Southern California with more than 80,000 people under evacuation orders in the Los Angeles area. The Palisades fire exploding to over 15,000 acres as of 4:30pm Eastern Time. The Eaton Fire at more than 10,000 with two deaths confirmed. Officials say the fast moving fires are 0% contained with strong winds fanning the flames. And the blaze is having an impact beyond immediate danger zones. Nearly 300,000 customers without power as of this morning and air quality at dangerous levels across LA. At least 1000 structures have been destroyed and it could be a long road ahead for cleanup and reconstruction. For more on the fires and the impact they'll have on the insurance industry, let's bring in CNBC's Contessa Brewer.
- [20:21]
Contessa Brewer
Contessa Melissa Even with the fires burning out of control right now, we're getting very early damage estimates from JP Morgan analysts putting insured losses at about $10 billion. But AM Best says it's just too early to define the damage, but that high value of lost real estate will generate large economic losses. Of course, a lot of homeowners policies were canceled over the last couple years and that meant a surge of new policies for the Fair Plan, the last resort insurer in California, 225% growth over two years, including both residential dwellings and commercial properties. Pacific Palisades is in the top five concentrated areas of exposure in Southern California for the Fair Plan. And it warned last year that its financial stability is at risk if it can't pay. And then all the insurers would have to chip in. That's a Real threat. That's why some of the smaller insurers have actually left the state. State Farm has the Most market share, 8 million policies in California, farmers a close second. Travelers, allstate, Chubb and USAA in the top 10. Now, years ago, Chubb began managing down its exposure in the regulated market where rates have to be approved. Instead, it writes property insurance for high net worth individuals under its and surplus line. Those are not subject to approval. AIG and Pure also offer the high end policies. And what we're seeing here, look, these are high end properties in Pacific Palisades and Malibu and the like. So these are the companies that could actually see some impact from these fires. Melissa.
- [21:56]
Melissa Lee
So already prior to these fires, I mean there, there were the 2017, 2018 fires and that really put this whole area into an insurance crisis of sorts. In terms of, you know, insurers pulling out, facing huge losses. How does this sort of, I mean, if all the insurers are ultimately on the hook for fair plan, I mean, even if they pulled out, then how do analysts sort of handicap that?
- [22:18]
Contessa Brewer
I think number one, the state has to handicap it first because again, all of these people are coming in. What the state has said is we recognize that there's a problem. They have not approved the rate hikes that the insurers have asked for. And this has been years in the making. So number one, that has started to change. But in, in return for those rate hikes, the state is expecting these insurers to agree to accept like 85% of the policies or the homeowners that apply for wildfire coverage. They're doing a tit for tat in this case, they've met the metrics for this sustainable insurance plan that they've set up for the state by the end of 2024. The question is, is it going to throw the plans to sort of bring this market into a healthier scenario? Will this fire now disrupt all of that and send these insurers running, which then puts California back at the beginning again of trying to figure out a crisis.
- [23:08]
Melissa Lee
Right. Contessa. Thank you. Contessa Brewer, Terrible situation, terrible for the people of California. How do we think about what is going on there?
- [23:19]
Karen Firestone
From this insurance part or from economic loss? The economic loss, but also, I think about. So as she said, many companies had already pulled out and wouldn't insure. What does this do to property values when you have these, I mean, the Palisades, it's a magnificent area, multi, multimillion dollar homes. If they can't get insurance right the property values have to go down a lot. And what does that do for California? Do they you know, property taxes are an important so I mean, it's a vicious cycle and I think that $10 billion loss number has to be so low.
- [23:54]
Melissa Lee
Coming up, a pulse check on the lending in the middle market. Our next guest says there's still strong growth in that space. More on that next. And the fast money 18th birthday celebration continues. Fun fact, when Fast Money first debuted, some of today's highest profile stocks weren't even public. Tesla, Metta, Uber and Snap, just to name a few. You're watching Fast Money live, the NASDAQ markets at in Times Square. Back right after this.
- [24:24]
Frank Holland
Global markets up to the minute, front page news. Wake up to Frank Holland at Worldwide exchange weekdays, 5 8pm Eastern, CNBC live. Ambitiously.
- [24:39]
Melissa Lee
Welcome back to Fast Money. A new report from private credit powerhouse Golf Capital showing middle market private companies posting strong growth in the first two months of Q4, giving investors a glimpse of what could be ahead for public companies this earnings season. For more, Lawrence Gollum joins. He is of course the CEO of Malab Capital, more famously, Karen Feiderman's husband. Lawrence, it's always great to see you.
- [25:01]
Lawrence Gollum
Thanks, Melissa. Very happy to be here. Congratulations.
- [25:04]
Melissa Lee
Thank you.
- [25:05]
Lawrence Gollum
The 18th.
- [25:06]
Melissa Lee
18Th, yeah, yeah. In 18 years ago, your company was also not public along with Tesla and Snap and Meta. Correct.
- [25:13]
Lawrence Gollum
We've had more steady, we've had more steady earnings than they have.
- [25:17]
Melissa Lee
Tell us about what the index has shown about what we can expect this earnings season.
- [25:22]
Lawrence Gollum
So taking out of our portfolio actual results from real companies for October, November 9th quarter in a row with solid revenue growth, 6th quarter in a row with margin expansion. Keep in mind these are US Centric businesses, private equity backed. So not a complete reflection for international. But one of the things that stands out particularly is this is the third quarter in a row of pretty good results from our consumer sector. And if you remember, starting about mid 23, consumer spending started getting really soft. Sticker shock from inflation, interest rates going up, reducing disposable income, burning off of excess savings from COVID stimulus. And folks including in the private equity industry were worried about how long that would continue. But you know, especially this quarter, after three in a row, it really looks pretty strong. And outside of consumer sectors tied to the home cycle, it's really great when.
- [26:18]
Melissa Lee
You start to look at what's happened in the last month, month and a half of the year though, in terms of a rising dollar, rising rates, I'm just wondering when you expect things like that to start surfacing, if at all, in some of the results.
- [26:32]
Lawrence Gollum
So one of the things that always strikes me when I come to visit you, which is not often enough, is the distinction between what's happening in terms of revenue and earnings growth, which is what we focus on, and valuations, which is a large part of what you focus on. The strong dollar in terms of the consumer is a plus. It's really not a minus if a company's got big operations in Asia or Europe. The currency translation profits are not so great, but for the consumer it's great. We've got low unemployment, high wage growth, we've got increases in job openings. The consumer is healthy and driving the economy right now and the dollar doesn't matter much except maybe the extent energy prices are lower, which again is a tailwind for the consumer.
- [27:19]
Karen Firestone
So thanks for being on Sweetie. Nice to have you. Do you think that this sounds inflationary?
- [27:24]
Lawrence Gollum
Yes.
- [27:25]
Karen Firestone
So we're inflationary. Things is going to be do you.
- [27:28]
Tim Seymour
Address all questions at home with Sweetie?
- [27:29]
Karen Firestone
Well, it depends on if he's in trouble or not.
- [27:32]
Mike Schumacher
So not often.
- [27:36]
Lawrence Gollum
Notes from the doghouse that we're seeing relative to Fed expectations, stronger inflationary pressures. You know, Chris Waller came out with some thoughts on inflation still coming down. He and I are not seeing eye to eye on this. The Fed recently raised its inflation expectations for 25 to 2.5. I'll be surprised if it doesn't have a three handle and I won't be surprised if it's three and a half percent. A lot of the Fed measures are taking advantage of the gasoline price reduction. So gas prices in Q4 down about 35 cents a gallon on average. End of period gas prices down 50 cents. Maybe that'll continue. It's not the way I would bet. So we're expecting inflation in the threes and I think if you look at where the futures are on Fed funds versus where the Fed dot plot is the and I think the futures are probably a little low and they're way higher than the Fed dot plan.
- [28:34]
Tim Seymour
Lawrence 18 years ago when we began the show, private credit as a product, as an investable product was also not really around, at least in the way it is today. Talk about both the availability of access to private credit, what that's meant also for credit spreads. Currently we're by the way we're we're about as tight as we've been on on high yield oas since going on. Not necessarily even what you're investing in. But if you look at credit spreads they've there are tights. There are tights we really haven't seen since before the big crisis. Talk about the asset class as a place for investors to invest in the opportunity.
- [29:07]
Lawrence Gollum
Sure. Well, I think when, when one is investing in private credit, particularly direct lending, which we specialize in, it's very hard to be a market timer. As a retail investor, you're going in and out of a BDC or some kind of fund where you have liquidity, okay, you have it, you have the ability to pull the trigger and get in and get out. From our point of view, we make a loan, we get paid back five years later. Most of the big institutional investors and private investors have to be choosing the asset class and choosing a manager. There actually was in BDC land a couple of big public BDCs back 18 years ago. Neither one of them exists anymore. It was American Capital and Allied Capital and they both blew up because of strategy shift. They were doing well in lending. They grew too fast to sustain the growth. They had to start buying companies. They didn't know how to own companies. I think every time there's been a cycle where fundraising is a little easier, you know many big investment managers, multi Strategy Investments, public GPs, they raise money when they can, necessarily because they should. In the middle market spreads are medium down and we'll see what happens. In terms of deal volume picking up, private equity firms are very excited about deal volume picking up. They're way, way more excited about deregulation than they are worried about tariffs.
- [30:26]
Melissa Lee
Lawrence, always good to see you. You're welcome back anytime.
- [30:29]
Lawrence Gollum
Thank you.
- [30:30]
Melissa Lee
Despite what Karen tells me, just joking. Coming up, we're just minutes away from a big Fast Money birthday surprise. You won't want to miss that in turning 18. We've got a few years on bitcoin. The cryptocurrency coming onto the scene in 2009 back when one US dollar was equal to more than 1300 bitcoins. We all know what's happened since then. Don't go anywhere. Fast money's back into. Welcome back to Fast Money. Check on how markets closed the day the Dow jumping more than 100 points, the S&P up about a tenth of a percent and the Nasdaq seeing a small loss. Hershey down about 2% after asking regulators for permission to buy more cocoa as it grapples with global shortages. And Disney higher after hours after announcing 157 million ad supported monthly active users across its streaming platforms. That compares a 70 million ad supported users for Netflix. Coming up, a major drop in quantum stocks is Nvidia CEO Jensen Huang lays out when he thinks that technology will be up and running to trade on the name Netflix and the fast money 18th anniversary just getting started. When we debuted back in 2007, Tobey Maguire was flinging his webs of Spider man in a third installment of the franchise, topping the box office that year. Shrek and Donkey were not far behind, making a splash in their third film, one of Guy's favorites.
- [31:52]
Tim Seymour
That's all we had.
- [31:53]
Melissa Lee
And Harry Potter was in his fifth year at Hogwarts as the Order of the Phoenix helped bring moviegoers to theaters. Ah, remember theaters? More reminiscing right after this. Welcome back to Fast Money. Quantum computing stocks getting crushed today after Nvidia's Jensen Huang said the computers were still decades away from being useful. Rigidity, D Wave, I, Ionic Q and others sinking more than 330%. The CEO of D Wave pushing back on Huang's comments today.
- [32:31]
Dylan Ratigan
When it comes to D Wave and.
- [32:33]
Lawrence Gollum
Annealing, quantum computing is dead wrong.
- [32:35]
Frank Holland
We are not 30 years out.
- [32:36]
Lawrence Gollum
We are not 20 years out.
- [32:37]
Melissa Lee
We are not 15 years out. We are today.
- [32:39]
Dylan Ratigan
We are supporting businesses today with quantum.
- [32:44]
Lawrence Gollum
Compute to solve their hard problems.
- [32:47]
Melissa Lee
He also said he'd sit down with Jensen to walk them through what he got wrong. These stocks, by the way, they've been on fire recently. Quantum computing and Rigetti up more than 1,000% in just the last three months. All of them, of course, getting a boost on the Alphabet news about quantum computing.
- [33:01]
Guy Adami
You know, and again, when valuations seemingly don't matter, I mean, people will bid things up to levels that don't make a whole hell of a lot of sense. But when you hear something like the comments made that it's not going to be a thing for a while, then people get some semblance of normalcy. I think that's what's going on. I don't think that move to the downside is over, by the way.
- [33:18]
Frank Holland
Yeah. You could also make the case in an ironic fashion that maybe artificial general general intelligence is a ways off, that all this spend that we're working towards to obviously train these models and do these sorts of things that seem really whiz bang. Maybe we don't realize that for another five to 10 years and maybe these valuations don't make any sense. I mean, you can make that comparison.
- [33:37]
Melissa Lee
It's interesting that when Google announced its breakthrough in quantum computing, we're all sitting here saying why is all this market cap being afforded to Google for something that is years if not decades away.
- [33:47]
Tim Seymour
And the reason is, I believe is because first of all, Google is undervalued. There's, there's an argument that some of the parts and different things, but it gives you some sense of what Google's up to. A lot of people don't understand some of the black box dynamics. I think it just recognized intrinsic value at Google and highlighted the fact that the stock's cheap.
- [34:04]
Karen Firestone
I agree with you, Guy, on Rigati. I mean, if you look, yes, it's had an enormous drop, but it's active back to where it was December 23rd. Right. And it was, you know, low single digit, mid single digits.
- [34:16]
Tim Seymour
Probably the last Yankee pitcher, by the way.
- [34:18]
Guy Adami
Well, you know, he had that no hitter on the 4th of July.
- [34:21]
Tim Seymour
It was a memorable day against the Red Sox.
- [34:24]
Melissa Lee
Tough times since unsubscribe. Anyway, coming up, fast money is 18th birthday party continues. Where was big tech back in 2007? Airbnb had just been born, Twitter started trending and Facebook helped light the fire for the coming mania of social media. Don't go anywhere. Our special guest will join us next. More Fast Money into.
- [34:56]
Dylan Ratigan
All right, welcome to Fast Money. We are now a daily show. We are on Broadway, I kid you not. We are live at the NASDAQ market site here in Times Square. Jeff Mac, Tim Cerzini, Gaia Dami, Eric Bolling, everyone is here and this economy of ours which delivered sensational.
- [35:09]
Melissa Lee
Amazing that that was 18 years ago. Today fast money turns 18. The five of us have been a part of the show for a long time. Guy was, as you saw, one of the originals, Karen and Tim shortly after. So much has changed since 2007 when the daily show started. Our hair, hair lines, our lives. Children have been born. Children have graduated. College. Markets are a whole lot different though. When the show launched, the biggest companies in the S and P were ExxonMobil, GE, Microsoft and Citigroup. Together the top 10 were worth $2.5 trillion combined. Today the top 10 names are worth more than 20 trillion. Apple back then had a market cap of less $75 billion and video was about 12 billion. Metta and Tesla were still years away from going public. And take a look at where the major markets were. The S and p less than 1500, the Dow about 12,000. The Nasdaq still less than half of what it was at the peak of the dot com boom. And the yield on the ten year treasury, oddly, just about where it is exactly right now. So Guy, quite the milestone. 18 years. You lived every minute of it. What's the biggest change that We've seen.
- [36:16]
Guy Adami
Well, I mean the biggest change we've seen obviously is you coming in 16 years ago. March will be 16 years. And you know, I don't want to talk a lot because we have a great guest coming on, but you filled some incredibly large shoes, but you did it in such a way that, you know, you made the show your own. So of all the changes, you coming on board some 16 years ago to me tops the list. Melms.
- [36:37]
Melissa Lee
Oh, well, it is a team effort every single night, day in, day out for sure. It's all about the ensemble and you guys and your smarts and your all the laughs that we've had. But in terms of the markets, we've just outlined a whole bunch of changes. So what do you think? Biggest change?
- [36:53]
Tim Seymour
Well, you know, you look back at those companies and you think about the markets. You know, 18 years ago, the oil and resources were strategic assets. They were sovereign assets. They were the things that were most guarded. In fact, they were takeovers of resource companies that weren't allowed. Now it's chips. So data is the new oil. I think we're in a different place. I also think that the, the retail investor and the sophistication of the folks that watch this show has gone through the roof.
- [37:15]
Melissa Lee
Right.
- [37:16]
Karen Firestone
To me, early on in the show's history, the precipice of a financial disaster was just so enormous. Right. The idea we see Citibank Bank America up there. Citibank we talk about now is only back to basically seven that idea and that the rise of tech, the power at how much money they make. It's extraordinary.
- [37:37]
Frank Holland
Yeah. I just think market structure, I mean that to me is like the biggest difference. Especially somebody who came into the markets in the late 90s and you thought you had an edge if you had information, you had, you know, access and all that sort of stuff. And to, to me, I mean, listen, look at me. I come on here, I'm wrong a lot. And you know, and hopefully we do like proper analysis. But it seems like the way and guy talks about passive investing all the time and market structure in general, I think that is democratized it for a lot of folks too. So there's. You can get rich slowly too. You don't have to just do it the fast money way.
- [38:03]
Melissa Lee
Yeah, we're here, as Dylan had mentioned, at the top on Broadway. We've been broadcasting here for 18 years. You never know who's going to come by the NASDAQ markets, you know, crossroads of the world. Welcome Dylan Ratigan, the original anchor of Fast Money right here on set.
- [38:21]
Dylan Ratigan
Nice to see you guys.
- [38:22]
Melissa Lee
It is great to see you.
- [38:23]
Dylan Ratigan
Hey, I just was in town swinging by. Yeah, well, I was. I figured I'd get some weed. You know, Times Square seems pretty weed heavy.
- [38:30]
Tim Seymour
Smells good.
- [38:31]
Dylan Ratigan
But anyway, nice to see you. Nice to see you. I've got a couple things for you. I got a gift from Italy and a gift from New York for you. So there you go. Congratulations. Thank you.
- [38:43]
Melissa Lee
Thank you.
- [38:44]
Dylan Ratigan
Very nice to see you. Thank you for letting me back in the building.
- [38:48]
Melissa Lee
Of course, without Dylan, there wouldn't have been a Fast Money.
- [38:51]
Guy Adami
Dylan's gotta get his. As he gets his seat. I'll say this, let me say hello.
- [38:54]
Dylan Ratigan
To you real quick.
- [38:55]
Guy Adami
The early days, people forget to see you, dan, all through 2000. You know, fast Money was a segment on one of Dylan's shows On the Money, an eight minute segment. And I will tell you, as I said, Mel, you are an extraordinary person. What you've done. Dylan is equally extraordinary in what he brought to the show. His vision for the show in late 2005 sort of paved the way. So it is mind blowing. Mind blowing to have you back.
- [39:20]
Dylan Ratigan
You and your compliments, pal. Calm down, take them, get them some weed. How do you guys work in this neighborhood? You walk it out to give and buy it. Just walk into Times Square and it's just sort of. The general air quality has changed since I was last here.
- [39:34]
Melissa Lee
People may not know people, some people may know you. You're now global editor for tastytrade, Tasty Live.
- [39:41]
Dylan Ratigan
I am.
- [39:41]
Melissa Lee
Well, I've seen you with Sosnoff.
- [39:43]
Dylan Ratigan
Yeah. Every Wednesday we go at 2:00pm Eastern and then every afternoon at 4:00 with the overtime boys. So I'm still, I still participate in the conversation. The difference is now I have to trade all the time. When you hosted this show, it was illegal to trade. I don't know if they changed that rule. But Tastytrade, it's a requirement. And so it's a different.
- [40:02]
Melissa Lee
What's changing your view in the past 18 years?
- [40:04]
Dylan Ratigan
Accessibility. I mean, I would say that the biggest thing is just the excess. I mean, obviously liquidity, but the technology and information. There are things that Karen or Guy or Dan or Tim could do 18 years ago that I couldn't do at home in Milan, where I live now, or I couldn't be on a laptop or I couldn't be, you know, a $2,000 account and wherever, nowhere and be able to put on some sort of a volatility trade on a spread that has enough liquidity. I mean, spreads were too wide, commissions were too high. And so even if you could imagine the strategy, you couldn't implement it in a profitable way. And so I think that's the biggest thing.
- [40:44]
Guy Adami
Let's talk about this show. Doctor, because you had a vision for this again in 05. It all sort of came together in 06. Are you surprised that now, 18 years later, we're still sort of doing that?
- [40:54]
Mike Schumacher
Yeah, of course.
- [40:55]
Dylan Ratigan
I mean, I think anybody. But it's not personal. I don't mean it like any.
- [41:00]
Guy Adami
I hate to see you coming.
- [41:01]
Dylan Ratigan
I think any creative project, which I consider this to be, that lasts for any period of time, let alone 18 years, is extremely unusual, extremely remarkable, and an incredible compliment to all of you. Not just Melissa, obviously, but also I think all. All the traders and production and the production team. I mean, there's a lot of. The fact that this has done at this level for this long is a career highlight for everyone involved.
- [41:31]
Melissa Lee
I want to also talk about your new venture, which is very interesting because it's not related.
- [41:35]
Dylan Ratigan
Well, you have to open your gift.
- [41:36]
Melissa Lee
All right, let's open it. Let's do that.
- [41:40]
Dylan Ratigan
And we can talk about the venture while you open the gift.
- [41:42]
Melissa Lee
Okay.
- [41:42]
Dylan Ratigan
So, I mean, but I'll let you lead.
- [41:44]
Melissa Lee
It's shoes.
- [41:45]
Dylan Ratigan
Well, it's Italian luxury goods. It's Italian sneakers. Silk, cashmere, and Japanese denim, of course.
- [41:55]
Melissa Lee
Japanese. How's it different from American denim? Yeah.
- [41:57]
Dylan Ratigan
I have brought for you a pair of our signature product, which is called the White Goat. And it is Italian goat leather, hand stitched. By me.
- [42:09]
Karen Firestone
By you?
- [42:09]
Guy Adami
I.
- [42:10]
Melissa Lee
No, you did not.
- [42:11]
Dylan Ratigan
I go to Venice myself every day, and I get out a needle and thread. Well, first I have to go.
- [42:16]
Tim Seymour
Do you ride in a rickshaw?
- [42:19]
Dylan Ratigan
The truth is, first I have to go goat hunting.
- [42:21]
Guy Adami
Of course.
- [42:23]
Dylan Ratigan
Without a goat. What can I even get done here?
- [42:25]
Melissa Lee
Check out the goat.
- [42:26]
Dylan Ratigan
No, it is not made by me. It is made by incredibly talented Italian artisans in Venice. And I would argue it'll be the softest shoe you'll ever wear.
- [42:37]
Tim Seymour
They might make these in your size, I would hope.
- [42:39]
Guy Adami
Yeah, you have to kill baby goats.
- [42:42]
Dylan Ratigan
But at this point, we probably have 100 products. We're premiering our first big collection at Fashion Week next month.
- [42:47]
Melissa Lee
Wow.
- [42:48]
Dylan Ratigan
In Milan. And it's just a nice way to do something beautiful. The thing with having I moved to Italy in 2018 to help this make some sense. And so living in Milan and being accepted into the Italian culture in the way that I have been has been the greatest privilege of my life. And so to be able to bring some of my New York to the Italian way of being sometimes, you know, it gets a little hot. It might get a little hot, but it's more good than bad. And sort of to bring their beauty together with some of my focus and passion has been a great experience.
- [43:25]
Melissa Lee
Euphoria Dylan thank you. Come by sooner than 18 years.
- [43:29]
Dylan Ratigan
Congratulations.
- [43:30]
Melissa Lee
Up next, final trades before we get to finals, we wanted to thank Levain Bakery for sending cookies in honor of Fast Money's 18th anniversary. 18 cookies. Look at them. Final tray time. Let's go around the horn. Karen I just want to say thank you.
- [43:49]
Karen Firestone
It's been a privilege to be part of this, you and Dylan and thank you to Susan Krakauer and Mary Duffy and John Malloy for finding me and allowing me to be here.
- [43:58]
Tim Seymour
Tim It's 18 years of an honor being doing this every night.
- [44:02]
Frank Holland
Taiwan Semiconductors Dan Interesting announcement from ebay.
- [44:06]
Guy Adami
And meta OG guys, great seeing Dr. Great seeing you two together.
- [44:11]
Melissa Lee
Disney Malms thank you for watching Fast Money. Thanks for watching these past 18 years. 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, NBC Universal, their parent company or affiliate, 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.comm fastmoneydisclaimer weekdays at 5aM.
- [44:59]
Frank Holland
Be first on world markets, first to the global business conversation.
- [45:03]
Melissa Lee
Get a jump on the investing day every day with Frank Holland.
- [45:07]
Frank Holland
Success starts early. Worldwide exchange, 5aM Eastern. CNBC.