← CNBC's "Fast Money"
CNBC's "Fast Money"
Staples Struggle and Chips Surge as We Head into New Year 12/23/24
00:43:44
Consumer staples stocks struggled on an otherwise strong day for markets, as yields and the dollar rose. What’s that say about the strength of stocks in the new year? Plus semis surge on a new probe into China’s chip industry, Zillow lays out its forecast for housing in 2025, and what to expect from FinTech and M&A. Fast Money Disclaimer
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- [00:00]
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- [00:28]
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- [01:00]
Dominic Chu
All right. Thanks, Leslie. And thank you, Mike. Life from the NASDAQ market site in the heart of New York City is Times Square. This is fast money. And here's what's on tap tonight. On the rise. Rates continue their slow, steady climb with the 10 year hitting 4.6% today. So can stocks keep rallying in the new year if bond yields keep moving higher? We're going to debate that one plus bummer for the builders on the back of those rising rates, housing stocks have been hit especially hard. Is the sector a stay away in 2025. We'll break that trade down. And then later on, will Trump break the cycle of pain in the energy patch? The Chartmaster ready to reveal the next move in Berkshire Hathaway and Fintech. Trade it or fade it in 2025? Yeah, you know what we're talking about. I'm Dominic Shewen from Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Steve Grasso, Dan Nathan, Guy Adami and then Carter Worth as well. We're going to start with two major market moves that caught our ey, semiconductor stocks surging after the US Launched a new probe into China's chip manufacturing. We'll dive into those moves in just a moment as you're seeing there. But first, staples down today, the worst performing sector in the entire S and P, outsized losses and names like Spirits Maker Brown Forman, Walgreens Boots Alliance, Dollar General. That coming as 10 year yields tick higher again, briefly touching the 4.6 mark again, a level not seen since late May. The dollar also trading higher, trading near more than two year highs at this point. So what do all of these moves signal is in store for the new year. Dan, please kick us off.
- [02:37]
AT&T Ad
Yeah, no, I know we're going to focus on chips a little bit. I think that's where a lot of folks expect a lot of leadership to be. Right. There's one secular shift that seems to be driving a whole heck of a lot of technology. So I think about Taiwan Semi. You know they are in the catbird seat as it relates to manufacturing of high end GPUs. I think a lot of folks think that Nvidia and Broadcom are going to continue to lead there. I just say this, that money came out of in video clearly into Broadcom. If you look at the smh, the ETF that tracks the semiconductor space, they seem to be going sideways. Hasn't made a whole heck of a lot of progress in the last few months despite some breakouts like a name like Broadcom. So I would expect investors to maybe early January, maybe take some profits to try to hold on to some of those names that have had these massive gains into the new year. But then at some point if we do have a sell off broadly on some of these names that obviously been very crowded, then you'll see money come back into them as long as Q1 earnings guidance is not disappointing relative to let's say where valuations are and expectations are.
- [03:35]
Dominic Chu
Guy?
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Guy Adami
Yes Staples by the way also on the desk tonight is that sweater that you're wearing.
- [03:40]
Dominic Chu
Yes you like this is this has been approved because by holiday.
- [03:44]
Guy Adami
Oh it's beautiful.
- [03:45]
Dominic Chu
I'm just saying it was approved here. I'll wear a sweater tomorrow as well when I'm on closing bell overtime. It's just the holiday season for me anyway. Guy, if you look at the consumer staples trade technology you we've talked about ad nauseum for, for so much of this year. The staples trade though, is it as attractive given the fact that yields just keep going higher and higher. We don't need those staples in their dividend yields, we can just get them in Treasury.
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Guy Adami
That's right. And I think the yield story is one that you know, not enough people are talking about. They're starting to talk about it now and you know, you look at a 10 year yield of 4.6%. I'm of the belief and I've been of belief for a while. If you want to throw a TLT chart. You can see the levels that we saw last fall. So October of 2023, sort of 82 or so. I think that's where the TLT is headed, which puts us probably close to 4.9% in the 10 year. And I think the market's going to actually start taking notice in a meaningful way. And to your point, dividend stocks, which may have been attractive, you know, a percent or so ago, are no longer all that attractive. On top of which, what you said Dan mentioned, the strength in the dollar is a headwind as well. So you got to pick, take notice. I know the S and P had a nice day today, but below the surface, there's some damaging things that are happening.
- [04:51]
Dominic Chu
It's not though, just all consumer staples. I mean, look at Wal Mart and Costco. They've done pretty darn well. Steve, so how exactly does that staples trade play out?
- [04:59]
Steve Grasso
Yeah, so you talk about large cap staples names too. But if you look at the index, the ETF that you're talking about, the xlp, we stopped or we should stop around this level. If you look back August 24, August 5 in 24, this is where you have some congestion in the charts. This is where you have some flattening out. So you should theoretically see the market stabilize here, especially in the staples. I think rates will eventually start to come in. I think it's a product of the 10 year is more about future growth, it's more about inflation expectations. The shorter end of the curve is more about the Fed. Obviously we've had an incredible run off the election. There was a lot of market uncertainty. I agree with the guys. I think the market should come in.
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Dominic Chu
The market should come in, but come.
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Steve Grasso
In, but not, not, not crazy. I think, I think we'd all feel happy about probably another 5% lower to create a sense of urgency for people to get off and say, you know what, let me try to pick values where I, where I perceive there to be values and to bargain hunt a little bit. And the valuations a little steep in the overall, overall market.
- [06:04]
AT&T Ad
Yeah, I think investors really showed their hand Wednesday afternoon though. Right. If they had a reason to kind of sell. You know, a lot of folks were coming on on Thursday. But wait, you know, this was kind of priced in. You know, when you look at the dot plots, maybe, maybe it's three cuts in 2025, you know, it just showed you that they were fine to take some profits if they had a reason to do so. And you know, again, this brings me to kind of Q4 earnings as we get into mid to late January, might we have some reasons for investors to do so? You know, so I think about just going back to some of the stuff that's winners. You just mentioned consumer staples. You mentioned Costco and Wal Mart. If you look at the XLP, the ETF that tracks them, kind of a poorly constructed ETF if you will, 20% of that. The top two holdings are Costco and Wal Mart, right? And then you get down to let's Coke and Pepsi and Philip Morris. They're the ones that have a lot of international exposure. They're the ones where the dollar is really a headwind as guy just said so to me. I just think there's going to be places, you know what I mean, to kind of place your bets, if you will. If you think Pepsi is overdone down at 52 week lows, you think the valuation is justifiable, you know, you think that, you know, folks are going to kind of come back into some of these names. If there's an economy that is maybe a little less certain than it was this year. Those are names that should do pretty well. The consumer stable Guy.
- [07:15]
Dominic Chu
I mean one of the things that we talked a lot about is this American except this idea that you focus on the US just domestic and everything else happening within our borders. Would it make sense to look at consumer staples that have less of that international exposure and ones that are maybe even mid caps that have more U.S. exposure?
- [07:32]
Guy Adami
Maybe. And if you can name a few, I'm on board with you. But no, I mean I'm not trying to be a wise guy, but you know, Costco I think has been winning to exactly that if you think about it. And you know, you throw Walmart in the mix as well. So I think there's something to be said for that. Without question. But this index, this ETF that we're talking about, you know, throw Procter and Gamble in, which is 10% as well. I mean the top three stocks and WAL Mart we've collectively loved, we love Costco as well. But you're talking about valuations that historically make zero sense, that if the market ever sort of wakes up and says wait a second, we're paying too much, then that whole trade unwinds in a pretty fast way.
- [08:06]
Dominic Chu
So Carter, the charts have to be fairly dramatic. We've seen a good amount of damage from any of these stocks. But from a sector perspective, does it look like it could be constructive or is the downside momentum still there?
- [08:18]
Carter Braxton Worth
Why we're on Staples and then let's go to semis a bit. But Staples are so driven. You all covered the concentration in the S&P 500 consumer staples sector with the top two stocks being 20%. Wal Mart and Costco. Consider the consumer discretionary sector. The top two stocks, Amazon and Tesla, are not 20, there are 40. We have this everywhere in the market. And in fact, the way to really measure the performance of consumer staples is not looking at the actual sector with its current concentration, which is a poor performer up 8 plus percent versus a market up 2526. The equal weight S&P 500 consumer staples sector is down almost 5%. I mean, imagine that in what is a year that has been so good for equities as an asset class as measured by, for lack of any other better way to measure The S&P 500, one of the parts that composes the whole, The S&P 500 consumer staples sector is up 8 versus the 2526. But the equal weight is actually down. And we see that in semis. Right. The equal weight semiconductor index is unchanged. It's ever thus. We have a. We have a concentrated market. We've had a concentrated market. And that is both a virtue and a vice.
- [09:32]
Dominic Chu
Okay, because you brought it up, Carter, let's bring back the semiconductor conversation because the charts there are fairly compelling as well. Those stocks are surging after the White House announced an investigation into China's legacy chips, which go into everything from cars to household goods to defense systems. The probe expands the U.S. s targets outside the booming AI space and it aims to really examine how dependent the US is on these types of prospects products. So what does this mean for chip stocks overall? Guy, I'll turn to you for this.
- [10:05]
Guy Adami
Well, I mean, people obviously. I think there was a bit of a relief rally in some of these names today on the back of me and obviously Broadcom had that huge move last week. Then we saw a sell off. It got some back today. I think people may be breathing a sigh of relief. I'm not so sure that's warranted quite frankly. I mean, there's still some headwinds out there. And in this space it comes in to form a valuation. I mean, Broadcom is a name we have loved collectively on this desk for a long time on the back of valuation. But given the move you saw last week, there's no way you can make a compelling case in valuation. Regardless of what they talk about in terms of total addressable market. The TAM that the Broadcom CEO spoke about in video, we've talked about it 100 times here. Now we've got it right, we've got it wrong. I'll say this price to earnings, compelling price to sales. No way in those margins that they're enjoying right now, they're not going to enjoy in perpetuity. So I think the SMH trade is on the precipice right here.
- [10:57]
AT&T Ad
Yeah. What's also really clear, and you just said this down, that some of those other end markets for semis right now, whether it's industrial, whether it's auto, we heard from Micron last week that, you know, consumer electronics, whether it be smartphones, whether it be PCs, are not particularly strong. And so when you think about the exposure that some of those have to China and then you put together a weak end market or a bunch of weak end markets, I mean, the last trade, the last leg standing is really generative AI. It's spending. You know, Google, Microsoft, Amazon, Mehta, they make up 40% of Nvidia's revenues. Like at some point you're going to need to see the semi trade broaden out. Carter just spoke to it with equal weight. S and P is not doing a whole heck of a lot. So again, you know, and I started the show by saying this, I think a lot of investors would love to see some of that froth come out of some of the leadership and then they're probably going to pile right back into the leadership until there's some reason for them to see some sort of decelerating growth or orders in muscle memory.
- [11:49]
Dominic Chu
Steve is there for, for chip stocks.
- [11:52]
Steve Grasso
And they've been to Dan's point, they've been the safety bet. Right. So they have large cash on the balance sheet. But if you look at Nvidia and Broadcom, the way we're set it up, people are going with, with Broadcom because they don't see a competitor with. If you, if you, if I, if Dan is Nvidia and I go to him to supply all my chips, he could compete with me. Broadcom doesn't have that ability to compete the way Nvidia does. So a lot of these companies, we know the, the top names, it's the five mega cap names that are the most, the biggest consumer of the chip space. If I'm a Microsoft, do I want to go with a potential competitor to get my chips from?
- [12:34]
AT&T Ad
Yeah, but one of the things about Broadcom and I think, and G. Munster and I had this conversation, I know he's on fast money. I mean one of his big themes, Deepwater asset management for 2025 is custom silicon. It's basically who's going to partner with a Broadcom to create their own high end GPU which actually does, you know, kind of give them a second source rather than. I think a lot of these folks are really sick of Nvidia and the stranglehold that they have on pricing right now. So again, that was a big reason why Broadco. Tom, move that way. We've seen story after story after story, whether it's Microns, Micron, whether it's Metta, these guys all want to create Microsoft, excuse me, Google, they all want to create their own chips and they're going to partner with folks like.
- [13:12]
Steve Grasso
But I think that's the most important part that you just said that they become, and I'm not, I'm just using the analogy they become China. Right. So people want to start and diversify their supply chain. So If Nvidia holds 85% of the AI supply chain, you've got to diversify around it. There's a handful of reasons why. But the investment for corporations, you know, corporate tax isn't going up. That was one of the unknowns going into the election. So you have the ability to have a little bit of Runway to say, do I want to invest more in my company?
- [13:42]
Dominic Chu
All right guys, let's. For more on all of this and the market outlook overall, let's bring in Katerina Simonetti of Morgan Stanley Private Wealth. She's a senior vice president, also a private wealth advisor at the firm. Thank you very much for joining us. Katerina, you heard the conversation from the desk. I wonder from your perspective, if you are managing people's money, do all of these things matter in that conversation about how 2025 shapes up?
- [14:07]
Katerina Simonetti
Well, absolutely. You know, when we think about 25, we are expecting some type of a mid to high single digit returns market return 26% this year in S&P followed by 24 last year. So it is only reasonable to assume that this level of growth is going to slow down and something is going to have to give. And of course this assumes that we're going to see a couple of more Fed rate cuts and inflation is not going to spike up. But it will be safe to say that 2025 could be categorized as another year where it's all going to be about the Fed and inflation.
- [14:49]
Dominic Chu
Okay, so if it really is, then, if it really is, how much then do investors have to be reactive? Katerina, to the Fed, do we just have to wait until they say or do something or is there a way that you proactively position for it?
- [15:03]
Katerina Simonetti
Well, it's a very fair statement and you know, when we look at the risks that the market is facing there is not much we can do about the Fed or tariffs or the headline news that might be hitting us at the beginning of the year. What we have control over is our portfolios and we tell investors that reaching the maximum portfolio diversification among stocks, bonds, real assets and alternatives, you know this is something that we can do and it's an absolute key in dealing with this market.
- [15:33]
Guy Adami
Katerina, where do you get concerned in terms of 10 year yields were 4.6 now for a lot of people was 4 and a half percent. Other people say it's going to be the levels we saw in the fall of last year. Where does the 10 year yield go? Where equities sort of put up a caution flag?
- [15:50]
Katerina Simonetti
Well, bonds definitely surprised us, you know and the, the key here really is what's going to happen with inflation because if inflation were to spike like bonds on the risk adjusted basis versus stocks so it is difficult to see where the rates exactly are going because there are so many risk factors facing the market. But we think bonds play an essential role in the portfolio with equity risks out there.
- [16:15]
Steve Grasso
Katerina, sort of, sort of a piggyback on your Fed outlook. And guys question on the 10 year during my career you bought the market at 17, 18 times, maybe even 16 times if you were lucky and you sold the market at 21 times times, rinse and repeat, you sort of just followed it. That was your 50,000 foot up, top down approach to how you traded the indices. How do you see valuations fitting in with your forecast for the S and P target and with your fed and your 10 year. Obviously your ideas on that of course.
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Katerina Simonetti
Market is extremely rich and not only in terms of valuations but also in terms of earnings projections. And it's going to be a tall order for us to actually meet all of the things to come together for us to, to continue the growth in the market like the one we have been seeing. So what we tell investors is that they should focus on individual stock selection versus index investing on absolute quality. We like large caps over small and the sectors like financials, energy, consumer staples. We're taking very protective stance and with focus on the dividends because there is going to be a lot of volatility next year even though we're optimistic on the market we we're going to end up the year at about 6,500. But quality is the name of the game all Right.
- [17:37]
Dominic Chu
So, Katerina, before we let you go, largely speaking, your conversations with your clients, are they generally optimistic about 2025, looking at the administration, the economy, everything else? Are your clients, okay, optimistic or are they getting more guarded?
- [17:52]
Katerina Simonetti
They're getting more guarded. They are concerned because it is impossible to ignore. That market has done really well and they are questioning what they should be doing. And we tell them avoid concentrated positions. Make sure that, you know, to take some of the gains off the table as much as possible. Tax, loss, harvest, because we can't be enamored with certain sectors of the market. I the tech, you know, all of that was just such an exciting story last year, you know, but we have to protect the gains in the portfolio. Otherwise we're going to see continuation of the roller coaster ride and we might be giving up some of those gains that we enjoyed in 24.
- [18:33]
Dominic Chu
All right, Katerina Simonetti at Morgan Stanley Private wealth, thank you very much. Happy holidays.
- [18:39]
Katerina Simonetti
Holidays.
- [18:40]
Dominic Chu
All right, let's trade this. Carter, over to you. What do you think the Trade is for 2025 given what you just heard from Katerina?
- [18:47]
Carter Braxton Worth
Yeah. Well, I have no idea. So we get that out of the way. The truth is, right, it's, it's a Wall street convention that was adopted about 35 years ago to have a year ahead price target. I mean who the heck knows? 12 months versus 13? What about 11? It's a feel good like a comfort blanket. Someone says to you, I think it'll be up 10, 12%. We also know, and this is important that every year since strategies have been tracked, every single year they predicted up years. Wall street does not believe in down because it's called the sell side for a reason. They're selling stuff. What I would try to focus on is Q1 and what is the probability of a drawdown, Some sort of give back. January is typically are not quiet. Often you have momentum and you get follow through and you get a big further January. Some people refer to the January effect, but you also get reversals. We know there was a big reversal in 2016 in Q1. We also know of course the COVID Q1 or even 2022 drawdown of 14, 15%. I think one can expect at least a 12 to 15% drawdown in Q1, 2025.
- [19:51]
Dominic Chu
All right, there you go. Coming up on the show, a make or break moment for U.S. steel. The countdown is on for a big deadline in the company's Nippon Steel saga. What's at stake for this landmark deal coming up next. Plus, energy is one of just two S&P sectors in the red this year. So can the struggling space turn things around in 2025? The names to watch right after this, more fast money Back into.
- [20:17]
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- [20:46]
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- [21:18]
Dominic Chu
Welcome back to Fast Money. The committee on foreign investment in the U.S. cFIUS is required to submit its decision on Nippon Steel's takeover proposal for U.S. steel by the end of today. The White House will then have 15 days to respond. If President Biden rejects the deal, the companies will have an option to appeal it. Shares of US Steel up 4% today on the back of maybe deal or no deal. What exactly gives here? Maybe we'll start with you, Steve.
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Steve Grasso
Well, it's no secret Biden administration and Trump administration, incoming administrations against this deal and I agree with both of them why they should be against the deal and specifically with The I'm long Lenorak's U.S. deal because Trump has said that he's either going to give incentives, whether it's tax or some other way to support the steel prices in the country and tariffs. We know that there's a 25% tariff in place now that could go to 60%. That will boost pricing. We've seen this story before in the first iteration of Trump. I think near term you're going to see a bounce in US Steel prices.
- [22:27]
Guy Adami
Interesting. Barron said a piece that this time it's not Trump's fault what they're talking about. I mean if we can go back in the crackstaff and Eck go back to 2017. US Steel was on a lower left, upper right trajectory into 2018. I think it was in March the tariffs came, the stock was $40, stock. It never looked back. It went straight down. So I'm sort of on the other side of this. I mean, Japan is supposed to be one of our largest allies. And I don't know what the problem is. I mean, they're coming in and trying to save this thing. They're going to save jobs, they're going to invest in the company. Clearly, U.S. steel can't do it themselves. And, you know, we can be as, I don't know, as I guess protective of our companies. We are. But if they're not running themselves well and somebody can do a better job, I'm all for it. So I don't know where the president comes off on this one.
- [23:12]
Dominic Chu
So, Dan, this is, by the way, if US Steel hypothetically gets taken over, it's not like the manufacturing leaves the US Right. It still seems to more jobs.
- [23:22]
AT&T Ad
I mean, listen, I think you'd make the case that, you know, once a deal like this is done, you could kind of actually put a lot of pressure on them to keep it here. I'll just say this. I don't have that much more intelligence to say, but I've long said that, you know, Elon Musk should buy this thing. It's got a $9 billion enterprise value. No, that he's got the X and he takes it public. There you go. I mean, it's a rounding error for how much he's lost in the Twitter.
- [23:42]
Dominic Chu
All right, Carter, is steel someplace you want to be given the charts?
- [23:47]
AT&T Ad
Yeah.
- [23:48]
Carter Braxton Worth
I mean, if you look at some of these sort of world's iron and steel indices, not a great looking picture. And it's really idiosyncratic. Right. Whether you're doing something like a Nucor versus US Steel. What we do know, of course, is these were the greatest companies in the world. U.S. steel, of course, was the most valuable at one point in the world. It was the apple of its day, just as General Motors and Exxon have each been or Cisco. But right now, these are small industries and they're small components in the general equity complex. The US Steel pattern itself, to me, it qualifies as so bad it's good deal doesn't get done, it sits here. If it does, you maybe get a little pop.
- [24:25]
Dominic Chu
All right, there's still a lot more to come on Fast Money. Here's what's coming up on the show.
- [24:30]
AT&T Ad
An energy sector in need of a caffeine boost. Can M and A lead the way to big gains in 2025 from big oil to the next big thing in nuclear? We're hitting it all with high energy trading. Plus, can the real estate market heat back up with mortgage rates so high, the keys to big gains for housing stocks and what could finally unlock opportunities for home buyers next? You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.
- [25:04]
US Cellular Ad
Gifting is hard, but here's a Give the gift of connection from US Cellular. Not sure what that means? Here's a slightly more specific hint. You can choose four free phones and get four lines for $90 a month from US Cellular. Your family wants new phones? How do we know? They told us. The good news is that compared to wrapping presents, you're great at getting hints. So take the hint and get them four free phones and four lines for $90 a month. US Cellular built for us.
- [25:32]
AT&T Ad
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- [26:04]
Dominic Chu
Welcome back to Fast Money. Energy is one of the worst performing sectors this year, just barely clawing into Green for 2024. And with tariffs and other potential headwinds on the horizon, the biggest players in the space might have to get creative to boost their stock values in 2025. Our Pippa Stevens has the details on that story.
- [26:23]
AT&T Ad
Pippa, that's right Dom. Energy is the second to worst sector this year. And with the lack of positive catalysts for oil, 2025 might be all about NAT Gas.
- [26:31]
Dominic Chu
It just had the highest level in nearly two years.
- [26:34]
AT&T Ad
And looking forward, there are two key tailwinds supporting prices. The first is LNG growth. The second is of course generative AI. Now that could translate to upside for gas focused drillers like Equity and Tarot. And expand energy at the expense of more oil focused players like apa, Devon and Oxy.
- [26:51]
Dominic Chu
Now President Elect Trump has talked about.
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AT&T Ad
Increasing LNG exports, so Cheniere is a name to watch. They're the largest exporter in the US and the second largest producer of LNG globally. Finally, keep an eye on the pipeline companies like Kinder, Morgan Williams, Oneok and Targa. They've all outperformed this year. And for investors who don't want to take commodity price risk, it's a way to bet on the energy sector as well as demand growth from AI plus.
- [27:15]
Dominic Chu
It is really hard to build an.
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AT&T Ad
Intrastate pipeline, especially so if you have infrastructure already in the ground, that is seen as an advantage. Dom.
- [27:24]
Dominic Chu
All right, Pippa Stevens, thank you very much for that guy. Pippa brought up the upstream folks, the midstream folks. We didn't really talk about the downstream, but it's there. Did you see her out in like Cigar Lake? Cigar Lake in Canadia?
- [27:38]
Guy Adami
She killed it, yes. Number one, good for her. Number two, I'm with her on this. I mean, energy has been a tough slog this year, without question. I think people look at WTI and they basically overlay TI goes down, energy stocks go down. But valuation is going to be compelling. And in 2025, when I think valuation is going to matter, it's going to be an energy. And she mentioned Cheniere lng. That stock on a valuation basis is still very reasonable and it's had a nice little pullback over the last couple of weeks. So maybe LNG is a place.
- [28:07]
Dominic Chu
Is there a favorite spot for you, Dan, in this spectrum?
- [28:09]
AT&T Ad
I don't know jack about oil stocks, but I'll tell you this, that the more I read about the tech stuff that I read about, when you think about generative AI, you think about Bitcoin and you think about quantum computing, there's going to be a massive amount of demand if there isn't already for energy. I know a lot of folks or a lot of these hyperscalers have been cutting these deals with nuclear. So that's going to be the story going forward at least while we continue to see progress on all three of those fronts.
- [28:33]
Steve Grasso
If you look guy brought up and Pippa brought up up Cheniere. Do you know Cheniere was the first company to get the rights to offshore liquefied natural gas? I bought Cheniere at $12 years ago. I sold it at 96. It looks like a sucker sale at this point. But if we're all focused on ExxonMobil and all focused on Chevron, Cheniere could probably be the dark horse in natural gas where they really pump the heck out of it and export a lot of it.
- [29:00]
Dominic Chu
Are there good setups, Carter, in your mind, in this energy trade overall?
- [29:05]
Carter Braxton Worth
Yeah, it's such a curious thing here to a sector that's very concentrated, right? Almost 40% in two stocks, Exxon and Chevron. And yet the whole sector is only 3% of the S and P. So one could say, wait a minute, two stocks are basically 40% of an entire sector, yet the whole sector is only 3%. One could say, why bother? There is a case to be made for those who are benchmarked against the S and P. And that's a game of chess to say leave the whole thing aside or just own the big one. Own Exxon and you get a decent dividend yield which is virtually guaranteed. I would buy the dip in LNG and I would buy this recent aggressive sell off in Exxon.
- [29:44]
Dominic Chu
All right, there's the trade for energy. Coming up on the show, mortgage rates may be in for a bumpy ride in 2025. That, at least according to our next guest, what that might mean to those looking to buy a house anytime soon. And those investing in the housing trade that's coming up after this missed a moment of fast.
- [30:01]
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Catch us anytime on the go Follow the Fast Money podcast. We're back right after this.
- [30:15]
Dominic Chu
Welcome back to FAST money. Stocks climbing in the final full trading day before the Christmas holiday. The Dow up 67 points. It's modest, but the S&P gaining 43 points. The Nasdaq up about one full percentage point there. Apple notching another record close today, inching ever closer to the $4 trillion market cap mark. The stock needs to climb less than $10 to achieve that feat per share. So keep an eye on that. And then Wal Mart sinking more than 2% but finishing off its lows. The retail giant being sued by the Consumer Financial Protection Bureau for allegedly forcing delivery drivers to use poorly managed and costly deposit accounts in order to get paid. And then finally, MicroStrategy shares tumbling and the company's first day is the member of the NASDAQ 100. The company disclosing in a filing Monday that it had sold 1.3 million shares to buy more than 5,200 bitcoins for over $106,000 apiece. That was near the record highs. The stock recouping some losses after hours. After Hours saying it will ask shareholders to approve an increase in its preferred stock authorization from 5 million to more than a billion shares. It will also look to increase the number of Class A shares as well. So MicroStrategy up 2% after hours. Homebuilder stocks plunging this month. Toll Brothers, Lennar, KB Home and Pulte dropping double digits in December as mortgage rates have climbed. The 30 year fixed rate loan ticking back above 7%. Last week's Fed decision helping send rates higher. But Zillow is sticking with its optimistic 2025 housing forecast right now. Orfee Diving is Zillow's senior economist joins us right now with the take and Orfi. This interest rate story is one that's going to be of a particular interest to homebuyers out there. So what is the forecast for rates next year?
- [32:02]
Orfey Diving
Yeah, look, traders tend to, we all tend to overreact a little bit to economic views. Higher productivity means the economy is strong, strong, but it's also slowing. I think slower growth than anticipated in 2025 could actually result in more Fed rate cuts than currently anticipated. Yields and mortgage rates could potentially ease somewhat. And so with lower mortgage rates, easing mortgage rates from where they are right now, we expect home sales to actually increase in 2025.
- [32:32]
Dominic Chu
If home sales are going to increase, where are we going to see most of the activity or fee? Is it going to be in the previously owned homes, existing homes, so to speak? Is it going to be in all the new construction that people are trying to put on the market?
- [32:44]
Orfey Diving
Look, I think new construction will continue to dominate. We saw new home sales increased again in November despite the increase in mortgage rates. The mortgages have been increasing somewhat since, since I think September, October. So new home sales are up 9% from a year ago. We should see existing home sales also rebound somewhat, maybe not as much. Homeowners are starting to come back on the housing market. Inventory is up about 17% from the previous year from last year. And so more options for buyers, a little bit more bargaining power, a slight improvement in affordability could be, could be good for the housing market. It's going to be a healthier housing market in 2025 or fear.
- [33:30]
Dominic Chu
Are there specific geographies that you're keeping track of as to be where will be hot and where will be kind of colder, relatively speaking in the U.S.
- [33:37]
Orfey Diving
Yeah, I think, look, you have markets that have built a lot. So those markets are kind of Austin, Texas, some of the Texas markets, you have the Florida markets where inventory is much higher than it was before, before the pandemic. Think those markets are going with more options. Those markets are going to benefit somewhat in terms of sales, total sales. I think that's probably where we're going to see a little bit of an increase. You also have markets near these big job centers like, you know, these expensive markets like New York and Boston markets surrounding those areas. Slightly less, slightly more affordable. Could also could also see an uptick.
- [34:18]
Steve Grasso
Next year or for when you, when you look at the geographic locations of the housing, how much, how Much focus are you putting on back to work where now companies are not demanding, but asking in a very firm manner for employees to be in five days a week. Do you think that's going to put pressure on homes, on secondary homes that people bought during and after the pandemic?
- [34:44]
Guy Adami
Yeah.
- [34:45]
Orfey Diving
You know, if you look at the data, our data, Zillow surfers, where our Zillow surfers looking? They look, they're definitely looking closer to those job centers.
- [34:54]
Carter Braxton Worth
Right.
- [34:55]
Orfey Diving
We're leaking, we're looking at places like Sunnyvale in California, slightly more affordable than Palo Alto, for example.
- [35:02]
AT&T Ad
Right.
- [35:02]
Orfey Diving
Some of those markets are starting to see a bit of an uptick in the number of people searching in those markets.
- [35:11]
Dominic Chu
All right. Orphea, Devon Key Zillow, thank you very much for the thoughts. Happy holidays, sir.
- [35:16]
Orfey Diving
It's a pleasure. Thanks for having me.
- [35:18]
Dominic Chu
All right, Carter, you've been a seller of the homebuilders. You sticking with that trade?
- [35:23]
Carter Braxton Worth
Yeah, I mean there is an old time technical expression. They don't act well. And what that means is that their absolute and or relative performance is poor. What do we know? We know that it's been a good year as measured by the S&P 500 for equities up 25%. And yet the sub industry group S&P 500 homebuilders are actually up 40 basis points. I mean, can imagine that. So that's the definition of not acting well, they, they also have the precondition of having been huge outperformers over the preceding five, six, eight years. So you have a little bit of a one, two punch. Excessive outperformance and now nascent underperformance. I think it's a bad area to be in 2025.
- [36:09]
Dominic Chu
All right, Carter, still negative on those homebuilders. Coming up on the show, fresh off Berkshire Hathaway's half billion dollar buying binge, the Chartmaster says the Oracle of Omaha stock is due for a leg higher. What he sees in the Technicals coming up next. Plus the future of fintech, why M& A could be about to explode in 2025 and what it means for some of the top performers in that space. We're sitting down with the CEO of moneylion. We got more Fast Money right after this. Welcome back to Fast Money. Shares of Berkshire Hathaway taking a leg lower after Warren Buffett's latest stock splurge. But Carter Braxton Wirtz says the stock is due for a rebound. Let's turn to the Chartmaster now for the technicals on this trade In Berkshire Carter.
- [36:58]
Carter Braxton Worth
Yeah. So this is a slow moving object, if you will, but it's a big object and it has recently sold off about 10%. And I think it's one of two things. There's either weakness to take advantage of or weakness stay away from. Whereas homebuilders, I think it's the latter. You stay away from the weakness. This is weakness to take advantage of. We have four identical charts and let's get right to them. We can take a look together. So here is essentially a one year chart of Berkshire Hathaway B shares with no lines, no drawings, no annotations, no judgments. Let's now move to the second chart. We know that this is the third. Count them. 10% plus minus sell off over the past six, eight months down 9.6, 9.7 and this one down 9.3. Third of four charts. We know that the sell off leaves us down to the penny to a well defined trend line. Now that is the trend line as drawn. We can also automate the process and use a moving average. And you'll see here final chart that again the sell off leaves Berkshire Hathaway B check back to the penny to a rising smoothing mechanism by for a bounce. A very simple premise, a simple trade. Does it have to work? Not at all, but that's my judgment. I think one is right to do it.
- [38:13]
Dominic Chu
Guy, what do you think?
- [38:14]
Guy Adami
His work is amazing. I'll say this, this is not going to be consensus, but if you think there's a sell off coming, it actually makes sense to be long this stock given the fact that he's put away almost $325 billion for I think a rainy day. So if you get the rainy day, it actually might be beneficial for Berkshire Hathaway.
- [38:32]
Dominic Chu
All right, there's the Berkshire trade coming up on the show. The future of FinTech. Moneyline CEO Dee Chalby gives us an inside look at how M and A could shake up the space in 2025 and the names that could find themselves on the auction block right after this. Fast Money is back into. Welcome back to Fast Money. Fintech platform Moneylion coming into the spotlight. Partnering with new show Beast Games on Prime Video, viewers can enter for a chance to win a slice of a $4.2 million giveaway. The show has helped propel Moneyline to the number one free finance app in the iOS app store. This is also coming on the heels of Gen Digital's plans to acquire the company for roughly a billion dollars. The deal is set to close in gen Digital's fiscal 2026. For more on the story, let's bring in on Moneyline, let's bring in CEO De Chaobei. He joins us now here on set. And thank you for being with us on Fast Money. We love having guys who have an insight into these kind of new emerging technologies. So let's take us through the Moneylion story and why this whole deal with Mr. Beast could be a massive game changer, not just for your company, but just for fintech overall.
- [39:46]
De Chaube
Well, first of all, thanks for having me. I started Moneylion in 2013 with a vision to be in the hands of 30, 40 million Americans, helping them make better financial decisions. Moneyline is a consumer finance marketplace, right? So we help consumers pick their best credit card, their best personal loan, their best mortgage. We have first party products like our digital wallet. And if you think about fintech and the evolution over the last 10 years, the reason we exist is because the incumbent financial institutions sometimes make these financial decision making a little bit tougher on the everyday household. So if you think about where we are in our evolution, we wanted to get scale, right? So if you look at Mr. Beast, Jimmy Donaldson, he's got 600 million followers, right? The first episode we partnered with him and Amazon for Beast Games that while people are having fun and playing these games, let's also educate them about financial wellness, about how do you open your first investment account? How do you think about dollar cost average? How do you think about retirement? How do you think about the next best financial product for you? And what we realized was that it was a perfect complement that for millions of Americans who self identify as struggling with finances, putting a financial services, a financial literacy content platform right in front of them while they're getting entertained is probably the best way to drive positive financial outcomes. And we love the scale. So number one, fintech app, 90 million views on the first episode, right? So we met all four objectives from a KPI perspective. And in the meantime, we introduced our brand at a scale that we hadn't done in our 13 years of existence.
- [41:22]
Dominic Chu
That's some crazy visibility.
- [41:23]
AT&T Ad
Well, it's funny, I watched the first episode. It was actually pretty entertaining. I don't mean actually, but it was really interesting. The product integration was really interesting too. But let's talk about this, not bury the lead here. So about a couple weeks ago, your company got bought. Now when I think about what's going on over the last few years, it was kind of like a fintech winter. We saw another deal, I think over the last week or so to talk to us a Little bit about why some of these interests are stirring a little bit. Why now?
- [41:48]
De Chaube
Yeah, if you look back to 2020 and 2021, the pandemic really propelled financial technology. We solved solutions for millions of Americans when the money center banks were a little bit on the sidelines. Right. That's been the story through the G, and that was the story of the pandemic. And that opened up the IPO markets. So a lot of financial technology companies either used a SPAC or they went directly and listed themselves in the NASDAQ on the nyse. We did as well. And then after that, with interest rates going up precipitously, the ZIRP environment ending, a lot of these financial technology companies that really kind of relied on either private capital or newfound public capital to grow all of a sudden had to find religion and profitability very fast. And they were for the most part left for the dead. Right. So, you know, you saw companies getting an 80%, 90% drawdown in their share prices. That happened to us. But what it forced us to do was really use the last three years to get to profitability, get the right operating margin, get the right customer segmentation so you could ultimately bring back to shareholders an incredibly profitable financial profile. So we were growing 20 to 30% at increasing margins. And once that happens, it opens up the aperture, it increases the surface area for a lot of optionality. You could stay public yourself, you could, you could merge, you could partner, you could do different deals, you could scale the business that way. And I think that's really where we are in the inflection point of the fintech evolution, if you will.
- [43:15]
Guy Adami
Well, congratulations. And it's, you know, you and your team have done extraordinary work. And I'll say that this, that winter you talked about probably worked to your benefit because you're able to focus on the business. But now moving forward, the regulatory environment is going to be probably beneficial for you and your business. Speak to that.
- [43:31]
De Chaube
Well, look, when you're an entrepreneur and operator, when you're building these businesses, you don't really try to game the vacillations in the regulatory environment. Right. So we were, I started the business in 2013. Different regime then, a different regime then, now a different regime. But what it does do is the rate of change, the second and third derivative of innovation changes. So right now I think we're in a pretty interesting position where you can actually really evolve American financial services and create step function increases in the distance that we have from our global competitors. The last three years you were always worrying about the regulator saying no to a new feature, a new product, new innovation. Regulation is not going to go away. I think the common sense regulation and everyone in the industry wants that. Right? But you did see a rerating in fintech stocks. You saw a rerating in bank stocks after the elections. Only because the view is that now we were in a pro innovation bet, right? And maybe there's some simplicity is important too, because the United states ultimately is 50 different countries, right? Each state has a say on consumer financial regulation. But if you can streamline that and you have in companies like ours have visibility into how you can build and evolve and innovate products, it's going to ultimately be amazing for the consumer and it's going to be amazing for American financial services broadly.
- [44:51]
Dominic Chu
All right, D. Chaube, Moneyline, thank you very much. Please come back and see us. Great.
- [44:55]
De Chaube
Thanks for having me.
- [44:56]
Dominic Chu
Love to. Happy Holidays.
- [44:57]
De Chaube
Happy holidays.
- [44:57]
Dominic Chu
All right, coming up next, your final trades. Keep it right here. And welcome back. It's the music. Time for final trades. Let's go around the horn. Carter Braxton Worth.
- [45:10]
Carter Braxton Worth
Biotech has been such a laggard this year, so I like it for a catch up trade. That's the spider ETF xbi.
- [45:19]
Dominic Chu
Oh, all right, Steve.
- [45:21]
Steve Grasso
Man of steel, Letter X. Merry Christmas.
- [45:24]
Dominic Chu
Look at that. Dan.
- [45:24]
AT&T Ad
Hey, by the way, Guy, you weren't here last week. No, December 18th was Guy's birthday. Blow him up on the Twitter.
- [45:31]
Dominic Chu
Happy Birthday.
- [45:34]
Steve Grasso
Double.
- [45:36]
AT&T Ad
Xlp. If we get a little funky next month.
- [45:39]
Dominic Chu
I think that's the staples trade and ghee birthday boy belated 75 does feels good.
- [45:45]
Guy Adami
Thanks for being here, Tom. LNG what Pippa said.
- [45:48]
Dominic Chu
All right guys, thanks for watching Fast Money. We are back this Thursday at 5pm Eastern. Mad Money with Jim Cramer starts right now. Happy holidays to everybody.
- [45:59]
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All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of cnbc, NBCU Universal, 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 Gifting is hard, but here's a give the gift of connection from US Cellular. Not sure what that means. Here's a slightly more specific hint. You can choose four free phones and get four lines for $90 a month from US Cellular. Your family wants new phones. How do we know? They told us. The good news is that compared to wrapping presents, you're great at getting hints. So take the hint and get them four free phones and four line. $90 a month US Cellular built for us.