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On this episode of On The Tape Dan Nathan, Guy Adami and Danny Moses are fired up when it comes to the U.S. debt limit (1:00). The guys provide an update on the financial sector and consumer staples (5:30). How will guidance impact the market in 2023 (14:30)? Is the energy sector too “crowded” and where else can investors look to park their money (21:00)? Danny lays out how Tesla is transforming into a cyclical industrial (23:30). The Bank of Japan can’t stop tripping over their own *bleep* (34:00). Is Bond volatility running rampant and bond yields going lower might not actually be bullish (37:00). Danny dishes out his picks for the divisional round of the NFL Playoffs (40:00).
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Show Transcript:
Guy Adami: [00:01:21] In November of 1975, I was about to turn 13 years old, and I think my parents bought me the album, I want to say. One of These Nights was the album, the great band, of course. Eagles. Not the Eagles, by the way. Eagles. And I mention that because, of course, the great Randy Meisner was the vocalist for the song Take It to the Limit Now. He did a great job with those vocals. So good, in fact, that he was reticent to sing it live because he felt it was not doing it justice. I mentioned that Danny Moses, by the way, Dan Nathan, you are listening to the On the Tape podcast. I am Guy Adami, Dan Nathan, Danny Moses joining us. We’re going to talk a little NFL in a while. We have a lot to talk about today, but take it to the limit resonates with me because in terms of the debt ceiling, in terms of all the jockeying in Washington, D.C. and I want to lead with that because I do think and I really hate to say it Dan, it’s different this time. But I do think there’s a faction, there’s a fringe group that are willing to sort of tank things in order to get their point across. And I got to tell you, Danny Moses, this debt ceiling thing has legs, and I don’t think the market is fully pricing things in. [00:02:39][77.7]
Danny Moses: [00:02:39] Yeah, we talked about it last week and not soon after, 12 hours later, Janet Yellen fired a shot. And then now she’s come out again today and said what they’re going to do, which is extraordinary measures in order to avoid piercing the debt ceiling of 31.4 trillion. So they have to keep paying federal workers. They got to pay into Medicare. You got to make Treasury bond payments, obviously. And now, as of today, they actually announced that they’re going to basically stop making the retirement payments temporarily. They’ll make up for in the future for civil servants and postal workers. And let’s not kid ourselves. Kevin McCarthy made a deal with the devil when he became speaker of the House. And if one person dissents. So this is going to be a battle, a long, drawn out process. I think it’ll probably come sooner than people think. The one thing people are trying to get through is tax season. And so the true evaluation, but I don’t think it’s going to make a difference is going to be tax receipts that are collected and then we’re going to be really facing it after April. So we’ll see what happens. It’ll be a lot of jockeying for position, but certainly, again, it adds another element to this already uncertain market. [00:03:37][57.9]
Dan Nathan: [00:03:38] Yeah, and this is just one of those really stupid things when you think about the government. I mean, what are we even railing about? They have the ability to print endless amounts of money. So the idea that there’s some sort of limit on the debt ceiling and that we would grind our government to a halt and potentially cause palpitations across the global economy because to your point, Guy, a bunch of people are pissed off about not being successful in their insurrection a couple of years ago. I mean, to me it just seems a little bit ridiculous here. [00:04:04][26.0]
Guy Adami: [00:04:04] It’s ridiculous and I think we will get to the other side of it. I guess my point and the reason why I thought it would be important to lead with it for this On The Tape podcast, there’s a faction of people, obviously, that don’t want to push us to the limit. And to your point, Danny, I think it lends itself to the gold market and what’s happening here in gold. Seemingly goes up ten, 15, $20 every day. Nobody’s talking about it. Precious metals are in play. And this is the environment that I think gold is going to really start to exhibit the qualities that we’ve been waiting for for such a long time. [00:04:36][31.5]
Danny Moses: [00:04:36] Yeah, I agree. It’s up a hundred bucks roughly for the year, up 5%. It’ll continue to outperform the market, I think. Speaking of singers and eagles and whatever, you remember L.L. Cool J. Guy? [00:04:46][9.8]
Guy Adami: [00:04:47] Sure. Love him. Ladies Love Cool J. That’s the LL. [00:04:50][3.2]
Danny Moses: [00:04:50] There’s a new LL in town. Her name is Laurie Logan. She is the Dallas Fed president. Now, you remember why she’s a Dallas Fed president? Because she replaced Robert Kaplan, who obviously traded very well in 2020 and had to step down. Well, she ran the markets desk at the New York Fed, which does everything the repos when you want to do QE, everything in New York that can happen. She gave a speech or she spoke somewhere yesterday. She’s the most logical person so far. So she’s now a voting member of the fed. So, you know how they rotate. She’s like 25 bps sit and wait. Kind of a balanced approach. Exactly what you would want the press conference to be. Keep an eye on her. I think she’s the head of the Fed at some point. So I just wanted to mention that. [00:05:29][39.1]
Guy Adami: [00:05:30] Well, if she’s reasonable and I haven’t heard of her, I haven’t seen her writings, but if she’s reasonable, that would be a breath of fresh air. I do think you need some people out there that understand that it’s just not textbook. It’s just not academia. You have to look in real life to see what’s going on. And I’m glad you mentioned Kaplan, obviously ex Goldman Sachs, because the Goldman Sachs quarter and then prior to that Goldman Sachs announcement of layoffs, I think it’s all part of the pastiche that we’ve been trying to put out there. Layoffs are coming, margins are contracting, slowing down in the economy. And I will tell you, Dan, and you’ve talked about this Goldman Sachs quarter was miserable in a word. And I think it speaks to a lot of the concerns that you had going in to bank earnings. [00:06:10][41.0]
Dan Nathan: [00:06:11] Danny, you said something last Friday in the pod. You said Goldman doesn’t take these sorts of cuts lightly. And we do know that they cut the bottom 5% of their workers every year. So when I heard the number, I didn’t think it was a big deal. But I did think it was interesting that you mentioned it. If a lot of companies know that there’s just lots of headwinds to their businesses and they know that they grew pretty dramatically over the last few years and they know they’re coming off record years into what was a hard year last year for most of these financial institutions, when you think about just capital markets activities and the like. I do think it was interesting you brought that up and then Goldman put out the quarter that they did. I just say this on the flip side is that if there was a bank that I just saw results from over the last week or so that I really would want to own, if we thought that there was a better second half of 20, 23 and maybe just a massive backlog for 2024, it would be Goldman Sachs, and Guy I think was on Fast Money the other night and you mentioned this conversation that we had with David Solomon. It was May of 2022 and you were quoting their tangible book value. And what did he say? He corrected you. [00:07:13][61.4]
Guy Adami: [00:07:13] He corrected me not to the $10, but almost to the nickel. And the reason why I found that interesting is because it spoke to the focus and the rigor that David Solomon had. And I will tell you, going into that interview, I was definitely inclined not to like them. I walked away liking them quite a lot. [00:07:30][16.8]
Dan Nathan: [00:07:30] Yeah. And so it’s interesting to me though, is that again, book value Guy, I think you said is like 3. [00:07:35][4.4]
Guy Adami: [00:07:35] 303. [00:07:35][0.0]
Dan Nathan: [00:07:37] 303 Or something like that. Stocks at 350 here and this stock were down another let’s say ten, 15% or so. That’s how you want to buy stocks like this, anticipating what the next 6 to 9 12 months look like you don’t want to be chasing. And that’s the one thing, Danny, I just when I think about this price, actually, we talked about a little bit of the FOMO in the first week or two of the year. It just didn’t feel particularly natural. It didn’t feel like a great set up. I think the narrative that this soft landing is the consensus. It kind of made me a little nervous. And when I think about some of these bank stocks last week, JPMorgan, after their results gapped down five or six bucks, it was like three or 4% or something like that. 2 hours later, I think by 11:00 on Friday morning, the stock was up a couple of percent or something like that. Well it spent the whole week giving that back, and so, again, I think a lot of investors really don’t know what they’re playing for right now in January. [00:08:30][53.1]
Danny Moses: [00:08:31] Yeah. So couple of things on the Goldman quarter, David Solomon said, quote, CEOs and boards are telling me they’re cautious, particularly in the near-term. I think one of the things that hit Goldman stock wasn’t that people knew there was already going to be layoffs coming. It’s like what is the near-term outlook? Their business is fine. Obviously, they’re getting out of this Marcus platform business for taking write downs and charge offs. Kind of related to that. The difference in the Morgan Stanley and the Goldman quarter is that Morgan Stanley has a great high net worth thing to offset the rest of the business. Goldman doesn’t have that as much. So that would be that type of difference. But Dan, I’ve been saying for years now, not even on this podcast for seven years, these banks, a lot of them because of Dodd-Frank and some of the restrictions of capital, they’re going to be viewed as utility stocks in a downturn. They have ample capital. They’re going to be fine. And to your point, who are the best traders that are out there? It’s Goldman Sachs in terms of if things get volatile, they can tend to benefit from that. I just think we need to get through this. I’ve said this before, there’s no rush to own these things. Obviously, people need to be invested and you want to look inside that sector, in the bank sector. I mean, you’re getting stuff Dan and we can shift to this. But you look at Discover, look at the multiple and Discover trades at six times earnings. It’s always traded at that type of discount. And so are you going to get hurt owning discovery here with dividend yield with a buyback in place? But you know what it was, Dan? It was a tell on the consumer, the charge offs in 2023, they’re forecasting to go between 3.5 and 3.9%. The street was at 3%. So I look at all these banks, they all are very different. Some were exposed to the consumer, some are more exposed to Wall Street. And I just use them as an indication for how things are. And if I combine David Solomon’s note about CEOs and I look at what the charge off rate and delinquencies are at Discover, I get a pretty good picture from top to bottom of what kind of going out there. [00:10:08][97.6]
Dan Nathan: [00:10:09] So, Danny, is that valuation I’m looking at Capital One here is that valuation of Discover in Capital One mid-single digits pe is that like a hangover from just the financial crisis and just the exposure to subprime? [00:10:20][10.8]
Danny Moses: [00:10:20] Well, there’s two things. So it’s trailing. So there was a lot of reserve releases, remember, up until Midway last year. So people aren’t going to give them credit for those type of reserve releases. They’re now going to ding them for what they believe will be increased reserves, and that comes right out of the kitty. So I think that’s part of it Dan and if I were to look and see what the 2023 earnings estimates where they fall out after this earnings season on those names, they’re very severely exposed, obviously those names. So they’ll always trade at a discount. Certainly going into this type of environment where credit has peaked and has one direction to go. [00:10:49][28.5]
Dan Nathan: [00:10:49] Yeah, it’s interesting. We started this conversation with Goldman’s layoffs that preceded those earnings and, you know, Capital One as just hitting the tape as we sat down to record this, that they’re cutting 1100 jobs and they specifically mentioned tech jobs, which Jamie Dimon, CEO of JPMorgan, is kind of railed against this a little bit in the fintech space. They’ve done some small deals here and there, but he’s talked about how the disadvantage that some of these large incumbents have because the regulation that is surrounding some of these fintech and I’m doing that in quotes, companies that are a bit upstarts here that they don’t have. And so when you think of COF, I mean, they have 55,000 employees, you say 1100. That’s not the end of the world. But the focus on tech jobs. These were high paying jobs that they competed with, with no shortage of technology companies, fintech companies and the like. So that’s a really interesting one to me. [00:11:38][49.1]
Guy Adami: [00:11:38] Yeah, and that’s important in terms of what the Federal Reserve is looking at. And we’ve said it for a while. I don’t think the Fed put is in the S&P. If it is, it’s south of 3000, which is effectively probably 25 or 30% from where we currently are, number one. I don’t think the Fed put is necessarily in the credit markets because credit markets have shown no sign, although we are going to talk about Howard Marks in a second, some of the comments he made to me, the Fed put comes in the form of unemployment and currently at three and a half percent, without question in my mind, they’re targeting 5%. You’re going to break something along the way in terms of banks real quick. And again, this is not JPMorgan specific, but just specifically to the numbers that they gave provision for credit losses for JPMorgan came in at $2.29 billion. The street was slightly lower than 2 billion. Just something to keep an eye on. Obviously, they see what’s going on. If you’re trying to figure out where you buy a JPMorgan, they come out and said the tangible book value was about $73 just north of 73, which at current levels means that the stock is trading about 1.85 times, which is not unreasonable, but probably a tad rich in this environment. I’d like it more around 1.6 times tangible book, which gives you about 120 or so $125 stock, which is a level you’ve mentioned a number of times. So I don’t think things are cataclysmic for the banks because their balance sheets are much better. They’re run much better. I think they are sort of reinforced in this environment. But there will be, in my opinion, a sell off where these stocks can be bought Danny. [00:13:12][93.1]
Danny Moses: [00:13:12] You know, I think one thing is we’ve talked about where can money hide and be safe? Is it in the banks? Is it in the staples? We’re seeing Dan staples underperform now, starting to sell off a little bit here. So I think money needs to find an excuse to have a home somewhere. And I don’t think the banks are giving it to you yet again, because I think we’re going to have a very difficult few quarters here as things kind of normalize. When I say normalized, like in a regular world where things default and the moral hazard and all the stuff comes to fruition. So, yeah, we’ll see. But I’m looking at Procter and Gamble again. They make the number through price increases. At some point, the unit volumes were down. I think their sales volumes were down 6%, but they raised prices ten. So they had like a three or four or 5% growth. But my point is that at some point those price increases have an impact. And they also gave you a look in the consumer because they also said that people are buying smaller bottles and multi-packs like those are the things that you have to start to pay attention to. So I know, Dan, we talked about Staples before. I know you have some thoughts on it. [00:14:08][55.9]
Dan Nathan: [00:14:08] This was Wednesday of this week. And I look up at my FactSet machine and I see the Nasdaq up nearly 6% on the year. I see the S&P up nearly 5% on the year. And then we had that data, retail data. We had retail sales, which were just disgusting. And we saw PPI, the producer price index. Okay. Which again, was not great. But hasn’t everything the Fed’s been doing solving for cooling off the consumer, cooling off some of this economic data and the stock market turn the stock market also turned with some Fed governor speak before they go into their quiet period before their Feb 1 meeting. And I think it was interesting that got hit really hard. Were defensive sectors right To your point about Staples, Proctor is obviously one of the largest components in the XLP. Those things have gotten slammed and now it’s a two day move as we head into the weekend. So I guess my point is, where do you put money? We saw a lot of money rotate out of Mega-cap tech in the fall, move into industrials, move into energy, move into staples, and some of that stuff was getting kind of expensive here. So this is the one where as we head into the bulk of earnings, I’m like, you know what? I don’t really see a great setup as the market just ran for no good reason the first two weeks of the year. [00:15:17][68.7]
Danny Moses: [00:15:17] You don’t think Dave Portnoy’s resurgence with Davey Day Trading Group or whatever the hell he calls it, was literally the biggest sign you’ve ever seen two days ago when he did that. Or I know that our friend Peter Boockvar tracks this AAII very closely. The basically is the sentiment gauge. It literally ripped back up. That is almost an infallible indication within days or even a week at most of when things will be. And so again, I saw the calendar turn, saw the little run up. And I think that run up had a lot to do with Fed expectations drifting towards 25 basis points on their meeting in February from 50 right building its way. Look at the dollar down to back where it was last spring, one or two ish on the DXY right. Things are kind of calmed down a little bit, but this is what my biggest concern is for people that are bullish out there is the handoff from obsession with the Fed to fundamentals. And what I mean, Dan you just mentioned it is over a thousand companies are going to report next week we’re going to get the bulk of the earnings and a real look. And I think when people start to realize that the Fed is kind of done, then what, they’re not cutting anytime soon. They’re not going to, quote, fix earnings for two, three, four quarters. The same way there’s a lag of raising. There’s a lag of stop then eventually cutting Guy. [00:16:20][62.8]
Guy Adami: [00:16:21] That’s the point we’ve been trying to make for quite some time. I mean, we pretty much know at this point what’s going on with the Federal Reserve we talk about him a lot because we all think collectively it’s important. But that baton has now been passed. And the lag effect in terms of what it does to margins and earnings has yet to be felt. And that’s sort of the point we’ve been making. The Fed can be on pause for the next year. That’s not necessarily bullish because we’re going to still see the effects of what they’ve done over the last year or so. Microsoft, I’ve said it. I believe this to be the case. I think Microsoft is one of the five most important companies in the world without question. They report on the 24th after the bell. That’s next week. I mentioned Microsoft because another round of layoffs there. I think that’s important to discuss. They’re at laying off people because things are so robust. At current prices Microsoft trades approximately 21 times next year’s numbers, which is expensive in this environment. And a few quarters ago, when Microsoft reported a terrible quarter and the stock, which closed that day around 258 in the aftermarket, was trading 242 on the back of that quarter, the stock subsequently rallied. I believe that was in June when they said they weren’t seeing effectively demand destruction. I’m paraphrasing the market, broader market rallied from there. Microsoft went from that 242 print almost to 300. Now, here we are flirting with, but not that close to a 52 week low. And one has to wonder if it’s now this is the quarter where Microsoft guides on demand Dan. And I tell you, if you read the tea leaves, if you hear what some of these software companies have said, if you listen to what some of Microsoft customers have said, now Microsoft layoffs, it leads one to believe this is the next shoe to drop specifically from Microsoft, but then what it means to their entire ecosystem. [00:18:08][107.3]
Dan Nathan: [00:18:09] So we just talked about deceleration in demand. We talked about multiple compression. I think this is really important because this is going to be the thing that really could change the investor mindset for 2023. If you think about the pressures on margins and we’ve been talking about this a lot Danny you just mentioned the DXY that’s come in more than 10% over the last few months, that’s great. If you’re a U.S. multinational Guy, you’ve been saying for a year that inflation readings, they’re going to be pesky and persistent. Who cares if they come down from a high single digits number? These are going to be weighing on margins. Our friend John Butters, a senior earnings Insight analyst over there at FactSet. He had his note out this morning and he’s talking about net profit margins. He says if 11.5 percent is the actual net profit for the quarter for S&P, it will mark the sixth straight quarter of net profit margin declines in the lowest net profit margin since Q4 of 2020. Just think about that. So here we are like two and a half, almost three years from that period, we’re in this black hole. But at that time we were throwing trillions of dollars at the economy to maintain margins so companies could keep people employed. And we are in the exact opposite place right now. [00:19:18][68.8]
Danny Moses: [00:19:18] Yeah, the two things that I keep harping on is don’t use how much your stock is down as a reason to buy it because it should have been. And the second is that again, we got out of a 13 year, 12 to 13 year blissful period where money was free, where the Fed had your back, where all these things and now we’re not this is not a one, two, three, four quarter phenomenon. We’re going to kind of readjust to what is, quote, normal. And a lot of people just don’t know what normal feels like. I was listening to this ridiculous Twitter space today with Ross Gerber and Gordon Johnson, who I like versus Ross Gerber. And Ross Gerber made a comment that we’re in. We’ve gone through a severe bear market. I’m like, What the hell? You have no idea what a severe bear market is. And so my point is that Microsoft’s a great company. It will be around, it’s fine, but they’re telling you that things are slowing. You’re seeing things are slowing and it’s all connected. Retail sales were bad, the holiday sales were bad. That’s all connected to all of this. Companies are spending less money to advertise because the retail sales go lower. Then they’re spending less on cloud. It’s all very connected. That’s how our economy is. And so except it know what you own and know that it is coming and maybe it’ll be priced in next week. By the time Microsoft announces, maybe it’ll be down another five or 10%. The world’s not ending, but again, bottom up stuff here, guys, is really what’s going to matter. And yeah, in the middle of all this, one thing you could encounter on Party City file bankruptcy and guy, just speaking of high yield, I know we want to just touch on Howard Marks here real quickly. You know his comments because one thing I failed to mention when this year started, the spread on investment grade paper tightened significantly. There was new money put to work. We rolled the calendar and people took that as a sign that we are through this. We are good. Spreads have contracted, they’ve tightened, we’re all good. And Howard Marks his comments, which I know you saw, he was very logical. He’s like, listen, high yields too rich. It’s up way too much to start the year, take a deep breath and then readjust to reality, which he thinks is not cataclysmic, but he thinks is coming here. [00:21:05][107.0]
Guy Adami: [00:21:06] I agree with them. And you’ve seen that HYG, which, listen, had a miserable first half into the fall of last year, got itself off the mat. So, matter of fact, as we’re sitting here, it probably got a little bit north of 77 or so levels we haven’t seen in quite some time. But it speaks to what Howard Marks says. Take a breath here, people, because I don’t think this whole potential credit problem has been solved. And quickly, in terms of inflation, people say, well, inflation numbers are what they are. You mentioned something interesting and we’ve talked about this around the edges. But if you really want to know what real inflation is in this country, listen to what Procter and Gamble said. Organic growth is code word for inflation, effectively. So the levels that these companies are able to raise prices, that’s the true gauge of inflation, which only mention it because it makes the Federal Reserve’s job that much more difficult. And you couple that Dan with this reopening of China and I’m putting air quotes up because I don’t really know what’s going on there, but crude oil has gotten off the mat a little bit, sort of peaked its head above 80. Some of these energy stocks have really gotten themselves off the mat, the OIH made a new 52 week high earlier this week. So you’re talking about areas where personally I still think have value. I find it in the energy space. Now, this is that old saying that’s what makes markets. I know you’re going to say they’re probably on the verge of rolling over. And we saw some reversals this week that would lead one to believe that. But I got to tell you, Dan, I still think energy’s going to be a place here in 23. [00:22:39][93.0]
Dan Nathan: [00:22:40] You know it’s funny, it just seems crowded to me. Every time I turn on CNBC or anything I see all over the fin twit or whatever. It just seems like that’s the area that most investors want to park their money because they do feel like this tailwind to China reopening and that might pick up a lot of the slack if you have a recession in Europe or a recession here. And I get that. I’m just saying the outperformance that we saw out of the energy sector, I’m hard pressed to think that it’s the place to be, especially if you think that a bunch of these other sectors that you’re going to rely on. We’ve had a lot of also a lot of strategists who’ve said this that don’t pin your hopes on the prior leaders of the prior bull market to be the ones the leadership in the next year. And I just don’t see how it can happen any other way. When you look at these five or six of the biggest names, they’re all trillion plus sort of names. I don’t know how you can have another bull market where the outperformance of late has come from the energy sector, which makes up single digits percent of the S&P 500 or industrials or that sort of thing. So to me, I think it’s crowded. It’s not where I want to put money too. But I think you guys are correct that these are businesses that are operating in much better ways than they have at different cycles. In the past [00:23:49][69.0]
Guy Adami: [00:23:50] You mentioned Russ Gerber and Jim Chanos, which in the battle of the unarmed Ross Gerber, finds himself extraordinarily unarmed. But Russ is a big fan of Tesla. We’re now 36 minutes into this, Danny, and we’ve yet to utter that word. But it’s worth uttering because, again, once again, interesting happenings here in Tesla. Price cuts. People say that’s bullish. I’m not so sure. But what do I know? The stock has gotten itself off the mat. I think you think this is probably another area where you lay back into a short position. I happen to agree with you, but the price action has been interesting over the last week, week and a half. What are your thoughts? [00:24:28][37.6]
Danny Moses: [00:24:29] Well, first of all, leading into this upcoming football weekend, which we’re going to talk on in a second, is a 1 p.m. telecast tomorrow sponsored by The Wall Street Journal, which will feature Jim Chanos and Ross Gerber. Kind of a bull bear argument to your point. Never bring a knife to a gunfight, whatever. And I just heard Ross talk with Gordon Johnson on the spaces. So I can already tell you how this is going to go on this bull bear. I would tell everybody with position without long short. Just listen to that, because you’re going to hear the smartest short seller of all time who just presents facts, not emotion about it. And you’re going to hear someone who doesn’t believe that stock price matters and you own a company and the stock goes up because it’s great. What’s happening here and we’re going to see more of that. It’s morphing and again into a cyclical industrial automaker, what it should be. This is no longer going to be valued as a tech stock, and that’s painful for people to accept. I looked on FactSet. I think the consensus is gap for a dollar for an earnings for Tesla in $24.2 billion in revenue. You know again we get a pretty good look because we know what deliveries are and so forth. I’m not going to guess where that thing could be. But I do know, though, those price cuts are not bullish in general. They’re just not. That’s right into their margins. It was something they said we have, quote, endless demand. If you have endless demand, you don’t do that. So it’s fine that happens. This is going to happen to all companies. But more than that is Twitter’s first interest payment is due in the next two weeks. It’s several hundred million dollars. They’re auctioning off furniture. I tried to buy like one of those phone booths so I could sound better on these podcasts that are kind of remote out there. I think it went for 1300 bucks, but they’re auctioning furniture off a Twitter. I don’t know if people know that. So let’s see what the quarter is. It’s next Wednesday. I think the recent run, I think it’s been a 20% run here from the lows. I don’t think there’s much more in it. So we’ll see what happens. But on valuation, I’m just not going to get there on the bullish side, ever. [00:26:05][96.9]
Guy Adami: [00:26:06] I understand there’s an element of a tech company around Tesla. I totally get that. I respect that. Tesla is going to do approximately $110 billion of revenues or so in the coming year. It’s a $400 billion market cap company. So I can do that math. That’s a little less than four times revenue, which doesn’t seem to be ridiculous until you compare it to a Ford and GM, which are both trading about 60, 65% of revenues. Now, I’m not suggesting that Tesla should trade at the same multiple. And quite frankly, GM and Ford are probably too cheap. But at some point those two numbers are going to find themselves bridging that gap. And I would suggest it comes in the form of Tesla going from about four times revenue, probably, Dan, closer to two and a half times revenue. And then you can start making a compelling case on the bull side, but we’re certainly not there yet, in my opinion. [00:27:02][56.3]
Dan Nathan: [00:27:03] Yeah and what’s clear is that those price cuts came in China first. They have a huge China problem here. They’ve just kind of laid into that region from a production standpoint. Elon has done everything in his power. He’s offended probably 98% of the world except the Chinese Communist Party when you think about that. So he’s cozied up to them. He needs their demand. And when you think about their market share, what it is in North America of EVs, it’s like over 60%. Is that true Danny? Its probably going down a bit, but in China, it’s less than 10%. So you have all of these local EV makers that are eating their lunch there. And when you think about just this economic cold war that we are, it’s actually a hot war that we are in with China. I just don’t know how they are able to thread the needle the way that Apple and Tim Cook has with that consumer. So I think you’re going to see increasingly nationalistic tendencies by Chinese consumers. And I just don’t think that he’s going to be particularly palatable when you think about that. And the last point, I’m just going to make on this chart, when this stock was $200, I think we were all in agreement. This was a textbook head and shoulders top. And so that was down from $400 just about six or seven months earlier. And what happened? It went from 200 to 100 in a straight line in a matter of months. And I’m just going to tell you this. And Danny, you said this. It had this really nice bounce. It got to one or two, got to 137 like two weeks later. It was pretty nasty there. I’m short. I feel it. But I’m telling you, when it breaks 100 on fundamentals and you’ve been saying this and you say this all the time, it’s going be a better short the lower it goes. When it breaks 100, it could actually get cut in half again. Now, that’s just math. We talk about that all the time. But just from a technical standpoint, when you lose this cadre of guys like Gerber and Black and there’s a couple of these other guys are nonstop all day long on the Twitter about this thing, that’s when this thing just has no support anymore. And the only incremental buyer is a short. [00:28:56][113.1]
Danny Moses: [00:28:57] Let’s say Musk was a stand up guy. He was a corporate governance, incredible person, ran a tight ship, said and did all the right things. And you had the numbers that you see what we have now to Guys point. The stock’s expensive. Show me that company XYZ without knowing anything about who runs it and all that stuff and all the bullshit that’s gone on and all the lies and stuff separated that I won’t even go to the NTSB, the NHTSA, all this stuff, separate autopilot, all on the numbers themselves. You can’t get there. So that’s it. That’s how I’m looking at it, is what it is. It will have its day. [00:29:28][30.5]
Dan Nathan: [00:29:28] Yeah and just one last thing I’ll just say on musk here is that I think he is singlehandedly destroying Twitter. And you look all over the place, people are talking about engagement. It’s just down dramatically. That’s just purely anecdotal. Look at your own usage of the platform. If you talk to advertisers, they’re leaving in absolute droves. And so, Danny, you mentioned that they have this interest payment coming up. Supposedly, The Information was reporting that sales for Q4 were down 35 to 40%. When you think about that and how hard it’s going to be to kind of rebuild some of those relationships, convincing advertisers that this is a platform where you want your product to be shown to users. And so to me, Twitter remains a huge problem because if you can’t make those interest payments because the business is falling apart with all these kind of own goals, then he’s going to have to sell more Tesla stock or the banks that he’s pledged the shares to are going to sell it for him. [00:30:28][59.1]
Danny Moses: [00:30:28] So, Dan, to your point, it’s not worth more than the debt. It’s not worth more than 13 billion. Maybe it’s 15. Right. So to your point, the equity is probably worthless. I’ll go back. Let’s close the loop on this. I believe he’s going to try to use Tesla stock to buy Twitter. Watch what he does. Something’s going to happen here funky. When he’s backed into a corner, he pulls out all the stops. So let’s just see. We can move on. And you know what the beauty is? Next Thursday, we’re on air. We will have seen this wonderful quarter that’s going to be reported next Wednesday. [00:30:53][25.0]
Dan Nathan: [00:30:54] I want to make one point here. We’ve gotten a lot of email and we’ve gotten a lot of tweets from a lot of listeners. And then they’re like, enough with the Tesla. Okay. But again, I think the three of us and Danny, you’re leading the charge here. We’ve kind of mapped out exactly what’s happened. And I remember saying this on air on CNBC’s Fast Money, the day the headlines were coming out in April, that he was going to buy it. And I said, The thing here is that Tesla shareholders are on the hook for this Twitter thing, and that’s been 100% the fact. Now, you might say to us, Danny, that this stock was going lower for fundamental reasons, for competitive reasons, because the interest rate environment, there’s ten other reasons why. Okay. But let me just tell you that a good part of this this melting ice cube right now, at least in the stock market, has to do with the fact that he bought this thing. He had to lever up to do it. The equity like, to your point, is worth nothing. And the other thing is he’s spending all day tweeting nonsense and inciting culture wars. And that’s just not something that Tesla I think shareholders who didn’t have to think about this stuff before or Tesla owners or prospective owners had to think about. They had to make certain judgments about the person who runs the company and his political views and the way he sees the world. [00:32:04][70.5]
Guy Adami: [00:32:05] It’s interesting. A lot of people say, well, it doesn’t affect me because I don’t own Tesla. I will tell you, when Tesla was inserted in the S&P 500, there’s a very good chance that if you’re listening to this, whether you realize it or not, you own Tesla. And the reason why we go down the Tesla rabbit hole week after week is personally I think it’s a huge tell in terms of market sentiment and what’s going on out there. And it’s just something we need to talk about because I do think it’s important. If you watch Fast Money, if you listen On The Tape, if you listen to MRKT Call any of those things, I think it’s pretty abundantly clear that I am no fan of central bankers. And I will tell you, Danny Moses, the Bank of Japan talk about tripping over their BLEEP. Well, that’s exactly what’s going on. And you say what you want about Japan six or so months ago. My calendar’s probably off by a month. They intervened in their currency for the first time in a very long time when the yen just was disintegrating against the dollar. Then they came in and effectively did the same thing vis a vis their bond market. Yield curve controls. I’m 59 years old. There was a commercial when I was a kid. It’s not nice to fool with Mother Nature. And the fact that these geniuses somehow, Danny, think that they can control things that are completely out of their control. I happen to think that what’s going on in Japan is the exact reason why gold is rallying the way it is. At least it’s one component of it. And if you’re not paying attention to what’s going on with Japan, with JGBs, with their currency, then you’re just not paying attention. [00:35:41][216.0]
Danny Moses: [00:35:42] There are definitely signs of desperation throwing everything they can. I think the Japanese ten year is now back down below 40 basis points again. It’s a mess over there. They have a ton of debt. The fear is that someday the U.S. becomes Japan, God forbid, from an economic perspective. The one thing that the global economy, the global trading world could always count on was kind of this yen carry trade. And that is now, I think, being thrown out completely because of the volatility that’s come in and because everyone all of a sudden cares about the fundamentals of a first countries balance sheet. We saw it in the BOE. We’ve seen it in Japan. We are going to see it here. Whether the debt ceiling issue brings it to the forefront, for whatever reason, people can actually stop ignoring the fact we can’t print our way out of everything all the time. So again, signs of central banks having issues with market functions and the volatility is insane in the Japanese its insane. Look at the U.S. ten year. We’re now at 340. It’s just bananas. So again, global rates, global policies, all of these things are being brought into question at a time where there’s earnings degradation, at a time where people are having trouble valuing companies. It’s just not a great setup. That’s it [00:36:46][64.3]
Guy Adami: [00:36:46] I agree with you. Again, central bankers run amuck, without question. And it thank you for mentioning bond volatility because you were clearly early on that I know collectively we said bond volatility is something you have to look at. Equity volatility is never going to get to the levels I think we saw. But this week, Danny, to your point, we saw U.S. ten year yields move 16, one six basis points in effectively three or four hour period. So that bond volatility, which went away for a period of time, is back in spades. And I’ll say this again, maybe my math is a little off or the levels of my math is off. I’m still convinced we’re going to a 1% inversion and choose versus tens. I thought it would manifest itself in sort of three and a half percent in the ten year, four and a half percent or thereabouts in the two year. It doesn’t look like that’s going to play out, but it’s getting there somehow. And maybe it’s four and a quarter. Three and a quarter or God forbid, maybe it’s 3% in the ten year and 4% in a two year. And I say, God forbid, because Dan if ten year yields are going to 3% in this country, something broke. It’s not bullish. And I’m here to tell you, a lot of people say lower yields is bullish, not under that scenario. [00:37:59][72.6]
Dan Nathan: [00:38:00] Yeah, I mean, I guess the other thing is we spent a lot of time talking about before we thought that the Fed was going to be as aggressive as they were in battling inflation. I mean, the idea that we were going to have a rate that goes meaningfully above 3%, though, think about where they got in in 2018 and Q4 when Fed Chair Powell was on autopilot, raising, what, a quarter point every other meeting, we got to three and a quarter percent. And that was like when you talk about things breaking, I mean, the stock market freaked out a little bit. It went down 20% in a straight line in a couple of months. So we’re probably going to find ourselves with a ten year going forward at probably a higher level than we would have expected. But it’s not going to be above 4% and it’s probably not going to be below two and a half percent. But then if you have some sort of event that comes up and again, this is what Yellen is no longer the Fed chair here. But if there was some sort of issue that came up with the debt limit, what are they going to do? They’re going to start jawboning easier and then yields will go lower. And then ultimately, if they have to do something, they will cut rates. And I know, Danny, you think that ultimately because the economy is going to slow so dramatically because of the pace in which they tighten monetary policy, they’re ultimately going to have to cut. And so, again, what sort of event would take it where Fed funds no one ever thought Fed funds was going to go to that zero bound. It took a black swan event. I don’t know if any of those are lurking out there, but there’s certainly plenty of events on my bingo card for 2023 or 2024 where I could see them starting to cut aggressively just to ease monetary policy, to absorb whatever shocks they see from some sort of event. Maybe it’s debt ceiling, maybe it’s some geopolitical event with China. Who knows? [00:39:37][97.1]
Danny Moses: [00:39:37] I’ll say it again before we go into the real quarterbacks. Remember the name Laurie Logan. Just keep it in your mind because she’s going to be the reasonable person at the Fed that I think understands everything. [00:39:48][11.0]
Guy Adami: [00:39:49] So I’m predisposed to like Laurie Logan, is what you’re saying? [00:39:52][3.5]
Danny Moses: [00:39:53] Yes. L.L. Cool J. The new one. [00:39:54][1.3]
Guy Adami: [00:39:54] I’m not only a participant in this podcast, but I’m a listener as well. So I actually made myself a little note. I’m looking forward to it. And just to end this, and I promise then we’re going to get into the divisional round of the NFL if in fact they cut rates sometime this year, you know what’s going to happen, I guarantee that’s going to be the Katy bar, the door for the gold market in the commodity market, because they will be lowering in to still an inflationary environment and it will give carte blanche to every commodity trader out there. And oh, by the way, don’t discount the fact that central banks have been positioning themselves for exactly that by buying gold in record amounts. [00:40:35][40.9]
Danny Moses: [00:40:36] Not if. [00:40:36][0.3]
Guy Adami: [00:40:37] Not if. Thank you. There are eight teams left standing in the National Football League. Of course, one of those teams resides in the area. My favorite football team, a team that nobody thought would get to this point. There are few people that maybe held out some hope. I was not one of them. I was thrilled with the regular season. Danny and I have gone back and forth on this, and I believe you’re starting to come around to the fact that Daniel Jones now, I believe a fourth year quarterback out of Duke University, is exhibiting qualities that I don’t think you thought he had, qualities that might make him one of the top I’m going to say this six or seven quarterbacks in the league where they play for pay. Thoughts on that before we get into our games. [00:41:20][43.2]
Danny Moses: [00:41:21] You had me at the top six or seven, but that’s fine. Listen, I’ve always said he’s a gamer. He just never managed the game well. He makes the plays. He’s a hustler. He’s all that. He’s got a good coach and they had a good game plan. And Minnesota stinks. I thought they were overrated. But I did take 500 Dan last week on the G-men. Get in my picks here Guy because I got absolutely screwed on the Chargers and the Jags 27 [00:41:43][22.4]
Guy Adami: [00:41:44] Don’t be one of those people. The bad beats are what they are. You could I’m sure you might have been able to hedge at some point. [00:41:50][5.7]
Danny Moses: [00:41:50] I could have, 16 to 1. [00:41:51][1.0]
Guy Adami: [00:41:51] By the way, the Chargers, they’re a team that I’ve tried to get behind for years now, and I don’t know how they let that coach out of the building without kicking his ass to the curb and getting Sean Payton or somebody else in the building because they have all the talent in the world. They just continue to screw the pooch, I believe, on the coaching side of the equation. Okay, but Justin Herbert stunned the Chargers, eight teams remaining four games this weekend. How many games are you going to tell us about Danny Moses? [00:42:17][26.2]
Danny Moses: [00:42:18] I’m going to take two. I’ve been on Dallas most of the year. Tampa Bay’s terrible. I knew that I would short them this year, but give me Dallas in four in San Francisco. Brock Purdy got tested a little bit in that game against Seattle. Seattle is not a good team. He was shaky. If he does that against the Dallas defense, he’s in for a long game. That’s a different team he’s going to face. And Dallas has got the monkey off their back. They’re playing with the house money now that they won a road playoff game. Dak Prescott is going to play with confidence. I like Dallas here potentially to win this game outright. The other issue game is obviously the Giants. They played the Eagles twice this year. The last game you played a couple of weeks ago, the Giants had their starters. That’s not real. The other game, the Giants got killed by the Eagles. And I think Eagles are obviously a great football team here. But seven and a half points is a lot of points with a team that’s again playing with house money. So I like the Giants +7.5 and Dallas +4. The Bills lind interesting against the Bengals it opened at four it’s now five and a half for the bills like the bills to win a Super Bowl I’m not touching that and the Chiefs who played the Jaguars in November and beat them 27 to 17. I think it’s somewhat similar again and that’s eight and a half, but that’s too many points. So Giants Dallas. [00:43:19][60.7]
Guy Adami: [00:43:19] I don’t know how many syllables in Jaguars but I like what you did there. It’s like the car Jaguar bill the way I used to drive one back in the day I’ll say this. Dan Quinn, the defensive coordinator of the Dallas Cowboys, is acquitted himself extraordinarily well this year. He’s got some horses on that defense. He will be an NFL head coach probably next year. And this is the game that I think he’s going to exhibit his talents and put an ass kicking on the 49ers who are a strong team. But I do think the Cowboys can win this game outright. I’m with you. I’m not going to talk about the Giant game because there’s the thing that don’t touch the money. I won’t. I’ll say this though. I’m really a little bit worried about the Bills, which is a team I loved as well. They’re showing some cracks in the armor there. I don’t know if they have the weapons necessary to beat a Bengal team that has been, I think, playing the best football in the league over the last eight weeks or so. So that games got me a little bit sideways. I think the Bengals can win that outright. I know you love the Chiefs. Nobody’s given the Jaguars a puncher’s chance. I do think maybe they got that one shitty half out of their system and maybe they’ll play the Chiefs well regardless, I am looking forward to playoff football in a divisional round in late January for my New York football Giants for the first time in six years. And if any Jet fans are listening out there. You suck. Dan [00:44:37][78.3]
Dan Nathan: [00:44:37] I think that’s that’s about it, you dropped the mic, buddy, that was fun. And listen, you know what, Danny? We’re hoping that you can pull out of 500 season in the NFL, and then we promise you guys for 2023 in the fall, we’re done with the NFL. [00:44:53][15.8]
Guy Adami: [00:44:54] I don’t know about that. I mean, there’s always. [00:44:56][1.6]
Danny Moses: [00:44:56] Maybe I’m done talking about it [00:44:56][0.5]
Dan Nathan: [00:45:00] All right. We covered a lot of ground here, fellas. [00:45:01][1.2]
Guy Adami: [00:45:01] Covered a lot of ground. Thanks for listening, as always. Next week, we’re back with a guest. We just thought it was a good week for us just to sort of riff on our own, because sometimes that’s what we’re here to do. Today happened to be a very rainy Thursday in the New York metropolitan area. The sun will come out tomorrow. Unfortunately, tomorrow is not tomorrow. Like what I did there. [00:45:21][20.0]
Danny Moses: [00:45:22] By the way, special birthday shout out to Vincent Daniel. [00:45:24][2.2]
Guy Adami: [00:45:25] Vinny. What is he, like, 60? [00:45:28][2.5]
Danny Moses: [00:45:30] Vinnies young and strong. Queens, baby. All right, boys. [00:45:33][3.1]
Dan Nathan: [00:45:33] Thanks, Danny. All right. See you guys. [00:45:33][0.0]
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