2025 IPO Predictions, Tariff Risks 11/26/24

0:02Live from the Nasdaq market date on a day when the Dow and S &P close at fresh all time highs. This is Fast Money. Here's what's on tap tonight. Trump's new tariff threat. The president-elect set to levy massive new tariffs on Mexico, Canada, and China on day one of his new administration. Is this part of his deal-making strategy or a true attack on our biggest trade partners? Plus, obesity bummer Amgen, the Dow's worst performer after disappointing results for its experimental GLP-1 drug. We'll talk to one analyst who still thinks this stock is a buy. And later, a technical take on the move lower in the VIX.

0:34Inside Best Buy is bad day and quarter. and why the recent surge in small caps could help fuel an IPO boom in 2025. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Katie Stockton of Fairleaf Strategies. And we start off with Trump's latest tariff threats. The president-elect warning he will place a 25 percent tariff on all products coming from Mexico and Canada on his first day in office until drugs and illegal immigrants stop moving into the country. He also plans to raise China tariffs an additional 10 percent. Sox were sluggish out of the gate, but rebounded by the end of the day.

1:08The S &P 500 and Dow closing at fresh record highs. But some areas of the market were hit by Trump's threat. The ETFs of Mexico and Canada, for instance, falling today. The Mexico and Canada ETF sinking 1 to 3 percent. The dollar also climbing against the Mexican peso and Canadian dollar. CNBC's Eamon Javers is here to take us inside the details of the story. Is this all just tough talk, Eamon? It is tough talk. And the question is how much substance is behind it. The president-elect's flurry of social media posts Monday night are raising the question of what he's up to here, because the bar he's setting for compliance by foreign countries is almost unattainable to stop all illegal immigration, all fentanyl into the United States.

1:44So what is this really about? Well, Trump took to social media to complain about that human migration and drug trafficking, suggesting that he'll impose tariffs on Mexico, Canada and China until the flow of fentanyl in particular has stopped. In a Truth Social post, Trump wrote that drugs are pouring into the country, mostly through Mexico, and until they stop, he will charge China an additional 10 percent tariff. Now, the Chinese embassy in Washington responded with a statement saying no one will win a trade war or a tariff war. The idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.

2:21So what may be going on here is an attempt by Trump to speed up a renegotiation of the U.S.-Mexico trade agreement that he signed back in 2020. That deals up for renegotiation in 26. But Trump may be calculating here that he can bring all sides to the table earlier using the leverage of these social media posts about the tariffs, Melissa. One question here is his strategy is sort of a seesaw, right? If in theory it works and you put the tariffs in and fentanyl trade declines, then you have to pull the tariffs off in response to that. So what Trump really wants, I think, is both tariffs and an end to the fentanyl trade.

2:59And he set up a seesaw dynamic where he doesn't get both in theory. We'll see whether this is reality when he takes office or whether this is an attempt to bring all those folks to the table. And Eamon, you outlined the response from the Chinese embassy, but Mexico's president also responded saying that they will basically open a tit for tat. So Trump levies tariffs and they will also impose tariffs of their own. So it seems like this time around, Trump 2.0, some of these countries are willing to actually stand up to these tariffs. Yeah, that's the problem with the trade war, Melissa, is that the other side gets to fire back.

3:31You know, and this is not just a unilateral decision by the president of the United States. This is a question of whether you want to get into a cycle of these tit-for-tat responses and see how far that takes you. And who wins in that scenario is an interesting question. That's, you know, the Chinese statement says nobody wins in a trade war. The president-elect clearly believes that the United States can win and he will win in a trade war. And that's why he's doing this. Eamon, thank you. Eamon Jivers in Washington for us. Should we be worried? Should we trade off the threat of tariffs, Guy? I think you can trade the bond market off it.

4:07Clearly, the equity market is not worried, but I think the bond market should. Next year, we're going to have$1.5 trillion just in interest to service the debt. Think about that. And then that's on top of all the issuances that have to be done in 2025. Now, this might be the right course of action without question. But again, I think it's inflationary. I don't think the bond market at 4.3 % to 10 years of pricing it in. At 4.5 % two weeks ago, I don't think it was pricing it in. And so for me, the way to play this is through the bond market thinking yields will go higher. You hear about it on the headline pushing back against Trump and against the U.S., who is the biggest economy in the world.

4:41Mexico right now recently overtook China as being the largest source of imports into this country, a little over 15 percent. It was only 12 percent a few years ago. So Mexico has been picking up steam. And the question is, if you're Mexico, do you really want to take the U.S. on? I don't think so. Having said that, you can't look like you're just going to fall down. And I think if you look at certain sectors that were most hit today, the auto sector specifically, it's argued that, you know, some 97 billion. I'm quoting actually Emanuel Rosner at Wolf, who said 97 billion worth of auto parts are shipped to the U.S.

5:12from other countries, but specifically through Mexico and Canada. So there are places that are particularly well, you know, I think hurt more than others. Jim, which had also been riding very high coming into today. I think that partly explains some of that move. But look, I think we've we've speculated now for weeks. We had a day yesterday. This is why this is fascinating stuff and why this is a trading show, because yesterday we had Scott Bessent, new Treasury at least secretary, proposed is someone that says, hey, look, I'm going to do my best. Or at least it was thought he's the moderate voice in the room and the room that's going to be worried about deficits and probably not push as hard on tariffs.

5:49We'll see. I think it's a lot of bluster. I mean, we have four years to kind of see what happened in the first administration. We've heard lots of tweets over the last four years. And you think about it. I mean, he has to kind of try to follow through with some of the promises he made on the campaign trail. I go back to September when he threatened John Deere, a great American company, with 200 percent tariffs for equipment coming in from Mexico. Well, at the end of the day, five percent of their sales come from Mexico. Right. Three quarters of their production happens here in the U.S. So I guess at the end of the day, a lot of U.S.

6:19companies are probably not going to make any big moves as it relates to manufacturing based on these threats. Because I think that if you look at all the nominations, I think a lot of folks, to Tim's point, look at a guy like Besson and they say these folks are going to have some pretty decent influence, not too different than Gary Cohn in the first administration. So I just don't think you're going to see too many big decisions by U.S. manufacturers based on these threats right now. And overall, the markets are acting fairly well, taking all this in stride, Katie. Yeah, I would agree. I mean, we have very positive momentum, of course, behind the major indices, and it shows optimism around the administration.

6:53So we've got to stay with the momentum, really. The relative performance U.S. versus international, especially Mexico, maybe to a lesser degree Canada, is still very positive. And we want to stay on the right side of that trade, at least as long as it's working and it's still working. Yeah, and I guess that's a question here, Guy. You can hear all these headlines that may sound inflationary, bad for the consumer, all of these negative potential impacts on the economy. And yet we have a market that wants to go higher into year end. No question. So do you embrace that? I don't embrace it, but it's not about me.

7:25I mean, the market is embracing it. The money flows are embracing it clearly. And there's an enthusiasm, I think, when people believe it's going to happen in 2025. The math suggests otherwise, if you start looking at things again, valuations are not timing tools, but the market's gotten itself extraordinarily expensive in a short period of time. We talk about Warren Buffett and his$325 billion that he's raised. He's clearly looking at something. His indicator is north of 200 percent at 23 times next year's numbers. The market is historically rich. I mean, there's a lot of things to be concerned about.

7:55And we can say that it's all bluster, and that might be true. But you know what? President-elect Trump hears that as well. So enough people have said that this is just a negotiating tool, that maybe it's not a negotiating tool. Maybe there is a line in the sand. And again, I don't think at 4.3 % in the 10-year we're pricing that in. And I think there are sectors that really benefit from this. I mean, we've talked about some that don't. And it also comes at a time when the market, as we've said, is broadening into a place where the move in the consumer and the retail stuff over the last three or four sessions has been extraordinary.

8:22And I don't know that it necessarily tells you exactly the health of the consumer, but it does tell you a dynamic. And this is on a day when we got Fed minutes that kind of look back at their last meeting. And ultimately, the mindset is that the Fed really doesn't know where neutral is supposed to be. We have liquidity at all-time highs, in my view. In other words, we've been coming out of a tightening period, and seemingly we're still restrictive. Yet, look at where credit spreads are. Look at where the equity markets are. Look where banks are, I think, starting to throw money around. So get back to stocks, and I like it.

8:51I mean, I like the fact that semis have underperformed, and the stock market's going to all-time highs. I think it's very bullish, and I think there actually is going to be funding coming from the MAG-7. It has been coming from the MAG-7 clearly into this broadening, and I think it continues. It seems pretty obvious that the economy is in good shape. I think that's something that a lot of folks kind of believed, you know, for better part of this year. We had GDP prints that were 2.8 percent. I think expectations are now 3 percent. You haven't seen unemployment go up meaningfully over the last, let's call it, I don't know, Guy, you're tracking this, like in the last few months.

9:24I mean, we haven't seen that sort of thing. And so the markets are kind of pricing that in. So I guess the question is, you just mentioned banks, Tim. You know, the banks in particular are pricing in a rip-roaring economy next year. Right. And so at some point, the rubber's got to hit the road a little bit. S &P is up 4 % since the election. I don't think that is some overwhelming sort of vindication of the policies and that sort of thing. And the only thing I'll just say is you're going to have to prioritize all of these threats. There's been a lot of them over the last year. And I don't think that they thought that they're going to have to deal with them all so quickly.

9:55But at the end of the day, the financial ones at least are in the best hands for right now. And I think you're not going to see something come apart. I just don't think we're going to see these tariffs on day one. All right. For more, let's bring in David Wu of David Wu Unbound. He formerly oversaw emerging markets fixed income strategy at Bank of America. David, great to have you with us. Thanks for joining us. Thanks for having me. What's your take about the latest talk about tariffs? And, you know, we have the benefit of having learned what the impact of tariffs could be from the first Trump administration.

10:24So what are your conclusions? I think the most important takeaway from the announcement last night is the fact that China was only hit with a 10 percent tariff versus 25 percent for both Canada and Mexico, which is actually very surprising if you think about this. But then again, if you think about it, it's not that surprising because guess what? The biggest basically tariff, whatever you call it, or monger, Lighthizer, has not yet landed a job in the White House. He should have been the first appointment and yet he has nowhere to be seen. In my view, what this tells me is something obvious, which is very likely Trump has already begun the engagement with the Chinese.

11:02I bet you informal talks are already progressing. Let's think about this. The second most important person in the Trump administration is going to be Elon Musk. Elon Musk has this biggest factory in the world in China. He's building the second biggest factory in the world in China. China is the second largest market for Tesla. So from that point of view, I don't think Elon Musk wants to see a blowout between the U.S. and China. On top of that, given the massive escalation in the Ukraine war, given what Biden is doing to provoke Putin to declare World War III, Trump probably has to now reach out to Xi Jinping, probably who's the only person who's got some leverage over Putin to basically help Trump to bring him across the line.

11:40So I would argue everything being said, I think actually what the announcement yesterday has nothing to do with tariff, has nothing to do with anything. In fact, probably just means that the administration is making a lot more faster progress than you might imagine when it comes to doing a deal with China. So you think there's actually a floor to how bad the relationship with China could get then, which would be sort of counter consensus at this point, because, you know, people on Wall Street are thinking the worst. I mean, if you're talking the big number, 60 percent tariffs, and I know 10 percent is the opening salvo.

12:12But if you're thinking ultimately it's 60, then that could be terrible. Right. So if you're saying that there's a floor because Elon Musk is going to. Exactly. Let's let's remind your viewers some numbers. In 2018, when Trump declared trade war on China, China accounted for 23 percent of total U.S. imports. Today, China only accounts for 13 percent of U.S. imports. In other words, even with 60 percent tariff, you're not going to hurt China that much. You're not going to raise too much revenue and you're not probably not even going to balance the U.S. trade deficit. And I guarantee you what Scott Besson, who is telling Trump, is that, you know what, you can hit China with 60 percent tariff, but long term interest rates are going to go up so much, it's going to make it counterproductive.

12:55You're going to raise less money by hitting China with tariff than you're going to lose by paying out more interest payment, which is now$1.1 trillion. So I think from that point of view, to me, what Trump is after is not the tariff. Trump needs the Chinese to create jobs in the U.S. I think there's a much more obvious deal that they're talking about on the table, which is lifting restriction on foreign investment for the Chinese in the U.S. to allow the likes of BYD to basically come into the U.S., create jobs, build factories and make cars and sell to the Americans, which is what the Americans did for the Japanese 40 years ago, the Koreans 20 years ago and the Germans 10 years ago.

13:33You think Trump really can—I mean, he gives a damn about whether it's the Japanese or the Chinese car, whatever. For Trump, it's only us versus them, and them is the same. So I think as long as the Chinese are willing to build cars in the U.S., I think that will be the win-win. Going back, though, to Elon Musk being the second most important person in the administration, allowing BYD into the country and NIO and all the other Chinese EV makers, for that matter, in, that could really hurt Tesla. So how does that happen in your scenario of Musk being very important? Let's just think about this. Musk has recently said he doesn't want to build a cheap, basically, EV car anymore.

14:12The Model 3 has sort of abandoned the idea because I think he's bracing for this idea of what I'm proposing. In fact, from that point of view, Elon Musk can basically stay competitive at the high end, focus on autonomous driving, which is something the Chinese are not going to be able to actually enter because the whole ban on connectivity. So from that point of view, you know what? You know, BYD is going to probably hurt Toyota, Honda, Hyundai, and so on and so forth. American car manufacturers anyway, not really that big an EV. They basically sell trucks for a living. So from that point of view, let the Chinese take market share from the Japanese, the Koreans, and everybody else.

14:47To me, it's not obvious that Elon Musk is going to be a big loser here. He could actually end up being a big winner. Remember, Elon Musk has already said on a number of occasions, His factory in China is the most productive automobile factory in the world, and he says that they produce the best, highest quality Teslas. That is much more important to Elon Musk in terms of his basically aim to become a global player. David, great to speak with you. Thanks for your time. You're welcome. David Wu. David Wu Unbound. That's a perfect name. Unbound, right? I mean, literally. Love his energy. He's been at Bank of America for decades.

15:23Nice. Yeah, for a long, long time. A lot of interesting, provocative. I don't get the Tesla thing. I mean, this goes back to January. Elon Musk said if their trade barrier is not put up on Chinese EVs, he said this on his conference call, it's going to demolish the EV industry globally. And, you know, when you think about he just said that, you know, like he's going to focus this is Elon on the high end. Model S and Model X are a small percentage of their production right now. They are very focused on this kind of 40 ,000 range car. If BYD comes in here, the average BYD car, I think at a much bigger range, it's like$25 ,000.

15:58You know what I mean? So I think there's no way to spin any of this. We just talked last night about these EV credits. It seems like Trump is on a different page than Elon Musk about a lot of this. So it's going to be very interesting to see how this shakes out. The whole idea, though, that there's going to be some sort of deal and what Trump really wants is the Chinese to come and make jobs for Americans. I mean, that's sort of a very interesting. This is at a time, of course, when China's economy is on its knees. I mean, they have to be a little bit more pragmatic about how they engage with the Trump administration versus the first administration.

16:30That's what I was going to say. I mean, David Wu, who I loved a lot of things he said, because he refers to a pragmatism that's going to take over in this administration. And that's got best and Donald Trump. I mean, that there's a pragmatism to understanding where tariffs don't work. Look, we saw this for the U.S. steel industry and Trump 1.0. It's also very important for U.S. companies that China's economy does better. It doesn't mean we're necessarily going to worry about stimulating China's economy. But at the end of the day, for the markets, if you look at a lot of the consumer discretionary and a lot of the things that have been beaten up on China weakness, there's a huge rally in a lot of those names.

17:01Also, dollar strength, pragmatism, if that takes over, nobody wants a strong dollar. It's great to be pragmatic, but the numbers don't lie. And you don't start with a clean slate when you walk in an office on January 20th, whatever day it is. You walk in with what you've basically inherited. And that is an extraordinary balance sheet in terms of the Fed. and interest rates that I think are going to continue to go higher. He mentioned$1.1 trillion in interest payments. That's this year, accelerating$1.5 trillion next year. I mean, you have to address that at some point. Tariffs don't do that. All right, now to the volatility trade.

17:30The VIX today trading below$14, dropping nearly 40 % just this month. And Katie thinks this chart is up, hanging around key support levels at this point. What are you looking at? Yeah, we definitely have to keep a close eye on it. We believe, and I know Guy agrees, that we've been in this high volatility regime since July, thereabouts per the VIX. And the VIX can be seen as a gauge of market sentiment when it's relatively low, it's considered more complacent, and that is a market risk. So we're right at the support level for the VIX, which has been somewhat range-bound as part of this high volatility cycle.

18:02And we feel that as long as this support level holds, that there still is that risk of a corrective phase, something that maybe we don't sell ahead of, but rather get some sort of dry powder to put to work in January, in February to take advantage of that. So we're really watching this very closely. It's around 14 and a half for the VIX. And if we were to see a breakdown, we would require two weekly closes below that level to confirm a breakdown. Then guess what? It looks like we're probably moving back into a lower volatility cycle, which is more market positive. And the next floor for the VIX is back near 11.

18:39So it's really a critical level for the VIX and really also the broader market, just given the negative correlation. Something resonates. So Katie was here in June, July, and she said that we're about to enter a period of heightened volatility. And it typically lasts nine to 12 months-ish. If I'm putting words in your mouth, I'm sorry. But by August 5th, we saw what happened to the volatility index. And I think a lot of people think that was it. I think that was sort of a precursor, not to suggest we're going back there. But I think there's going to be another round of volatility. These levels are critical.

19:07I think it's going to hold. Coming up, a lot of after hours action to bring you a lot. Here's Adele, CrowdStrike, HP, Autodesk, and Workday all on the move after reporting the details and numbers out of those quarters straight ahead. And Wells Fargo still operating under an asset cap put in place after their fake account scandal. But could the growth restraints be on the way out? The hurdles they still need to clear? What it could mean for the bank's next move. Don't go anywhere. More Fast Money in two.

19:41Welcome back to Fast Money, a pair of tech earnings movers after hours crowd strike lower despite beating top and bottom line estimates. We'll start off with Dell shares tumbling on a mixed report. That conference call is underway. Christina Parts and Elvis has got the details. Hey, Christina. Hi, Melissa. Well, investments in AI did help Dell's infrastructure group, but it just wasn't enough right now to offset any weakness in their more traditional businesses. As the COO saying on the call right now, the PC refresh continues to move out. Quote, we know it's there, but the triggers have been slower to move.

20:10And that delay, along with supply issues with NVIDIA's Blackwell chips, forced Dell management to lower their Q4 revenue guidance to a range between$24 billion and$25 billion. That's lower than estimates. And while you actually saw the stock go from about 5 % negative to about down 10 % in after hours trading, management says they did hit record AI server orders demand in Q3, and their pipeline grew more than 50 percent. But, quote, this business, and this was from the call right now, this business will not be linear, especially as customers navigate an underlying silicone roadmap that is changing.

20:42Regardless, we are winning deals at a price premium to our competition. So definitely a more sober take on AI right now. All right, Christina, thank you. Christina Parts Nevelis, why do we think that NVIDIA gets the pass when it comes to Blackwell delays, but Dell does not get the pass. Because they keep coming out and saying there's insane demand for it. And again, so does NVIDIA. I know, but no, that's what I said. So I don't hear insane demand from their customers for the high end, you know what I mean, the next generation. So there are a couple of things going on here. I think that was the takeaway with NVIDIA's beat and raise last week is that the beat and raises are getting less and less.

21:20And then you keep hearing more about the transition to this higher end. So, you know, I mean, like Dell is a great example of a company that keeps talking about AI demand, but they keep saying the rest of their business is weak, which is not too different what we heard from ASML. So it sounds like the PC business is weak right now, and you're going to have lung-free AI demand. That's what they said. But is that a reason to sell Dell? I mean, I kind of feel like if you're going to let any business be weak, you want that one to be weak. I mean, that's the lower-margin business. That's the old-school business.

21:49The ISG business, so the infrastructure group, is the one that has gotten a lot of excitement around enterprise and, again, multipurpose data servers. And I think that's the story. It comes back to this. I mean, first of all, it's been a roller coaster ride. If you've been playing Dell, Karen's been doing a great job. First of all, you went 90 % up from February to June. You went down 90 % from June to August 5th or that low, and you're up 60%. It trades at about 15 times forward. It's not expensive with a pretty sexy growth business, and it's growing around 10 % a year. So I think you can own it here, even though this isn't the kind of a name that I would like to be chasing.