Fast Money 10/4/23

0:01Live from the NASDAQ, Marcus, I did in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Chaos in Congress with Kevin McCarthy out of speaker. Who will get the gavel next? How long will it take and what impact will all this have on the budget? The deficit and potential credit downgrades. We're live in D.C. with the latest. Plus crude crumble from an oil spike to an oil spill in just one week. WTI now down nearly 10 percent in just the last five days. What does it all mean? We'll debate it. and later a special edition of Traded or Faded. We'll show the traders this one-year chart and ask them, based only on what they see, whether this stuff is a buy or should get kicked to the curb.

0:41The show hasn't started yet. It's getting away from you. We're excited. We're not supposed to talk yet. We're excited. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, who's already made his appearance. Chatty, chatty, Tim. Steve Grasso, Kai Dami, and Julie Beal. And we start off with the potential fallout from the turmoil in Washington. The House currently without a permanent speaker after ousting Kevin McCarthy last night. So who's throwing their hat in the ring? When will there be a vote? What will new leadership mean for Congress's fiscal agenda?

1:11Let's get to CNBC's Emily Wilkins for the very latest on this. Emily. Hey, Melissa. Well, the race for House Speaker is underway. Steve Scalise and Jim Jordan both officially announced today that they will seek the gavel. Other members are looking at a potential run, including Congressman Kevin Hearn. And the House, here's the schedule. They're going to be meeting Republicans on Tuesday. So they're not going to be having a speaker until then. On Tuesday, they're hoping to have a candidate form. They really want to coalesce around one candidate. And then we could see the vote for the next speaker start as early as Wednesday.

1:45Now, whoever wins is going to need to hit the ground running. The new speaker will have only a little more than a month to actually figure out a way to fund the government before a shutdown. And that could also mean grappling with funding for Ukraine. Jim Jordan told reporters today that that probably is not going to be a top priority for him. What I understand is at some point we're going to have to deal with this appropriation process in the right way. We're going to try to do that in the next, whatever, 41 days. The most pressing issue on Americans' minds is not Ukraine. Republicans are also discussing making changes to the House rules to prevent the next speaker from being ousted as easily as McCarthy was.

2:25That movement is getting backing from the Senate's top Republican, Mitch McConnell. I hope whoever the next speaker is gets rid of the motion to vacate. I think it makes the speaker's job impossible. And the American people expect us to have a functioning government. It remains to be seen if Republicans can actually coalesce around a candidate quickly or if we're going to have another 15 rounds of voting for speaker. Melissa. Emily, thank you. Emily Wilkins in Washington for the very latest on this. The market did rebound today despite the uncertainty in D.C. The Nasdaq leading the gains up more than a percent while the S &P was up eight tenths of a percent.

3:08The Dow was up 127 but still in the red for the year. But could that turmoil in Washington put another strain on stocks? And anybody who watches Fast Money knows we are not a political show. We don't usually start the show off with what is going on in Washington. But to the extent that the eight Republicans who ousted effectively McCarthy yesterday, they cited mostly fiscal responsibility as the reason why, to the extent that Moody's underscored, as well as Fitch's downgrade back in August, underscored dysfunction in the government as reasons why they're putting the credit rating either on watch or downgraded.

3:39That is why we start off with this tonight. Guy. Yeah. And that's why yields were. Well, one of the many reasons yields have been going higher. And you're right. And this is not going to be political. But what's interesting, then we mentioned Ukraine. And so people are going to say you just always bearish using your dogma. But I'll say this. If I'm in Ukraine right now, I'm worried in terms of the next speaker, potentially one of the I don't know, one of the things they have to adhere to is we are not going to fund Ukraine anymore. But then you have to ask yourself, what is this? China sits back and looks at, say, this might give us sort of an open door, potentially to sort of escalate things with Taiwan.

4:15So I don't think this is particularly bullish for the markets, in my opinion, through that lens specifically. I think you could make the case that there is a bullish angle to it if you have someone who's more fiscally responsible. And if that group comes in and they don't want spending, because now everyone's talking about spending. Sure. And if that group pulls the reins in, that could be seen as a bullish tailwind. Right. In the long run. Definitely. Well, look, the agenda that includes not funding Ukraine is fiscally positive for our balance sheet. Let's be clear. And Moody's has used the term governance to describe either dysfunction or.

4:54And I've said this before, I've invested in emerging markets. I've spent a lot of time looking at governance issues and sovereign ratings in places where they're always in question, whether it's Brazil or whether it's Turkey, with all due respect, you know, the fact that it's an issue and it's an issue in the bond market and it is an issue in the bond market. And I think it's playing somewhere into not front and center. It's not like we're still the flight to quality. Let's be clear. But when you think about the term premium that people are at least starting to price into the yield curve, so needing more to move further out the curve.

5:25Maybe that's why the 10 yield is going higher. There's a lot of reasons, including Washington and including the fact that there are central banks around the world that often are using treasuries as an instrument that may not be as active for different reasons on their own. So we can't point to Moody's and the ratings agencies as as an opportunity to say this is why we're going higher. It's another ingredient in the stew. And I know you want to get to Julie, but the the other thing is, is that it's not going to be 15 rounds of voting again. It can't be. They're going to make sure that it doesn't happen.

5:55So they'll coalesce around Escalise. He's probably the one that's going to do it. There's a couple of other spots there. There's a speaker. There's the majority leader. There's the whip. There's enough room to go around. OK, well, Julie, how do you how do you factor all this going on in D.C. into your market view? You know, I mean, I think the level of chaos that we're seeing is worse than what I experienced with my high school roommate. I mean, it's just really, really messy. And I think what we need to keep in mind is, you know, We agree that the U.S. is the reserve currency, and it's pretty hard to peg how much that has benefited our economy, that we get to borrow at such cheap rates for our expansionary policy that we've had for the last couple of decades.

6:34So if that starts to deteriorate, that has pretty meaningful consequences, considering the level of deficits that we're looking at. So I worry kind of about the long-term implications of this much squabbling. It doesn't make us look good. Yeah, and it's interesting to mention the dollar in the context of the dollar's run of late. and just the currency differentials, which is making the dollar stronger and causing it to rally. I know I've been saying weaker dollar, and I've also acknowledged I've been wrong. And the most important thing here is the dollar at some point will have to give ground.

7:06And I look to gold, I look to precious metals, and I think there's a real opportunity here. The same things that people are so scared about that have them driving up yields and doing all these other things to the market, I think have something to do with where the dollar is. It's interesting. Real quick, you know, Jim Jordan said that Ukraine is not top of mind for the United States. I get it 100 percent. But Poland probably wasn't top of mind for Americans in 1939 when Germany invaded. And it wound up being a much bigger situation because we sort of turned a blind's eye back then. History is clearly repeating itself.

7:37And I understand you don't want to be the policeman for the world. Totally get it. But one has to ask themselves, you know, if we were to take ourselves out of this equation, You can't do the counterfactual, I know, but what's going to happen to the rest of the world if that, in fact, happens? That's what I'm concerned about. To Julie's point, what happens if we don't get the debt under control? So we look, it looks clownish. It looks terrible. It's making sausage to the 10th exponent. But if we don't get the debt under control, we look clownish and it looks terrible as well. That has to be addressed.

8:10So it's clownish either way. I think it's kind of either way, but no one has the ability to say, let's get the debt under control because it's the entitlements that are 70 percent of it. Well, let's bring it back to a market show because I think we're getting political because you can make an argument about what's important or not. And politically, everybody's got a different idea. But how about the United States government from a trader's perspective that was effectively borrowing a lot of money at zero rates and now has to pay even more money back at higher rates? And it's only getting worse.

8:37And if you think about the fiscal dynamics of this, it's amazing. And it's amazing where we are and where this isn't going to change. And this adds into, you know, Jim Bianco was here last night. I mean, we were having this conversation with really smart people that understand both the technical, the fiscal, and even call them the qualitative or the governance factors here. But yields gave ground today because the economy looked weaker. We had a couple of data points and amazing. Are we rooting for a slightly weaker economy? You know, that is also absurd. All right. For more on the turmoil in D.C., let's bring in Sal Kapoor.

9:11senior national political reporter at NBC News. Sahil, great to have you with us. What's your understanding of the timeline of when we will have a speaker in place? Hey, Melissa, well, it's not clear yet. What we do know is we expect House Republicans to huddle early next week, likely on Tuesday, to talk amongst themselves in what they're calling a candidate forum for potential new speakers to introduce themselves to the conference and make their case. Then they could get in a room together and vote as early as Wednesday and see if they have a consensus choice. Now, remember, they could do this one of two ways.

9:44They could get a majority of their conference, pick a speaker candidate and move to the floor, and then see what happens. That's what they did with Kevin McCarthy, and he ended up needing 15 ballots to get elected. One thing that former Speaker McCarthy said to Republican lawmakers, according to a source I spoke to in a room when he announced his intention not to run again yesterday, was that they shouldn't do that again on the floor. They should all coalesce behind a candidate and then move to the floor to avoid, you know, to save the country from that spectacle. So who is it going to be? There are some candidates who are already in the mix.

10:16There is Steve Scalise, currently the House Majority Leader. He officially announced his intent to run today, put out a letter to colleagues. He is the natural heir to Kevin McCarthy's speakership. There is Jim Jordan, the first candidate to officially announce. He used to be a far-right agitator who ended up becoming the chair of the Judiciary Committee. It's ubiquitous in conservative media, a favorite, certainly, of many on the right. And then there's Kevin Hearn, the chair of the Republican Study Committee, who, before the Freedom Caucus came along, that was the conservative group. He is actively considering a run.

10:47He has not announced yet. Those are the three key names to watch right now. Everybody else I would consider a dark horse. Far from clear who is going to get the support, guys, because, you know, former Speaker McCarthy spent his nine months in the job dancing on the knife edge of functionality and paralysis. this. Is anybody going to be able to do a better job with this narrow majority when you're dealing with a Democratic Senate and a Democratic White House? Remains to be seen. Yeah, which leads me to the question, Sal, which is, you know, the reason given by many of the eight Republicans who basically voted to oust McCarthy was fiscal responsibility and a desire for more of that.

11:22Do any of these leading candidates have that ability, given the dysfunction within the party? JOHN YANG, President, President of the United States, that's the million-dollar question. Can any of these candidates do what Speaker McCarthy could not do in that job? And remember, the reason that Kevin McCarthy was not able to do more about reducing the deficit and getting discretionary spending cuts that many conservatives, many Republicans want is that Democrats control the Senate. Democrats control the White House. Joe Biden is president. You have to get him to sign a bill in order for it to become law.

11:51And Kevin McCarthy did favor much more in terms of spending cuts than the Senate would accept. So the question becomes, can any of his successors get the Democratic-led Senate to accept more spending cuts than they're willing to now? And I've got to tell you, I've spoken to numerous senators today in both parties, and they say the answer is emphatically no. You're not going to get a more right-leaning candidate in the House of Representatives to be Speaker and force left-leaning senators to accept cuts they won't. And by the way, you guys, I heard you guys talking about entitlements and mandatory spending cuts.

12:24That is off the table. I got to tell you, even Kevin McCarthy, even his right wing hardliner say they don't want to touch Social Security and Medicare. Those programs are very costly, but they're also very, very popular. And there simply isn't the political will. They're talking right now about 30 percent of the budget, discretionary spending, and half of that they don't want to cut because it's Pentagon. So it's really a small sliver of the budget that they're even having a discussion about. I would not expect anything meaningful to happen on the debt or the deficit, no matter who becomes speaker.

12:49Yeah. Sahil, thanks so much for joining us. Great to get your take on things. Sahil Kapoor, joining us from Washington tonight, which leads us back to fiscal spending. It's still going to happen. It's still going to be out of control. And so what does that mean? When does the weak dollar trade actually come in? Or is there too much going on around the world that is effectively bolstering the dollar at this point? Well, I mean, in terms of current account surpluses and whatnot, actually, the euro could go higher. If you look at what's going on in Japan, the Bank of Japan has really also been kind of a circus in terms of their policy.

13:21They have inflation. They've been manipulating their yield curve. They've been manipulating their currency. I think they intervened. No one said that for sure yesterday. So, I mean, there are arguments that there could be other places that give the dollar. I mean, the yen should be appreciating. The reality is it should be. And the euro certainly, look, be careful also about yields backing up. We think yields backing up here's a problem. We haven't even begun to talk about the pigs. We haven't talked about Italy, Greece and Spain and Portugal, which at times were, I would argue 10 years ago was how we got here.

13:50Julie? Yeah, I mean, I kind of agree. The U.S. is really kind of the best house in a really bad neighborhood across the U.S. It is probably the most stable with the most vibrant and dynamic economy. So I think we continue to be reserve currency. I just think that rates stay high in order for investors to be compensated for the higher risk, just honestly. So what did you make of today's market action? It's good, actually. I mean, the fact that yields traded up 10 years got up a little north of 480, reverse, that's good. Maybe they exhausted themselves today. That was a good sign. You know, 10-year yields could go back to 4.5 percent-ish and still be in this up channel from the spring, which would probably be positive for the broader market, number one.

14:30If that were to happen, the dollar would probably fall in the back of it. And we're going to talk about it all next block, but that should be supportive of some of these commodities as well. But I don't know how long that's going to last. I still think the trajectory for yields is higher, although today was a good sign that they might go down for a couple weeks. I think the major issue that we talk about, what no one really focuses on is QT. No one, no one. That's always happening in the background. That has a huge amount to do with the with the rate, at least the chart on rates right now. If I had my wish list, I get the weaker dollar.

15:00I think rates are going to fall off a cliff. I do. And I think that's going to shock the market and the market's going to rally because everything is so pent up. I think the market is oversold. I think rates are 10 years oversold. So I do think that you're going to see that reversion where you see oil come in. That sounds like a short-term reversion. It could be a short-term unless we start to put the damper and the rains on QT. We haven't heard any of that from Chairman Powell. And that's the main reason why you're seeing rates rally like this. What's oversold is the stock market. And it's all relativity.

15:35I mean, in terms of at least over the last six to seven weeks, I mean, where we've put positioning. And I'm just going to point out that today we closed near almost a record relative high of the NASDAQ 100 against the S &P. So in other words, where's leadership come from? It's come from the triple Q's and it's come from the SMH or semiconductors. And if you look at the performance of the market, I know it's not an exciting moment in terms of the overall performance, but Q's are back near that July 18th level when they hit all time relative highs against the S &P. The semiconductors are up 4.6 percent against the S &P over the last nine trading sessions.

16:08So where you wanted leadership during a down market, I think it positions you for the same leadership to take you higher for at least a seasonal run. Coming up, crude crash, oil sliding sharply from recent highs, down more than 10 percent in just the last week. So just how much lower will energy prices go? The commodity convo next, plus souring on Apple, one longtime bull downgrading the tech giant. And even head honcho Tim Cook is offloading shares. The traders are biting into that one when Fast Money returns.

16:45Welcome back to Fast Money. Crude oil falling nearly 5 % to its lowest close since late August. Crude is down more than 9 % in the last week, as inflation and high interest rates stoke demand fears alongside Saudi Arabia, confirming plans to cut production into year-end. We were just talking about this huge snapback. Yeah, this to me today felt like a bit of an unwind of a lot of different things happening, which is fine. And I've been bullish, and it was right until two or three days ago. Now it's reversed. I don't think it's over by any stretch of the imagination. All the things we've talked about for a year, supply-demand imbalances, are absolutely still in place.

17:19And you've seen sell-offs before in crude oil of this magnitude. They're all at critical levels. OIH traded down to support, XLH, all these things that we talk about. But I am not here to give up on the energy trade by any stretch. No, I don't know how you can. I don't know how you get around major structural issues, including U.S. shale having peaked in terms of the growth dynamics. And you can make an argument that's not going to grow. And the 8 % to 9 % yields we had out of U.S. shale, Permian, et cetera, is now more or less flat. I don't know how you're getting a decade of lack of infrastructure investment.

17:53I think Saudi is the only spare capacity out there. I think demand is not going to fall off a cliff. And I think the politics of oil keep it high. I've been negative on the stocks, positive on the actual commodity. And I think the stocks are more or less reacting to backwardation in the oil market, meaning forward contracts are cheaper than present contracts right now. And if you look at every chart in this space, they all just fell off a cliff. I am not bullish on these energy companies. And it remains to be seen whether demand enters the calculus going forward for the commodity. Why is gold just languishing?

18:28Just because of the dollar. Higher yields than the U.S. dollar. And if you look at gold miners, if you look at those plays within the mining space that are gold dependent, there's a couple money managers that often are correlated, and they've been destroyed. And I do think precious metals are going to have their day. And, in fact, if you talk to all the doom and gloom guys, what are they holding in their basement? They've got a lot of gold. Why don't you play a guy's game? If you had known what the news is, where would you say gold would be at this point? Inflation through the roof, rates through the roof, gold should be where?

18:59Mel sounds a lot like Steve these days. A little deep froggy. And it's anywhere but higher. I mean, we're multi-month lows here. But again, dollar higher, rates higher, not good. But as Japan continues to sort of do this slow motion implosion, I mean, gold. Last year, central banks bought a record amount of gold. I think it was 72 tons or something. No,$70 billion worth of gold, 1 ,221 tons. They're on pace this year to do exactly the same. Just hasn't manifested itself in the price yet. Right. Theoretically, as Stephen mentioned, there's every reason to own gold at this point, though, Julie. I mean, no.

19:34Right. It doesn't have earnings attached to it. So I'm not interested in it. I understand the underlying fundamentals for gold and commodities. But I think it's you know, if there's anything that we've learned from this year is that all the forecasts for all of the commodities were just dead wrong. And, you know, you recognize you really see it in what's happening with the price of oil is you have one player and really one person that is actually determining where things are going. And the level of control that they have is just it's just to me, it makes it really hard to invest here. All right.

20:04There's a lot more fast money to come. Here's what's coming up next. The Big Apple getting sliced. A longtime bull cutting his rating on the tech titan. And even Tim Cook is reducing his stake. What the CEO selling means for the stock. Plus, healthcare home run. There's a fast pitch coming your way. And our next guest is throwing some heat on stocks that could be a Grand Slam investment. The names ahead. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

20:44Welcome back to Fast Money. A longtime Apple bulls at KeyBank downgrading the tech giant to sector weight from overweight today. The analysts saying valuation concerns and a potentially weak hardware upgrade cycle could weigh in the stock. CEO Tim Cook also shaking things up by selling more than half a million shares of Apple stock he received as part of a performance bonus. Those shares were worth more than$88 million and netted him over$40 million after taxes. It was his largest share sale since 2021. The reasons behind the downgrade, basically, valuation is stretched when you take a look at the revenue growth rate that is expected.

21:18It's been down three quarters in a row on a year-over-year basis. These are the things that have been pointed out, Tim, by you, in fact, and many others. Yeah, I just – and the multiple at this point is a problem for me. The discretionary spend trend overall for the consumer. The China news that is probably, I think, been more headline than actual so far. But I, you know, I love Apple as a company. I think what they can do from a capital markets perspective, they can engineer earnings because they can buy back stock. It is hardware as a service. It's just too expensive here. I think it needs to go lower.

21:55Yeah, but it's a mature growth profile, Julie, according to this analyst, for premium valuation stock. Yeah, but I think a lot of what Tim's saying is true. I'm willing to pay a little bit more for a really strong management team and very good capital allocation. And I think they have opportunities in front of them still. You look at this chart, let's take it on a super long-term basis. You have to think about every time you would have wanted to sell if you'd owned it for the last 10 or 20 years, right? And it's really hard in moments to say, I'm just going to sell this on stretched valuation.