Fast Money 11/30/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square this is fast money Here's what's on tap tonight. A November to remember from semis to small caps to regional banks and beyond. It's been an off the chart months for the stocks. So does Santa make his deliveries early for investors or are more happy returns coming down the chimney? Plus new drama at Disney. Activist Nelson Peltz once again seeking seats on the board. Will this battle end up being decided by a proxy fight or will Iger give in this time? A live report just minutes away and later new highs for Salesforce in the back of earnings.

0:33a pair of social stocks surging higher, and a record-breaking month for oil producers here in the U.S. I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ, on the desk tonight, Karen Feiderman, Dan Nathan, Guy Adami, and Tim Seymour. We start off with the market surge, the Dow jumping 520 points today, closing near its highs of the day, hitting a 52-week high on its final day of the month. Lower than expected inflation numbers and Salesforce's strong results contributing to these gains. The S &P 500 also higher, the NASDAQ climbing back from a triple point deficit to end the day near the flatline.

1:06Today's rally securing a November to remember for the month. The Nasdaq surging 10 percent. The S &P and Dow climbing more than 8 percent beyond the major averages. Semis up 15 percent. Regional banks soaring 14 percent. Small caps up 9 percent. The 10-year Treasury yield plunging more than 40 basis points to 4.3 percent. So what happens next here as we kick off the final month of the year? And as a lot of Fed officials have signaled that it's likely that the last rate hike is behind this guy. I agree with that. I think it probably is. And if you've been long stocks, congratulations. A lot of people on this desk, I mean, even Dan has talked about Qs and 2s.

1:42Karen and Tim, I have not been bullish, and I'm not bullish now. But I understand sort of what's going on. And the end five minutes of the day, that markup in the month end, is almost comical. But it comes in the face of 18, 19 months now of leading economic indicators deteriorating, a job market that's seemingly wavering here. So the data is getting worse while the market's getting better. And I totally understand. So don't at me. I get that this stock market is not the same as the economy. I understand that intuitively. What I have trouble with is now the gap between the two of them is seemingly growing every day.

2:16But is there really like a dichotomy or something that needs to be reckoned with? Because we're seeing the slowdown. That's exactly what the Fed wanted, but we're not falling off the cliff. And that's exactly what stocks want. It's sticking the landing. So have we stuck the landing? You're going to say no. I always say, you know, a Strug, Kerry Strug kind of landing. Right. Not the most elegant, but nonetheless got the job done. I mean, we won't ever know that we missed a recession until, right, eventually there will be one at some point. People say, well, that's a recession I was calling for.

2:47So, I mean, it does seem a little Goldilocks, which is a little scary, right? You have data that's just a tiny bit cool. You have earnings that are good and the Fed being sort of, you know, out of commission for now. that's a great setup and then you got a lot of chasing into year-end I the last I don't know 20 minutes of the market we're just at just a melt-up of kind of ridiculousness I see our animals up I don't know 10 9 something so that could easily be reversed but I think there's still some momentum going into year-end who knows for next year this this means just kind of chasing I don't think things have fundamentally changed very much yeah here's the good news right if If you are long and you've caught this rally, and by the way, Guy, you're way too nice.

3:32I was not constructive on stocks. Over the last month and a half, I really thought when we were down 10 % in the S &P 500 from those July highs, I thought there was a good opportunity for a washout. I think there was good. Like, to me, I wanted to see it get overdone. I didn't think down 10 % from those highs was really overdone. And it was led by a lot of the names that had gotten us there, the mega cap tech stocks. And I really thought going into Q3 earnings season, we might have a final push lower that would start to discount. Not too different than last October when things got a bit overdone to the downside.

4:02It didn't happen. Caught me way off guard. The one thing I'll just say here, and this is what I'll say, if you are long and you caught this rally, a 13 VIX is kind of giving you the opportunity to stick with the stuff. If you're inclined to basically buy protection, do stock replacement, that sort of thing. And again, who knows what's going to happen over the next week or two. This felt a little unnatural over the last week and a half or so. I'll just say this, though. If you ask, like, what's going to happen next year? I look at the equal weight S &P, it's up 5 % on the year versus an S &P, market cap weight, that's up 18%.

4:33I look at the Russell 2000, I mean, it's up 2.5%. And it's down 10 % from this year's highs. It's down 25 % from its 2021 highs. So there's parts of the stock market that are saying something different about the economy, different than what I think the market cap weighted S &P does. And I know we can do shows and specials and all this sort of stuff on that. But at some point, that will matter, you know what I mean, in 2024, if the promise of AI, if all this stuff doesn't really turn into, you know, profits that justify an S &P trading at 20 times, which is definitely very heavily weighted towards those top 10 stocks in the S &P 500.

5:12But if we've seen the peak in rates, Tim, then why can't the Russell 2000 find some footing here and continue to rally? I mean, a lot of sectors were worried about the impact of the Fed rate hikes. And if we've seen the worst of it in terms of where rates are going to go, then we should have some some fuel for these parts of the market. Well, I'm not sure we've seen the the high in rates, but I do think we've seen the Fed max out in terms of what they're going to do at the short end of the yield curve and Fed funds. And I think if you, you know, as everyone has said here, it was kind of a tale also of two different months in November.

5:51So you had the first half of the month to me was really all about the leadership. It was all about what got us here. It was all about, I think, a dynamic where it was defensive moves higher by, you know, by those leaders. But when you look at the CPI number of November 14th, since that point, you've seen that equal weighted S &P really outperform. And that was a CPI number that I didn't think was going to move the markets. And frankly, I think it's the most important thing that happened during the month. other than a couple of days ago when the Fed's Waller, who's been one of the more hawkish members of the voting Fed, pretty much acknowledged that that not only is.

6:30Well, obviously, difficulty with Tim, I'm sure he's still talking somewhere. But let's let's. Yeah. Well, just one thing I wanted to add, though, I did think the activity today out of the Nasdaq, right out of the Magnificent Seven. Seeing other things starting to catch a bid, right? We see banks have had a bid recently. The IWM, which a month ago was 10 % lower. I mean, not a month ago. Yeah, about three, a month ago, let's say, 10 % lower. So maybe this rotation that I've sort of long been expecting, maybe it's upon us because some of those are getting. Yeah, but the Russell is like, okay, Microsoft or Apple's market cap is greater than the Russell 2000.

7:11You know what I mean? Like, just think about that, right? So there's 2 ,000 stocks in that index of small cap stock. So to me, it's more interesting to me about what investors are saying about small caps and their opportunity to do well in this economic environment. That's my two cents there. So I don't really think that's significant. Then you think, OK, so money is going to move back into the banks. If the money center banks were really hurt when rates went from 4 % in the 10-year to 5 % in a very short period of time, and those stocks were making new 52-week lows, and many of the large money centers were making new lows, obviously, to their SVB lows from March.

7:44So, OK, you get a snapback there. But that's not a leadership that's going to work. Energy hasn't worked for a whole host of reasons over the last couple months or so. So I just don't know where the leadership is really going to come from. It needs to be broad-based. And I think these mega cap techs are going to need to have to participate because going back to the highs in July, it was Microsoft. It was Apple that led us off the highs, down 10 % from those highs. And those stocks, you know, outperformed to the downside versus the major indices. So I don't know. I mean, like, I feel like, and Tim said this, he started the week off and said this, that the leadership that got us to these highs, got us back to these levels, is likely going to be the leadership if we are in another bull market.

8:22They're going to continue to lead us because I don't see all that other stuff making up for what these companies can do. You know what I mean? In the economy, but also in the stock market. Speaking of Tim, Tim's back and can speak for himself. How exciting. Yeah, I don't know where you lost me, but thank you, Dan. And I'll just say this also. The dollar was another big part of the month. The dollar lost 3.5%. So not only does that have implications for multinationals, but it has a lot of implications for risk. So let's break this down then. Yeah. The next month, so into year-end versus 2024, Guy.

8:58I think given what we saw this month, it would make perfect sense to see a little bit of a giveback early in the month of December, which starts tomorrow. That would make logical, would be logical. You might see then at the end of the month, you start to get that markup like we've seen. 24, almost by definition, has to be challenging. I think so much of this rally is predicated on bad news being good news and the fact that it gets the Fed out of the way and actually gets some cutting early next year. And again, it's to be careful what you wish for, because I don't necessarily believe that's going to be a good thing.

9:27And you mentioned small caps briefly. I think they employ north of 65 percent of people in this country employed by small, medium-sized businesses, most economically sensitive. They're starting to feel the pain. If you listen to any of these conference calls, you can hear it. The unemployment rate starts ticking up. It's not going to be great for them. And then subsequently not great for the Russell, which isn't great for the economy, which theoretically should drag down multiples in the S &P. That all makes sense. You can paint a very dark picture, and it seems like a very, it seems like an intelligent picture of how to, you know.

10:01And it's a picture that was painted also a year ago. Yes. Right. 100%. Yeah. Right. And it still hasn't come to fruition. Although the Fed did do quite a bit of lifting during this last year. So that, and still in the face of it, the market did okay. I think that what you're saying makes sense to me. I just don't know that the market is going to care about anything but rates. that the Fed is gone is just a, you know, that's the market. But why? You know, think about this. No, but think about this. In July, August, the 10-year got above 4 % for the first time in a very long time and went straight to 5%.

10:37And now it's back at 4.35%, okay? So, like, literally the economy didn't have a whole heck of a lot of time to deal with the 10-year there. I know mortgage rates, you know, like moved up and this and whatever, but the Fed funds rate hasn't moved since July, okay? You know what I mean? And that felt like a bit of a blow off to me in 10 year yields. And so I think it's more likely that rates stay higher for longer until and if you go back to 2007, if you go back to 2000, when they paused on the rate hiking cycles, they paused and everyone thought the same thing. Everyone thought, well, the Fed's done.

11:09And when they start to lower, if they're able to lower, then that's going to be good for risk assets. But it wasn't because when they had to start lowering to some of the things that Guy is talking about, they had to lower really aggressively. Right. And so I'm not like I don't want to sit here and try to say there's some calamity that we can't see that's coming. But make no mistake about it. What happened in March was a calamity in the banking sector. But the Fed came back to help out. And that really sparked a rally that I think got a lot of folks, a lot of folks offsides about what was actually happening, what was countering QT.

11:40So, you know, I don't know what's lurking out in 2024, but I just know history from rate hiking cycles. And we were just talking to Mike Wilson a little bit ago from Morgan Stanley. And he thinks what a lot of investors get wrong is that the pause in an inflationary environment is very different. OK, when you start when you start lowering and we still have inflation, even though these inflation readings are coming down, they're still up year over year. And especially after the year that we had in 2022. Well, if you were to say, what is the one thing I'm most afraid of, which is we have not addressed this issue of out of control spending in the United States.

12:15Right. By the government. And so we saw that phenomenon of huge expected. Right. Q.R.A. That was just mind boggling. Then the next one, the cadence was better. And so bonds further out the curve did better. It wouldn't be in any way surprising to see that be a real issue coming up next quarter. Because if you think there was an overhang in terms of bond issuance, imagine what is to come. Right. Right. That's my number one fear. Yeah. All right. Well, the stock market rally may be on borrowed time. Our next guest sees a significant rebound ahead in the benchmark 10-year yield. Market forecaster Jim Bianco runs Bianco Research.

12:50Jim, great to have you with us. We were just saying how maybe it's all about rates. And if that's the case, then this is bad news for investors who are bullish, who are long. You're saying 5.5 % is where we're headed on the 10-year. Yeah, I was on with you a month ago, and I said, you know, the 10-year is going to 5.5%. And it's been a terrible month for that call. But I'm still there at 5.5%, say, in the first half of 24. And the reason is I don't think we're going to have a recession. And I think that the inflation rate is bottoming somewhere around 3%. So if you've got 2-ish to 3-ish growth in the economy, which is what it's been for the last five quarters and projected to be in the current quarter, and say 3 % on inflation, that's 6 % nominal growth.

13:34I put a little fudge factor in there, and I got 5.5 % on the 10-year note because the 10-year yield should somewhat approximate where nominal growth is. So that means that the interest rates should probably bottom out here in the next month or so and continue to move higher. What does it mean for stocks? I heard you guys talking about this earlier. I think the biggest problem stocks have now is there is an alternative. There is an alternative in 5.5 % to 5.25 % money market funds. Dr. Jeremy Siegel just finished a new edition of his book, Stocks for the Long Run. And he says over the long run, the stock market should, over many, many years, give you an 8 % return.

14:12Well, if I could get 5, 5.5 or so in a money market fund, I'm getting two-thirds of that with no risk. So the stock market's really got to do something better than average to get people interested. And all we've seen it do so far this year is get people interested in AI. because if you take the AI stocks out of the S &P or the S &P 493, they're collectively up three and a half percent this year or less than cash. And I think it's not because the economy's bad. I think it's because the competition of higher rates is a problem. So if rates move up in the first half of 24, that hurdle is going to be bigger for the stock market.

14:50Is a backdrop to your call on for rates to go to five and a half percent that the Fed is done, Jim, and rates go higher anyway? Yeah, I think the Fed is at least done. I don't think that they're going to be cutting rates. I'll point out that it's been almost 35 years since the Fed has cut rates with core inflation above 3.5%, and we're at 4 % right now. So unless there's a serious deceleration in core, I don't think they're going to cut rates at these levels. And I wouldn't be surprised if there's talk in the first half of 24 of one more rate hike, just one more. But that's just one more. But I'm really more emphatic about the idea that I think that all the rate cut talk is a little bit premature.

15:37The idea behind that is interest rates, you know, the Bill Ackman real rates at two or two and a half percent is going to be punishing for the economy. I don't see that. I think the economy can handle two, two and a half percent real rates. And it did before QE and will now. And that's why I don't think the Fed will see any urgency in having to cut rates despite those seemingly high real rates. Jim, you talk about this. It sounds like this is a rates going higher is a good situation for the economy for all the reasons you just stated, the move to five and a half percent. But does something break on the move to five and a half percent?

16:12I mean, servicing the U.S. debt at five and a half percent. It's a much different environment than where we are now. A lot of things can happen that are bad on that train back to the train north of five percent on its way to five and a half. 100 percent agree. Ben Bernanke in 2019 said economy expansions, which we're in now, or no landing, as we like to call it, don't die of old age. They're murdered. And some murder weapon has to show up, whether it's covid, a spike in gasoline prices or crude oil or a financial crisis or some unknown event comes through and murders it. So yes, there are potential murder weapons out there, and we can't predict those.

16:51But short of a murder weapon, I don't think you're going to see that type of breakage of the economy, at least at this level. You point out about higher interest costs for the U.S. government, and that's true, and that is an issue, that as interest rates go up, the U.S. government has to pay higher interest costs. But on the other side of the equation, businesses are improving their financial position because of this, because more businesses are seeing an increase of interest income over interest expense. Their cash that was earning them zero is earning them five. And as a group, businesses are better off because of higher rates, because of those cash flows from income, than they are being burdened by those expenses.

17:32Now, it differs from company to company, but they're a big offset to the government right now in terms of they're benefiting from higher rates where the government isn't. Jim, always great to get your thoughts. Thank you. Thank you. Jim Bianco. Tim, do you think something breaks if we get to five and a half percent? Sure. And we're starting to see signs of this in private credit. I think there are places in the economy where you do have corporates that are highly levered and don't have the same access to capital and I think have been feeding on, feasting on and have business models that don't work in an interest rate environment at five and a half.

18:06I think Jim's right on a couple of things. And if there's three components of what took rates higher, those three components, at least right now, haven't changed at all. And I think long rates go higher as well. Again, you're talking about inflation that maybe it's obviously come in. We had a nice PCE today, but we're still well above. And services dynamics and the cost of services, Jamie Dimon said this on the deal book panel he was on. It was fascinating to hear that. I mean, you know, the bottom line is certain things I don't think are going to go a lot lower from here anytime soon. The central bank lack of buying of our treasury market continues.

18:43And yes, we have another quarterly refunding announcement. And there's no question when your interest expense has gone from a couple hundred billion, and I know it sounds like a lot, but it's gone to about 600 billion for our government. That's a big deal. And I think that's something that over time, it's why I love gold. It's why some of these long term charts look 15 years ago, we sat on the show. We had a lot of really smart people come on our show and tell you that the Fed was was going to, you know, free money was going to be the end. And the minute they had to pull it back in, it was going to be a disaster.

19:12Well, it didn't happen overnight and it's not going to happen overnight. But there are trends here that I think have changed and are not reversing. And they include long term interest rates. Now let's get to Tesla, the EV maker delivering its first cyber trucks in front of a packed house at the Gigafactory in Texas. This is Elon Musk entering the event, driving a Cybertruck onto the stage to raucous cheers. The 45-minute live stream was filled with Muskian hyperbole. Elon calling the Cybertruck, quote, our best product, saying it is faster than a sports car with more utility than a truck. He also showed it can withstand machine gun fire and high-powered arrow attacks.

19:52Just in case you're in trouble. Tesla shares extending their slide in the after hours. Let's get more on this launch and the pricing from Phil LeBeau. Hey, Phil. Hey, Melissa, this may be the first time that we've ever heard the name Al Capone used to sell a truck when it is introduced. But that's what Elon Musk does, and that's what he did this afternoon. You saw some video when he was driving into the event. They delivered about a dozen Cybertrucks today. These were the first people who are taking ownership of these trucks. The base price, by the way, starts at basically$61 ,000, but those aren't delivered until 2025.

20:30No, I think the ones that were delivered today, I think these were the fully loaded Cyber Beast versions. That's just my guess at this point. We don't know that for sure. The top price on those, just under$100 ,000,$99 ,990. You mentioned the shooting a gun, a machine gun, into the side to show that the stainless steel panels are bulletproof. There it is. They also shot a Glock into the side. And as Elon would say, you know, it kind of has that vibe if it's the end of all times. If it's an apocalyptic time, you want to have the Cybertruck. Maybe that's a good selling point as well. By the way, the towing capacity, 11 ,000 pounds.

21:08The payload capacity, 2 ,500 pounds. In terms of electric pickup trucks, this has widely been expected to be a market that will develop quickly over time. Really hasn't so far. Through the third quarter, Rivian's R1T is the best-selling electric pickup truck, just ahead of the Ford F-150 Lightning. And there you see the GMC Hummer pickup. It got a lot of fanfare when they first started introducing it. Super Bowl ads, LeBron James. It's a niche vehicle. Really hasn't done anything. As you take a look at shares of Tesla, keep in mind that their delivery guidance, Melissa, is for 1.8 million vehicles this year.

21:45They'll deliver a few more Cybertrucks. They're really not going to move the needle in terms of deliveries, certainly not this year and not expected to next year. If they hit full production as they expect to in 2025, it'll be about a quarter million annually. And that's if they hit full production. Melissa? The truck really does feel like it has sort of a Cormac McCarthy, sort of the road apocalyptic nature to it in terms of being bulletproof and the kind of car you want to be in if you have to survive the end. And in terms of the pricing, I think it's interesting that it's between the R1T and the Ford F-150 Lightning.

22:23Does that matter? Are these really considered competitors or is this so niche-y that it just sort of stands on its own? I say this is a complete niche. Look, hats off to Tesla because you want to make a polarizing vehicle. You don't want to make just another ordinary-looking pickup truck. If they did, I'm sure they would sell them, but I'm not sure that it's what Tesla needs or wants at this time. They need the Cybertruck. It starts the conversation, and Tesla is targeting that 20 % of the pickup truck buyers who are lifestyle buyers. They're driving it around in cities or in suburban areas. They're not really using it to move things around.

23:07they're using it to make a statement of a style statement and that's exactly what you get with the cyber truck all right phil thanks phil lebeau i feel like you're chomping at the bit what are you talking about so the biggest trick the devil elon ever pulled was convincing just call people who don't know it's a quote okay all right convincing people convincing people who would Never buy an EV to buy an EV. Think about that. Okay? So if you're buying, if you're a lifestyle buyer of that Cybertruck, you know what I mean? Like, most of those people are not buying EVs. They're not in the market. Are they not?

23:44No, they're in the market. Are they a Tesla fan? They're in the market. Well, they are. They're his fans. But that's the trick that he's pulled. It's genius. I'm saying it's absolutely genius. Okay? So, like, okay. So now let's just look at the numbers. So last year they earned$4.07. They had a 25.5 % gross margin. And this year, they're going to maybe do$3.10 on an 18.5 % gross margin. The auto margins are lower. OK, so next year, all this stuff better really happen, right? Because they better be able to actually raise prices again. They better be able to get efficiencies for some of these new products and the like here and get those margins up again.