Google’s Future In Question… And The Black Market Of Obesity Drugs 10/9/24

0:02Live from the Nasdaq, Marcus Aidan, on a day when the Dow and S &P500 both close at fresh record highs. This is Fast Money. Here's what's on tap tonight. Searching for answers with the DOJ considering breaking up Google. Is the stock now a no-touch and will AI dollars now look to go other places? We'll debate that. Plus, obesity drugs in the black market are in-depth reporting to the growing underworld of counterfeit Ozempic and other GLP-1 weight loss drugs. A must-see CNBC investigation coming up. And later, still grounded at Boeing, where the stalemate on a machinist contract stands, tracking Milton as a monster storm nears impact in Florida, and the road to Tesla's robo-taxi, fast friend Gene Munster in the house ahead of tomorrow's event.

0:43I'm Melissa Leacombe, G-Law from Studio B at the NASDAQ. I'm the desk tonight. Tim Seymour, Karen Feinerman, Bono and Eisen, and Guy Adami. We start off with a proposal that could change the face of the Internet as we know it. The DOJ last night setting out proposals that could lead to a breakup of Google. Shears apparent company alphabet dropping in response. Eamon Javis has got the details on this proposal and the likely next steps. Eamon. Hey there. Look, this is the first look that we've gotten of what the DOJ thinks a post-trial Google should look like. This is just a high-level proposal, remember.

1:14DOJ is expected to offer a more detailed framework by the end of the year, and a federal judge is expected to make his ruling by the summer of 2025. Google lost the case, remember, back in August when a federal judge ruled it had a monopoly in the search market. And in a court filing last night, the Department of Justice said it's considering a breakup of technology giant. Google and is contemplating sweeping changes to the business practices of the company. The DOJ said the measures it would like to impose could include contract requirements and prohibitions, non-discrimination product requirements, data and interoperability requirements, and structural requirements.

1:53It's that last term, structural requirements, that indicates that DOJ is thinking about ways to force Google to sell or spin off chunks of itself. But reading the tea leaves here there are a lot more details in this document around the contracting language the data sharing then there are details around breaking up the company so maybe the DOJ is farther down the road and thinking about some of the less dramatic approaches or just willing to put those in writing in a way it's not with the breakup stuff it's still Google reacted aggressively last night in a blog post bashing what it called the DOJ's radical and sweeping proposals Google said we believe that today's blueprint goes well beyond the legal scope of the court's decision about search distribution contracts.

2:37A spokesman for Google rival DuckDuckGo said this proposal smartly takes aim at breaking Google's illegal hold on the general search market now and ushering a new era of enduring competition moving forward. Now, one idea that's sure to be the focus of a lot of attention in all this is the idea in this document of requiring Google to make publicly available the indexes, the data feeds, and the models used for Google search, as well as Google search results, features, and ads, including the underlying ranking signals. All of that could help other companies get into the business, but there are some questions there around user privacy as well.

3:14Melissa? Well, Eamon, we're talking about search as it stands today, but there's also language in that 32-page blueprint that indicates that this would possibly extend to AI, too, search of the future. Yep. It's very clear that the Department of Justice is thinking a lot about AI. That's one reason they say why they need to do more due diligence here. They want to go back to discovery, get a lot of current internal Google documents in order to understand how this market is playing out real time. Because the last time they got documents from inside Google was like three years ago. Now they want to do that again so they understand where they're going with AI and how to structure this so that Google doesn't have unfair domination of the AI markets.

3:56It's one idea they're kicking around in the document is allowing websites to opt out, even if they're being crawled for Google search, to opt out of having their content be used for Google AI reconstruction. So you can say, yeah, you can find me on Google, but I don't want you summarizing my content for your AI model and taking the fruits of my labor, so to speak, and putting it into your AI machine that the users ultimately will never come to my site to see. Right. Eamon, thank you. Eamon Jabers in Washington for us. This would drastically change Google's business model if this came in. And it's a big if, granted, because it's going to be appeals and take years to litigate in court.

4:33But if this came to fruition or even a part of it, it really would change the model here. It would. But I think the big ifs are really more important than what this could potentially be down the road. If they exhaust all the other whatever venue they have to try to exhaust and all of the other remedies are not chosen. And this ends up being the one and the business is the same as it is now, then. What's that worth today? I don't know. Apparently three bucks or so. I just don't know what to make of it. And I think we're, it's just, you know, the market doesn't like uncertainty, particularly when you have this great business model and it's under some siege.

5:10But I just don't know how to discount it in any way that I would have any faith in. So I'm kind of just letting it be. Yeah. Interestingly, though, typically when we hear about, you know, proposals and things, Markets are able to sort of compartmentalize that and say, you know, that might be years down the line. Google's going to appeal it. They're going to fight this, et cetera. And it doesn't have much of a reaction to the stock. At its lows, it was down more than 2 % on the back of this proposal. But the headline risk here is something that at least if you had thought about this at some point, and I don't know when because this was all expected.

5:44I mean, so there's no surprises here. It was incredibly broad. There's still some detail to follow. But you're right. And so it gets back to if you look at Google really year to date, you know, The stock's meandered. It's not done a whole lot. And is the market doing something that the analyst community hasn't yet done? Because right now, these are medium-term risks. And I just go back to where we've been on Google from the beginning of time. Like, don't you kind of – wouldn't we say if you broke up the company, the sum of the parts is worth a lot more than the company is now? So I know that's not what you want to see, and I know we're talking about AI risks.

6:14But the reality is I'm not so sure if you broke down, you know, search and data and the four areas that they're targeting. I think those are things that actually would add value. Well, can I just say one thing about that? I think what they're trying to do, I agree if they were to spin out YouTube and they had, you know, Waymo and they spun out. But those aren't part of the problem. Right. They're looking to dismantle where the meat of the monopoly is. Right. Jim Cramer, to say, called it a state-sponsored destruction of capital. I'm quoting from Jim. And it's interesting. And I agree with Tim on this one.

6:46And we've talked about it. There was a line in the original Wall Street, the breakup value is higher, and the breakup value is significantly higher. That's the movie. Why are we wrecking that company? Because it's wreckable. By the way, we'll put that on YouTube as well. But, you know, you think about Netflix, I think it's a$315 billion market cap. You can make an argument that YouTube might be more valuable than that, and they're not getting rewarded for it, Google, right now with YouTube in there. So I understand why the stock sold off on the back of this, but if you really think about it, I mean, this is probably a bullish thing.

7:17For shareholders, and by the way, the stock is still too cheap, although it's 190, I think, was a recent high down to 160 now. But you look at a lot of the analysts, I think the lowest price target that I can find is about$1.85, most are north of$200. So just on valuation alone, I think you like the stock. Yeah, I mean, I think, you know, we're looking far into the future in terms, as Karen said, in terms of the breakup. There's an appellate process. That's going to take years. The initial ruling won't even be for another year. And I really think the exclusivity agreements seem to be the low-hanging fruit in terms of we're looking at exploring vehicles that could actually lead to a non-monopolistic framework here.

7:52So, okay, does that really hurt Google or does that really hurt Apple in terms of the payments used? Okay, now we're looking at the UX experience, whereas they're essentially preferencing Google search. Having a layout where you're essentially able to make a choice, I would argue that based on merit, Google still probably prevails because there's such customer stickiness and right now they have the best product. The real concern for me is the AI going forward. You know, for these large language models, you do need all of this data. And essentially, if that's being siphoned away and being stored within Google, well, then that gives the incumbent somewhat of an advantage.

8:25If that then is dispersed more evenly or justly or whatever term you want to use, then I do think there is a real threat to the next generation of AI-related tools. There is. I mean, it is shaking out in terms of you go to that AI summary and you don't click through. and those sites that would normally benefit from the traffic from the click through and therefore their ad rates are solid are being dinged because the click throughs don't go so there's this really interesting sort of period here where we're trying to figure this out and if companies were able to say no you're not going to cite my stuff because we want users we want searchers to actually look for my stuff on my website so i get the click through i mean that this is something that still needs to be sort of sorted at this point.

9:10Yeah. And display of search is one of the big things that they're going after. So I guess we don't know. Setting up going into earnings, let's go there because we've got a new CFO. There's some focus on expense management. There's some dynamic in terms of where I think the company actually may continue to break down that core business. But in terms of the look forward, I mean, I think they're going to deliver on, you know, where guidance is and possibly even improve upon it. And it gets you, if it gets you to nine bucks a share on 25 earnings. This stock's traded 18 times right now. It's pretty cheap.

9:40That's not only a Gemini issue. No. Right. It's across the board. It's across the board. Yeah. Yeah. For all of them. So I don't I mean, this is much more of a horse race than search right now. Right. With how many players and who's got share and at the moment. At the moment. At the moment. Although the Justice Department believes, no, they've got a leg up because they're dominant in traditional search. And so, therefore, they will be dominant in AI search. And yet we debate that on a nightly basis, who is in the front in the terms of the race for AI search. Right. NVIDIA. Right. Yeah. At the moment.

10:14Yeah. All right. Meantime, the 10-year Treasury yield hitting its highest level in 10 weeks on the back of today's auction and Fed minutes. This is Investors Awake to Mars CPI Print. For more, let's bring in Andy Constant. He's a CEO and chief investment officer at Damned Spring Advisors. Andy, great to have you with us. I think the last time we spoke to you was certainly before the last Fed meeting. So a lot has sort of changed in market psychology. What do you make of what we've seen so far? Yeah, since Jackson Hole through the FOMC meeting and even after that, the markets were concerned about the labor market.

10:47The Fed was concerned about the labor market. The Fed was concerned about overall GDP and was quite satisfied that inflation was on its way to returning to target. And all that changed over the last couple of weeks. In particular, it started with, well, obviously, the September payroll data was a big surprise on the upside in terms of how strong the labor market was. But prior to that, the gross domestic income, GDI, which is conceptually the mirror image of GDP, had been significantly weaker than the GDP was, which was a concern that it was leading the GDP down and the conditions were worse. That got completely revised away.

11:30And Chairman Powell, at his appearance at NAIB, highlighted this and said that it removed some of the downside risks to the economy that the Fed was worried about. And he then directed the audience to look at the SEP, which has two more cuts of 25 basis points in it, trying to walk back what at that time was the expectation of at least one 50 basis point cut and possibly two. And today we're at less than two cuts. It's been a big change driven by the GDP and the labor market. Both of those two things, along with core PCE, are what the SEP dot plot uses. It just mechanically uses it through their reaction function to determine what their target policy rate is.

12:24Two of the three things are now well above what they projected. And just a few weeks ago, the unemployment rate is at 4.05, and they had projected 4.4. And there are only two more reports between now and then. And the GDP now is priced at 3.2 percent. And they had projected 2 percent. So it's going to require a very, very icy, cold CPI number and then subsequent weakness in jobs and GDP for them to get anywhere near their SEP projection. And so it's possible that even fewer, even a pause gets priced into markets. Hmm. Andy, it's Karen. Thanks for being on. So I know you've sort of been in the higher for longer for a while, which this seems to dovetail with that.

13:16Do you think the equity markets are just too optimistic for 2025 cuts? Well, I mean, I think there's two questions on equities. One, will the earnings, which are elevated growth rates expected of 12 % to 13 % for the next two years, are those going to be realized? They could be. In fact, a strong economy, even with above-target inflation, gets them closer to those earnings. So that's good. Higher for longer is good for equities, and that earnings come in well. It's valuation that gets hit when long-term bond yields start to rise. And so are valuations cheap? 22-ish forward-looking guidance on elevated earnings doesn't seem cheap to me.

14:04But until – so it's a question. Now, will the Fed's rate – is what is keeping multiples high? The expectation of significant rate cuts, or is it something else? And that will be seen. Andy, thank you. Always great to speak with you. Andy Constant of Damp Spring. The other part of that, the whole sort of thinking about valuations where they are now, is if you believe that 10-year yields are rising, we've seen this before, and so it could be that the markets have sort of digested this and accepted this level of rates, have become inured to it. Well, these are long-term rate levels, though. I mean, on some level, where the 10-year is is where it belongs.

14:46I don't know. It's certainly where it's spent time. And so maybe valuations are fine where they are in light of that. Well, the optimists and the bulls will say, and maybe correctly, by the way, that rates are going higher because the economy is on steady footing. The unemployment rate, yes, spiked, but it's coming back down, probably sits around 4-2, 4-3 for a while. And rates can go higher in this environment. That's one school of thought. The other is sort of Stan Druckenmiller's school of thought. a week or so ago, 15 to 20 percent of his portfolio now is short bonds. And he actually said he was embarrassed that he wasn't short more, given all the issuance that are coming out over the next couple of years.

15:19So listen, right now, the market's looking through the optimistic lens. I get it. There is the other side of that coin. Are you in the Stan Druckenmiller camp? Yeah, I am. I've been in that camp. Are you embarrassed? Are you embarrassed, Guy? I'm embarrassed by a lot of things, but not by being in this camp. Well, it seems like the foregone conclusion is that, You know, we're too, monetary policy is too restrictive. But if the argument is that GDP is exceeding expectations and possibly dragging up inflation expectations, well, then are we nearly as restrictive? And does it make sense for us to be essentially pricing in the rate cuts that we had as of, let's call it three or four weeks ago?

15:53I think he makes a very compelling argument in terms of S &P multiples. But we've seen the S &P fly in the face of that argument for the better part of 18 months now. But with a poor auction today, Andy didn't spend a lot of time. He talked about an economy that's given rates a reason to move back where they are. Geopolitics, flight to quality, dollars rallied, yet treasury yields are selling off. We had a bad auction. So we haven't really addressed some of the things, I think, in where rates are that Guy's talking about or Stanley Junkin Miller's talking about. And Andy's talked about. So I do think that that's a big deal.

16:24I think the technical component of issuance and credit worthiness. At some point, this is a situation where the ratings agencies will come in. I know we're the most attractive person in an unattractive room or something. I'm trying to be really careful how I do this, by the way. You can't really do this well anymore without getting someone upset with you. But I think we know what I'm saying. U.S. is always going to be a flight to quality. And even during a time when U.S. isn't all that impressive, it's still a flight to quality. Usually we use houses, best houses. Thank you. Thank you. You've got to save me next time.

16:56So Tim picked most attractive in a room of unattractive people. Okay. Interesting. I don't know how we should feel about that. You're positioning in bonds quickly. I am a little bit short bonds. Not a lot. Okay. Coming up, Boeing pulling its contract off for his deal talks, break down the next steps in negotiations and what it means for production. And we continue to watch the progress of Hurricane Milton as it closes in on Florida's West Coast. The latest on the storm and how millions of Americans are prepping. Don't go anywhere. Our Fast Money is back in two.

17:32Welcome back to Fast Money. Boeing shares trading near two-year lows after the planemaker withdrew its latest contract offer to its striking machinist. The company is saying further negotiations, quote, do not make sense at this point. Our Phil LeBeau is following the story, joins us now on what is next. Phil. Melissa, we're waiting to see what's next. And I'm not optimistic we're going to hear any kind of an update anytime soon after the report last night or the message last night from both Boeing and the machinist union. So here's where things stand almost one month in to this machinist strike.

18:05No talks are scheduled for the remainder of this week. Now, that could change. They could decide to go back to the bargaining table tomorrow or Friday, but none are scheduled at this point. The machinists have said, look, there's been no progress in terms of the offer coming from the company. Boeing's liquidity increasingly is in focus. S &P, yesterday afternoon, we talked about it. You guys talked about it on the show. S &P estimates that Boeing's impact, the cost of this strike,$1 billion per month. So when you look at shares of Boeing, going back to the start of the strike on September 13th, we're really starting to see the impact now as it hits a 52-week low.

18:42The liquidity, they ended the second quarter with$12.6 billion in liquidity. The threshold that they have generally talked about and most believe they don't want to go below is$10 billion. Raises the question, all right, well, if they do a capital raise, what is it? Possible equity raise of$10 to$15 billion has been thrown out there. Nothing has been finalized, though. You take a look at shares of Boeing this year. We should point out that there are more than a few reports out saying that the company has at least begun initial conversations with bankers about how to set up a capital raise. That's obvious.

19:19You can't just call the bankers and wait to the last minute, Melissa. You know that they're putting the pieces in place in order to raise equity at some point. The question is, when do they pull the trigger? Because clearly, this strike shows no sign of ending. No. Phil, thank you. Phil LeBeau with the very latest on the Boeing strike. Phil mentioned that S &P estimate,$1 billion per month, I think it was. Yes, in terms of the cost of the strike. UBS also had its own estimate about a month ago saying that a one to two month strike would be a$4 billion hit to free cash flow. So they're really feeling the squeeze at this point.

19:55In November 25, 1980, in Louisiana, Tim, I remember this, Roberto Duran was getting his rear end kicks. No Moss? Yeah. And that's what I'm about. I've got to say no mod because at a certain point, you know, I've been trying to make the bullish case for Boeing for a long time, and it's not working. You've thrown in the towel. A little bit. You've given up on it. I like what you did there. Abandon ship. Bobby Duran. And was that against Sugar Ray? Sugar Ray. But Bobby Duran did come back. He picked himself off the mat. And that's the question here because even if they do a$10 billion equity raise, the question is where does that leave you?

20:27It buys them time, and it buys them time. They're going to get through this. equally as beaten up, in fact, probably more so than you on this one. But at this point, this isn't the time to sell it. The downgrade in the liquidity crisis is something we have not seen, and I think some of this is posturing. So I'm wondering, though, how do they do a$5 or$10 billion raise, probably more of a$10 billion raise, without having some clarity on the strike situation, right? Like what are they selling? Kind of. I mean, you know, do you want to walk right into that? Do you want to buy equity right into that?

20:58Maybe if they price it in the hole enough, maybe you do. Right. That's true. But they've got to price it lower than here, I think. That's trader talk, price it in the hole, meaning at a steep discount to its current price. Thank you. The more you know. The more you know. Rainbow. Doesn't sound. Would you touch this, Bonoan? I have touched it. Oh. And how'd that feel? My fingertips are a bit singed. Okay. Like Guy, I've been trying to make the bullish case, I think, long term there. But I still think the opportunity cost is too high. I'd wait for the secondary before digging in for more. All right.

21:31Coming up, some Fast Money movers from today's session. Why Delta and GM are among the names catching our attention. And as Hurricane Milton nears landfall in Florida, the latest on the strength of the storm. And how millions are preparing. All the details next. You're watching Fast Money Live from the NASDAQ market side in Times Square. Back right after this.

21:57Welcome back to Fast Money. You're looking at a live shot of St. Petersburg, Florida, with Hurricane Milton just hours away from making landfall. NBC's Bill Karens joins us now for the latest on the storm. Hey, Bill. Yeah, so we've had some minor changes. We had a wobble that's gotten the attention of all the people in Tampa Bay because any significant wobble to the north makes the storm surge worse there. But as we go watching the storm, it now looks like it's going to make landfall somewhere around Sarasota, possibly to Bradenton. It's a couple hours earlier now, so we're thinking that landfall could possibly be occurring as we head through about 9 p.m.

22:28to maybe about midnight or so. So let me give you a close-up, zoomed-in track, and show you where the storm is going to be going. You will see as we track this storm up through the Sarasota-Tampa Bay area, then across just south of that I-4 corridor. That's where we're going to see the heaviest wind. That's where we're going to see the strongest rain, and that's where we have a big threat tonight of flash flooding. As far as storm surge goes, we're mostly going to be focusing on what's going to be happening Sarasota southwards. That's where we could be dealing with anywhere between 9 to 13 feet.

22:57You may have heard in the last couple of days up to 15 feet, but because the max winds have been knocked down a little bit, earlier they were thinking landfall like 125, now we're down to like 120. So we have knocked down the potential for the max surge a little bit. So the weaker the storm can get before landfall in the next couple hours, the better. But that storm surge is already baked in. We already have water on the roads in places in Fort Myers, the Naples, as that surge has already reached about three to five feet in numerous areas. But as that eye moves onshore, especially around Sarasota to Venice, Florida, that's the location that we could get that nine to 13 foot surge with wave action on top of it.

23:32That's where we could have the destruction of especially the homes on the first floor. And guys, we also today have had 17 tornadoes across Florida and that threat will continue over the next couple hours, too. So as with every major hurricane, there's going to be multiple life-threatening assets of it. And you can see one of those tornadoes there that we've had numerous. This was on the east side of Florida, too, in many cases. We're on West Palm Beach up to about Melbourne, Florida. This one was in Broward County, Florida. There you see it. These weren't small tornadoes either. These were a few were actually what we call wedge or pretty big tornadoes.