Jamie Dimon’s Dire Warning, and Is Eras a One-Hit Wonder? 10/13/23

0:01All right, Brian, thank you very much. And tonight on fast breaking down the banks after a strong post earnings pop, the major money centers all paired early gains what the action tells us and what a dire warning. from Jamie Dimon might mean for the market. Plus, insuring gains. The chartmaster hunting for opportunity in a couple of areas of the market we don't normally talk much about to make the case for why you should feel safe in these stocks now. And later, look what you made her do. Demand for Taylor Swift's era tours movie so high that she took her blockbuster to the big screen a day early and she could rake in hundreds of millions of dollars for the effort.

0:41Is there any other star that could do the same? Is there a better business person in entertainment than Taylor? We'll break it all down. Good afternoon, everybody. I'm Tyler Matheson in for Melissa Lee, and this is Fast Money. On the desk tonight, we've got Guy Adami, Tim Seymour, Steve Grasso, and Carter Worth. Gentlemen, welcome. Great to be with all of you, even if it is only remotely. We start with the big money center banks retreating from a post-earnings pop earlier in the day. Wells Fargo, J.P. Morgan, Citigroup, and BlackRock delivering beats, but their stocks ended the day mixed. Wells up a little bit, J.P.M.

1:18up a little bit, the others down. And J.P. Morgan CEO Jamie Dimon may have something to do with it. Dimon telling investors in a statement today, quote, this may be the most dangerous time the world has seen in decades, citing the Ukraine and Israel-Hamas war as major risks to global markets. The major indexes sliding in the final hours of trading today. The Nasdaq down more than 1%, the S &P falling 0.5%. The Dow ended the day virtually unchanged. Small gain, 39 points there. So what is the bottom line on this first batch of bank earnings today with many more coming next week? How is it rippling through the rest of the market?

1:59Who wants to go first? I'm going to ask you, Steve. How do you see these bank earnings and how do you think it tees up next week and the market more broadly? Well, if you started off the week, Tyler, everyone said don't buy the financials, don't buy the banks. At least we had a good performance out of them. They all, by and large, beat JP Morgan usually runs the day. Today was no exception to that. Also, Jamie is very negative on macro a lot. We talk about storms, categories of hurricanes analogous to the economy. But when you look at the macro environments now, I tend to agree with him. I've never felt this negative about geopolitical events.

2:47I don't think anyone on this desk in our trading lifetime, we had our 9-11. Israel is having theirs. But this seems bound to get out of control. energy prices, inflation. It seems like it's a potpourri, if you will. Negative events, constantly getting worse. But as far as the financials are concerned, everyone thought that they're on the cusp of falling into an abyss. I don't think we're seeing that. I think the stocks perform well. On the one hand, Steve makes the point that Diamond, and sort of agrees with Diamond, that the world situation is very precarious right now. But Tim Seymour, at the same time, the fundamentals of the banking business look pretty good.

3:38And J.P. Morgan really went, flipped, from predicting a recession to saying no recession coming, not this year, not in 2024. And no storm clouds. First of all, Tyler, great to have you. And I agree. It's almost as if Jamie Dimon on the front page of the newspaper, you're reading the geopolitics. But on the turnover to the financial page and look at J.P. Morgan's numbers and look how they blew away consensus. And if you actually they were close to 478, if you remove some one off items, net interest income, credit, fee income. And we knew investment banking was down. So the biggest money center bank, the biggest bank in the world, the highest quality balance sheet, the one that trades more than double price to tangible book value than a Citibank is the one that I think had pretty good, certainly good insight into their core business.

4:31Now, Jamie has, Steve alluded to this at times, really been cautious on talking about the macro and talking about the world and talking about storm clouds hovering over. The market doesn't believe the banks here. It's really clear. We closed on the lows of J.P. Morgan, finished up one and a half percent. But and it has outperformed the other money center banks. But I just don't think until we start to really get some sense of where the economy is going to settle in, banks are going to have a tough time trading here. Guy, jump in here. On the one hand, the profits were quite good. On the other hand, several of the banks point to slowing loan originations and rising charge offs.

5:11So how do you look at these numbers and put them into the mental computer for next week and beyond? I'd like to answer your Taylor Swift question. The question was, who is a bigger media star? The answer is obvious. It's Tyler Matheson, number one. We can all agree on that. In terms of the banks. I've had more eras than Taylor has, let me tell you. Good for you. In terms of the banks, I don't think they traded particularly well. I mean, Citibank has been awful, closed lower on the day. Bank of America, I know they didn't report. I mean, that stock's been grim death, closed lower on the day. J.P.

5:50Morgan sold off pretty considerably from the high they put in early in the day. And Wells Fargo sort of, it's been muddling along. So listen, I understand the want to be in banks on valuation and all those things, but I think the landscape for them is not particularly good. Loan loss provisions are going to go up. Loan origination is going to go down. You know, delinquency rates are probably going higher. And this bond market, quite frankly, the only people that seemingly navigated it well was J.P. Morgan. And there are articles now coming out about Bank of America that we have been talking about for months, how they've basically, you know, I don't want to say screwed the pooch, but since it's Friday, screwed the pooch.

6:27You just did. Go ahead. You did. Go ahead. We're all friends here. You know, the one thing I love most about Carter Worth's shot, apart from R2-D2 over his right shoulder, is the fact that he's got a clock. So I will always know what time it is and how much time I'm eating up with my verbose questions. Carter, what do you make of the banks? Yeah, you bet. A clock will keep us all on track. You know, I think the thing is this. There is no such thing in principle as good or bad news. There's only news. And then, of course, the reaction in the market tells us. Often we see a stock that beats, guides up, increases the dividend, but it goes down.

7:00And so then it couldn't have been good news. It was bad news. And that is the case today. Guy referred to this, Tim, Steve. I mean, we have an issue where it wasn't good because the BKX index of 24 stocks, four were up, the rest were down. And today, consider this, the BKX made all-time relative lows since its inception in 1992 to the S &P 500. So you're talking about an index that basically right now is all-time underperformance lows versus the general equity market going back 30 years. These are not good businesses, and I don't want to be long them here, and I don't want to be long them in general.

7:40And I see Steve Grasso nodding a little bit there. Yeah. And, you know, there is a difference. I guess I should have probably pointed this out. If you want to, Tyler, more and more people who you talk to don't want to own financials, but they're happy having an allocation, to Guy's point, in a financial name. And the name is always J.P. Morgan. So it's OK to be negative financials. If you have to be long something in your fund, you're probably long JP Morgan. But we are pricing these names out as if the bad weather is never going to clear. And that's never the case. So, Tim, are you a defender of the banks here?

8:23Are you the loan sort of voice defending them a little bit? Or am I reading it wrong? You're talking to me? Yeah. So it's it's very difficult for me to point to a world where the consumer is weakening, where and Jamie pointed this out. I mean, the American consumer continues to borrow and spend now for the economy. That's probably the resilience you want to hear about. But we've talked about the burden on the household. And so, look, in terms of the top three money center banks that that I think people are focused on, maybe there's four with Wells Fargo. But Citi, Bank of America, JPM, JPM is the clear leader.

9:00And it's the clear leader both in terms of the quality of the balance sheet and the resiliency of some of the things that I think are hurting the other banks. When it comes to provisions, when it comes to credit, when it comes to profile, JPMorgan deserves the premium. So back to your question, what am I doing with banks here? I'm not owning them for the divs. And I know that Carter's pointed out the relative underperformance, which is almost shocking. We had gotten to a place as we came really out of COVID where banks were not only commercial and industrial loans were growing, they were paying divs, their capital strategy was one that was giving back capital to investors.

9:35Between SVB and between the provisions, that's halted stop. I don't think the dividends will stop. But I can own J.P. Morgan through this. I think it's a great franchise. I think you get to a place where Citibank is so cheap you can own it here. And that's where it's been. I own it 20 percent higher, though, and it's been a frustrating ride. All right. Let's let's move on to talk a little bit more about bonds. Our next guest says another big bond move is coming. And let's bring in Damped Spring Advisors CEO Andy Constant. Andy, welcome. Good to have you with us. Thanks, Tyler. What's that big move?

10:08Which way and why? So, you know, about last time I was on in August, we talked about the announcement of the issuance of long-term bonds, and that set the tone for the bond market for the last two months. Since then, we've also had strong economic data, and it's possible that that data may encourage the Fed to actually follow through with their hike. But with data out of the way, with the nonfarm payrolls and CPI out of the way, The next big bond move isn't likely until the Halloween quarterly refunding announcement. And at that announcement, there is going to be a large deficit that needs to be financed.

10:55And Secretary Yellen holds the lever on whether she continues to issue the bonds that she did in August or shifts back to issuing bills. My sense is she will continue on the path of terming out the financing of the federal deficit debt, and that will mean large quantities of bonds. But regardless, we've had a 55 basis point increase in term premiums on bonds, and that's a big move. And so the next slug of bonds that the market has to absorb will likely not make quite as big an impact, more on the level of 10 to 20 basis points. So, okay, so if she's going to go and, as you say, choose to go issue bonds to finance the piling up of deficit money, and it's really shocking how much deficit money needs to be financed, that would suggest that interest rates on longer-term securities are going to go up.

12:01By how much, did I hear you say how much? Let's call it 25 basis points. From where we are now on the 10-year, which is what, 4.65-ish? Yeah, and I wouldn't be surprised to see five, five and a quarter, particularly if the economy does sustain this relatively high GDP. So some combination of the economy not yet ready to turn over and this large supply could drive us into the fives on the 10-year note. What did you make of the inflation numbers yesterday? I mean, they were a little higher than I guess anticipated, but a little, just a little. Yeah, I think the most noticeable number was the one that Chairman Powell focuses on.

12:46The month over month core services, ex-housing services, was 0.61, which was extremely hot, 7.2 percent on an annualized basis. And that is the number that time and time again, Chairman Powell goes back to as his services inflation measure. And it was warm. So, you know, that's you know, we'll see how it plays out. But, you know, for now, I'm focused on the next quarterly refunding to see, you know, the supply demand dynamic. I guess there'll be more numbers between now and the meeting in November. There could be a lot more geopolitics on the table between now and then. I wonder how the geopolitics plays into what the Fed might do.

13:34But I know Steve Grasso had a question for you. Steve. So, Andy, bonds and stocks and the equity market have never been as correlated as they are right now, or I should say for a very long time. Do you see a world where the 10-year can keep rising and the equity market can perform, or is that just not possible? So that's not my base case. My base case is that the increase in yields will cause multiples to contract. And I'm sort of targeting 4 ,000 as a level to catch up with the bond market yield increase through multiple contraction. But at the same time, if the bond market is rallying, it's also possibly true and likely true that the economy remains strong.

14:22And that's part of the reason why bond yields are rising, which could have a positive on earnings. Unfortunately, earnings, consensus earnings still are for 12 percent annualized growth for both 2024 and 2025. So it's tough for me to get there because earnings are already discounted to be very strong. And there's this pressure on multiples. You see 4 ,000 on the S &P. What is the time frame for that? You know, I think there's a lot of rhetoric around seasonals. Seasonals typically leave the market quite strong. When the market's up 10 % or so, like it is, you get a rally into the year end. But that's typically due to the fact that the winners are deferred till next year to be sold to avoid crystallizing a taxable gain.

15:24This year is so narrow in its leadership. The taxable gains are so narrow. and the bond market is providing a tremendous amount of capital losses to harvest, that I don't think that delayed selling will necessarily occur. And if the supply and demand is normal, not this deferred sense, the Santa Claus rally is pretty unlikely based on the work I do. All right, Andy, thanks so much for spending Friday evening with us. Andy Constant, we appreciate it. Let me turn to you, Guy, and see what your reaction is. Andy thinks that with rates rising, multiples per force must contract. Do you agree? Agreed.

16:09Agreed. And it's great to have him on. He was on a few months ago, spot on. I would differ in one sense that, you know, I think yields are going higher because, quite frankly, the market's demanding a higher yield to buy our debt, and the incremental buyer is just not there. Japanese aren't buying. They're probably selling because they have to defend their currency. We've talked about that for a while. And obviously the Fed isn't in this game either. So the incremental buyer is out there, but rightly so. They want a higher yield to buy our stuff. And it manifested itself in the Treasury. That auction yesterday was a disaster.

16:42And that's one of the reasons the market sold off. So, yeah, I do think rates go higher. I don't think that's bullish for the market. That was also one of the things Andy pointed out in his notes, that yesterday's auction was a bad auction in a string of bad auctions. So he said. All right, let's go back and talk a little bit about Pfizer because we've got a news alert on it. The shares are dropping and sharply after the company slashed guidance for the year. Lots of news in here. The drugmaker now expects full-year revenue between$58 to$61 billion. That's down from$66 billion. Earnings per share now expected to come at about$1.45 to$1.65.

17:19That's down from$3.30. Pfizer also adding the U.S. government will be returning about 8 million doses of Paxlovid at the end of this year. Tim, you are a shareholder of this company. There is a lot of kitchen sink stuff thrown into this statement from Pfizer. Yeah, Tim's Pfizer, by the way. Look, this is a case where I thought we had priced in the decline of Paxlovid and essentially the commercialization and the government contracts and everything that is a COVID dynamic that I think was critical for all the success that this stack had when it got up there and touched over$60. This type of a revenue cut, though, tells me I don't know where they were on this.

18:02I don't know. It's concerning when you see this kind of an EPS cut. We're talking about a significant cut. When you talk about 145 to 165 full year guide, this isn't a cheap pharma company. And that's really frustrating because this was not at least the guide that was in the market that had a lot of bad news already in there on where we knew that there was a major pullback in COVID and vaccine dynamics. I think the people out there that are really following the stock also want to hear about CapEx cuts, OpEx cuts, because that's going to deliver. And I know that's not exciting, but in Pharma land, there is a lot to save there.

18:37Non-cash charge of$5.5 billion to the cost of goods sold due to lower than expected utilization for COVID products, and a$4.6 billion, I think it is, of revenue. No,$4.2 billion revenue is currently estimated to be reversed there. Carter, thoughts? You know, I've done what Tim has done, tried at least twice to step in, play for a bounce. It hasn't worked. Consider this. Usually it's bad technique to buy things in downtrends. I know it. Yet we all sometimes break the rules or make the mistakes. But the final thing is, what did they just say? They said their earnings are going to be, what,$1.45 to$1.65?

19:17$1.45 to$1.65, yeah. 20 years ago in 2003, they earned$1.75. So here we are, 2023, and they're going to kind of be somewhat a little bit below that. What's it worth? Maybe a lot lower. All right. Well, I see from your clock it's 519. We're going to go to a little quick. Hold on a second, Tyler. Hold on. I got to say one thing. I mean, Pfizer is a pretty big company, right? I mean, to do this on a Friday afternoon after the close, I mean, I would expect more from senior management at Pfizer. Do it on Monday morning. Do it on Friday morning. But Friday after the close, no, I'm telling you, it's just ridiculous.

19:57I mean, they should be ashamed of themselves. Yeah, you're right. I mean, it is a Friday afternoon dump, the kind of thing you see from politicians and other places. Let's take a quick break, and when we come back, we're going to talk about a 24-carat trade coming your way. Gold glistening recently, so should the metal pave the streets of your portfolio. The traders will weigh in on that next. Plus, talk about a moving target, the retailer target notching a bullseye week for a change, But can the run continue if the consumer starts to buckle? Don't go anywhere. Fast Money will be back in two minutes.

20:37Welcome back to Fast Money, everybody. One safe haven trade worth its wait today. That will be gold shining bright, locking in its best day of the year and climbing more than 5 % on the week. Some other commodities like silver oil also showing strength this week. Guy, let's turn to you for some thoughts on gold. Oil is its own animal. Tim can speak to that. But gold is having a day. And we've talked about this now for a while. Carter actually brought this up a couple weeks ago. Tim has talked about it. Central banks last year bought a record amount of gold, 1 ,221 tons,$70 billion. They're doing the same this year.

21:14Effectively, and there was a note out earlier this week talking about things that we've been saying. They're hedging, they being central banks, their own ineptitude. They see what's going on. And now it's starting to manifest itself in the price. IMFs making comments, World Bank's making comments, more countries trying to get into the BRICS. All these things are a pathway to gold, and it feels as though the market's going to wake up to this. And what I said on the show the other night, and this will not make sense, but the market is not long of gold yet, and that will start to kick in through all-time highs when some of these really big institutions start to get in, and then the party's going to start.

21:50But gold, I think, is telling a story, Tyler. Very, very interesting. And I love the phrase hedging their own ineptitude. Carter? Yeah. Well, it's twofold. I mean, for very short-term traders having moved up$120 an ounce over the past six sessions, you're back to a difficult level. I would trim right calls. If you have a structural view that all is not well in the world, perhaps Jamie Dimon's view, you certainly want to have gold as part of your general exposure. Yeah, it would seem that way, Tim. And obviously, Guy believes that this is not just a one-day or a one-week phenomenon, that there is a longer-term trend here, I guess I'd say.

22:32Gold is long-cycle investing, OK? There's a lot of gold bugs out there that have been long forever. But to me, we have a mean reversion back, and the move in gold is something that's been building. And I think it's correlated heavily with the dollar. It's correlated heavily with the VIX that was up 19 % or 15 % today. Why do you think gold had the day it had? One of them is telling you something. One's the tail, one's the dog. Or there may be both the tails. It tells you a lot about the Jamie Dimon comments. It tells you a lot about a world where Andy Constantine's comments about Treasury announcements and refunding and dynamics where we still have a government that isn't showing up on the House side.

23:13So this is the reason to own gold. And if you want to own gold, you want to own silver. And you want to own other precious metals. And if you look at these charts, people say, hey, what happened to gold over the summer? Hey, you know what happened to the gold over the summer was the dollar. The fact that gold traded, I think, more or less and held serve is incredibly powerful. If you look at that downtrend from earlier in the year, some of that correlates with the dollar move. And actually, today's move means you're backing up. You're basically brushing right up to the top of that downtrend and breaking through.

23:43All right. We're going to take a quick break. There's a lot more fast to come, and here's what's coming up next. Going on a target run, the retailer notching its best week in months. But as pressures mount for the consumer, can shares keep trained on the bullseye? Plus, to the penny, a pair of twos. You know what's next? The chartmaster is hitting the technicals and giving some assurance to insurance stocks. You're watching Fast Money. We're back right after this.

24:19Welcome back to Fast Money, everybody. Time for our chart of the week. And there it is. Target bullseye jumping, well, there you see it, week to date, 6.2%. And taking its gains for the week way up on the day as well, 1 % today, 6.5 % for the week. The retailer notching its best week, by the way, since January. Though it's been a rough year for Target by any stretch. shares are still down nearly 25 % this year. So is this a reversal of misfortune for the stock or a temporary show of strength? Which is it, Tim? Well, it's a combination of things that Target has underperformed peers on. And there's a discount to Walmart that's, I think, 11 turns on a PE.

25:02It's a function of some of the dynamics of what made them so successful during COVID. And the merchandise mix and the discretionary part of essentially their goods profile and in a world where grocery and top line is coming from real consumables and staples. And that's not necessarily been the target special sauce. There you go. You look at a 6 percent outperformance to Walmart on the week. And if you look at Walmart to a stock like I'm long Walmart. I love it, although I'm significantly less long. And I think it's you know, it showed some cracks in the last week. Again, outperforming Walmart by 6 percent.

25:38That spread between these two companies is a very interesting spread to trade. And I think some of the same things that will hurt Walmart obviously have hurt Target. Therefore, that's an interesting spread trade here when you've come to essentially a three standard deviation move of one versus the other. Steve, your thoughts? Yeah, we're not a political show, but you got to stay out of politics if you're a corporation. You're going to offend 50 percent of the people, no matter which side you take. So Tim talked about Target's outperformance with Walmart this week. That was impressive. I think It's a short-term bounce.

26:10I'll switch gears and go to Costco. Costco membership, those fees are like an annuity for the company. They have outperformed Walmart, Target. If you look across the board, whether it's one month, three months, year to date, or full year, they have outperformed the space. They continue to outperform the space. Yeah, and as you point out, that membership fee is really an annuity. It is just a stream of income that keeps on coming. All right, coming up, keep an eye on insurance stocks. Yes, you heard me right, insurance. The chart master digging into the group's technicals so you can give your portfolio some protection.

26:47Plus, earnings season just getting started. And with mega cap names gearing up to report next week, we're going to bring you some big action from the options pits, the details when Fast Money returns. Look at that list of companies that we'll be reporting next week. Missed a moment of Fast? Catch us anytime on the go. Follow the Fast Money podcast. We're back right after this.