Live From Miami Beach, We’re Dissecting the Market Rally and Previewing Big Tech Earnings 1/29/24

0:01Hello? One, two, three, four, seven, eight, nine, ten. This is Fast Money, and we are here tonight for the iConnections Global Alts Summit. The next few days, I'm Melissa Lee, joined on set by Dan Nathan and Guy Adami. Welcome to Miami, everybody. It's great to be here, right? It's excellent. It is a monster event, over 4 ,000 folks. Who's who of VCs, hedge funds, pension funds, wealth managers, and asset allocators. Here's what's on tap tonight. Big tech on deck, more than$10 trillion worth of market cap reporting earnings this week. Will the results add fuel to the Magnificent Seven's fire? We'll find out with top tech investor Brad Gerstner, founder and CEO of Altimeter Capital, why he says one of these high-flying names has even more room to run.

0:46Plus, we're counting down to Wednesday's big Fed decision. Will the central bank lay the groundwork for a rate cut at its next meeting? We'll get thoughts from Goldman Sachs' asset management's Elizabeth Burton. And later, place your bets. FanDuel parent company Flutter Entertainment making its debut on the New York Stock Exchange. We'll talk to Rick Heitzman, an investor in rival DraftKings, about the outlook for sports betting and what's at stake ahead of the Super Bowl. It is great to be here, guys. Thanks for joining us. We'll get to all that in just a few minutes, but we kick things off here in Miami Beach with the funding announcement that fueled a late-day rally in the markets.

1:19Both the S &P and Dow notching records at the close. The S &P closing above 4 ,900 for the first time, while the Nasdaq, which led the gains today, is now less than 3 % off the all-time high set in November 2021. The moves came as the Treasury suggested its balance sheet is in stronger shape than originally thought. The government estimated it would sell$760 billion in bonds in the current quarter. That is down from what it borrowed in Q4 and about$55 billion less than its previous estimate. The Treasury plans to reduce auctions even more sharply in Q2. The news sending yields lower across the board with 10-year falling close to the 4 % handle at its lows.

1:57And there are plenty of other market headlines to watch this week. Of course, earnings from five of the six biggest companies in the U.S., a Fed decision on Wednesday, and a jobs report on Friday. So what does this all mean for investors? What are you hearing on the ground here, Guy? Well, that was the news, the Treasury news. I mean, the market was higher in the first place, and then you got that, and obviously we ratcheted it up. I mean, it's seemingly the market has every reason to rely. People are looking for good news. They're finding it in the form of all these different things, and here we are.

2:24The flip side of the coin, of course, is the higher the market goes, seemingly the more expensive it gets. I think it was Marko Kalanovic at J.P. Morgan, I think, put out a note earlier this afternoon talking about exactly that. So if it's just multiple expansion and we're going to rally on all these different things, as Dan would say, have at it. The higher we go, the more concerned I get. Have at it, Guy Dami. I mean, listen, you know, it's back to the narratives that were driving the stock market in 2023, right? And so when you think about where we are right now, we're like one month into the year.

2:51And I think what you just had to say, Mel, about this week, this is massive. When you think about the expectations for some of the biggest stocks in the entire stock market, how they have rallied into the earnings this week at a time where, OK, fine, we're back to yields are going lower. We're back to kind of CME Fed fund futures pricing in cuts maybe sooner than people were expecting just a couple of weeks ago. I just worry, again, that we've lost a bit of that outperformance from the relative or the S &P equal weight. We're now getting a lot more concentrated, and expectations are really high into these earnings.

3:24And expectations are very low into the Fed on Wednesday. Yeah, I think there are real questions about whether or not that broad-based rally can actually find any steam in this sort of environment, especially when you take a look at today's action. I mean, what stood out to me today was Tesla. Tesla, despite, you know, basically the train wreck, as Dan, or Uber Bull Dan Ives even is calling the conference call a train wreck last week. But even in the face of that, managed to gain in today's session on basically no news. No news whatsoever. The broader market obviously helped. And the level that we traded down to sort of helped.

3:53I mean, if you watch Fast Money over the last six or seven months, we had been sort of flagging somewhere between 175 and 180. Seemingly was a home for the stock. I think we got to 179-ish last week. So I guess technically it made sense that we're bouncing off potentially in oversold conditions. You're 100 % right. But, you know, it's one of those things where what are we really looking at here? I mean, this Treasury news obviously is fueling the fire. But are things as good as the market suggests? And I would say, you know what, Mel? No. And how does lower rates across the board in terms of across the yield curve factor into the Fed and how they will manage to keep rates restrictive enough to, you know, kind of hamper the economy from going game busters?

4:30Yeah, I mean, that last piece of the puzzle. And again, you know, that unemployment data is still pretty good, you know, below 4 percent or so. And so that would be the thing that we were all kind of waiting for last year to kind of confirm what the Fed's like kind of final job was to do to moderate the pace in which the economy is moving. But after that GDP data that we had last week, after some of the jobs data that we had, it seems like the economy is humming along. So that's why I think the expectations for a dovish Fed is probably misplaced. And it might be even misplaced as we get into March a little bit.

5:02But I'll just say this. You know, we've talked now for five minutes and we haven't mentioned the geopolitical risks that exist out there. You know, last night, you know, when this horrible attack happened in Jordan and crude oil was moving higher, we know that we've seen the dollar move higher. When you think of all the headwinds to growth out there and really the risk of an expanded situation going on in the Middle East with what's going on in the Red Sea and the like. So to me, I just think that like the risks get higher and the concentration and the same things that got us here exist. And they're probably a bit more acute now than they were just two months ago.

5:35We like to play that game. I was just going to say, it's amazing. I can't even believe you just said that. After 15 years, that's what happens. I was going to say, you know, we play this game. If I told you what happened last night, where would you think the markets would be today? You certainly would not say where they are today. Should I write that down somewhere? I mean, how do you know that? As if it were scripted. No, if you had told me Lindsey Graham says bomb Tehran. It was Cornyn said similar. I'm paraphrasing now. And then you told me about the deaths. What's going on? I would say oil's north of$80, easy.

6:02Yields, I don't know, because sometimes there's a flight to quality, so maybe yields are lower. But the S &P's got to be down 40 or 50 handles, given what we had just given the run-up we've seen. And obviously that did not take place. Yields did go lower for the other reasons. Oil actually reversed and the market rallied. The market is impervious to just about everything right now. And that makes you even more skeptical. Well, it makes me skeptical again. I mean, listen, you know, I read a stat from FactSet this week that the top five or six stocks in the S &P 500 account for 54 percent. They're 54 percent year over year expected growth.

6:34The bottom 494 are expected in Q4. OK, and this is a quarter that's behind us to drop 10 percent. So, again, the concentration, the expectation for these top five or ten names is so massive. It's broader than it's ever been, at least in my career. So it just makes the potential for an accident, like, that much likely to happen. All right, can we rewind to a year ago when we were sitting here at this hotel for this conference, and the consensus was so negative? Yeah, 100%. And here we are a year later, and the Nasdaq is up 35 % or so. And you can tell people are very excited about what's going on.

7:12I mean, the difference in a year is amazing. Not only that, the weather over the year. I mean, it's like San Francisco right now. It's chilly here in Melms, as you can tell. But people are excited about the opportunities. They think the Fed's out of the way. They think inflation's been tamed. They think unemployment is going to stay below 4%, that earnings are going to catch up, that small caps are going to catch up. It's polar opposite of what we saw a year ago in this same location. All right. Well, for more on the next move for markets in this week's Fed decision, we're joined here on set by Elizabeth Burton, client investment strategist at Goldman Sachs Asset Management.

7:44Elizabeth, great to have you with us. Thanks for having me. You don't think the Fed's going to actually pivot until later this year, much later. So how are we set up in relationship to that expectation? Because it feels like we're not we, but market participants are expecting something much sooner. Right. We believe that the pivot will start around March and continue in three cuts and then go to a quarterly cut cycle. In terms of the folks that I talk to most, which happen to be the institutional community, which are here at this event today, they're not trying to act on these individual decisions.

8:15They're thinking about the longer-term effect of a higher interest rate environment, which even if we at Goldman Sachs believe that interest rates are coming, as a former CIO and allocator of an institutional fund, I still think I would be thinking about the risk to the upside that we're in a longer, higher for longer environment still. Do you think that, Elizabeth, is being reflected, at least in the stock market, through the Russell 2000 small caps, where the cost of capital that's higher, right? Obviously, these are more of a headwind to them, let's say, than the large caps, which are not dependent a whole heck of a lot.

8:43They seem to be fine either way, lower rates, higher rates, that sort of thing. Do you think that's what's being reflected in the disparity between the S &P 500 performance closing today at a new all-time high versus the Russell 2000, which is still down 20 % from its all-time highs late 2021. Well, on the small cap story, like one thing that they are taking advantage of still is they also are able to take advantage of some of these short-term rates. Like they're also putting their cash in higher rates than like their large cap counterparties used to be able to do. So they're not totally getting hurt in a silo by this rate type of environment.

9:15Why they're underperforming versus their larger peers, I don't know. But to the points made earlier on the show, I do think the concentration risk something that we need to be aware of. And I do think it's time to look at small gaps. I know there was some discussion earlier in the week on why people on the show may not agree with that. But I think in general, the risk of doing nothing is pretty great here, with such a large exposure in the U.S. pension community and corporate pension community. We're an alternative asset class conference, and you're here. So connect those dots. I mean, what are your thoughts about that this year?

9:44Right. So I've been coming to this conference for years, even before I was at Goldman Sachs as an LP. It's one of my favorite events. And I think what's interesting this year is that we've seen a resurgence in interest in hedge funds, which the last couple of years coming to this event as well, I'm sure you saw a lot of interest in private credit and private equity. There's still a lot of interest in private and credit and private equity. What's interesting to me about the interest resurging in hedge funds, I think it's actually partly a liquidity story. Investors aren't so much hurt by this denominator effect.

10:11Now they're hurt by not getting their cash returned to them. It's a fraction of what it has been in years past. And so I think, one, they're looking at hedge funds as a way to get access to alts in a more liquid fashion. But two, they're still concerned about the geopolitical event and market risks that you've been talking about. And sometimes it's hard to put on an option strategy and know which one might pay off for, you know, the myriad of scenarios you're trying to prepare for. And hedge funds might be one way they're trying to mitigate that. What kind of alts? What kind of? What kind of alts?

10:40So we like real estate debt. It's one of our favorite trades going into the next couple of years. We still like private equity. I think what's interesting from the allocator perspective is, you know, three, four years ago, there was so much cash to deploy into all. Just every private equity fund that came into your shop, you'd consider giving money to if they had a strong track record. Now you have to be more selective. You don't have as much cash to go around. So interestingly, strategies like renewables and sustainable and impact investments, these are all getting a lot more attention. because what the focus is now is do you really have the operational capabilities to increase margins, you know, grow them over time, not just have some fancy financial leverage gimmicks.

11:22For an area like sustainable, though, is there a concern that higher rates are going to make it more difficult for products to get off the ground? I think higher rates are an issue for all alternative asset classes, right? So infrastructure was a good play last year, but you saw a lot of deals not getting done because buyers and sellers are having to re-underrate based on the higher rate environment. So I think that's going to be problematic for all alternative asset classes in a higher interest rate environment. Elizabeth, what do you think the primary reason for, let's say, only three cuts versus what the market was expecting, let's say, a month ago was maybe five or six cuts?

11:53What will be the reason for that? Will there be unexpected growth that, you know what I mean, essentially that some of the naysayers who are still planning on a recession coming at some point, what will the reason be for only three cuts this year? Well, I think what we've heard from the SPED speak coming out is they want to take a measured approach. That language might change when we hear more language coming out in the coming weeks. But I think that they want to see that we're trending in the right direction. You know, inflation isn't made up of one data point. It's made up of a lot of data points, and they're not all constantly trending in the same direction every single print.

12:25So I think part of that is that measured approach to sort of see as the data continues to play out which parts are stickier than others. Elizabeth, thanks so much for joining us. Great to see you here. Thanks for having me. Elizabeth Burton, Goldman Sachs Asset Management. Alternatives are fascinating, and you mentioned higher rates, higher, makes it more difficult. But, you know, in Elizabeth's work, she suggests inflation, you know what, it's probably going to be stickier and more problematic than the market realizes. And I agree with her on that. Right now, we're obviously not seeing it, but you're starting to see in some facets a reacceleration of inflation, which I think makes the Fed job that much more difficult, especially when the markets at levels we're at, and especially with the expectations, five, if not six cuts this year.

13:03Yeah, Mel, and you started this conversation by saying just the change in sentiment year over year, what the consensus was heading into 2023. They were great. It was very bearish, expected. You know, I was in that camp expressing economic weakness. I'm a bad critic. And now here we are, the exact opposite. And I think what Elizabeth is kind of laying out is possibly a stagflationary environment, right? And so if we are going to basically – listen, and that GDP print and the GDP that we saw throughout last year was far better than expected. But that will moderate. The Fed themselves in mid-December was pointing to 1.4 % growth this year.

13:34But if rates don't come down as much as market participants are expecting, I don't know how well that will translate into valuations for risk assets that are very pressed to the upside right now in the S &P 500 in particular. Right. Coming up, Tesla taking their Cybertruck roadshow to China. The EV maker hoping to keep excitement up, but will Chinese regulations become a roadblock for this company? The details are next when we head to Beijing Live and much more from here in Miami Beach. Altimeter Capital founder and CEO Brad Gerstner will join us in just a few minutes where he sees opportunity in tech land as we gear up for this week's results, plus his top picks in the space.

14:09You're watching Fast Money Live from the iConnections Global Alts Conference. We are back into...

14:24Welcome back to Fast Money in Battle, Chinese property giant Evergrande was ordered to liquidate by a Hong Kong court overnight. CNBC's Eunice Yun has the very latest. Eunice. Hey, Melissa. Well, trading in Evergrande-related stocks resumes today after being halted Monday along with that court order. A Hong Kong judge agreed with the creditors that the struggling property giant has ample opportunity to devise a debt restructuring plan. And the judge literally said enough is enough. Now, it's unclear what the impact of this order is going to be. In a statement, Evergrande's CEO had said that he was sorry about the winding up order and that the company would, quote, ensure home deliveries and promote normal operations.

15:10Separately, he told a local paper that the Hong Kong order only affects the specific listed company. Now, I spoke to a creditor who said that that was not a justified comment saying that the liquidator is legally entitled to China's onshore assets. Now, this is what bankers and lawyers have been telling me, that what happens next really depends on whether or not the Chinese backed Chinese courts, so the government backed Chinese courts would recognize the Hong Kong liquidators and in that way, allowing them access to Evergrande's assets here, which is mainly the bulk of the company's business.

15:55Guys? And Eunice, this will be a real test, especially for foreign investors. If this liquidation, which is probably the largest of its kind, doesn't happen smoothly, then that could really further sour appetite from foreign and overseas investors. Well, I would say among those creditors, for sure. The creditors said to me that they had just lost patience, especially in the past six months, because they felt that they were just getting stonewalled the entire time. But I have spoken to other foreign business executives who said, you know, well, these creditors, they did take a risk. They invested in what's seen as a very risky part of the economy at this point.

16:37And so they have to own that risk as well. Meantime, Eunice, busy day, busy weekend here. Tesla kicking off its Cybertruck tour in China over the weekend. The company is taking the high-concept EV truck to eight different cities across the country, but there are strict regulations they have to get around. Yeah, absolutely. That's one of the main points that was coming up when people were They're eyeballing the Cybertruck. There was a lot of excitement. They are, you know, one of the key points here is that Tesla does still dominate the EV space, but a criticism has been that they don't refresh their models.

17:18So this promotional tour was seen as a way to get people excited again about Tesla technology. A big hurdle, though, are the regulations, especially around trucks. And one interesting point is that people pointed out that Tesla avoided the use of the word truck in their Chinese labeling. Basically, the Cybertruck here is called a traveling wagon. And one of the hurdles is that there's so many strict regulations about any type of pickup truck. So maybe this is a way that would make it a little bit easier for Tesla to be able to sell the Cybertruck, at least to regulators, but the population and the public really seem to enjoy it.

18:05Eunice, thank you. Eunice Yun in Beijing. I'm sure traveling wagon in Mandarin is catchier than in English. You can only hope. We have a traveling wagon. They've got a lot of hurdles, though, in China, not just selling the Cybertruck, just selling their normal vehicles. Yeah, and again, expectations for the Cybertruck here in the U.S. are not particularly, you know, they're not producing a lot. There's probably not going to be a whole heck of a lot of demand. You saw how it's operating in the snow. Have you seen some of those videos? Not particularly great. I just think that when you think about China and you think about just some of the nationalistic tendencies that they're having right now towards, let's just say, automobiles, EVs in particular, I just don't see that as a huge driver over there in China.

18:44And it's also one of those things. If they don't like pickup trucks, it's a little conspicuous when you think, you know what I mean, when you think about it. So to me, it's DOA in China, in my opinion. Rivian is an interesting trade if you're looking for trades. I mean, in November of last year, the stock traded down to$15.25 or so. By the middle of December, it was trading$24. It reversed the entire thing. So we've round-tripped the move, but we basically put in the same low we saw in November. So if you're looking for a trade, this is sort of an off-cycle report. I think they're mid-February or so.

19:12You know, Rivian could be interesting, especially if Tesla just put in a short-term bottom. So more bang for your buck maybe in Rivian. Dan's talked about this stock a number of times. All right. There's a lot more fast money to come. Here's what's coming up next.

19:56We're back right after this.

20:07Welcome back to Fast Money. The S &E closing at another all-time high as investors await big tech earnings as well as Wednesday's anticipated Fed decision. The Dow jumping more than 200 points. The Nasdaq rising more than 1%. Shares of Chipotle meantime up more than 3 % today, hitting an all-time high. That stock is up nearly 50 % over the past year. And Valero shares also higher today despite a down day for crude. Valero up nearly 7 % this month. What's behind this? Okay, so let's talk about Chipotle real quick. I mean, obviously now it's starting to get ahead of itself. They reported in early February.

20:41I think you're going to see this continue to move. Analysts are probably still behind the curve. I was at the airport this morning at 5 o 'clock. There was a line around the corner for CMG, number one. At 5 o 'clock? No, actually, I'm lying. That was just anecdotal. Valero favorable crack spreads. And if you look at what's been going on in Valero, you would think that it'd be under considerable pressure, but it's not. We should actually have who's our friend that we talk to all the time, maybe Halima Croft come on and talk about this. But Crude is going backward at it again. The crack spreads, without getting in the weeds, are favorable for the refiners.

21:10I think Valero can continue to go higher. You know what the line around the corner was? Shake Shack. Yeah. Yeah. It is. Which is also in your imagination. There's also fake Antichrist. So here's the one. When I think of literally the performance of a Chipotle and I think of McDonald's, which just made a new all-time high, I think of this company that just swung to gap profitability for the first time ever. I see double-digit kind of sales growth here. I think this is like with a$4 billion enterprise value, this is a cheap, I think, asset in that space. I don't know how you keep piling into, let's say, a Chipotle or a McDonald's.

21:42You're right. But people have been saying that about CMG for three years. And when they split like 15 for one or 10 for one, then you're, oh, all these people. By the way, I worked at Shake Shack, as you know. I know. No, seriously. What was your specialty? The Shack Burger. You know, pounding those patties down. I wore the little hat with the net. I hope so. Yeah. All right, coming up. FanDuel Parent Flutter listening in the U.S. today, giving investors another way to play the sports betting space. So what will the debut mean for competitor DraftKings? Early investor and current shareholder Rick Heitzman will join us next to dig into the listing and what is next for the sports betting industry.