Momentum Magic Rolls On… And A New Year’s Correction? 12/16/24

0:02Live 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. Major momentum. Two of the hottest trades since Election Day have been highly tied to the crypto space. But can the rally keep rolling? And what's it mean for the names being left in the dust? And SoftBank's big investment. CEO Massasan meeting with President-elect Trump at Mar-a-Lago and pledging$100 billion in U.S. projects. What it could mean for the economy and for other AI investments. Plus, a recently not-so-magnificent stock in the Mag-7. Capri reportedly looking to offload some of its luxury portfolio.

0:35And Starbucks' shares, they're getting decaffeinated. The story is behind all those moves. I'm Melissa Lee. Coming to you live from Studio B at the Nasdaq, on the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Lori Calvacina, head of U.S. Equity Strategy at RBC. Welcome, Lori. And we start off with the latest signs of momentum shift in the market. The Dow notching its eighth straight down day, shedding 110 points for its longest losing streak since 2018. Meantime, the tech-heavy Nasdaq at all-time highs surging more than a percent to close at a record of 20 ,173. And two big momentum trades soaring again today.

1:07Bitcoin touching a fresh all-time high, topping$107 ,000 for the first time. Crypto proxy MicroStrategy have been up more than 7 % after news late Friday that the stock will be added to the Nasdaq 100 next week. The gains fading in afternoon trade, but shares still up nearly 550 percent this year. MicroStrategy outperforming Bitcoin by almost 30 percent just since Donald Trump was elected president. So what is the outperformance signaling to you? Because it could be a broader market signal, Tim, or it could be Bitcoin specific. Well, it feels like allocation. Broader market, if you look at the Nasdaq, it's been outperforming not a little, but a lot.

1:51By 5 percent since Thanksgiving, if you look at the equal weighted, it's underperformed by almost 5 % since Thanksgiving. And yet, again, the S &P is up 7.5 % since the Fed. We've got a Fed meeting this week. In fact, we've got a bunch of other central banks this week. And I think the message is you've got central banks that are continuing to do their part. You've got seasonals, which we spent a ton of time on. But I think the dynamic around both CPI and then also look at that services, flash PMI on U.S. services, which is the highest in three years for the biggest part of the U.S. economy. Now, it could be a noisy, lumpy data piece, but ultimately the macro data has been supportive to a market where you've given equities every other ingredient.

2:33Labor markets are holding up, in fact, are probably better than expected. I think we're rallying into year end, but it's notable that, again, the part that leads markets higher are truly the ones that are moving the market higher, not the breadth, but actually the same 10 stocks that are doing it. Yeah. Laurie? Yeah, it's been fascinating to see, right, because everyone's been on the broadening bandwagon, and now all of a sudden we're seeing growth come roaring back. And I think when you look at Bitcoin, right, it's all tied up in the Trump trade, and there are a lot of new things that are happening, right, that it makes complete fundamental sense.

3:00But I would just add to what Tim said. I do think the economic fundamentals are solid, but there is also concerns about inflation creeping back in. Are we getting to the end of this Fed cutting cycle? And what I'm starting to hear from investors is the word stagflation again. And when you're in a stagflationary environment, the playbook has been to go back to these mega cap growth names. GDP is also sitting at around 2.1 percent for next year's forecast. That's typically also an environment when these, you know, kind of mega cap growth areas do well. So it's a good macro, but not quite good enough to support that broadening.

3:31Yeah, and broadening thing, right? So let's just look at the equal weight S &P 500. You know, it had this nice rally off the election. It's given back maybe almost a half of that over the last week and a half or so if they want to pull up the RSP. The BKX has come in a little bit. So to Lori's point, you've seen this massive move into the growth thing. I mean, I think about the Fed. We have it on Wednesday. We have a meeting in January. It's a week after inauguration. Maybe we continue to rally into that. We do have Q4 earnings coming in around that period. I think that's going to be a really dicey time because if we do have a hawkish cut this week and we start to kind of price out a whole heck of a lot of cuts next year, I think the Fed funds futures, the CME, is pricing in like a less than 20 percent chance of a 25 basis point cut in January.

4:14So if we have this situation where rates stay bid, we just saw like, well, rates not going lower. Yields stay bid after the rally that we've had. And if we think that growth is going to start to slow, that's not going to be a great setup for equities. And just the last point about Bitcoin and what we saw today with Broadcom up another 11 percent after it rallied 24 percent on Friday. It's gained about$300 billion in market cap in two trading days. Look at Tesla. It's gone from$250 the day of the election to about$450 now. There seems to be a bit of euphoria. And how I pull that all together, it feels a lot like early 2000.

4:48I'm not trying to say that we're about on the precipice of a crash, or late 2021 when we saw a lot of price action like this too. So the sentiment is unusually bullish right now, and it's getting more and more crowded, especially as we see some of the broader trades kind of coming to an end a little bit in the near term. So I disagree with a lot of what Dan said, not all of it. But I think we will see growth. I think we will see the economy do better. I'm not afraid right now of growth slowing. I actually think it will accelerate. And I do believe that animal spirits have been, you know, released.

5:25And that makes people willing to take more risk, willing to do things to grow. And I think we will see that regulatory regime change. And I think those things all help businesses feel confident and grow. What I'm sort of like you, I do think that I'm surprised that inflation isn't reflected as the potential to be much higher. I think it will be like, you know, the 10 year bonds were flat today. And I think we saw some decent PMI. We saw that was global. So I think that will weigh on the economy, but not as much as the positive of the sort of growth in the economy. Can I just read about one second?

6:04So I don't think that growth is going to come in that much worse. So we're talking about earnings growth and economic growth. Right. So we saw how GDP growth was trending this back half of the year. It was better than expected. Right. So my point is that if yields continue to go higher, we get four and a half percent or higher in the 10 year. The dollar continues to rally. I think that is a headwind for earnings growth. I don't know how much of a headwind it is for economic growth. But when I think about earnings growth and I think about consensus, we're looking at 12, 13 percent expected growth.

6:32That has not come in or gone higher too much in the last year or so. So there's a lot of things that have to happen to justify the multiple expansion that we've seen over the course of this year. Yes. I would just say three quick things. If you're thinking about the economic environment, again, the number for next year right now is trending around 2.1. The average back to the 70s is more like 2.6. So 2.1 is great growth, but not quite great enough, right, to kind of get people out of this old secular growth leadership. And that's what I'm starting to hear about a lot. And I say, you know, to Dan's point on the dollar, we do tend to see downward revision pressure when the dollar is strengthening for most sectors, X things like REITs, utilities, and financials.

7:10So I do think that's a potential hiccup. And then, you know, you mentioned, I think, what, 20, 21, 2000. The analogy that's been coming up in my meetings recently has actually been 2018. And if you look at, you know, sort of the beginning of that second year of Trump's first term, we had gone through this enormous euphoria in 2017, excitement over the tax cuts. We saw the CFTC data on S &P 500 futures position break out to a new high. And that is exactly what we're doing this time around. So, you know, I think that we've got a lot of, you know, fantastic momentum in the economy, fundamentals. We need the GDP numbers to get a little bit higher.

7:44But at the same time, we do have some of these things that seem like they're going to trip us up. And going back to the original topic of conversation, Bitcoin, you know, Bitcoin, Trump, the S &P, they're all moving together. So we can get clues from one for the other. I think this is a good time to take advantage of all this momentum to the upside. I mean, it's a great time to be selling upside calls, especially, I think, in mag seven stocks. If you don't think we're going to get some kind of a correction as we get into March or April, as some of the policy starts to begin to have some teeth to it, I mean, there's no way.

8:10I mean, again, the moves that we've had, the fact that the triple Qs are up 13 and a half percent since the Fed meeting. So the Nasdaq up 13 and a half percent since a Fed meeting when, you know, there was really no major surprise there. The talk about inflation is important because, if anything, that is the outlier for 2025. If you get a Fed that if it's a hawkish cut, but more importantly, if the table truly forget the rhetoric this week on Wednesday. But if you get a table set for a Fed to begin to start to position to very neutral, but not necessarily an easing bias, stocks haven't priced this in.

8:42So, again, take the advantage of what you have in terms of momentum right now. I mean, selling three to six month Google calls, I'm not saying it's a free lunch and you can always play ways where you can roll up and out on those. But I think the mega cap tech stocks, which are leading the market higher, are a place to capture where there's been a lot of fun flow. And that's what this is. I think, I don't know how you feel on options, but I think the three of us actually might agree on that. I do think the skew in the MAG7 names is so much higher to the upside that you can put on attractive collars and protect your downside.

9:15And I agree. I agree. There's a lot of momentum and hype there. I mean, we saw Google hit 200 today. What a move today. I know, just today. And not even counting last week. I mean, right. That's 35 % in Google since September 6th when the UK said they were taking them down. There have been a couple pieces of news in Google over the last week, though. So this quantum news and then some of the reviews of some of the Gen. AI products are launching again. And Waymo. This had been a massive underperformer for all the reasons that we hadn't seen the innovation. I want to make one point, though. If you're expecting, like, massive M &A from mega cap tech, I think it's important.

9:48Let's talk about Broadcom. OK, Broadcom tried to buy NXPI. OK, this goes all the way back right during the Trump administration. Then when that got knocked off, I think you could say, OK, we're going to have a better regulatory environment for M &A. Well, Asian countries, European countries can block these deals. Broadcom tried to buy Qualcomm. The Trump administration or the FTC or DOJ, they blocked that deal. So it's not going to be so easy, I think, to do deals. I agree with you on big tech. I think a handbag deal might go through, let's say, hypothetically. You mean between handbags? Yeah, you might be buying in bulk.

10:21You know, the FTC is. But if you take a look, I mean, to your point, though, in terms of Google being an underperformer, are we seeing this sort of realignment of assets where you're going from what had been the performers, like, let's say, a Microsoft, which hasn't been performing very well? I mean, the last high, I think, was in August, sometime over the summer, into a Google now. So at the end of the year, even within the MAG-7, you're seeing this sort of recognition that there are the underperformers within mega cap tech that we want to be in. Yeah, I think that's fair. And look, I will say just mega cap tech broadly, right, they keep putting up the earnings and they're taking turns, right?

10:54I mean, there's one that shines a little bit more brightly than the other at any given point in time. But the reality is the value trade is not working because it is not putting up the earnings growth. And so the relative valuations are staying elevated for the big cap tech companies because they simply deserve it from that earnings perspective. And it's just not changing. And then the part of this market that's not performing that does kind of dance into Max 7, certainly NVIDIA does. But semis are underperforming. So this is what's fascinating, because SEMI's really led the market from October of 22, that CPI low, through where we got through, and really through the early part of this year.

11:26March is really when SEMI's kind of tapped out. So interesting also you're seeing even relative value trades, or maybe they're just relative both sentiment and catalyst trades. Taiwan SEMI really outperforming NVIDIA over the last three months. And that's something that I think will probably continue. I think the NVIDIA thing is really important. You could say, or we might have said six months ago, that if Vidya starts selling off, so all our semis are going to start selling off, maybe that leads some of these hyperscalers lower. It's just gone into Marvel. It's gone into Broadcom over the last two weeks.

11:53And let's be clear about this. With Broadcom getting over a trillion dollars in market cap, the MAG-7 is over. It's the fateful eight now. I mean, that's it, because I think the risks keep going higher and higher as this trade can be. So who's in the field? He just unveiled a new thing. It's the old MAG-7 plus the Broadcom. These are all the trillion-dollar babies here, and I think they've become increasingly sort of crowded. And just Microsoft could be a really interesting story. Fateful? Oh, no, you can't do that and run away from it. Listen, fateful eight. What do you mean by fateful? Hey, Jim Cramer, give me a ring.

12:27I know you coined the fang. I did the MAGA. You remember the MAGA? Yes, I remember. Microsoft, the Apple, the Google, the Amazon. Yeah, everybody else remembers it, too. Well, Trump picked it up. Not really. Yeah. No, but in terms of fateful eight, you mean they determine the direction of the markets. Listen. I mean, what's so faithful about them? Can I tell you? They determine the future of this secular technology trade towards generative AI. There's no doubt about it. So if all these companies start, and Microsoft started to do this, their guidance, their CapEx wasn't good enough. That's why this stock is lagging, right?

12:56So if we get to a situation where there was overordering and all these high-end GPUs, if there was too much capacity built out by the hyperscalers, and we start to kind of see guidance go flat, then the stocks are going to take, they're going to correct here. So now the eighth member now, so that who has helped create the fateful eight, Broadcom, which is up, I mean, it's up 40 percent in six days. Now, why is it up 40 percent? I mean, mostly an earnings number where you got some look into their AI business. And actually, the sense is that we have also three years out, we've got 40 to 45 percent of high gross margin AI business.

13:30That to me, this kind of fresh momentum, it's not so much that people are now looking to sell Invaded by Broadcom. I think it just tells you a lot of people feel like there's a lot more to do in this AI trade. I almost feel like it's fresh legs to AI. Dude, that was the most, it was just BS. They say they see the TAM of$60 to$90 billion by the end of 27, and the stock rallies$300 billion on that. That's like the dumbest thing I've ever heard in my life in the market. I mean that, because you can drive a truck through that guidance, and then here's a company that's going to do$60 billion in sales, and maybe$15 billion right now are generative ads.

14:03And we're not even talking about the GPUs that NVIDIA is making. So a whole heck of a lot of things have to go right for them to take meaningful share in that maybe$90 billion number in three years. And you know what? The price performance and the multiple has pulled that forward. Investors have made that leap of taking that leap of faith for NVIDIA. Where the hell were they two weeks ago? For NVIDIA. And where has NVIDIA gone directionally? Mel, but this has been going on since May of 2023. I'm not defending it. I'm just saying what the market psychology might be in this trade. You know what I'm going to say?

14:32That's the dumbest thing ever. Have at it. All right, let's move on. MicroStrategy co-founder Michael Saylor joined CNBC earlier today saying his company will keep buying Bitcoin even at these levels. I've said we'll just keep buying the top forever. Every day is a good day to buy Bitcoin. We look at it as cyber Manhattan every year for the past 300 years. You pay a little bit more than the person that bought Manhattan before you. But it's always a good investment to invest in the economic capital of the free world. Does he own real estate here? From Warren, what is next for the CryptoProxy? Let's bring in Joseph Vaffy.

15:10He's the managing director of equity research at Canaccord Genuity. Joseph, great to have you with us. Thanks. You are an equity analyst. How do you value this company when actually you really have to have a directional call in Bitcoin to put a price target on MicroStrategy? Yeah, good afternoon. You know, I think you have to have a positive medium to long term view in Bitcoin to be positive on micro strategy. You know, kind of going back to Michael Saylor's analogy of Manhattan real estate. You know, there's not much more of it that's ever going to be created. And so there is a scarcity value proposition there.

15:48You know, in the case of MicroStrategy, you know, they're just going to continue on this path of buying more Bitcoin. And, you know, importantly, what you see in this strategy is MicroStrategy's ability to create accretion in Bitcoin held per share. It doesn't necessarily show up in their financial statements, in their earnings numbers or the like. But every day, if you are an owner of a share of MicroStrategy, that share represents an increasing amount of Bitcoin on a per Bitcoin basis. And so that's what I think that's what investors are really looking at. And that's why they've rewarded the company so much in the last couple of years here.

16:37I'm just curious, Joseph, is there any other example of a company in history that has used their balance sheet in order to buy other assets? I mean, basically, it's almost like a shell company because it's basically exercising the tools that a corporation can use to raise money in order to buy Bitcoin and make more money off of that. The yield is much higher on that. And so is there any equivalent and is there any at all regulatory risk that somebody steps in and says, this is not this is not kosher? You know, I mean, it it is a consideration, I suppose. You have an operate. I mean, this is an operating company at its heart.

17:15It's a software company. It's got an operating company set of financials. It's not an investment company. They are acquiring an asset. They're acquiring Bitcoin, just like maybe an exploration company, a drilling company or an E &P company would acquire assets. They sell it. I mean, they sell, they produce, they produce or they drill for oil or gas to sell it. And this is expressly to hold it and or to trade it. Well, they're not trading Bitcoin. They have really only ever bought it. They've actually, I don't believe they've actually ever sold Bitcoin. They just continue to accrue Bitcoin as a scarce asset.

17:59And that's been the strategy to date. So, Joseph, what do you think of the asset then? I mean, at the end of the day, we all know what this is a call on. And I'm not questioning your ability to make a call on Bitcoin. I'm just kind of curious what your call on Bitcoin is. Because ultimately, that's really what this comes down to. And I would think this does feel different than a miner going out there and securing physical assets in the industry that they're involved in. But, you know, talk on Bitcoin or who's the next Bitcoin or, you know, where do you go with this trade or are you just buying Bitcoin forever?

18:32Well, you may be just buying Bitcoin forever. You know, I mean, you know, taking a word out of Michael Saylor's pitch book, you know, Bitcoin is the exit strategy. If you look at Bitcoin over the last few years, it's come a long way. It's seeing broader institutional adoption under a second Trump administration. We're expecting a much kinder regulatory backdrop. We've been dealing with a very, very menacing regulatory backdrop here over the last couple of years. You know, if we get a broad regulatory framework in place, digital assets just continue to make their way more into the mainstream. There will be more buyers of it.

19:17You could see other players do or mimic a micro strategy type of strategy. Or you could just see large tech companies, you know, the Magnificent Seven, just allocating 1 % or 2 % of their balance sheet to Bitcoin. So it does feel like, you know, nothing's perfect and not every asset class is for everybody. But the backdrop around the fundamentals of Bitcoin have really only been improving here over the last year, year and a half. Joseph, it's Karen. If we get this regulatory environment that's very friendly to Bitcoin, do you think that the premium would stay? You know, it's an interesting, I think you're talking about the premium at which MicroStrategy's equity trades at versus its holdings.

20:07You know, right now, MicroStrategy is the only one implementing this strategy, more or less. There are some smaller companies out there that are doing it. There's a small company called Semler Scientific that mimicked this strategy, and it's actually worked quite well for Semler as well. You know, at this point, there's not really any competition for microstrategy in this arena. If we get a broader regulatory framework, you know, there could be more buyers of Bitcoin. I think it would be a high-class problem for microstrategy because it would probably be upwardly biased extra demand on the price of Bitcoin.

20:45But maybe it wouldn't be as easy for them to implement this strategy at the scale that they're at. Joseph, great to see you. Thank you. Thank you. Joseph Baffi. I mean, Trump has said that the rules will be written by people who love your industry. That's exactly what he said at that crypto confab in the South over the summer. Yeah, no doubt. I mean, again, is this a pull forward? You know, when you think about the use cases of Bitcoin right now, the only one is really, you know, nerd gold. It's a store of value, right? So might there be other use cases if there is some regulatory that kind of puts it in the hands of some of the businesses that want to use it?

21:21You asked a question, though. This is really important. We were just talking about this. Have other companies done this sort of thing? Well, Apple's a great example. We were just talking about it. They bought back$800 billion of their own stock. They've retired more than a third of their shares. And you would tell me that was really accretive at the way in which they were buying back their stock relative to where they were borrowing money. And that is a good example of this. It never became levered. It was actually trading like a value stock as they were doing it. Now it's become a growth stock when there is no growth.

21:49And I'm channeling my guy, Adami, right there. So it's interesting to me that that's a great example over the last 12 years. Coming up, luxury on sale. White Capri could be looking to sell some high-end businesses. And the analysts getting bullish on Macy's heading into the winter season. All the retail moves straight ahead. But first, investing in America. President-elect Donald Trump and the CEO of SoftBank announcing a major investment in the U.S. Just how much they are spending and how many jobs could come with it. Don't go anywhere. Fast Money is back in two.

22:24Welcome back to Fast Money. SoftBank CEO Masayoshi-san appearing with President-elect Trump today at Mar-a-Lago to announce a$100 billion investment in the U.S. over the next four years. They promised the projects will create 100 ,000 jobs in AI and infrastructure. CNBC's Eamon Javers has got the details. Hey, Eamon. Hey there, Melissa. It was a scene right out of The Apprentice this morning as Donald Trump and Masayoshi-san engaged in some lighthearted negotiations over that$100 billion investment in the U.S. Trump tried to raise it to$200 billion, but Masayoshi would only commit to try to reach that higher figure.

23:00All of that in jest, of course. In the wide-ranging press conference that followed the investment announcement, Trump touched on a range of business topics, including the possibility of a resolution on TikTok. And we've learned late this afternoon that Trump has met with the CEO of TikTok. Trump didn't commit to any specific outcome in terms of the social media company, but he has said that he's got a warm spot in his heart for the Chinese-owned company because it helped him win the election this year. He said he had a productive meeting with the pharmaceutical industry leaders who came to see him at Mar-a-Lago and placed blame for the high cost of drugs, not on them, but on unnamed middlemen that he said are driving up prices in that industry.