Oil pulls back on Hormuz hopes... And a billionaire investor’s bond market warning 8/25/26

0:02Mazda has been named Consumer Reports' safest new car brand. It starts with our approach. Every Mazda comes standard with proactive safety features. So you're more aware of what's around you, more focused on the road ahead, and ready before problems ever start. Mazda. More of what matters most to you. Go to mazdausa.com to learn more. Consumer Reports does not endorse or promote any product. Say you always wanted to have a backyard oasis. Here's the thing. If you get smart with your money, you can do things like that. With Empower, you can start making the most out of your money so you can go out and live a little.

0:41Isn't that why we work so hard? To have some fun with our money? Like treating yourself to something special or spontaneously doing something extra for a loved one. So use Empower and get good at money so you can be a little bad. Join their 20 million customers today at Empower.com. Not an Empower client paid or sponsored. Live from the NASDAQ market site right here in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap. Oil falling on new hopes again. Traffic will come back to the straight-up four moves. But should you have faith in the move lower? And what does it mean for the oil and gas stocks?

1:17That is black gold. What about gold gold? It's suddenly rocking again in the gold miner ETF pacing for its best month on record. So, what now? Plus, Nvidia breaking a seven-day losing streak ahead of its earnings tomorrow night. Dick's Sporting Goods get tripped up after its own report shows bad shoe sales and healthcare at new highs, Merck and Vertex. Just some of the stocks hitting records today. We'll get behind the moves and whether or not there is any more momentum in those stocks. Hi, everybody. If you didn't notice, I am not Melissa Lee. I am Brian Sullivan coming to you live from Studio B at the NASDAQ.

1:56On your desk tonight, Tim Seymour, Dan Nathan, Guy Domi, and Danny Moses. Dimo. Host of the On the Tape podcast and co-author of, what are we doing? Contrarians at the Gate on Substack. Did I get that inflection? A little longer. Thank you. What's going on here? Welcome, Danny. Great to be here. All right. We're going to start. We've got a lot to do. So we're going to jump right in. No chit-chat. Okay. And we're going to start with the latest developments in the Middle East. The latest headline, sending oil prices sharply lower this afternoon. WTIO finishing the day down 3%. Brent crude down 4%.

2:30The big move, though, was in what they call the Mourban contract. That is from Abu Dhabi. Maybe third biggest contract in the world. It fell more than 8 % on the day. Why? Here's why. The move comes after Iran and Oman announcing they have reached some kind of tentative deal to effectively control, and you know, guys, I hate this word, particularly because the U.S. Navy is getting a fair number of ships through, reopen the Strait of Hormuz. The two sides releasing a statement in English that reads, quote, the ministers discussed a phased framework that could provide a practical and viable basis for moving forward.

3:09It involves a creation of a temporary joint corridor, information exchange, traffic management, and provision of relevant maritime and security services. End quote. Crude post against Lois Settle in about two weeks. Still, though, let's be clear, up about 20 % since the beginning of the war. But Guy Adami. Yes, sir. Yogi Berra said deja vu all over again. And I feel like we get these kind of announcements, maybe not daily, but close. Market moved. Should it have? Or if you see a fork in the road, take it. Take it. Yeah. Take it. While you see a chance, take it. Steve Wynwood. Yeah, which is a really lousy song.

3:48Valerie on that album is actually a decent song. Not really. In terms of the commodity, look, oil is going to fluctuate. But I think what we've learned, and by the way, between you and Pippa, we do an amazing job here at the network covering the energy sector. I think what the market has figured out, crude oil doesn't need to participate for these stocks to do well. Now, OIH is at a decent runs pulled back recently. The XLE made an all-time high last week. Again, pulled back a little, maybe a little bit of a double top from that March high. But I think what we've learned is there's some structural problems.

4:20Valuations are reasonable, if not attractive. And these companies have learned how to do very well in this environment. Their balance sheets are as best they've ever been. And their productivity rates are the best they've ever been. So you stay long energy stocks, regardless, in my opinion, of where crude oil goes. There were not too many stocks that hit new highs in energy today. But the last couple of days, last couple of weeks, been a lot of new highs, a lot of the smaller cap, mid-cap refiners, which I know you like, Guy Adami. But Tim Seymour, how do we look at the energy space right now?

4:48Well, and Danny's going to talk about some stuff because he brought up on our call. And if you think about MLPs and you think about the income, but you think about the growth component of what they're now going through, really, it's a deja vu all over again for them. I think this is also I don't really care where oil prices go in the short term. The term structure of the futures curve tells you oil prices are going to be higher for longer. And when you think about also what we're going to be talking about for a lot of this show, what we're going to be talking about for the rest of the week, and all we've talked about for two weeks are essentially long-term rates.

5:20And if you told me that oil prices were going to 70 and you told Scott Bessent that two weeks ago, he probably wouldn't have made the announcements that he made because, again, the rates markets are driven by the oil market. So back to the question you asked me, though. Yes, I think you can own energy companies here. I think you want to own oil services. I like SLB because I actually think they're a technology company that happens to also operate within the energy space. But the integrated oils, and I mean Europeans, especially like Total and Shell, which trade here, are places to get yield, but also places to get that diversified exposure that I think are cheaper than the U.S.

5:55wants. Total and Shell very quickly follow up, Tim, obviously both offshore companies. Total is French. Shell sort of Dutch-British. Yeah, TTE and SHL. Why those? You like the valuation versus the U.S.? They're cheaper. They're paying higher dividends. I know this isn't a factor right now, but it certainly has something to do with what the companies could do in terms of their capital markets. They could be buying back more stock. These guys break even for those heavy divs at much lower rates than the U.S. do. And I just think they're under-owned. I think energy stocks have benefited from all the volatility in tech and some of the high beta names looking for a home.

6:29And oil at 80 is still very supportive of that. I go back to ExxonMobil. Last year, they came out and gave out a target for 2030 EBITDA based on$65 oil. So you think about what these companies can produce and how cheap these names are. I think not only are they safe havens, but I actually think there's fundamental reasons to own these names as well. I guess I'm focused on diesel right now. If you're thinking about the health of the economy and kind of where these spikes or at least this elevated level of both gas and diesel are sitting, I mean, these are levels that are not likely to come in pretty dramatically, at least on the diesel side.

7:00and you think about how many different parts of the economy digital touches, we're going to have inflation readings over the next few weeks, I think CPI, PPI, that sort of thing. And I just wonder with consumer confidence where it is, and just kind of to your point, Sully, we've seen this before, these sorts of announcements, the fact that it's coming from Iran and Oman is interesting because this is where some of the movement meant to be a couple weeks ago. But some of the conditions in which any sort of control over the strait right now is probably not going to be that palatable to us, right?

7:33Or the other countries in the region, any of whom I've spoken with, they're not going to pay a toll. That's right. Right. And so Iran and Oman can say what it wants. And by the way, Pakistan also floating some peace deal type stuff on the more macro side. We had a guest on the 1 o 'clock show today. I filled in for Kelly saying basically don't buy it. Like market oil went down because the computers sold off. Fundamentally, nothing has changed. Well, I mean, listen, our good friend and friend of the show, a friend of our show more than your show, Halima Croft. I mean, she was on a week or two ago, I mean, suggesting don't buy any of this stuff.

8:05You know what I mean? And just kind of at least not through November 4th, right, that sort of thing. So I think a lot of folks are trying to play folks. I mean, like our adversaries in some of these situations are trying to play the waiting game, and they want to get through the midterms, that sort of thing. So there's going to be fits and starts. You know, crude oil is something that's had a nice rally. But again, I guess focus on diesel a little bit because that's the sort of thing I think has the potential to really show up in some of these inflation prints. Well, that goes, the diesel story, Guyadami, goes to your refiner story.

8:33I know you've talked about Valero for years, by the way, and it's been great calls. Because these companies, the way they make money, you know, the spreads, difference, some of these margins are up 700 % year over year. I mean, I don't know a lot. I know that's unsustainable. But in the short term, man, the market has been buying these stocks big time. I mean, if the crack staff back in EC can put up a crack spread chart, you will see that it's pulled back recently. But we're just coming off all time highs. And to your point, I mean, that's just off the gasoline thing. I mean, when Dan brings in the diesel equation, I mean, the margins have been through the roof and you're seeing it in their earnings releases.

9:09And that's why I still think despite the I mean, these parabolic moves in these names, you want to find a place to buy them, not sell them. I still think there's value here in Marathon Petroleum, Phillips 66, and Valero specifically. Yeah, I mean, and there's smaller cap ones, too. We don't talk about any. I don't know if anybody's got a take on these. But you look at PBF Energy up 147 % this year. You look at Delic. You look at Par Pacific, Tim. These are not names that we talk about a lot. Do you want to stick with the big names, the marathons of the world that you know? Are you willing to venture down a little bit?

9:42I know you've got a strong view on small caps in general. Yeah, you know, I don't I don't believe in small caps. You literally don't believe they exist. No, I just don't believe I need to spend a lot of time on them. I think there's a disproportionate amount of time spent on small cap stocks. But why are we talking about that? But I think we've got to call Dan Diesel now because it's nice to hear him talking about Diesel. I just don't hear him talking Diesel. Well, you know, when we get to the Eploc, it'd be cocked Diesel. You can only hope. That's a good nickname. You can only hope. I would say rather than chasing either E &P or pushing out the refinery curve, I think you're going to an ET, you know, a transfer partners or ETP.

10:19I mean, these are places where you're getting a huge yield. Again, these are utilities, but these are utilities that are being driven by power demand. They're going to have five billion in CapEx growth in a good way. There's a there's their NGL business. That's, you know, natural gas liquids. So, again, the product market is full and the margins on these where they're taking tolls. Speaking of tolls, I just think there are places to be very conservative. And again, MLPs at one point were a no-go. And in 2016, 10 years ago, people were destroyed. I think they're going a lot higher. I think it's key now, energy infrastructure here in the United States, these names are going to benefit from that.

10:56And people are trying to find yield, worried about owning treasures, which I know we're going to get into at some point today. These are very high-yielding companies, and they're growing. And so I think these are great places to look, the MLPs. A lot of people are buying them also for the data center play where they go what they call behind the meters. They build like a dedicated pipeline to the power utility that's just running the data center. You mentioned getting the yields. That's right now, Danny. We're doing it right now because billionaire investor Stanley Druckenmiller kind of slamming Treasury Secretary Scott Besson's decision to intervene in the bond market.

11:29In a Wall Street Journal op-ed titled Let the Bond Market Speak, Druckenmiller warns that artificially in his terms, suppressing interest rates heightens dangers in the market. The critique, particularly noteworthy because Besant worked for Druckenmiller. They both worked actually for George Soros and Druckenmiller kind of mentored slash bossed, whatever. Scott Besant, let's bring in CNBC contributor Peter Bookvar, who is chief investment officer at One Point BFG Wealth Partners. Yeah, I guess. And also, by the way, there's a lot of relationships here. Peter, maybe slammed is too strong of a word.

12:06What was your take on the piece, but also what's your take on on what Besson is doing or trying to do? Well, I wasn't surprised by the content. I was more surprised by the high profile and critical nature of it. And as you said, as they did work together to sort of push back in such a public fashion, I think was was a surprise. I think at the end of the day, what Druckenmiller is saying is, you know, the Fed has been trying to manipulate the yield curve since 08 via QE on top of what they did on the rate side. And I think Kevin Warsh even started to say, OK, enough is enough. But then Besson comes in and tries to bully the long end of the yield curve.

12:53The problem with that is, is the market is much bigger than he is. and Druckenmiller saying, just let the market price the level of rates that it believes it should go. Because in the piece, he said, whenever a government is going to try to fix the price, they're always going to lose against the market. And I think that that was really his bottom line. Now, I don't think Druckenmiller was necessarily making it clean. Do you believe that? Because the bond market is massive. I get it. It's global. What happens in Japan matters here. All the stuff we talked about actually just yesterday. But at the same time, the bond market does not have a printing press.

13:31We're not talking about doing that. I get it. But you can sell short, buy long. There is a power the Treasury has that maybe the bond market does not have. Well, in terms of buying power without the printing press, the market is going to swamp what the Treasury is trying to do. What was clear with what Besson did is he drew a line at around that 475 level and said, I don't like it here. The market, of course, within a couple of days said they believed otherwise. Now, today, we've obviously seen the drop in yields because it's responding to the decline in oil prices. And that's what the long end of the yield curve should do.

14:12It should respond to that. And I do wonder, because of Kevin Walsh's relationship with Druckenmiller, whether Walsh sort of disagreed inside his mind with what Besant did, because Walsh has been telling us prior to becoming chair and after becoming chair that he's OK with the market doing more of the work in terms of setting the cost of capital. And here you come in with Besant doing what he did also by issuing short term bills, if he does follow through with this to finance those purchases, it makes Fed policy even more sensitive to that short term bond issuance. And that if he does need to hike rates because inflation is still an issue, it's going to be even more cost prohibitive from an interest rate expense perspective for the U.S.

15:01government. Peter, it's Tim. So let's push a a little further down this, you know, three's company dynamic that's not, you know, Suzanne Somers and John Ritter guy. Joyce DeWitt. But I am talking about Warsh Druckenmiller and Bessent, and I almost, like, Stan Druckenmiller has more credibility than just about anybody on Wall Street. And the fact that these are two former partners, proteges, and the fact that he's really jumped in here against Scott Bessent, the Treasury Secretary, not Scott Bessent, the hedge fund manager. I don't know how to ask this question without forcing you, but does this mean Scott Besson really is losing credibility?

15:43Or do you think this is a case where there's an attempt by all three parties to show kind of the independence of the different areas of the government and the Fed? Well, I'll tell you where I think he could cross the line in terms of losing reputation is if the 10-year yield resumes its upward trend. If it goes to 475, it goes to 480, goes to 485, and Besson decides to increase the pace of this exercise. And instead of going from 2 to 4 billion, it goes 4 to 8. It goes 8 to 16. It goes even more. And if he decides to push back even more against any market-driven rate move, that is when he risks losing his credibility instead of allowing the market to price where they believe rates should be.

16:34Yeah. Peter Bufar, always appreciate your time, my friend. Thank you very much. Danny Moses, I want you to comment, but I also just tweeted this out. Don't tell anybody. But tenure yields have moved less than 1 % in three years. They haven't done squat in almost 36 months. The bond market seems to have made up its mind where bond yields and borrowing costs should be. I was asked on a podcast this week, are we in a financial crisis? Of course, they wordsmithed and said, Danny Moses says we're in a financial crisis. What I said was, if you didn't know anything else except what Scott Besson did, you would think that we were in a financial crisis by how he reacted.

17:11And Besson was on this network last week talking about how his intent was to get the market to focus on fundamentals and not trade the headlines. Well, fundamentals now mean looking at$40 trillion in debt, approaching a 7 % deficit. And that's kind of been the problem here. And when you're trying to contain the yen, so prevent Japan from shoring up their issues by selling U.S. treasuries, when you're trying to gain this thing to Druckenmiller's point, let the market forces do their thing. And you're right. We can survive in 5 % 10-year yields. It's the reason that they're going higher. Let me ask a different way.

17:42And Guy, jump in here. Is it possible, my point about the 10-year yield is that if you look at a 40-year chart, we're historically kind kind of right where we should be, if not on the lower side. Number two, is it possible that no matter what happens, the bond market could sit here for another couple of years? This could be where we live for the next five years, two years, 10 years. Who knows? The issue now is that we've never had this much debt to deal with and the amount that's coming up to refinance. Right. So the cost of just the interest alone is sucking up a lot of the budget. And so to Peter's point, and kind of what he's talking about here, is that you've got to let natural forces kind of work their way in.

18:16And I don't think there's a reason to panic here. But again, I think now we're going to highlight kind of the fiscal condition of the U.S. and it's not pretty. Yeah, I mean, they could. Absolutely. I mean, the scenario you just outlined, could they stay here for the foreseeable future? Absolutely. I don't think they will. I think they're going higher. I think they're going, when I say meaningfully higher, I think north of 5 % in the 10-year. We're not an economy nor a market that is set up to endure that, I think. And by the way, Danny mentions, you know, they're fighting on a multifaceted front right now in terms of trying to keep our rates down, trying to protect the Japanese yen.

18:48There are a lot of balls in the air. I think you should have learned something, I think, from Japan with their yield curve controls and see what they're doing, you know, what they're dealing with now. Guy, didn't Besant, and correct me if I'm wrong, but didn't Besant the other day say, didn't say it, but it's clear, 5 % is not going to happen. Well, sorry to jump in. No, go. You know, I don't know how he can say that. Also, I don't think we should underestimate that we just borrowed at the most expensive rate we have in 25 years with the biggest number. OK, this is it's just like, you know, people, you know, if you invest in funds at the top of the market and that's when they lose the most money.

19:27I mean, I think to say that on relative terms that things have barely moved is to not look at the trend from October of 25 and long rates is to not identify that by the end of next year. I bet we'll have had a trillion dollars of high-grade long-end issuance that's come out of CapEx AI spend. We've already had$250 billion this year. You're talking about corporate bonds, though, right? Yeah, but you can't tell me that's not driving up long-term rates. It's competition. By the way, these companies used to trade inside of treasuries, are now trading wide of treasuries. That's pulling everything wide.

20:01Japan's pulling everything wide. We've never run as big of a deficit to GDP. we've never had an inflation that's been this dug in for this long. And I don't know how anyone can control 5%. I'm not saying we have to get there. But to assume that this is just like, oh, we've never, you know, this is kind of dime store stuff, I don't think that it is. I'm not yelling crisis at all. I'm saying to not recognize that the structure of our debt market is very different than it used to be is not saying it accurately. It was a good rant. Listen, the next 40 minutes is going to be all about small caps. The next 40 minutes is now going to be all about passion.

20:39I mean, the smaller, the better. All right, coming up. Actually, we're going to one of the world's biggest companies, NVIDIA, set to report earnings in less than 24 hours. Tomorrow night on this show, we'll get it. And we're going to tell you after the break what the options action is signaling now. Plus, some health care stocks hitting records today. how to play the strength in both Amgen and Merck. Do not go away. A lot more fast money. Still to come.

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22:26Don't just launch AI. Land it. Because when AI delivers results, it's amazing. We configure, optimize, and deliver the tech that runs business. CDW, make amazing happen. Come on. Welcome back to Fast Money. NVIDIA breaking a seven-day losing streak all ahead of tomorrow night's earnings report. The company investors expecting to see revenues nearly double from a year ago. But outside of sales, investors are also going to be watching whether NVIDIA is able to cut its dependence on hyperskillers, the biggest tech companies, the Amazons, the Alphabets, etc., for future growth. So what are the options markets saying about the results?

23:10We don't know. Mike Coe does. And he joins us now with the options action. Mike. Yeah. So NVIDIA, always one of the busiest single stock options. Right now, the options market's implying a move of about 5.9 % between now and the end of the week, probably 9 % to 10 % over the next four weeks or so. The stock hasn't performed particularly well the last four reported quarters, down about an average of 6%. But we have seen well above average call volume relative to puts. So it traded almost three times as many calls as puts today. One of the more active contracts, the 215 strike calls that expire at the end of the week.

23:42We saw some institutional blocks in there, people paying about$5 for that contract. That's a bet that the stock could be about 4 % higher by the end of the week than where it is right now. And to me, options do seem reasonably priced, and the bar seems a little lower, maybe, than it has been. Mike, thank you very much. Dan, your take? Yeah, I don't disagree about the bar. You know, it's interesting that the options market is basically pricing what it always does, about 5 % in either direction. Oftentimes, it kind of barely meets that or underperforms that a little bit. And, you know, this is one that I would say this is the most important NVIDIA quarter since the last one.