Reading Into Bitcoin’s Big Boom, and Can a Couple Unstoppable Stocks Keep Riding Higher? 2/14/24

0:01Live 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. The Bitcoin boom, the cryptocurrency surging over 20 percent in just the last month and now back in the trillionaires club. Should investors cheer or fear this roaring rally? Plus, can't stop, won't stop. NVIDIA and Eli Lilly continue their unstoppable moves skyward. So how long can these names keep defying gravity? The chart master is standing by with some answers. And later, no parking allowed. We'll take you to a community in Arizona where Ubers, e-bikes and your own two feet are the only way to get around.

0:34Is this part of a new play for the builders. Our Diana Olick will join us with the details. I'm Melissa Lee. Coming to you live from Studio B at the Nasdaq on the desk tonight, Tim Seymour, Karen Feinerman, Courtney Garcia, and Steve Grosso. We start off with a Bitcoin breakthrough, the cryptocurrency topping the 52 ,000 mark for the first time since December 2021. The coin has gained more than 20 % just this month. And get this, Bitcoin's market cap is now back above$1 trillion. That's bigger than Berkshire Hathaway. If it were a company, it would be the seventh biggest in the United States. Take a look at some of the Bitcoin proxies, names like Coinbase, MicroStrategy, Marathon Digital, all up double digits today.

1:12The move's coming as inflows into the newly launched spot. Bitcoin ETFs pick up steam. The fund's attracting almost$1.2 billion in investments last week, this according to Fundstrat, and seeing prices soar alongside it. So can this rise continue? And what does this mean for risk appetite in the markets, Tim? There's high correlation there. And it also means that it's a little ironic because I think in the last week or so we've digested inflation data dynamics around the Fed that say the Fed is higher for longer. It's just it's a case where I think if you have less Fed, this is one of the core tenets behind owning Bitcoin.

1:49In other words, it's about having a currency or a instrument or a security or we're not calling it that yet. That actually is grounded in some kind of of, you know, backed, you know, where you can actually not just print money forever. It's not a fiat currency. That's the reason I think a lot of people own Bitcoin. Obviously, there's a whole speculative fervor around it. And I do think we're going to get through that 64000 level. I do think it is indicative of where we are in markets. I look at the high multiple tech stocks that were soaring, the ones that were not making any money, the long duration assets that are also soaring, a Spotify, you know, whoever you want to look to that was in their heyday.

2:27And I think this is something. And then you look at the addressable market for for for Bitcoin. In other words, who can it really be? Well, now it's been institutionalized. And I think that's part of this. But there's no question it goes back to risk in the Fed. And it's amazing when you take a look at the run in not just Bitcoin, but a lot of the proxies that we had mentioned. I mean, it started months ago in anticipation of the approval of the spot Bitcoin ETF. And there was some thinking that maybe there would be some sell on the news sort of, you know, dampening of this rally. But here we are.

2:54We continue to go through. Well, there was sell on the news, right? That first few days went from like 47 down to maybe 40, even maybe broke 40. But I think what you were saying is the Fed being disciplined would normally not be a good thing for Bitcoin. That's correct. But it seems to be at the moment. It doesn't really matter. Remember, we have the halving later. So the supply, there's half as much supply coming on each year. And I think it's just the supply demand dynamic of new ETFs that are raising a ton of money that need to be undergirded by actual Bitcoin. Right. So there's that demand that didn't exist.

3:33There was everyone waiting for it. They weren't going to pre-buy it. So I think that's what's going on. I don't know how else to explain. You're in it. I am in it. I know, which is hard to defend as a value person, but I've been in it for a long time. Yeah. Yeah, we're not in it. This actually isn't something we look at for investors. But I do think a lot of this has to do with people getting into the ETFs because it is that supply chain that you're talking about, right? So behind the ETFs, they have to buy more Bitcoin, which is causing a supply glut with it. It's interesting, as you point out, that this is now larger than Berkshire.

4:08is the same time as I pointed out how Microsoft is now basically twice the volume of the entire energy sector. So you're really just seeing that people are putting all of their money into what they perceive as the growth assets. Because if you're getting 5 % on a money market for your safety, they're saying, well, if I'm going to be investing my money, I'm putting it into those high growth areas. So that's where you're seeing people's risk appetite. It's going right back up. And is that justified? I think that's the question, right? I mean, I think some of these riskier assets are getting close to that irrational exuberance, I would say.

4:38But I think that's exactly what's happening in the markets. People are rushing to those categories. And that's what you're seeing with Bitcoin. So I think Karen said this. If you're an institution, I think you said it's been institutionalized. Is that the word you used? So if you're an institution and you have an ETF that you can now buy it, I don't think you're allowed to buy it in the first week. So I think you have to wait. So it probably matches up with the amount of weeks that they had to wait. I'm long I bet. And we were worried about Grayscale. What happened to Grayscale? It outperformed.

5:06So you're not really seeing that money coming out of Grayscale going right into the ETFs. Grayscale seems like it's unto itself. It's a place where people are going to keep it. Tim touched on this. It's where people have their trading. So I don't have a Coinbase account. I could trade now IBIT in my regular account, which makes it a lot easier and a lot less risky for me. I don't want to have to worry about an account getting hacked. Not to say that those accounts are susceptible to being hacked. But any account can be hacked. I just feel I know these accounts. So now now I could be invested in them.

5:40I sort of had to have a Texas hedge going on because I'm long marathon digital as well. So marathon digital was up 14 percent today. I bet was up four percent and change. So I'm long them both. I'm long them enough to feel good about it, but not too much to lose sleep. You have the having. How many outstanding are we with Bitcoin? 19 million to change. We only have to go to 21 million. So you have things that are really at the forefront this year, having happens every four years. So you have things that are at the forefront that give you a really bullish setup going into spring. It wasn't too long ago when we were sort of doubting Coinbase or it looked like investors were doubting because of the percentage declines, even though the longer term chart was a pretty good one.

6:23And here we are. We're back into these sort of huge monster double digit percent gains. I think the correlation is absolutely going to continue. And, you know, talk about addressable market. And the whole point is, is that there are more people now looking at digital assets. And I still think it's the on ramp. I still think it's a it's a case as these assets become more investable. But people are rallying up Robin Hood over the last couple of days saying they now actually are getting some inflow from people from Fidelity accounts or Schwab or whatever. I mean, the same dynamic goes for just digital assets overall.

6:57all. And so I know there was a laughable period where people were throwing money out the window in terms of tokens and various forms of crypto. But there's no question that, again, think of all the different markets where we talk about a growing addressable market. So back to Coinbase, I'm long. And I tell you what, it's going to be over 200 before it's below 100. And I think it's going to get back to those old highs. Is there, it's a question, I don't know the answer. Is it taking some of gold's share? I was wondering, I mean, if all this money is flowing in, where does money coming from, right?

7:28I would think that it would. And so that's just an additional source of virus. Or is it other tech? I don't know. It's probably a little bit of both. They call it digital gold. So I have to believe that that's the reason. But I think that it was a rehash of CPI. I think people looked at CPI yesterday and said, oh, they're going to be raising. So that's what the steam came out of Bitcoin yesterday. And now today they say, well, that's so levered to rents and rents have been spiking. So the Fed really follows PCE and PCE has been running at 1.9 percent. The Fed's target is 2 percent. And that's why it rallied today.

8:04I think you have a case where if you if you believe that there are commercial real estate problems, if you believe that there are issues yet to happen in the world and yet you believe that the worst of the Fed is over again, that's a backdrop for being defensive. A lot of people and the original kind of essence and the raison d 'etre, etc., for Bitcoin were people that thought the world's coming to an end, so to speak, in financial terms. And that was, you know, I think that's part of the reason why people will continue to buy it, especially in a world where we look at the U.S. deficit grow and grow.

8:34Meantime, broader markets closing near their highs of the day, with the S &P finishing back above the 5 ,000 mark, the Nasdaq leading the gains, though all three indices still lower for the week. Our next guest is doubling down on his call that we are in for a volatile first half of 2024. Wells Fargo Securities Head of Equity Strategy, Chris Harvey, joins us now. Chris, great to have you. In terms of volatility in the first half, like a decline from here or volatility moving higher? Because it seems like we're just going to new highs here. I think volatility will spike up. I think what's going to happen is things are going to get a little bit, we'll see a repricing of risk, right?

9:09So typically when we're coming out of a big micro period, you have earnings season, we're moving over to the macro. Yesterday, we got a taste of what happens when the macro takes over. That wasn't great. The other thing that we're talking about is that things are actually good on the macro side, which is going to keep the Fed at bay. If we rolled the clock back 12 months ago, we say, OK, GDP is going to be better than expected. Stocks are going to be up 20, 25, 30 percent. Credit spreads are tightening to below 100 basis points. The consumer was at consumer net worth is all time highs. Right. And the job situation was still good, would we be saying, yeah, now is a great time to lower rates?

9:45We'd say no. In actuality, this is a time where you actually raise rates. That's not going to happen. But we think it's going to be, you're going to see the Fed being pushed back and pushed back and pushed back. And we're just going to see a repricing of risk at this point in time. So in terms of that repricing of risk, I'm curious to whether or not NVIDIA's results is going to be sort of a key test for you as to whether or not that repricing will actually happen. So I think what's good for NVIDIA is good for NVIDIA, right? So NVIDIA is up 50 % year-to-date, right? So taking a, just shifting a little bit, we run or I run or oversee one of our model portfolios.

10:21That model portfolio is up or outperforming by about 200 % or 2 % year-to-date. We have 10 % in cash. In a typical environment, that shouldn't work. That shouldn't occur. But what's good for NVIDIA, right? So NVIDIA is driving that performance. NVIDIA will continue to drive that performance, but it's not driving the average stock higher, right? What we're seeing is rates go higher. That's way on the average stock. And NVIDIA will do what it does, right? It's not an indication of the broader market. But it's an indication of the Magnificent Seven, which has been driving the gains of the broader market.

10:55Which is the broader market. Right. I mean, it is the market. It is, right? Or I should say the average stock, right? If you look at small caps, you look at mid caps, you look at value, you look at equal weighted, it's flat to down this year, right? And that's being weighed on to a certain degree because guidance fundamentals are fine, but they're not great. Rates are going higher. So as long as you're a part of that magnificent seven, fantastic. If you're not, it's tough sledding. So would you be saying that you should buy protection? I mean, we saw other than yesterday's spike in the VIX, which maybe I don't even know if the VIX is such a good instrument to look at anymore, that it was down almost what it was up yesterday.

11:34Are you saying you should buy protection there? It's cheap. So what we're saying is we want to participate to the upside. We want to protect to the downside. The way we're doing that is we're positioning the portfolio with communication. We want something garpy, something growthy. That's communication. Communication is working. We want to balance that out with something more defensive, something oversold. That's health care. And to a lesser degree, it's utilities. And we think that portfolio is the portfolio you want to go. You want to run going forward, whether you're a bull or bear. And year to date, we've been running this portfolio for the last 12 months, and it's worked out very well.

12:05And I think in a difficult tape, that's going to work as well. And year to date, to the upside, it's performed quite well. You just pointed out a few minutes ago here that small caps in value, a lot of people coming into the year said, oh, the markets are going to broaden out. That's where it's going to be. That has not come to fruition. And I'm just curious, when you're positioning a portfolio or if you're recommending that to anybody, Should they have an allocation there? How much they are compared to the MAG-7? Like how much do you want to, you know, is that some of a FOMO trade that's going to continue to rise?

12:35Or do you want to have money there still? So it's our opinion that you shouldn't see a widening out, right? That small caps are not going to work. What happened last year at the end of the year is what occurred is you had a lot of short covering. You had a lot of hedge funds shrinking up their book. That caused the dynamics to look like things were broadening out. Then year to date, you saw reverse. As the calendar turns, everything reverses. The underlying fundamentals for small cap, they're not great. The macro, what you need for small caps to work is a really big run in the economy, really big upward revisions.

13:07You're not seeing that. The other thing you need is you need to see credit spreads come down. Credit spreads are already tight. So this environment is not great for that. This is an environment where there's a lack of growth. You're looking at 2, 2.25 % GDP growth. And in that environment, you still want to stick with growthy stocks because of the scarcity of growth. All right, Chris, great to see you. Thanks for coming by. Chris Harvey, Wells Argo. You agree with this barbell approach? I like a lot of the things Chris is saying. I think utilities are oversold. I think they're extremely attractive.

13:34I think health care is interesting. And I think a barbell makes a lot of sense. And I would also highlight that it's what everybody's saying here. Equal weighted is down 30 basis points year to date coming into this. But I look back at an S &P that pre-COVID, so before we even knew that we could have all this accommodation and all this dynamic that really has changed the world. But S &P was at 3 ,300. And so if you think about where we are now. And there's still probably some COVID fluff in there. But ultimately, what's been doing it? It's been the biggest stocks in the world. And I'm not sure what's going to stop this.

14:05And it's just a little bit of a reshuffling of the deck. Apple's making new, fresh, relative one-year lows against the S &P. NVIDIA is now bigger than Google. Microsoft's just off of relative all-time highs to the S &P. So as a fund manager and whether you're an advisor or whether you're someone that's actually running equities and running, you know, long, short U.S. or wherever you are, getting underweight those stocks is very, very risky, and I don't see anybody doing it. Yeah. Do you think NVIDIA reports and NVIDIA will do what NVIDIA does, or is it some sort of referendum on a lot of the other AI-powered names that lead and drive the MAG-7 and the markets?

14:44Yeah. So we've looked at NVIDIA and we've tried to pick the top, and we've failed repeatedly. I think the point of the MAG-7 or whatever we're going to call it now is a product of passive investing. So it just feeds onto itself. No one's buying the Russell. It's underperformed for too long. And I've stated that fact that over 40 % of the Russell is actually unprofitable companies. And back in the mid-90s, that number was only 15 % of the Russell was unprofitable. So it's too deep to take that stab and you can't stay there for long. So you're forced into buying, do the passive investing, buying all of the MAG-7 and staying with market cap weighted stocks.

15:24So getting back to NVIDIA, it's a flip of the coin at this point. They still own 85 percent of the market. I still think they can chug along just fine. We are seeing the cracks, though. I mean, Tesla has sort of dropped out, right? Right. Apple, as you mentioned, a relative one-year low against the S &P 500. It's not all rising at the same time anymore. I do think, though, there is some amount, and I don't know what that is, of NVIDIA that is not passive, that is very retail, very excited. You know, the buzz around this couldn't be greater. So idiosyncratic. Yes. I don't know how big that is, but I do feel like there's a lot of, you know, expectation and buy the rumor, sell the news.

16:02Absolutely could happen. I do have IWM, though, as well. That I mean, it was nice today, not so nice yesterday. I just feel like it has underperformed for way too long. Thematic growth, though, you know, kind of always has been and will continue to be. And so whether it's a lily and or whether it's even what's going on in online sports betting or whether, you know, You're looking even at the digital and the crypto and the Bitcoin markets. I mean, that's where people are investing. And I think that's going to continue to not be weighted in fundamentals and valuation. We've got a news alert on some 13F filings.

16:33Berkshire Hathaway making some more moves in HP Inc. and Paramount. Leslie Pickers got the details. Hey, Melissa. Yeah, first I should tell you that Berkshire Hathaway, its mystery name is still a mystery. This quarter's filing still included that notation showing confidential information has been omitted and filed separately with the SEC. So we continue to be in the dark, sadly, on what that is all about. However, the firm did make some moves in the fourth quarter. As you mentioned, Berkshire increasing its stake in Chevron by 14 percent to hold about$19 billion worth of that company at the end of 23.

17:10However, Warren Buffett's firm slashed its ownership in HP Inc. by 78 % to hold under$700 million worth as of the end of December. Berkshire Hathaway also reducing its ownership in Paramount Global by nearly a third to hold under$1 billion worth at the end of the year. And Berkshire sold 10 million shares of Apple. That sounds like a lot, but that's just 1 % of the firm's ownership worth roughly$174 billion at year end. And, of course, always a reminder that these forums are snapshots from six weeks ago. They may have changed in the time since. Mel? All right. Leslie, thanks. Leslie Picker. Karen, what do you make of some of these moves?

17:51Well, now I really want to know what the mystery move is, of course, right? Paramount, whatever is happening right now, talks or not, or who knows if anything gets resolved, they sold prior to that. Not big changes. Nothing really jumps out at me. She said, you know, that's a tiny drop in the Apple bucket. It's been quite an extraordinary bucket. Coming up, some after hours action as earnings season rolls on. Shares of Cisco dropping after delivering results and numbers out of the quarter on how to trade the name next. Plus, a rideshare shakeup Uber jumping on news of its first buyback plan. And after Lyft's post-earnings pop, is this trade worth the ride?

18:30We'll discuss that when Fast Money returns.

18:35This is Fast Money with Melissa Lee right here on CNBC.

18:47Welcome back to Fast Money and earnings alert on Cisco shares of the legacy tech stock down after posting weak guidance, but the company reported a beat on the top and the bottom line. Christina Parts Nevelis got the latest. Christina. Yeah, the call just finished. Cisco, though, resetting expectations for the second quarter in a row. CEO Chuck Robbins warning on the call. They have to cut investments in costs because companies are generally more cautious with IT spending, especially within cable and teleco providers. They are seeing weak demand there. Think Verizon, AT &T. Customers are still working through elevated inventory levels as well.

19:18And that's taking a little longer than expected and possibly a reflection of weaker time. Cisco plans to cut five percent of its global workforce. So that's roughly about 4 ,200 people in Q3. That will mean about$800 million in costs. The company, as you mentioned, Melissa, beat earnings expectations for the quarter. But keep in mind, the bar was already lowered last quarter. Its networking business did drop 12 % year over year. But software sales increased. It now represents 50 % of total revenue. The dividend also increased about 3 % in the quarter. And it may not change the tides right now.

19:49But this quarter, Cisco announced a partnership with NVIDIA to deploy GPUs with Cisco Ethernet using Cisco's global sales channel. So it'll go through them. And Chuck Robbins just saying on the call, too, that they are seeing about AI orders tripling. And we should start to see that in their fiscal new year, which would be in September. The CEO, Chuck Robbins, will be on Mad Money tonight with more details about the caution in their guidance. Christina, thank you. Christina Parts Nevelis. Tim, do you own Cisco? I do own some Cisco. And this definitely can fall under the category of value trap.

20:21I mean, this is a company that that to me in the last five years has been transitioning from hardware to software and into security and doing things that are high margin and very interesting and annuity based. And they should be helping the multiple. And this is one of these names that over the last four or five years, if you listen to the street, there's a handful of analysts that have called this one of the great value, you know, whatever. Big, big cap tech stocks. So when you hear the weak telco outlook and some of the dynamics that Chuck Robbins, who's very, very honest with the market. And I think sometimes there is a little bit of an overly conservative outlook.

20:52And it is what it is. This is two quarters in a row that these numbers are really disappointing in the space of a world where people are spending on security. They are spending on software. And some of those offerings don't seem to be growing as fast as I'd like them to. Yeah, and I think that's the question. Is it a value trap? Because I think the valuation is attractive here. I think they actually have a really strong balance sheet. So I wouldn't be surprised if we see more share buybacks or dividends from them or even more M &A activity. So I don't think this is going to be an instant gratification trade by any means.

21:17But I think as a longer term investor holding a piece of this, I don't think is a bad idea when you have days like this. You know, when you look at it on a chart, a last earnings cycle, the stock dipped. It was under under a lot of pressure and it rallied back. So it was off the bottom. It looked like it was going to be a value investment, but it sold off again leading up to this. So it's I thought it was going to be an actually a good entry point. And it's sort of interesting the way he talks about the pandemic and his customers and how they're working through supply chains. So I think they're getting to the bottom where it will be a value stock again.