Tesla Stoppage Raises Red Flag Over Potential Red Sea Impact, Plus Making Sense of the Bitcoin ETFs First Day 1/11/24

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. Red Sea ripple effect, the turmoil and armed conflict in this critical shipping channel taking a toll on the global supply chain. Tesla set to halt most production in Germany. Shipping rates are soaring. The latest developments coming up. Plus, Bitcoin's big day. All of the 11 crypto ETFs are now trading. And the frenzy pushed Bitcoin above 49000 before midday fade. Is this the peak of the current crypto rally? We'll debate that. And later, Netflix and chill out for ads.

0:32It's a thing. We'll explain it. Boeing's bad week keeps getting worse. And the big banks are on the clock to Mars trade tonight. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feynman, Guy Adami, and Dan Nathan. We begin with a developing story out of the Red Sea, a major real-world ripple effect. In the ongoing armed conflict in this critical shipping channel, Tesla announcing it will suspend most of its EV production at its Berlin factory due to the impact on shipping costs and a supply gap. Let's get straight to Pippa Stevens with more on this and reports that the president could be addressing the troubles in the Middle East tonight.

1:08Pippa. That's right, Melissa. Biden is reportedly set to speak tonight, according to The Times of London, right after UK PM Sunak held a call with his cabinet this afternoon about the likelihood of a British and U.S. military strike against the Houthis in Yemen. This says Reuters, reporting that Tesla is set to halt most operations at its gigafactory in Germany for two weeks. Tesla is the first company to halt or slow output due to the conflict in the Red Sea. But as more tankers reroute around the tip of Africa, it's adding time and cost for shippers and companies. Shipping rates from Asia to the U.S.

1:44East Coast have more than doubled since October, according to S &P Global Commodity Insights. A 40-foot container now costs$5 ,100, up from$2 ,150 just three months ago. Now, this coincides with the ongoing drought at the Panama Canal, another of the world's key waterways, which is also impacting shipping rates. Now, inflation's been cooling, but a prolonged conflict in the Red Sea could throw a wrench in that trajectory. J.P. Morgan saying this week that increases in global shipping costs could add to consumer prices over the next several months. Now, of course, a lot of this depends on how long this conflict stretches on and the extent of the escalation.

2:26But for now, Melissa, we are seeing higher prices. Thank you, Pippa. Pippa Stevens. Let's bring in retired U.S. Navy Rear Admiral Mark Montgomery. He's a senior fellow at the Foundation for Defense of Democracies and former policy director for the Senate Armed Services Committee under Senator John McCain. Rear Admiral, great to have you with us. Thank you so much for joining us. I guess, what is your take in terms of how the developments are shaping up right now? Does it seem to be getting worse? It seems to be reaching another level. this point, especially if Biden is going to address the nation tonight?

3:01Well, thank you for having me. And you're exactly right. And it was the issue was teed up perfectly. You know, we've been trying to do what we call deterrence by denial, which is create a defensive mechanism where our ships, the British ships, shoot down the drones and the and the missiles headed at the merchant ships and where we deter small boat attacks. But that deterrence by denial could only go so far. And clearly, it hasn't done enough to convince the major shipping companies like Mariscan, Hopod Lloyd and MSC and others to not do the long route around Africa, which is almost 3 ,000 miles longer.

3:36So I think we're getting that point now where we're going to see deterrence by punishment, which is where we conduct offensive operations against Houthi sites, you know, their weapons launching sites, their weapons stowage sites, maybe their small boat piers, their helicopter airfields. In other words, punish the Houthis and prevent them from conducting operations out to sea. And that might be a stronger signal to the shipping companies that the Red Sea is a viable transit route. We do want to note that the White House has since said that President Biden has no plans to make any sort of statement tonight, but will, of course, continue to monitor the situation because things could change here.

4:15Karen, you've got a question. I do. Thanks for being with us. There's a story about the Houthi leader saying we're going to have a big response to any potential U.S. activity. How do you think about that? Well, I think we're seeing quite a bit from the Houthis now, right? I mean, the 27 strike set of strikes was just reported. You know, the 26 strike several days, two days ago, you know, involved, you know, 21 cruise missiles or drones or ballistic missiles fired out there. So I think we've seen a lot from the Houthis. They've been well armed by Iran over the last decade. So they have quite a bit of equipment.

4:50But I think, you know, we've seen what they can do. And what we need to do now is remove a lot of that capacity. And you can only do that through offensive strikes. And I think they can be done in a reasonably risk managed way where there is little risk to U.S. forces in conducting a strike. Admiral, you talk about risk management. And when you think about just what's going on here, we know that the Israelis launched a drone attack into Lebanon last week. We have obviously what's going on in Gaza. And so when you think about Hamas, you think about Hezbollah, you think about the Houthis, these are all Iranian-backed organizations here.

5:24What is the likelihood that this could spill over, something more direct with Iran, especially if these punishment measures do seem to work, but for instance, they just continue to go about this? So I'm certainly not advocating for any strikes against Iran or Iranian forces at sea or something. I think we need to confine this to those proxy forces that are conducting attacks against the shipping. I also believe there's cause for attacking Iranian proxies that have launched more than 100 missile or drone attacks against our ground forces in Syria and Iraq. We've been exceptionally fortunate to have no U.S.

6:04combat deaths in Iraq or Syria from those attacks. But I would confine our operations to Iranian proxies and message to the Iranians, this is about your proxy forces. We're going to hold them accountable. Do not resupply these forces. And if you do, we'll hold that resupply accountable. But in no way, shape or form, should we imply that we're attacking Iran itself or Iranian forces at sea. This needs to be explicitly directed at those proxy forces that are threatening U.S. forces and global shipping. Rear Admiral, thank you for joining us. Talk about the coordination with the rest of the world and who, you know, we've read about where the Brits are involved.

6:46You know, the U.N. has made some statements. It's important to understand, you know, where there is alignment and where there is follow through from other folks other than the U.S. So I think there's two different types of cooperation here. On the defensive side, there's been pretty good cooperation in Operation Prosperity Guardian. You know, they reportedly up to 20 different countries are supporting it or participating, only half of which would prefer to be named. You know, that's unfortunate. But, you know, there's one Muslim country in there, Bahrain. But, you know, others are participating.

7:20I think we're, you know, that kind of cooperation on the defensive side is what I sort of expect. On the offensive side, I think this really needs to be confined to just one or two countries to minimize the chance of collateral damage and inadvertent misses, and also to minimize the risks of the forces doing it. So it would be the U.S. or the U.S. plus the U.K., and I think we need to keep that extremely limited. And also, I think we're doing a favor to some of our allies and partners who are comfortable doing the defensive operations, but politically don't want to risk the offensive operations.

7:52What's your assessment right now of supply chain disruptions? And does the situation get worse before it gets better for companies looking to use that as a waterway? So I think we're only beginning to see we're only seeing the beginning of the disruption. So in other words, this is instead of 8 ,500 nautical miles, it's now almost 12 ,000. It's an extra 10 days of shipment, you know, from, you know, coming from Southeast Asia around to to European ports. So this 10-day extension, we're just beginning to see the start of the bow wave of that, right? And so conditions will get worse until they stabilize in a new normal of longer, more expensive, an extra million dollars per container ship cost transit.

8:40And this is impacting about 12 % of world trade. In some areas, it's 10, some it's 15, but overall about 12%. So we're seeing the bow wave of that. There'll be more stories like the Tesla story that come out over the next two to three weeks. And regardless of what happens tonight or this weekend, you know, with some kind of offensive strike, I believe that we're going to see the impact of this for months. And we haven't even we have not yet seen the totality of the impact. One last question, and I hate to use this metaphor, but using the baseball metaphor, what inning are we in in terms of these shipping delays?

9:17It sounds like we're at the very beginning. second inning. I mean, the impact started and the ships began to divert and the impact of that diversion is just starting to be felt. So I think we're very early in this and I don't think the game's going to get called early. All right. Mark, thanks so much for joining us. Rear Admiral Mark Montgomery, we appreciate your insight. Second inning, it's going to be a long game. That was the right question. You started the show last night. You asked Tim, Tim, you know, how do you read the CPI? If I had told you numbers, we'd be able to tell you where the stock market's going to go.

9:55And Tim was, you know, Tim said probably not, maybe. But and I'll tell you, if you had told me the numbers that came out this morning, S &P's down 75 handles. Easy, given what the expectations were and given the run up we've had. S &P closed unchanged. But what we just talked about for the last 10 minutes or so, that's not going to do anything to help the inflation problem that I think we're still in the midst of. And all these rate cuts seemingly priced into the market. I don't know. I think people are getting ahead of their skis a little bit. I mean, if we thought it was sticky, it could be even stickier given the increased shipping costs.

10:25Well, and again, the market's playing like we're in the bottom of the eighth or top of the ninth in terms of their Fed policy. And so not bottom of the ninth, but again, and I like this metaphor, by the way. It's nice. I think we need to continue it throughout the show. But I think, as Guy said, that CPI number, it doesn't necessarily change the Fed. It does tell you that the Fed is nowhere near cutting. I mean, in some sense, I don't think that the Fed has told us that they were near cutting. You also had jobless claims number. Look, a four week moving average on this means there's zero movement in the job market.

10:53Joblessness is not increasing in this country in a meaningful way. And all of this means that inflation is a lot stickier. Basically, today's CPI says we're not. Also, you talk about the early in the game. CPI at 3.3, 3.4 on core is is still very far away from the Fed getting to two percent. Housing costs are really sticking and moving higher at this point. Insurance, very high. I mean, there's a cost. And then now we have these additional costs that have not yet gone through to prices. Right, right. No, it's the first thing I thought of as well listening to him talk was about, OK, this is not good for what we've seen is a reversal in the supply chain issues that have come up for the past two years.

11:34And that has provided a really nice tailwind as companies have been able to say our landed goods cost is better. So our gross margins are much better. Now, if this reverses all that, that isn't good. And then, I don't know, I would expect to see increased volatility as well, which isn't generally good. Yeah, it brings us, though, to two years ago, like this week, when tanks started rolling or amassing on the Ukrainian border from Russia, right? We started to see natural gas. We started to see crude oil prices kind of work higher. And we had that big spike. And make no mistake about it. I mean, that situation and that short-term situation and the unknown about how long that war would last, what the disruptions would look like, it caused a huge spike.

12:12And I think it definitely made much worse the inflation situation at the time, especially when a lot of folks were expecting that the supply chain disruptions from COVID were getting better at that time. But here we are two years later. Right. And we have gas at the pump. Three dollars nationally. We have crude oil. Right. At seventy one dollars or something can't get out of its own way down from ninety five, despite a lot of these geopolitics issues. So, I mean, to me, I think that like the near term, we're going to see all these charts about the Baltic dry and we're going to see all these shipping rates and they're going to go up.

12:42And then we get used to it and then we work it back in. But again, if if these sorts of disruptions to manufacturing and supply chains, you know, if they're real, like, who knows the second inning of this stuff? I don't know. Like we just dealt with a global pandemic a few years ago. We got through it and everything seems to be going OK. I do think that the U.S. is somewhat isolated, certainly relative to some other countries from this being a, you know, and and it sort of reinforces the on-shoring idea or near-shoring. Which is inflationary, which is all of it. But stick your inflation in other parts of the world might be even a bigger challenge for those central banks, as opposed to where we are in terms of our own economic data, which is much stronger than other countries.

13:22I think that's right. And there's no question that we have a very tenuous, complex geopolitical situation in the Middle East. And for equities, you know, I'm fortunate enough to be asked to fill out, be part of the Merrill Lynch Bank of America fund manager survey. wave, when they give you four or five listings of what your biggest concerns are for 2024, and it's everything from the Federal Reserve to a credit crisis, but where people are clicking on more than anything is geopolitics. It's certainly where I'm clicking. So when you think about the discount - This, do you think, or China, or - Yes, yes, and yes.

13:56All yeah. Okay, because there's no question. We have Taiwanese elections. We have elections here. We have elections around the world, but we have the horrors of what are going on in the Middle least. And I just think it's a case where the risks go up. It also reinforces the energy security trade. It's great. It's great for gold. It's great for uranium. I mean, some of these trades are things to think about. It's also, you know, if it really gets ugly, it's a dollar flight to quality story, which isn't good for equity. So there's a lot to do here. That's exactly right. Will it be a flight to quality in the form of the dollar, making the dollar go higher and in the bond, making yields go lower?

14:30Because yields should have been markedly higher today, I think. given those numbers we saw this morning. And they were muted. And maybe that bond auction at 1 o 'clock did something to mitigate that. But the cross currents are tremendous. And that Taiwan election is a big deal that nobody seems to want to talk about. But, you know, with all eyes being on the Middle East right now, all eyes are being taken off what's going on, continued between, well, I don't want to say between, but the rhetoric out of China. Coming up, a big day for media stocks, Netflix, Paramount, and Warner Brothers all on the move.

15:01The latest headlines driving the streaming space and Disney's latest consumer push next. Plus, Boeing shares sinking after last week's blowout. And now regulators are taking a closer look how options markets are navigating this news and the impact on some airlines ahead of earnings. Don't go anywhere. Fast Money is back in two. This is Fast Money with Melissa Lee, right here on CNBC.

15:30Welcome back to Fast Money. Netflix shares touching their highest level since January 2022. Meantime, Paramount and Warner Brothers down in the dumps after analysts at Redburn Atlantic downgraded both names and Disney launching a new shopping advertising experience. Julia Borson has more on all these stories. Julia. Yeah, media stocks moving around today on news about growing ad supported streaming businesses and also in concerns about challenges to the linear TV business. Now, let's start with the stock that was shooting higher today. That is Netflix. Shares adding 3 percent, up over 5 percent earlier today.

16:04This after Netflix's ad chief yesterday announced that its ad-supported tier jumped to 23 million monthly active users. That's up from 15 million nearly three months ago. They also talked about very high user engagement. Meanwhile, Warner Brothers Discovery and Paramount shares plummeting on downgrades from Redburn Atlantic equities. The firm warning that linear advertising is at a negative tipping point and consensus does not adequately forecast declines across the group. Paramount shares losing 5.5 percent. The firm's saying that they see the most downside in Paramount, while Warner Brothers Discovery shares lost 4 percent on a downgrade to neutral.

16:42And Warner Brothers Discovery also got a note out yesterday from Bank of America, reiterating a buy rating, but noting that the company is managing through a challenging macro environment. Also want to take a look at Disney shares. They're up just fractionally after announcing new ad tools, including a shoppable ad format called Gateway Shop, which lets consumers and streaming viewers make a purchase from an ad without leaving the Disney Plus app. This is all, of course, aimed to make the streaming ads as effective and valuable as possible. Melissa? No mention in that Redbird note about Paramount potentially being on the block?

17:20Well, of course, there's a lot of sort of speculation about Paramount being on the block. What my sources are telling me about this, Melissa, is that this still has to go through a due diligence process. And yes, there is interest from David Ellison and his investors and his team, but they still haven't done the due diligence on Paramount Global yet. All right. Julia, thanks. Julia Boorstin. Let's trade these names. Tim? Well, you know, Netflix's ability to move away from the pack is never more apparent. And it's a question of what you want to pay for it. But obviously, in terms of the cash flow generation of the story, but the engagement, the ability of this model to grow upon itself.

17:57We haven't even talked about things like gaming and whatnot. I don't have a position. And in fact, you know, I sold the stock, I don't know,$100 ago. And I really thought I was going to get a chance in a market environment to buy it back. And I would love to buy this on a dip. I think there are a lot of people that want to buy it on a dip. And I would say this. There's other names, some ugly names. I own a couple of those ugly names. I do think M &A in the space, some of the parts is heating up. I think the downgrade, I don't think they told us anything we didn't already know. I think the private equity, specialized private equity, all the people from within the industry, strategics, I think they're buzzing.

18:29And it's just about what these assets are worth. And I think they will be bought. It is staggering to think that Netflix in November had a little bit more than 15 million global monthly active users. To go to 23 now is a tremendous jump. It's a huge jump. And that's why the stock is acting in kind. And Tim said you want to be able to buy it cheaper. He may get the opportunity after earnings, I think, on the 23rd. But, you know, you look at it, you say 31 times, is it expensive? Yeah, I guess. But with their earnings growth that they're seeing, you know, maybe it's justified. But I'll say that Citi downgraded the stock, I want to say earlier today or late last night, on the back of their concern that they're going to spend$20 billion or so post-strike on content.

19:08And maybe that's a reason to downgrade it. Or actually, maybe that's a reason to say they're so far ahead of the curve they can do those things. Yeah, that would be my interpretation. I mean, you know, the streaming wars have been so bloody and costly for everybody involved, except for Netflix, who stands alone with, you know, positive free cash flow, a very good balance sheet, the ability to do that kind of content spend. I'm long. It's expensive, which I don't love. But I do love the strategic position they're in. You know, we spent a lot of time talking about this really since Netflix kicked this off.

19:39Right. About a year ago or so. And I go another way with this. I think about social commerce. I think about, like I read a stat last year, Instagram, that has 2.3 billion monthly active users. A third of their users are going to make a purchase on Instagram, right? It gives them the ability to place more ads and be more engaging. And that brings me back to this Disney. You know, we talked about, remember that Walmart, that ROM commerce sort of thing that introduced that short form show that streams. You can buy the stuff from there. I think these things are all coming together at some point. I think there might be other partners for some of these streamers, some of these lesser streamers like a Paramount.

20:12And, you know, we're going to see that, I think, in 2024 and 2025. There's a lot more fast money to come. Here's what's coming up next. Boeing burned. Shares sinking again as the feds get involved with last week's major malfunction. What they're looking at and what it could mean for the company. Next. And speaking of airplanes, Delta results are on deck. And this name has gained some serious altitude over the last few months. So can it keep flying high? We'll debate. You're watching Fast Money, live from the Nasdaq market side in Times Square. We're back right after this.

20:56Welcome back to Fast Money. Boeing shares still reeling from last week's mid-air door blowout, down more than 10 % since Monday. And now the FAA is launching an investigation to Boeing's quality control. Dan was flagging some options activity in this one, indicating what? Yeah, interesting. It's short-dated call buying. So, right, so you see a stock gets hit like this. You know what I mean? They're looking at it to February 2nd, weekly expiration. So that's a couple weeks here. You know, I think Karen's got a, what, a multi-day rule or something like that? Three-day rule, yeah. Let things shake out.

21:25I mean, there are going to be a couple more bad headlines, like I would assume, like we saw it today or so. But if you're looking to play for a bounce, you know, maybe these things, you know, they get these inspections done quicker than expected or something. I mean, that's the way you would define your risk and do it. But short dated options that are in the money, paying, you know, that sort of premium doesn't seem like a great way to do it for me. Because I think all of you guys, and I know, Tim, you've been long this thing. You know, you're going to say you're going to have to be patient here.

21:48You've done this now for the last five years on a few occasions. No, it is a story to be patient. And we're going to hear from them at some point soon. And the free cash flow profile of the company to me is what it's all about. I'm not discounting the fact that you could change your discount level on the stock, but that's not how people value it. They value it on free cash flow. Their defense business is strong. Guys brought that up recently. And the free cash flow, again, they delivered, I don't know, 540 aircraft last year. And you think about the max profile. The calculus that's being done over the last couple of days is that this is not a big deal.

22:20I'm not going to tell you it's not a big deal. It's a big deal. But I think longer term, this company gets back to where they were. They have 10 days to file a report to the FAA to say what was the root cause behind that door plug blowing out. And so that's going to be another sort of catalyst either way for the stock potentially. And that report is filed. And they report on the 30th. So the end of the month, they report on the 34th. So all these things line up. And, you know, if we just look at it in terms of math, forget about the human factor and the emotional. It's not a big deal. But when you bring in the fact that they've done this now a number of times and they seemingly can't get out of their own way, people are selling first, asking questions later.

22:56We talked the other night about a level 220. Well, it got close today. And then the next level is 205. But in two earnings, if you have an opportunity to start at 220, I say yes. And if something happens on earnings, it gets you 205. I think with both hands, you buy the stock. Ultimately, though, which is I must be why Tim's long. It's a duopoly, right? Right. Where are you going to go? And so I think like the prior things that we've seen in Boeing before. Can we play that out for just a second? Where are you going to go? but will Boeing have to discount in order to make customers feel secure?