tv Fast Money CNBC June 28, 2022 5:00pm-6:01pm EDT
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there, at least to a large degree. maybe on the corporate side you need some more returns, and i think in general, we still think that there is a chance to get lucky with inflation rolling a little bit, as they tried to get rates to a more sensible spot. >> we will get that thursday, all with michael on our new finance week, we will hear from arthur lake later, mike, we will see you later on. let's talk money, that begins right now. right now, we'll see nasdaq dropping just under three percent, energy is the only sector that had net game. also, disney's board to extend the ceo contract, this could be the opportunity to see shares rising again. what's got that name moving
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higher, and can this momentum last? this is nasdaq money, tonight, we will see more in depth selloffs, major averages, closing near the lowest of the day, the dow is down nearly 500 points, the biggest loser is the nasdaq, dropping nearly 3 percent. drying out the industry of big tech. take a look at the stocks of amazon, tesla, these companies cost an estimated $350 million investment today. are we in for even more pain ahead? >> it is a bit of a head scratcher. i think the consensus is that the market was really oversold, we had that rebalanced late
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last week, and people thought that maybe it would get a little bit more length to the rally. i did not see too many people calling it an end to the selloff over the last couple of weeks, but just really on a sediment basis, into the end of the quarter, this is one of the worst second quarters that we've had in the last decade or two that we have had two consecutive negative quarters in the stock market. if you are looking at the s&p 500, the rally we had in march, to highs just a couple weeks later, that was about 18 percent, this one wasn't even 10 percent, off of the low s&p 500. so the bear market rallies or losing intensity. lastly you might have thought this would correspond with a sharp move higher. >> that's what we were talking about. >> and it didn't happen. this is not particularly great. >> what did you make of that?
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it seems to have concluded here around the 3.2 percent mark, plus or minus some bits. >> yeah, you know, i think really what we are going to see is probably some continued weakness. i don't necessarily think that's a good thing, because i think it's foreshadowing potential further weakness in the economy. i think that's going to be the issue. we have this inflation scare and i think it's still with us, but i think we are probably at peak inflation, but unfortunately we are also at peak earnings. i think that's going to be the biggest risks. we are going to go from this inflation scare to this earnings scare as the economy slows down. so, the smp might be trading at 15 times, but it's trading at 15 times these imaginary earnings, i think that needs to come down. we had $208 of earnings in 2021, but that 2021 earnings number was boosted by stimulus that is now working in the exact opposite direction. my guess is earnings estimates are going to start to come down. even looking at q2, there was really energy that was keeping it up, it rose up to 30 percent
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during the quarter so we are starting to see some weakness, i think that will continue and i think that's why these bear market rallies that we are going to see, will continue to lose steam. >> we saw that the profit margin forecast will need to come down, that lines up what we heard out of nike yesterday, they are pretty strong in the ntc business, and have some really good analysts in china. they still talked about ocean trader costs, those costs will continue to persist higher, in the future, at least. >> a move with nike is kind of like a move with the market, they really gave up a lot, so, speaking to earnings and earnings divisions and really, if anything, if you are going to start to call a bottom on the market, which i'm not sure anyone is, there is probably a checklist of a lot of things you want to see. you are going to start to begin to see earnings revisions move higher. i don't even think they have moved to lower yet, which is probably part of the problem.
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we are talking about some of the dynamics that we've seen from last week, but what is disturbing is really you know, the levels on stocks, like the microsoft and nvidia, not just a little, but decidedly. if you look at the downwards trend, it's something like an opera from april first. you can draw a pretty straight plan line down, and a lot of these stocks are failing there. the underperformance of text, which we are really starting to see from december first. again, i don't think we are at the end of that. we are going to talk later about consumer confidence, and which gave us year-over-year, 20 1/2 percent of growth in housing prices, that's something that is going to weigh on the market and way on the consumer. today is disappointing. the quarter and is around the corner and i don't think that we can't figure out some way to rally the quarter's end, but it doesn't stop our problems. >> consumer confidence was low,
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i'm not saying that any one piece of data moved the needle in the market today, but it's sort of a picture of a sort of expectation outlook that are being lowered. >> yeah, listen. i think jeff really summed it up nicely in terms of now we are in the period of time where earnings expectations, not only expectations, but earnings themselves are coming down. i think we have been pretty steadfast, to our beliefs, june 14th i said on the show, i thought we were set up for a pretty mindnumbing rally into this quarter that we were talking about, but obviously that happened, i have to tell you, i did not see today's coming, the smp turned off 120 ish channels on seemingly nothing. i thought this would be a week, like i said the other day, where we would be in the eye of the storm, or the eye of the
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tiger, but i thought we had this window of time where the market just levitates towards 4100. i don't know what happened today but it was clearly not good. all of the concerns that we have had hadn't abated, but something changed today in terms of price action, that i was not accounted for. >> i wonder how many people downloaded that song, eye of the tiger, because of us. jeff, is there a game plan for you? as you look into earnings season, as we are expecting, it seems like we are bracing towards what companies are going to be guiding towards. >> i think my game plan continues to be the same, because it was a really rough day for growth, i've been talking about leaning into quality growth, over the last month or so, but i still think we want to lean into companies where we have seen big
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earnings, which are somewhat less vulnerable to the economy, because i think we are going to continue to see economic growth. when we are looking for market bottom, if you go all the way back to 1950s, 90 percent of the time when you see major corrections in themarket, leading indicators, i don't see those indicators bottoming anytime soon, so we will have fading rallies until we get some footing. i don't think it's going to happen in 2022. >> i think developing a game plan into these scheduled events, we know when they are, probably going to start in a few weeks, that's assuming we don't get any negative pronouncements. over the last couple of quarters, if you are expecting some really big negatives guides lower, we didn't get them. we talked about there were some big ones, netflix and target, that's really more recent, but you might not just get a lot of these bloodletting situations. you might get companies eking
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some information out, microsoft talked about that, they may say something different this time around. i think playing for that big lowering across texas, you may not get it. i don't like to use those expressions like a stock ticker's market, but i think some of these percentages, some of these growth patterns that have been in bear markets for more than a year or so, they are probably getting closer to a bottom because the revisions are going to get low enough, and therefore, they are low enough to start beating late this year or early next. >> there may also be a degree of disbelief when it comes to earnings and what the companies actually have, because a couple of the warnings that you mentioned came just weeks after the quarter was posted, so i'm wondering as an investor, we are going to get this guidance.
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but things really quickly change, and we don't see the impacts of that in the previous tightening in the previous weeks and months, we could see divisions lower in the future. >> i think that's a great point. i think you just nailed it, in terms of how can we try to have clarity or visibility when companies, that are on top of this seemingly 24/7, and i'm not looking to pick on target but they come out with their numbers and then 2 1/2 or three weeks later, they say something even more devastating, so it's very hard to have that kind of visibility. to jeff's point, to think that somehow magically we can have earnings growth and this be anywhere near sort of the 200 dollars that people are looking for, and then putting multiples on that for some reason but i don't really understand, that don't make a lot of sense, the question is what is the right multiple in this environment? i think it's somewhere between 15 1/2 and 17. and what is the number going to be when we finally get there?
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i think to jeff's point, it's going to be closer to 230. >> moving on to china, shanghai and beijing declared zero covid cases for the first time since february. health authorities have a quarantine period for visitors from overseas, and shanghai is set to reopen this week. our next guest says this isn't enough to restore investor confidence. senior policy analyst, storage, great to have you with us. i was reading your notes from last week about the property market in china saying they are basically saying that is the worst downturn on record, worse than the one we saw in 2000 08, and the ripple effects are going to be immense, on that same day, president xi jinping says numbers are going to be excellent, can these two truths coexist? >> i think the loosening of
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border restrictions, which we have had here, is going to be an attempt to have a little bit of economic recovery and a little bit of pandemic control. to be honest with you, i'm not sure that both things can be done simultaneously. he seems to think that that 5.5 percent growth rate is realistic, but all of the things that i'm seeing and the chinese economy right now, a lot of those numbers indicates that those numbers are not going to be made at all. >> it's tim, i agree. i guess i am less concerned about headline gdp numbers in china than i am about policy. in viewer view, the health commission is saying something on some level different from the government, again, zero covid policy, we had a couple
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of government officials have to walk back on extending that another five years. do you think there are some cracks in policy? in china i don't expect that they ever plan to walk it back economically, but i guess i get the sense that not only is this unpopular at home but there are folks within the government i want to see a much easier approach. >> absolutely. those individuals in charge of the economy are trying to hit those numbers, that president xi jinping says they are going to hit, but you are absolutely right, covid zero, dynamic control has not gone away, as a policy. so at any point in time, we can find ourselves back in the situation where there is draconian applications for getting back to zero covid. so, for president xi jinping, the question is always , we know where the end is and what it looks like, to me, i don't see it happening. we have no predictability, and i can't trust this policy response. >> i think perhaps we have some seasonal loosening but what happens as we move into the
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winter? will we see lockdowns again? and the chances of this happening, quite frankly, are great. >> basically even though this is all good in terms of the end of lockdowns for now, this could just very well be a temporary sort of hiatus. >> i think it relieves some pressure. as we have heard, there has been a lot of anger around this policy, but the zero covid policy has clearly hammered china's economy, but i think this is a slow approach. we mentioned shanghai reopening. this would be a real test case to see just how much tolerance china has with respect to large gatherings and outbreaks of covid-19. i'm not convinced that we are
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there, but i am certainly going to acknowledge that having these quarantine times has us step in the right direction for a lot of people. will it be enough to restore confidence for international investors? to restore confidence for businesses, people who live and work in china, i'm not sure we are there yet. i think there is a lot being determined about how this reasoning will go over in the long term. >> it's always great to get your analysis, thank you. i was thinking about this this morning, guy, as i sometimes do, and i was wondering with china reopening, it's a great thing for supply chains but is it ultimately more inflation for the rest of the world? >> yes. 100 percent. that's exactly where i was going. once again i find that the first thing that struck me was this is extraordinarily important, and what it is supportive of is i think
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energy. i know it's very difficult, how to fight this energy trait, it looks like it's going over forever, i just don't think that's the case. i think that this should become a tailwind for the energy trade, which is a challenge that actually did decently well today. >> the hard thing about this is that the lockdown can go back into effect at any time. and it is sort of hard to plan for that. it's nice that we could get direction, but we don't know how long. maybe that uncertainty is worse than having the certainty of dealing with the situation the way it is. >> i mean i think it's good to see some flexibility but the risk of the rug being pulled out is what we talked about for a while, it's why it's hard to figure out how to pay for some of these stocks. it's probably too cheap right now, but to go back to where we were before is probably ot going to happen. but i also think that china between now and the end of the year, is really focused on growth, so it's not just the covid policies, it's the
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stimulus that we are seeing, and i think all of these factors are very important, and i think the chinese economy is going to play a big part. we talk about economic indicators earlier, you are talking about trough levels pmi's in china. their pmi's are in the 1st percentile, very low. we talk about market bottoms, at least in china, usually associated with bmis around those levels. you introduce some stimulus there and you are starting to see it, business confidence is turning up a little bit, and then you are actually seeing it in financial markets, even certain discretionary names like young brands, so there is a shift in growth a little bit here, that might be the most important thing, relative to the importance of stocks in that region specifically. >> i asked the ambassador that, that was tim's nickname, could one make the argument that china may be the best position in the market here to rally to your end? >> ambassador here, yeah, i
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think we have a couple things going on, china is in many cases, the policy rating for the em. em certainly started to pull back, which, at one point, in the 2021 market, as yields started to bottom, that would certainly be in the dollars too. so, the dollar is a dollar petering out, certainly very beneficial for china overall, if you are investing in one of those etf's, like the eem or the bw oh, who have outperformed the s&p over the last six weeks, by about 8 1/2 percent. so, they are absolutely being outperformed. if you look at latin america, there are arguments that this economy is very good for latin america. there are a lot of opportunities here. we still want to see china's approach to their tech companies. that's, to me, is the most
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important thing for me. >> cofounder and ceo, ben siberman will step down and become executive chairman for pinterest. >> listen, he founded the company, he got it to this point, it has been a tough road for a lot of growth companies like this that basically struggle with profitability but also, they are really trying to kind of hack out a world where they are just dealing with behemoths. the idea of hiring someone from google commerce to run this makes a whole lot of sense to me, as chairman i think that makes a whole lot of sense, i don't think we need to rush out and go and buy these things, but we could wait and see what the quarter looks like. >> i've always had sort of a spot for pinterest, because i once found a sock puppet of
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you. or was that it's equally >> that was at sea. yeah, we have an at sea. just to clarify, lisa villalobos, the cracked producers of those two shows, she actually bought a puppet of me, on the flipside, i'm an early adapter of pinterest, and the members of our team helped me create a page which is remarkable, you need to take a look at it. but it's also remarkable that effectively, we move our stock from 15 1/2 up to 88, right back down. it's really amazing. if anything, it has been a tough slog. >> do not miss jim cramer's
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interview with the outgoing and incoming pinterest ceos on mad money tomorrow, right here at 6:00 p.m. eastern time. coming up, just keeping inventory is causing retailers to reject returns and causing consumers to hold onto unwanted goods. first, a big vote of confidence esre the board, still under prsu this year, what needs to happen to turn things around. don't go anywhere, we will be back soon. (fisher investments) nope. we use diversified strategies to position our client's portfolios for their long-term goals. (other money manager) but you still sell investments that generate high commissions for you, right? (fisher investments) no, we don't sell commission products. we're a fiduciary, obligated to act in our client's best interest. (other money manager) so when do you make more money, only when your clients make more money? (fisher investments) yep. we do better when our clients do better. at fisher investments, we're clearly different.
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>> welcome back to fast money. disney's board of directors unanimously voting to extend trend bob chapek's contract for three years. >> his contract was set to expire in february, susan arnold saying in a statement, disney was dealt a tough hand by the pandemic, yet, with bob at our home, he weathered the storm, but maintained the position of strength. with disney shares down about 45 percent in the past year there were questions about whether the board would extend
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his contract after he faced criticism for mismanaging disney's response to florida's so-called don't say gay bill. it's chair issued a statement, with many questions regarding firing senior executive peter white just a few years ago, they have faced challenges, including subscriber goals for disney plus streaming services. sources tell me that executives have concerns that disney's recent lightyear movie had one of the lowest box office debuts of any pixar movies after each of the last pixar movies were released exclusively to disney plus, leading to concerns that disney plus is cannibalizing the box office. >> just hypothetically, if they were looking for another ceo, who might that be, know that peter rice is gone? because i believe that he was
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seen as a potential heir apparent. >> he was considered as a heir apparent, but i think it's that he doesn't necessarily have the experience. maybe six or eight years from now, some of the names i have heard are dana walden. dana walden is a long time tv executive who came over from fox news and was reporting to peter wright, now she would work with peter wright in that senior role in his television urbanization. she has a lot of experience in the industry, and whether she could be seen as a potential successor, i think that she had a big profile in new york times, and raising her profile, is the one who oversees the company's distribution, in terms of managing which content
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goes directly to consumers, what goes to theaters. obviously that's a very important role, and an unusual role, so he has less experience than dana walden in the industry but they certainly seem to be grooming him with a little bit more intention in the media world. those are two names that people have been talking about, especially with that big profile in the new york times lately. >> what's wrong with disney in your view, jeff? >> you know, it's been caught up in a lot of things. some questions about streaming is certainly one of them lately. i actually talked to our analyst this morning, to get his most recent take and our price target is still 130. just to go through one of the assumptions, there are many, but $8.99 for the service a month, not a huge increase in
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the cost of the service, but one of the things i think was sort of interesting, in the long run, is their ability to leverage old content. they do that really effectively sort of across the company, he used toy story land as an example, there are four of them across the parks, this is a movie that came out what, 30 years ago? and they are still making $1 million a year annually on that content. pretty interesting there, i think. they are going to spend more on original content. i think right now the streaming landscape is a little bit money money, i don't think consumers really know what they want so i think that is spreading out the spend, but i ultimately think didn't disney is one of the winners, and that is going to help stock moving forward. >> i think the evaluation gets to a point where now you have posted 20 times, regardless, you are at a level where you are pre-covid, before you priced in the streaming business and maybe it's cannibalizing. i think there are many other benefits including recurring revenue of the subscription that should give them a much higher multiple, which is why many analysts view a hybrid
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model here. i look at disney down from 40 percent, 15 percent on the top, maybe a little bit less off of its covid low. when we were questioning the companies balancing on some level, they were retrenching, dealing with a cash crunch because of what was going on in the parks. this is not that company. i just think this is the kind of a company that we are supposed to be starting to pick at. this is the kind of company that i think on some level, a consumer behind the many different economic cycles, that consumerism is based on the studio. i like that move. >> you know that is to me the most important point. this is not that company in the throes of the pandemic in the spring of 2020, a stock that went from basically 129 dollars down to 80, then all the way up back to the 200s. so here we are, the money has more than cut in half here and i think your evaluation, even
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if estimates come back here, during all that time when we were not pricing of the streaming business, i suspect we will, over the course of the year. i think if they are going to spend a lot of money on it, in terms of subscribers, we have certainly seen this with netflix. >> tom rogers talks about that all the time, i know he's watching but i think that discount is more than now in the stock. i think that discount was when the stock was training in the teens or so. here at 95 i think it is more than discounted, we are probably looking at something more of a negative. i am with tim and dan. it doesn't matter what i have, if it is 7 1/2 times next year's numbers, that's probably the cheapest that disney has been in quite some time.
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levels again outside, like dan just pointed out, these are levels like 2016 on. unless you think we just have really devastating catastrophic things on the horizon which will take this lower, i am hard- pressed to believe that we are going to get crushed with disney at these current levels. >> we have a lot more fast money to come. here is what coming up next. >> retailers, letting customers hang onto returns as inventory issues pile up. so, which names can brave the buildup? plus, time to duke it out, with options. energy companies may not come along for the ride. the details, ahead. you are watching fast money, live from the nasdaq market site in times square. we are back, right after this.
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>> welcome back to cnbc. a brutal day for consumer stocks, nordstrom, among the worst performers in the sector. confidence in stocks has fallen to its lowest level in 16 months, inventory challenges for these companies means a full blown recession may be unavoidable. we saw this sort of apocalyptic inventory situation with walmart and target. do you think there is a boomerang effect now, that they are going to order a lot less?
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>> they had way too much inventory, now they are trying to get rid of it, which is good, but they want to make sure they throw it out. one thing that retail is nobody wants to be out of stock, and it's really had to be out of stock, when you can make more money. >> we heard from brian cornell, the ceo of target, a number of times, whether it be during his reports or the warnings afterwards and then some comments with the conference after that, talking about how halloween is going to be hot, back to school is going to be hot, back to college is going to be hot. we hear all of these things together, what do you make of it? what kind of a picture is this painting? >> i think he's right for basic products, hollowing has become
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the third-largest holiday of the year, after christmas and easter. so they are going to sell a lot of candy. a lot of candy for halloween, and we are going to sell great necessities for back-to-school, so those products are going to do very well. target and walmart did the right thing, they are going to have good third quarters, great quarters, perhaps, but overall, demand is going to reach a point where we are already in a recession, prices have simply gotten too high, that consumers have no choice on what to buy. it cost me $100 every time i have to fill up my suv, so you are starting to see that in the numbers already. the best retailers are still going to do great, but a lot of them, that have really never done it right, so, getting credit when it's too easy, they are going to find that they really didn't change their business models enough to make a difference. >> jeff mills here. this quick question, i was
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curious what you think are the best position retailers here as we head into this economic slowdown. maybe talk about what characteristics help them stand out. >> number one, out of consumer dollars, what retailer spends the least on their own business, so the customer gets the most value for their dollar, right? cosco, for example, did very well, they did well pre- recession, postrecession, during the recession, tj maxx is in a very strong position as well, home depot did well, i would also add to the group, retailers i expect to do well, the dollar store, especially dollar general, which was one of the best companies and that segment. >> which are the ones that are weak, or are actually week under the surface or will not survive very well? >> i think the department stores, i think they're going to do poorly as our mall-based
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apparel stores. they didn't do well before the recession, during the recession, they came out looking a little better, but they aren't fixed so they are going to stay broken. they are going to continue to do poorly, and i think we'll continue to see that. >> thank you so much for being with us. gary storch. tim, do you agree with him? >> well, one of his most interesting points was that he thinks a lot of these retailers didn't really fix themselves. if we are talking about department stores, they probably have the most to fix. i'm sure they have been out here talking about how macy's has done a great job on inventory and e-commerce, and they have rationalized their footprint. i think that is difficult, and difficult specifically for department stores. but gary knows better than i do, take the companies that have really made change, 40 percent in 40 odd days for target, cornell has been out there multiple times, different messages, but his stock has raised 13 times this year.
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even though there inventory and certainly their sales shift, we have started to hear a lot more about. but again, there are places including walmart that i think you want to be. these are companies that you want to own now. i think we have priced in a lot of recession there. >> which ones you like? >> he likes those dollar stores. he has been all over the dollar stores. >> what does dan like? >> i think it's interesting what tim just mentioned about these department stores. we had of a lot of debate pre- pandemic, thinking they were going out of business, right? there were certain dynamics, i think the consumer stuff really paid off, but i think one name that has really started to interest me, is amazon. i know a lot of the story has been that they have over expanded and benefited from these poor numbers but now if you look at this, and how they
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consolidated after the pandemic, and in that late year breakout, it's hopped out when basals handed over the reins a year ago. i actually think amazon stepped up really well. i think some of the investments they made is going to make it a great story for the next five or 10 years. the last one will just make it thinking about tim cook, taking over apple, sund are taking over google, and microsoft, it makes perfect sense that they are going to have a similar five-year run. >> coming up, we will tell you how investors are rushing in, and duke energy, we will tell you how they are playing when fast money returns. like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq
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>> we are taking a look at duke energy, of course that is a utility, a little bit different. what we saw was six times the average daily call volume. the activity was concentrated in the july one options. we saw a sale of 3000 of those at $.45. ultimately over 8500 of those ended up trading. the seller of those is obviously betting that duke is not going to go through that 110 strike price, which is a little bit more than four percent more than the higher stock price. that works out to about nine percent annual, in terms of how the stock stays below that strike. >> thank you, mike, for our post-show, coming up, telecom, crushing it, what has this . rket charging higher plus, casinos in the green, after china's reduced restrictions. roll the dice, when fast money returns.
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>> the ghost in the machine, which again, great model, semi- 1982, if i'm correct, it's neither here nor there, but you could actually -- >> guy is shaking his head like he dropped out. okay, well, we tried. jeff, let's get your thoughts on semi conductors. >> absolutely. i can step in here. it's interesting. i think we have to keep this in perspective. qualcomm has been beaten up, but apple is still going to develop these 5g chips. i think what it does is give qualcomm a little bit of time to diversify its business, but qualcomm is exposed
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specifically, maybe more so than a lot of other companies, because they go with apple. earlier this month it's back to original numbers i think it'll be interesting to see what happens in the coming days, but that trend is in play. the positive thing is that semi's genuinely, the evaluations are easier to defend but overall i think i want to see more proof that the worst s over. >> you know they are going to report after the close with what they have to say about pricing, what they have to say about cyclicality, which jeff just mentioned, that might give us a really good sense of what the back half of the year looks like, but we talk about inventory in the retail space we might find the last companies or oems that use those semi-conductive orders that have inventory, so i think the report tomorrow night will be very important. >> you have been watching these for a long time in terms of their read on the economy, here. >> down about 15 1/2
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