The dow falling as much as 600 points before turning around and briefly going positive only to end the day down. 5 the nasdaq led the losses. What a session, guy, following yesterdays big selloff. What do you make of the action, guy . Interesting mel and i text before the show she asked if this was an old tie or a new tie i pulled it out for this fridays show. What do i make of this i mentioned im looking for an open lower spend the rest of the day rallying into a long weekend. We sort of got that. The late day selloff concerned me a little bit. Theres a rotation in the financials and the fact that the vix which spiked above 38 closed lower on the day i think you have something to think about for both sides of the equation, both bulls and bears as we head into this long hollywood weekend. What i thought was interesting about the session and maybe this is a head scratcher, is that bonds are selling off throughout the session and remain lower we got the yields going up to. 72 on the tenyear. There really wasnt any wavering even when the markets turned around you definitely still have the steepening of the yield curve. The difference was when we were up 5 or 6 higher on the s p and the nasdaq, the yield difference between the s p 500 and the tenyear bond was much smaller there was room for the market to rally. The vix was actually down even though nasdaq and s p was down 3 today that was a bit of a tell, hey, wait a second, maybe this market is going to rally here and reverse. I would say if you think about the jobs numbers today, which is really kind of the big news out there, there was a Little Something for everyone maybe things are decelerating a bit. But i think people realize the worse the economy gets, the more the money printer gets revved up. Given today is friday and volatility usually goes down ahead of a weekend, was that a real signal to you that things are going to change during the session . To an extent, yes i think heightened volatility here to stay for the foreseeable future, definitely into the election season. Weve been a bit toppish one thing to keep in mind is that volatility can work to the upside and to the downside typically when we talk to and refer to about skew, we think about put. What weve been seeing is indiscriminate buying to the upside thats helped push volatility up as well. Put call parity tells you that calls and puts are the same strikes, you have the same implied volatility. We have a full show on this 5 30 tonight is that here to say . Im not so sure, quite frankly. I brought that chart along because we are at this interesting technical juncture where weve traded into this narrow wedge the question is what direction do we break. I think back to the end of april where you had a steepening of the yield curve from the end of april through the beginning of june and you saw banks outperform to the tune of about 20 over that period youve seen the curve steepen again. Back to august 4th its been choppy youve started to see banks outperform to the tune of maybe 3 or 4 . Im skeptical that banks are going to be able to sustainably move higher. I think any trade thats predicated on the curve steepening thats driven by increase in Inflation Expectation should probably be faded at this point. They talked about what they want to do, but they havent necessarily talked about how theyre going to do it they have the same tools in their tool kit theyve had over the past ten years theyre undershot their inflation target consistently. My guess is Inflation Expectations are probably going to come back down. The curve is not going to be able to continue to steepen and banks are probably going to languish once more. This is a chart of the bank etf versus the xlf which didnt perform quite as strongly. Do you think that wedge does resolve to the downside . Listen, if i had to guess at this point, i do think we head lower. The banks have traded awful through this whole thing a lot of what you have to worry about with the banks are those two aspects. Its that Inflation Expectation, then its the default risk if you get an economy that is flat lining and theres still 89 unemployment, then you have to worry about what the banks Balance Sheet is you need to be worried about the fact that theres some default risk in there. Thats why i think banks probably resolve to the downside. Guy i got to tell you something that brian kelly, i love this group, by the way. You got bice breaker. You got the general. You got brian kelly. Hes a genius. Hes a genius, mel i dont know what debenture is i cant spell debenture. Banks arent really the problem this time around i dont think banks are going to scream higher. But a name like citi for example is trading at 70 of tangible book its just too cheap. I do think city is challenged. I do think the banks are challenged what i think is going to happen, the banks are going to rally on a squishy tape and youre going to see everything give up the ghost as we get into october and bonawyn, banks have been on your Shopping List during this sort of selloff period. Yeah, they have if you really look at kbe or kre versus the xlf, the xlf has outperformed quite significantly. Theres exposure there to investment management, invest service companies. I think you pay a premium for that im focused on the large Money Center Banks if you look at the last earnings report, they had the provisions for default risk they also had exceedingly high fee generation and trading profitability. Im willing to pay up for that aspect of the business. Bonawyn makes a lot of good arguments, jeff mills. Why are you so down on the banks . I think if you look at the provisions as they stand today, the question is are they enough based on what ends up having in reality. Thinking about unemployment, you still have 4,000 people on the sidelines in the labor market. You have another 5,000 categorized as temporary unemployed you do have this shadow unemployment going on. Even though the employment report was okay, i still think you see that permanent unemployment number continue to go up. In terms of the Balance Sheets and what ends up happening with the losses, i think thats still something we need to keep in mind if im looking within banks or financials, i think its tempting to look at a wells fargo down 50 for the year and start to bottom fish a little bit. I would still want to be with a jp morgan. Some of these companies that are in financials that arent banks, yes, theyre trading at a premium right now. I think they will continue to do so for some time. Wells fargo is on the move after hours after news of Berkshire Hathaway cut its stake in the company to 3. 3 from 6 previously lets bring in jeff hart was that a good move on the part of berkshire, the notion of cutting one stake in wells fargo here in half practically look, banks have performed better recently. Thats been quite of nice to see. Youve got to view frit from th lens theyve been pretty lousy performers its going to take a while for it to play out i kind of find myself looking at the universal banks, the citis, the jp morgans, the bank of americas, even the goldman sachs. I think when you lere looking t banks, youre looking for scale and revenues that are not as dependent on your traditional spread lending the environment is tough its gotten a little better but its probably going to be a long time before it gets a lot better theres not a lot of loan growth out there. So the more you can get fees and kind of noninterest spread related revenues, i think thats the place you want to be looking at banks. Weve been debating banks on the panel. It seems to come down to how you view the economy in the future, whether or not you view unemployment getting worse, whether or not people are going to be foreclosed on, et cetera do the banks have enough in terms of reserves right now, and under what scenario do you think those reserves are enough . I do think reserves are built enough once we get into next year, its going to be a matter of releasing the reserves weve kind of seen them take their reserves up to a level that would suggest losses get close to half as bed as they were on the super severely stressed scenario. That seems reasonable to me, because the amount of stimulus we have out there is really helping a lot. A lot of the regulatory forbearance is helping a lot the jobs numbers were really bad, but theyre getting ready fast people can go back to jobs if the economy keeps improving, which i think it will, thats generally good news for the bank because theyre kind of the lubricant that keeps the economy going on the financing side. But when i look at banks in general, its still hard to overlook a tough rate and tough loan growth environment. I still find myself looking at a jp morgan. What i like about a jp morgan is if we go into a double dipper session and things really get bad, the strong get stronger jp morgan is strong. Theyre going to come out of that a winner. If things get better, theyve got leverage to Capital Markets and things like that theyre well positioned to do well in almost any environment we come into. Jeff, the argument ive made for a while, banks to me its about price of tangible book ive made the argument that i think jp morgan deserves that premium valuation. Right now as the market closes were looking at a citi which tangible book was reported around 72 the stock is trading at 52. I think it should trade at a discount, but should it trade at that steep a discount to a name like jpm no, i dont think it should citi may not be hitti inting it theyre a hot clolot closer talking about jp morgan, you buy it today you kind of win either way citi is the way to play it if you think the economy is going to be better theyve got a much bigger credit card portfolio you tend to see bigger losses and you tend to see them sooner. If the losses dont materialize, citi is set up to be a winner there. But youve got to have that macro view and be willing to be patient. Jeff, great to see you thank you. Jeff mentioned credit card exposure thats interesting just a couple weeks back or sew Capital One Financial ceo made comments they dont really have a good grasp or whether or not their borrowers are employed or unemployed there are a lot of borrowers out there at varying degrees of unemployment a lot of these cards are tightening their lending standards. Brian kelly, i bet this caught your eye. Yes thats exactly the issue that you have with banks, with credit card companies, is that you dont have a good idea of, number one, what your lender looks like at this point, the one that youre lending to and number two, what the economy is going to do are we going to remain at an elevated level of unemployment if thats the case, Something Like a capital one which tends to be a little bit lower on the credit scale is going to have a whole lot of problems. Until i see some kind of sign that we havent plateaued here, i think weve got to stay away from these. Coming up, investors souring on shares of lululemon today has the stock gotten too far ahead of itself . Lulu wasnt the only name that didnt participate in todays rebound. As we head to break, take a look at some of the stocks e y. Ndof the biggest rebous thda our Retirement Plan with va gives us confidence. Yeah, they help us with achievable steps along the way. So we can spend a bit now, knowing were prepared for the future. Surprise we renovated the guest room, so you can live with us. Oooh, well. Im good at my condo. Oh. I love her condo. Nana throws the best parties. Well planned, well invested, well protected. Voya. Be confident to and through retirement. Analyst downgrading lululemon but raising the price target on the stock. Would you be namasteing in this game. Clever. You know what, this stock has done so well i agree with their call in that what they were saying is, listen, it could go a little bit higher but we cant imagine its going to go a heck of a lot higher were downgrading it to neutral, which is a little weird, but up kbr grading the price. The point i think theyre making is we have a lot of upside how much more is left. How much more do you want to squeeze out. When you look at whats happened in the market, if were getting a rotation, maybe were getting a rotation then this stock could suffer from that. It was a very introspective note they write we just cant thats refreshing how many analysts of late have come out raising ratings just because stocks are running away from them its actually nice to see somebody throw their hands up in the air a little bit lulu along with a lot of other stocks has been part of this trade where people are buying because they think they can sell it at a higher price doesnt mean its a bad company. I like lulu, but i then when you get forward earnings at 65 times, you at least have to take a pause. For comparison, peloton is going to earn 1 1. 8 billion in 2020 ad their market cap is 25 billion in no universe does the acquisition of mirror equate to a 12 billion increase in market cap. In that environment, it underscores whats going on fundamentally. It doesnt mean you cant invest and own the company for the long term but at these levels you have to be careful this is the most highly valued specialty retailer even more so than the heyday of victorias secret. Were talking about 50 billion market cap the valuation metrics are something to take into account here its about risk reward i dont know how much upside there really is. Keep in mind this is a consumer facing brand were talking about all of the threats to the consumer but yet were saying at their price point theyre going to be able to continue to have the type of sales and margins theyve had historically ive got on yoga pants now but i dont know how much longer that whole phenomenon is going to last. Etsy is being added to the s p 500. Manager guy, what do you make of these additions . Etsy is a fascinating company. We purchased a guy adami sock puppet on the etsy many years ago. The stock traded up to 135 its pulled back people will rank on this company in terms of valuation, but the growth has been there. How long it lasts, i dont know. Out of the ones you just mentioned, etsy is the one that sticks out i never would have said this because i didnt understand it i sort of understand it now. H r block comes out of the s p 500. Breaking news on Amazon Web Services a tough new worded statement from Amazon Web Services this responding to the pentagon which earlier today suggested that it favored microsoft for this massive 10 billion contract on cloud computing. Amazon web services responding to that statement from the pentagon, accusing the president of blatant cronyism here the statement goes on to say that the president is simply making the wrong decision, amazon suggesting this is nothing more than attempts to validate a flawed, biassed and politically corrupted decision some very strong words from amazon theres an Ongoing Court battle about all this its clear this is not going to be resolved today, but this fight goes on, the rhetoric here heated between these two companies. Seems like it might not even be resolved by the election. Obviously there is some bad blood between President Trump and jeff bezos amazon suggested the reason the president wants microsoft to get this contract and not amazon is because jeff bezos owns the Washington Post which the president has said is biassed against the president. Theyre saying this is political corruption of the highest order. This statement by amazon, ive rarely seen anything like this this is a very lengthy statement from one of the nations biggest and most powerful companies lambasting the president of the United States as being part of a corrupt effort here to simply benefit himself personally it lists example after example that amazon feels is simply inappropriate by this administration really tough language here eamon jafrs lets go around the horn brian kelly . In this environment i want to look through what could be a trough and i want to buy a longterm play put it in your drawer kind of thing. Exactly top drawer, let it go. General mills perhaps not surprisingly im going to be a seller of kbe. I think from a valuation perspective theres a catchup trade to be had. Bonawyn eison i think its a little bit of the baby being thrown out with the bath water here. If alpha gets above that 100 i bead a buyer. Guy adami you have Frank Holland at 6 00 thats a lineup, mel. I think it gets up to 60. That does it for us here on fast money. Ptnsctns mi uere. Oio aio icongp next e mad they gguy a promotion. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Welcome to a special options action. Yesterday the dow plunged over 800 marks. All the investors rushed the exits of the crowded tech trade. With us tonight Carter Braxton worth, tony zang and mike khouw. Carter, where have w
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