tv Fast Money CNBC May 31, 2016 5:00pm-6:01pm EDT
exchange. in just a word, we have the ism index coming out. feels like that's going to dominate. >> it is. >> guys, thank you so much for joining us here on "closing bell." that does it for us. "fast money" begins now. "fast money" starts right now. live from the nasdaq market site overlooking new york's times square. good evening, i'm simon hobbs in for melissa lee. the traders on the desk are here with me. bank of america's warning to the world, find out what has the firm saying that could be a 15% correction around the corner. and why they're reasoning for that. signs of a bottom for biotech. the smart money is flowing in and the deal making is coming back. we'll show you whether it's just a short-term bounce or if there are more gains in store. and later, opec on deck. and the commodities king dennis gartman said he isn't buying into the leader and he'll tell
you why something else may be the key to oil's next move. but first, we start with the markets. it was, of course, a tough day for stocks, i guess. the dow down 150 points at its lows. although both the dow and s&p eked out gains for the month of may. and the losses come as expectations mount for a federal reserve interest rate rise as the dollar enters a two-month high. what do you do with your portfolio now? >> i don't see anything wrong with going for the protection, especially at the levels coming into today. we finished last week at 2100. but you look at the way the dow traded today. it really was something that was reflective of a couple of things. boeing, bing turn to the down side. the energy names, chevron, exxon, you see the way oil flipped from over $50 to close underneath $49. big flip there. is that something that's sustainable? the way we've been trading lately on oil, it seems like the
ranges seem to have a higher lows and higher highs. you've got to be impressed with the way the financials have held up. as a matter of fact, the move over the last couple of weeks along with apple and all those suppliers, that's where people are going. financials, technology, that's been the lift over the last couple of weeks to get us where we are now. >> is an interest rate rise factored in to where we are now? >> i feel like there is. there is not a spokesman who hasn't been in front of the media recently telling us about what's going on, how this looks, and what they're leaning towards. they certainly sound to me like they're leaning towards a hike in june. whether they do or not is a different story. >> the only issue is we saw the fed futures are the increase june 15th. 24%. here's the one problem that i see right now. you see this dollar is holding pat here. the dollar is acting like they are going to raise in a couple
of weeks. if you look at fed fund futures, it's not. i think you have a little bit of a conundrum. >> we have breaking news on alibaba. >> good evening, simon. yeah, we wanted to fill people in on a story that is just breaking now. started breaking in japan 20 minutes ago. soft bank, 32% of alibaba shares are owned by softmank. it started back in 2000. soft bank is going to be selling roughly $7.9 billion worth of its alibaba stake. taking it down from a 32% level to about 28% when these various transactions are done. let me quickly tell you about the transactions. the key one is the issuance of what's going to be a $5 billion mandatory exchangeable trust security that will be exchangeable when it -- in three years. it's a three-year term. when it turns out in three years, you'll get alibaba
shares. it will have the effect effectively of having softbank go to the upside in three years, but not actually suffer any of the down side. not clear exactly what other terms are associated with that convertible security, including the premium and/or coupon it will include as well. essentially taking down its debt by paying back debt, raising cash in order to do so, and taking down its 3.8% right now to 3.3%. in addition to the $5 billion convertible, softbank will also be selling $2 billion worth of alibaba shares back to the company. then something called the alibaba partnership. the top 28 executives at the company. they will be buying $400 million worth of softbank's ownership stake of alibaba.
and finally, there is a sovereign fund that has not been named that will buy half a billion dollars of shares. all adding up to a sale of $7.9 billion worth of alibaba shares. but just to give you a sense as to how large that position is at softbank. only taking its owner position down to roughly 28%. but a significant transaction nonetheless that certainly we wanted to get to people with. particularly because of the interesting security that is the heart of it. >> okay, david, thank you very much. david faber with the breaking news on alibaba. karen, what should people make of what's going on here? >> i would think we'd see pressure on alibaba. i was wondering if yahoo! has any ability to do any of those kind of swaps as well or whether it's just softbank's opportunity or not. it's an interesting set of transactions. sounds like. structured well for softbank, sounds like. so i don't know. i would think pressure on alibaba. >> after an after-hours trade
we're down only 2%. people are certainly not frightened by the move, or feeling that the skids are being put under the stop. >> i also point out, i just looked at it, i didn't look at alibaba all day. but i see it traded four times normal volume today. so i'm not sure quite what that means. i don't know if people were -- >> china's shares were active earlier. >> i will say to karen's point, the headline risk in this stock to me is still towards the down side. it's trading well given what you just talked about. i'd let the shakeout before i get back into it. >> it seems all these investigations are coming back. you go over a year ago and look at this stock and start to look at all of the fraudulent things sold on that. now all of a sudden it gives softbank an opportunity to get themselves into a position where they're taking off some of that leverage they had on in there. >> it's still at 28%.
>> importantly, it's still there. but i think for softbank, this sounds like a great trade. >> it makes yahoo! look like a bunch of chumps. how are they going to monetize it. it makes them look like a bunch of amateurs when you think about it. to me you have softbank which has been a stalwart for 20 years. you have yahoo! that have this one thing that bailed them out. and they couldn't figure out how to monetize it. i would expect pressure on yahoo! here as we still try to figure out who is buying that core and what is left. >> or monetize it in a tax-free way. let's step back to the market discussions. stops clearly having arguably a tough day as the fed hike rate fears continue. >> i'm sure people disagree with me, i think you have to stay long bonds. i still believe in the gold trade. i understand it's linked to the
dollar, but i do think although gold has sold off over the last two weeks, there's something going on in gold miners and commodities. so i say stay long bonds, stay long gold. >> why do you think that about gold? >> to me, something changed -- to me it all changed when japanese went to the negative interest rate policy. a lot of central banks hoarding in the market. it sold off on dollar strength. but to me there's something going on. >> you would think fed tightening, that you would see the gold trade unwind. >> i agree with that. >> but you think -- >> it links that fed tightening, dollar strength. i don't think of gold as a commodity anymore. to me it's now a play against currencies. >> interesting. or perhaps the belief that the fed put itself behind the curve and is arguably attempting to make up room there. >> that's a much longer
conversation there. but i think they're going to move. i agree probably for a different reason. i think they're going to move because they have to give themselves some runway at the back end of the year if something drastic happened -- >> i don't think they'll do it this summer. >> why would they -- >> whether a voting member or not, why are they in front of us, telling us every day -- >> that's the thing. just tell me. they don't. to me, i think -- >> i'm just saying, why is the fed in front of us every sing -- whether it's bullard or whomever telling us, look, the economy looks great. that was a quote from just the other day. everybody's gaming the system in some way to tell es they want to raise the rates. >> i tell you, i think the best possible scenario is to remain hawkish in their stance. talk the way they need to talk. and if the market doesn't crater, then you have a situation where maybe they're ready to do it. i don't think they'll do it in
june. and i think it will be unlikely in july. and you get to the election. you may have the second rate increase in ten years happen in december. the second one that happens. to me, i just don't think that you have to trade it right here. if you look at how fed fund futures have been whipping around. at the last month they were at 6%. 34% late last week. now at 24%. i suspect we'll see -- >> what in july? >> july is about 54%. >> in june or july, maybe brex is the issue. >> june 23, we'll know. >> then we'll know. so june, july, i think that the bonds are sort of telling you. i don't think the bonds are saying no. look at the move from the bottom. >> are the bondsman ip late by the huge wave of the liquidity of the system? maybe not the -- >> think about the world that we live in right now. and when you look at the potential for this rate cycle increase to me, when you look at
$9 trillion of sovereign debt that is in negative interest rates, look at everything that's going -- it just doesn't make any sense they'll go in a cycle here. >> let's stick with the markets. bank of america, merrill lynch has a stern warning for investors. it believes the s&p could drop by up to 15% this summer. so what's behind that warning. head of u.s. equity strategy, bank of america has kindly joined us here at the nasdaq market site to explain. good evening. >> good evening. >> this is a very bearish call from you guys. >> i felt pretty good about the markets since 2011. this is the first year it's felt not so good. first of all, we have the fed embarking on a tightening cycle amid a profits recession. normally the fed does not hike into bad growth. they hike into good growth to slow everything down. this time around we have the fed hiking into at least two quarters of negative year over year profit growth.
so we look back over time. we found that this has happened three other times in the past. just three times. and two out of three of those times you saw the market sell off in the next 12 months. here we are, sitting at the same level that the s&p was in december of last year when the fed hiked rates. i just feel this is not a great setup for risk assets. >> just clarify one thing, though. >> sure. >> all that said, you still only think there's one rate rise from the feds, and that's in september. >> well, okay, here's the thing. economists believe the rate hike will happen in september. but they do think there's a real possibility that we do get a summer rate hike. which is another reason that i'm worried about stocks. because i don't think the market is pricing in a summer rate hike. the reason is, if you look at the stocks in the sectors in the s&p that are expensive, there are industries that benefit from zero interest rates. these are utilities, staples. they're still trading at some of the highest multiples we've ever
seen. what's cheap today are financials, technology companies, cash rich companies that would actually benefit from a tightening psych. >> we asked this question before you came on. i asked you specifically, do you think a rate hike is in the market? >> i'm just looking at the way the financials are trading. look at the last couple of weeks, since the governor types got out there and everybody's jawboning about this idea of a rate hike. look at the way the financials have -- look at the low pe type companies. a lot of the tech companies, apple and so forth, and look at the chips, all moving to the upside. i think a lot of that based on people starting to expect in their rotation into certain markets. >> they moved a little bit. but if you look at their valuations, they're still discounting a fairly benign rate environment. one hike this year, another one next year, nothing to write home about. i think what would roil the market is the fed would do what they're jawboning right now.
a couple of rate hikes this year i don't think are priced into the market. that's not the only reason we're bearish on stocks, though. i'll tell you a couple of other reasons. the fed tightening is a profits recession. the credit market is telling us something. granted, credit spreads retrace pretty significantly in the last couple of months. but if you look at one of the indicators we like to track, the distress ratio, that's telling us that something is wrong in credit. that capital is harder to get. the fed is tightening. senior loan officers data shows it's grown tighter rather than easier. corporations getting capital is becoming more and more challenging in this environment. >> what's your year end target? >> i think we're amongst the lowest on the street. >> what area of the market is the best? >> i think you want to stay quality. you want to stay large cap. but i don't necessarily think you want to hug these low dat ta
sectors like staples and utilities. which i think are super expensive, priced for perfection that happen to be some of 9 most levered sectors in the s&p 500. what i do like are cash-rich companies. here i see a lot of examples in tech, in health care, health care is really taking it on the chin this year, from the election risk, for being a crowded area of the market. so tech and health care would be the areas we see the most relative value opportunities. >> great to see you. >> thanks. great to be here. >> from bank of america merrill lynch. >> stocks are rich. dan will say they're richer on a nine gap. let's put it this way, if you give an s&p 120, that's rich in my opinion in this environment. i do think the fed moves in june. i think that's bad. i think if they dochblt move, it's worse.
they find themselves in a corner. >> i think we're in a similar situation that we were last time. there was a lot of urn certainty about what the course of tightening would be. a lot of uncertainty outside the united states. i actually believe it's not going to be one or two rate hikes that trips up the broad market here. it will be external like we saw last summer. piece are pricing a small probability of that. look why the yuan is, it's going lower here. so relative to what the pdoc is also saying, i think it's going to be something external. look at european equities. they still act like garbage. when you look at the euro stocks, it's still down 17%, 18% from the 52-week highs. don't just stare at the s&p 500. there's a lot of stuff that agents poorly, like the russell 2000. >> up next on the show, the one dollar stock that's now worth 30 in a matter of weeks.
we'll give you the nasm and tell you if there is still more gains in store. financials clearly, one of the few sectors negative for the year. that's soon to change. why you should be banking on more gains ahead. later, commodities king dennis gartman isn't buying oil in the leadup to opec. he'll be here to tell us what has him staying away. , the mastf suspense and the macabre. i enjoy keeping people up at night. my analysis shows your stories are actually about human connection, even love. great storytelling needs drama and empathy. my cognitive apis can help any business better connect with its audience. you should try writing a book. find a remote hotel. bring the family. i do not think that is a good idea.
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welcome back to "fast money." a big day for the health care and biotech space today. allergen tweeting that he's taken a large stake in the business, saying he's supportive of ceo brent saunders. no reason to believe that the investment that was made for the influence of the actions of management or control of the company. that's not all. there's also some deal making heating up in the biotech trade. announcing it's agreeing to buy celator. are these signs that the bottom, guy, is in for --
>> great signs, actually. ibb is what i look at. if it closes above 285. biotech feels like oil felt like four, five months ago when it cratered, started casually coming back. nobody believed it, including myself. then you wake up one day and it's up to 75% to 80%. i'm not suggesting that's what's happening here. but these are all good signs. one thing about allergen. it traded basically unchanged on the day. about a month or so ago, pete pointed out unusual activity in allergen when the stock was trading either side of $200. i'm wondering now if what he saw was on the back of what was announced today. >> you get this big huge cash come flowing in as well. carl's obviously going to push for buybacks. we know how this works. this is a company that's very leveraged and they've got a huge amount of debt. they have a great ceo that carl
has familiarity with. and take a look at the entire company and the way it is built. it is not just like valeant. they actually spend money on r & d. they've got an incredible pipeline. it's a really interesting company. i'm specifically talking about allergen right now, not the entire biotech space to me. the space is really toxic. it's still very uncomfortable because of the political side of things. depending on who gets in the white house, politically, biotech has some interesting battles in the next nine months or so. >> that would override everything else? >> i think it makes them more difficult to trade. you're not just trading off of pipelines anymore, you're trading off of the land scape and pricing of those pipelines. >> there are probably a lot of babies thrown out with the bath water. i think we'll see pockets of it continuing to be terrible. particularly as the valeant
thing, we get more clarity there. i don't know, you've got to be really good to be picking trxx. >> one of the ways i'm playing it right now is the xlv. look at the etf and what it's made up of, big pharma stock. they have good yields. some of them are cheap, some are very reasonable. if you ever get the pickup like guy is talking about in some of the beaten-up biotex, you have the xlt making the move back to the 52-week high. >> welcome. great to have you. we didn't welcome you. i apologize. >> thank you. listen, talking about the 15% correction, what would biotech do through that? would it move with the market? would it do worse? would it do better? >> i would think they're a little more protected. >> you would think, right? let's say, play 9 game, 15%
correction. ibb given the run that it's had might underperform in that scenario in a 15% down scenario. >> i disagree. i think you want to stay away from the xbi, the ibb. i think we're in a market here where you actually want to own and keep oeng strength. you probably want to keep selling weakness, especially when the broad market -- >> you do get the biotech mixed in with the pharma. tesla's annual shareholder meeting kicked off literally moments ago. what about the giga factory? set to open in july in theory. phil lebeau will join us with a special report. i'm simon hobbs. you're watching "fast money" on cnbc, first in business worldwide. here's what else is coming up on fast. >> liftoff! >> that's basically what the banks have been doing since the fed signaled a rate hike is
coming. but should you bank on more gains, or is it time to take profits? a top technician weighs in. plus, the commodities king dennis gartman says it won't be opec that moves the oil market, but instead something else. >> no! >> the horror. >> find out what he's watching, and where you should put your money to work.
welcome back to "fast money." clearly financials, a hot topic of conversation again tonight. in fact, one of two s&p sectors still negative for the year along, of course, with health care. the banks are now less than 1% away from turning positive. and with the fed rate hike looming, can you bank on more
bank gains? richard ross is checking the charts at the smart board. richard, what's the verdict here? >> thanks, simon. we think june is too soon for a buyer of financials. we know about the plethora of catalysts. they're not all going to be a positive. what are they going to do? they're going to drive volatility and volume. you know who looks both of those things? this guy right here. keep in mind hedge funds and onlies, as they've been since 2012, let's go to the chart here. s&p financials, yes, we're still in a down trend. but an impulsive move off the low. what we like on the pull test and hold the 50-day. back above the 200 for the first time since here. now, note what happens. back in august we get the rally. boom, that's a failure there. this time we cross. so what's the macro behind the financials? what's driving that run? here's your two-year yields. this can be your best friend or worst enemy.
let's start with the former. you see the breakout from the triangle, bullish flag? that's telling you the hike expectations are coming higher. what's the dark side of this trade? boom. the 210. guy loves this one. in theory, this is terrible for financials. this is the flattening of the curve, the two-year yield is going higher, but the ten-year giving you the flatter curve. financials, best performing sector quarter-to-date, up 5% for the quarter. for some it's just a bearish delay. now, how do you take advantage of this? black rock. look, it's got decent lows. pretty good capital return story. and it's got a double bottom base of support. that's good enough to give me the high and the low. i'm a buyer of black rock. i'm a buyer of financials. >> okay. i think that's -- what do you think? >> the black rock one, i don't think of as much as financials. i think more of it as market related, stock market related.
etf related. looks like so far, so good. >> it's pushing up against resistance we saw in 2015. let me just say this. >> rich ross just rattled that off. for the folks at home, that was no teleprompter. that was just him doing his thing. unbelievable. what worries me is the 2010. that spread continues to narrow. i understand why people are buying banks because they think the back end will rise. i don't think it will. >> the reason for that is -- >> i think we're in a huge deflationary global spiral. that's a whole other show on friday at 5:30. >> looking forward to it. >> that's called "options action." >> when you look at some of the main components, some of the top ten, jpmorgan, still 8% from the 52-week highs, citibank 24%, a lot of bank stocks acting
poorly. you better get that yield curve to have the stocks make the sort of run that i think the s&p will need to break out or that inde see in and of itself. black rock, larry has been less than sanguine about the stocks as of late. >> we've seen several weeks of these -- >> i didn't think you were coming to me. >> i can feel it, though. i like financials, citi, and a couple of financials hitting recently. options have been there for a while now in jpmorgan and other names. >> you're steering this ship. you can do whatever you want. >> i've been on the wheel. i'm just doing what i'm told. a big day for michael coles with the stock rallying. we'll tell you why the retailer could move 10% on earnings tomorrow. tesla's annual shareholder meeting is under way. will the ceo give any updates on the giga factory or what about
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welcome back to "fast money." crude oil a slight fallback today. a steady climb into thursday's biannual opec meeting where leaders are expected to make little headway in cutting global production. is crude oil a buy before thursday's opec meeting? dennis gartman says no. he joins us now. dennis, welcome back to the show. >> good to be here, simon, thank you. >> why is oil not a buy? you believe as many people do that opec is essentially broken here. >> yeah. i think opec really is broken. opec will continue to be around. always good to have meetings. but they should be able do nothing going forward for a very long period of time. you do have two religions at a clash who are working to make sure that they take each other's
market share. the iranians and the saudis are absolutely at one another's throat. the iranians have been able to increase production much faster than anybody had anticipated. the saudis have made it abundantly clear that they think their own oil is a wasting asset over the next 15, 20 years. they intend to sell it as they can. it's going to be very difficult to push crude oil much above $50 per barrel. just a lot of supply coming at you from the iranians, coming at you from the saudis. at $50 with the contango making it $52 for the one year forward, almost any good fracker, whether he's in the balken, in the permian or eagle ford, will make money. plus you have a lot of ships offshore in singapore, in the persian gulf, and even in our gulf. tankers that are loaded with crude oil. there's just a lot of supply. demand is strong. it's reasonable. but supply is there. i think it's just an overhead supply that will keep crude oil
from going much past 50. >> this is karen. that meeting was just about as bearish as it could be, yet oil didn't seem to respond like people who have expected. do you think there's bullishness built in here? >> karen, not really. i just think there's just so much supply that can come at you at these prices. whether it's here in the united states, whether it's from iran, whether it's from saudi arabia, whether it's from -- let's be blunt. we've had some bullish news that has pushed the news higher. you do have the problem with nigeria, a new group there that continues to take production offstream, a new and rather violent group. but you have the canadian circumstance come at you. the nigerian circumstance come at you. this is the best you've been able to get. the contango in the past several days has begun to widen again. which is also a sign of impending weakness. if you make me do something, i'd rather be a seller of crude oil up here.
i'm not going to be aggressive with it, but if i have to do something, i think the chances are the next $5 is lower rather than the next $2 being higher. >> but you don't sound sure enough to actually call it now a ceiling, correct? >> no. i'm considering it. i haven't -- i trade only from my own account. i'm considering being short. i know for a fact i don't wish to be long. that's one thing. and that's a bit of a change. i'd rather not be long of crude oil. if i'm going to do something soon, it's probably to be a seller. but am i going to be aggressive with it? not really. >> dennis, good to see you. thank you for sparing the time. dan, what's your view here? >> if you think the next $5 is going to be lower, then i think you look at the xle, etf 40% of that is exxon and schlumberger. i think you can see the break a pretty sharp uptrend that has
been in since the lows in february. i know the xle is a low-ball vehicle way to play if you're looking to express a bearish view in crude. >> he can speak to this. ovx topped out at $81 and change back in february. today one of the biggest moves to the upside it's had. i'm wondering if some of the jawboning now, like it marked the bottom on february 11th, i wonder if it's marking the top. i'd rather be a seller than buyer. >> if it is the top, some of those bottle rockets would be better to short where you're protected. >> in the meantime, we have now a news alert on under armor. let's get to seema mody. >> this is in relation to the bankruptcy proceedings. under armour updating its full revenue guidance, lowering
estimates to $4.93 billion versus estimates of $5 billion. the company says the sports authority's bankruptcy and liquidation will cost under armour at least $23 million in a write down in the second quarter. second quarter operating income is expected to range from $17 million to $19 million, down from $35 million the first quarter, while 2016 operating income is seen between $440 million and $445 million. shares of under armour down 3%, now even 4% roughly after hours on this guidance. simon, back to you. >> seema, thank you very much. the latest on under armour. people will remember under armour will be on the march. >> if you look through these numbers, look at the growth they're projecting for 2016, revenue growth up 24% year over year. when you look at this, i think this really helps create an opportunity. if you're looking at something like under armour, be careful of one thing, they have incredible
growth. if it ever starts to slow down, that will be a problem. you look at what's going on in the nba right now, nike versus under armour, steph curry versus lebron james, they're spending money to grow in the footwear world. that's a huge growth area right now for under armour. the pullback could create an opportunity. >> when sports authority filed for bankruptcy, they thought it would be able to operate in a smaller footprint and it ended up being a liquidation. >> you could take some of the stock and divert it to other places. >> now it's just going to be dumped on the market. >> and they're getting a greater and greater presence in dick's sporting as well. >> okay. coming up on the program, elon musk speaking to shareholders at tesla's shareholder meeting.
phil lebeau is here in new york to break it down. michael kors gearing up for the earnings report tomorrow. why the stock could be a screaming buy. that's later. much more "fast money" still ahead. the side effects. hey honey. huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck? check your broker with brokercheck. ...of fixodent plus adhesives. they help your denture hold strong more like natural teeth. and you can eat even tough food. fixodent. strong more like natural teeth. fixodent and forget it.
welcome back to "fast money." tesla's annual shareholder meeting is now under way. phil lebeau joins us with the latest headlines. >> here's the headline. elon musk started off by saying i want to talk about the history of tesla. maybe two hours from now before we get any news. frankly, i don't expect any. this is an interesting period that we have coming up here for tesla. 2016 really sets up whether or not they can make it in 2017 and '18. look at what tesla has in terms of bench marks. in june, basically in the next month, they'll lock in the design on the model 3. that could slide a little bit. but they can't wait much longer if they want to make the first delivery by the end of 2017. in july they have the opening of the giga factory. they'll start ramping up production. that will be the first chance for the media to see it. >> they're building it now. >> the giga factory? >> yes. >> it's done essentially. it's not up to full capacity. but it's done just outside of
reno. later in the year, real question is whether or not they hit at least 80,000 in annual deliveries. you know a lot of people are more than skeptical. >> is there any question they actually hit it? i don't think that could happen. i mean, would you be surprised if it -- >> you'd be shocked, wouldn't you? >> i don't know if i would be shocked if they didn't. i have heard from people that they are increasing the production, especially on the model x. and that there is momentum there. but we've seen this before with tesla where they have momentum and when the actual delivery numbers come out, they're not quite to where they should be. >> to be clear, you don't believe they're anywhere near it? >> yeah. it won't shock anyone to -- >> i think there are more than enough people -- if they came in and said at the end of the year, we delivered 74,000, people would sit there and say, okay, i'm not surprised. >> they'll talk it down over the course of the -- >> if they're not going to hit the 80,000, they will. i haven't run the complete
numbers. but they've got -- it's back loaded. second half of the year is when they have to deliver. >> people were surprised about the model 3 estimates they think they're going to hit in 2020 or 2018, something like that. >> yes. >> what about lithium ion? the batteries that make all this possible. is there an issue they'll hit some sort of snafu? the big auto guys are getting into the market massively. >> they believe the supply will be there in order to supply the battery packs to build the battery cells. i haven't done a deep dive on whether the lithium ion market, that commodity is going to be swamped. at some point they're going to run into some issues. that's the big question with the giga factory. >> thank you, phil. >> glad to be here. >> the stock sold off, it ran into the announcement a couple of months ago. the model 3 release. and i think people were excited about it. but they're not going to be delivering cars en masse until
2018 for all intents and purposes. the model s is a expensive sedan, when a lot of competitors are getting into the space. i think the stock below 200 is probably a level, if you're one of these people who wants to buy elon musk, buy the future, but i wouldn't be buying here and i certainly -- >> i would love to hear what you think, karen. >> a girl fascinated by tesla would love to have one. >> you saw elon musk recently. >> he's a visionary. steve jobs type of visionary. however, i think no shot at the production. which is okay. all of that being said, too rich for me. at some point i probably will buy it. >> do you have to believe in the production numbers to buy one? >> no, i don't. >> but you have to believe in the production numbers if you own the stock, though. the stock bumps up because of the fact he said he can deliver 500,000 by 2018. can he get to 80,000 this year? doesn't seem like something possible yet. >> still ahead on the program, looking for opportunity in
china. the biggest one might be not be what you think. we've got a special report right after this break. plus, we'll tell you why traders are betting that shares of michael kors could take off. after its earnings report tomorrow. that's next. you're watching "fast money" on cnbc, first in business worldwide. this car?
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it's been hard to bet on china over the past year, there could be a major opportunity that investors are missing. seema mody has the details from hq. >> speaking with many people on the ground in china, simon, over the last two weeks, it's clear health care is being seen as the biggest untapped opportunity in china. roughly 96 million people have diabetes in the country. one of the highest rates in the world due in part to the consumption of sugary drinks and adoption of a western lifestyle. they're now getting overweight and obese at a fast rate. that's creating an opportunity for drugmakers that specialize in treating diabetes. at the same time, china is dealing with a rapidly aging population. by 2040, over 20% of chinese population is estimated to be over the age of 65.
and the president's decision to end china's one child policy doesn't seem to be encouraging more families to have kids. it's simply too expensive. the other big health concern is china's ongoing pollution, which i witnessed in the air and water quality, which continues to get worse because of decades of industrialization and lack of government oversight. there are chinese pharmaceutical giants that are working on new medicines to tackle its health care crisis. simon? >> interesting. >> it is interesting, yeah. >> seema, thank you very much. seema mody there. do you feel able to -- there's the idea that there's a lot of -- could you trade that? >> you could trade it through american companies that are feeding into china, if you feel like it. like a starbucks, apple, those types of names, or something like a chl, china mobile. when you look at the dominance that they have right now in that market, simon, and 64 million
additional subs on the 4-g system came in just last quarter, 64 million, we've got 300 million people here. you just look at some of the numbers. they're staggering. they give you almost a 3% yield. a lot of them are hiding out right now. telecom, that type of thing. getting almost a 3% return right here. >> i'm not quite sure how you made the link from there to the china mobile. >> the diabetes side of it. obviously -- i own pfizer, merck. i actually was looking at how do you trade china right now. that's the way i would trade china. >> he's got a sharp mind, baby. he took you from point a to point b. just saying. we move fast here. we don't lollygag around. >> let's go from china to the smart board with dan nathan who's tracking michael kors ahead of tomorrow's earnings. >> i wouldn't exactly call that
a gra tutuitous lead he made th. of course, reports tomorrow before the opening. about 10% move on the average over the last four quarters, moving 16% over the day following its earnings events. options volume hot today. six times average daily volume. the june 46 calls. break even at 47. force when you think about it, look at the chart. the stock is down 30% from its 2016 highs. look at this gap. this is when retailers, apparel makers were getting slayed last year. the stock was down in sympathy here. i think we need to take a day to trade like this. this trader is trading to fill in that gap. think about the move, down about
60%. this is one way to play in a contrarian fashion into an event. >> karen, what do you think? >> i'm long michael kors. i think this stock has been hit three times already. it was down on nordstrom and fossil. i think there's a miss already built in here. it is cheaper by a ridiculous amount than ralph and coach. >> and still got it in your view strategically? >> with that balance sheet, close enough. i mean, close enough. my worst case scenario is 40. >> for more "options action," check out the full show 5:30 eastern friday with dan and the rest of the crew. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay.
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it's an honor to have you onboard. newmont. >> thank you very much. i'm simon hobbs. catch "fast money" again at 5:00 p.m. mad money with jim starts right no now. my is simple -- to make you money. i'm hear to levre to level the field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money," welcome to cramerica. other people want to make friends, i'm just trying to save you money. my job is not just to entertain you but to make you money. tweet me @jimcramer. every night i come out here for two big reasons -- the first is obviously i like the attention. but the second and more important reason is i want to help you build and preserve