Summary
Highlights
The broadcast opens with a disclaimer about Robinhood as a sponsor. The hosts, Dan Nathan and Guy Adami, discuss the current market sentiment, specifically highlighting trepidation around the AI trade. They point to specific news and reasons causing investors to rethink their involvement in this sector. Oracle's performance is used as an example, with discussions on its valuation and the broader implications for the AI ecosystem.
Dan and Guy delve into Oracle's situation, questioning the 'sanctity' of large capital expenditures in AI. Guy introduces the idea that investors are starting to realize that these investments may not yield the expected returns, leading to companies being penalized for their spending. Coreweave is brought up as another example of an AI-related company experiencing a significant downturn, despite Oracle's inability to fulfill cloud contracts, which theoretically should benefit Coreweave. Insider selling in Coreweave is also highlighted as a red flag.
The discussion shifts to the relationship between a company's equity and its Credit Default Swaps (CDS) for Oracle, indicating a potential market breakdown. They speculate about potential bailouts for AI companies like OpenAI. The hosts also question Amazon's significant investments in AI and other related companies, suggesting it might be a 'dumpster fire' given the ambiguity around Artificial General Intelligence (AGI) and the performance of other AI models like Meta's Llama.
Michael Obacina from Robinhood joins the discussion, noting that retail investors are feeling shaky. He observes that the top 10 stocks on Robinhood remain relatively steady, with the exception of meme stocks like GameStop. Obacina points out that the market has seen no major moves following recent Fed, Oracle, or Broadcom announcements, and the S&P 500 is stuck in a tight range. He wonders if 'triple witching' might unlock some movement.
Guy and Obacina discuss Bitcoin's weakness and its potential crossover effect on the NASDAQ and the AI trade. Obacina presents a bearish technical analysis of Bitcoin, highlighting a triple top formation and downward sloping moving averages. He suggests a potential retest of the $75,000 level if the current trendline breaks, which is also significant as it represents the average price of MicroStrategy's Bitcoin holdings.
Dan outlines a specific options trade on the IBIT, an iShares Bitcoin ETF, anticipating Bitcoin to close the year on a low. He explains a long put butterfly strategy with January 2nd expirations, aiming for maximum gain around the $45 level. Obacina breaks down the trade, confirming it as a long put butterfly and explaining the mechanics of such a complex options strategy, including max profit and loss scenarios.
The conversation shifts back to broader market movements, noting the significant drops in NVIDIA and Palantir. Guy points out that despite the perceived strength of some tech stocks, others like Broadcom have seen substantial declines from all-time highs. Caterpillar is introduced as an example of a seemingly strong industrial stock that has also experienced a rapid 10% decline. The hosts discuss the dispersion in market performance and the lack of correlation across sectors.
Doug Kass's charts are presented, showing the S&P earnings yield at historic lows (bad) and the CAPE ratio near historic highs (also bad), indicating potential market imbalances. A chart demonstrating households having more net worth in stocks than real estate is displayed, a scenario historically preceding market crashes. Relative valuations of tech vs. defensives are also examined. The hosts then discuss Adobe, which has been impacted by AI disruption but is now being viewed as a potential long-term play due to rising forward earnings expectations, despite its poor stock performance since 2021.
Guy suggests a bullish outlook for Adobe, anticipating a move towards $435-$440 if certain technical levels are breached. Obacina offers options strategies for Adobe, proposing either selling an out-of-the-money call spread for bearish views or a bullish 'risk reversal' trade for those optimistic about the stock. He explains how to construct a cash-neutral or credit-generating risk reversal trade by selling put spreads and buying calls, demonstrating the potential for both defined downside risk and undefined upside potential.
The hosts and Obacina conclude the segment, emphasizing the importance of diverse perspectives in trading. Obacina reiterates his concern about the S&P's ability to hold the 6800 level and warns of potential further damage if it breaks. They also mention upcoming content featuring Robinhood's Head of Brokerage and CIO, providing a year-end wrap-up and insights for 2026. The segment ends with holiday wishes.